MUSCATINE, Iowa--(BUSINESS WIRE)-- HNI Corporation (NYSE: HNI) today announced sales for the first quarter ended April 2, 2022 of $572.3 million and net income of $14.2 million. GAAP net income per diluted share was $0.33, compared to $0.34 in the prior year. Non-GAAP net income per diluted share was $0.33, compared to $0.36 in the prior year. GAAP to Non-GAAP reconciliations follow the financial statements in this release.

First Quarter Highlights

• Positive price-cost and sequential gross profit margin improvement. The Corporation delivered positive price-cost, despite record levels of inflation during the quarter. This, along with the benefits of the previously discussed business simplification and labor capacity actions, helped improve gross margin from fourth quarter 2021 levels.
• Strong revenue growth. The Corporation generated revenue growth of more than 18 percent driven by pricing actions, volume improvement, and the benefits of acquisitions completed in the prior year.

“Our initiatives to improve long-term profitability are on-track and delivering results. These include pricing actions to improve price-cost, strategic growth initiatives, multiple business simplification actions, and efforts to expand labor capacity. We expect noteworthy improvement as 2022 progresses driven by margin expansion in our Workplace Furnishings segment and strong growth in Residential Building Products,” stated Jeff Lorenger, Chairman, President, and Chief Executive Officer.

First Quarter Summary Comments

• Consolidated net sales increased 18.2 percent from the prior-year quarter to $572.3 million. On an organic basis, sales increased 15.3 percent year-over-year. The acquisition of residential building products companies in 2021 increased year-over-year sales by $14.0 million. A reconciliation of organic sales, a non-GAAP measure, follows the financial statements in this release.
• Gross profit margin compressed 280 basis points compared to the prior-year quarter. This decrease was driven by price-cost dilution and lower net productivity, partially offset by higher volume.
• Selling and administrative expenses as a percent of sales decreased 170 basis points compared to the prior-year quarter. The decrease was driven by dilution from price realization along with lower variable compensation, partially offset by higher core SG&A, increased freight costs, and higher investment spend.
• Net income per diluted share was $0.33 compared to $0.34 in the prior-year quarter. The decrease was driven by lower productivity, higher core SG&A, and higher investment spend, partially offset by higher volume. Non-GAAP net income per diluted share was $0.33 compared to $0.36 in the prior-year quarter.

First Quarter Orders

• Orders in the Workplace Furnishings segment excluding the impacts of restructuring, increased more than 10 percent year-over-year led by price realization and strength with small to mid-sized customers. That strength was offset somewhat by continued softness with contract customers.
• Orders in the Residential Building Products segment increased 25 percent organically compared to the prior-year quarter. Remodel-retrofit and new construction order rates were both strong.

• Workplace Furnishings net sales increased 16.6 percent from the prior-year quarter to $353.1 million.
• Workplace Furnishings operating profit margin compressed 80 basis points year-over-year driven by operational investments, lower productivity, and higher core SG&A, partially offset by higher volume and favorable price-cost.

• Residential Building Products net sales increased 20.8 percent from the prior-year quarter to $219.2 million. On an organic basis, sales increased 13.0 percent year-over-year. The impact of building products companies acquired in 2021 increased sales $14.0 million compared to the prior-year quarter.
• Residential Building Products operating profit margin compressed 350 basis points year-over-year, driven by price-cost dilution, higher investment spend, and the impact of acquisitions.

Fiscal Year 2022 Outlook. The Corporation’s outlook for fiscal 2022 remains unchanged from the view provided in the fourth quarter 2021 earnings news release. Capacity additions and benefits from pricing actions are expected to drive strong revenue growth with accelerating profit improvement in the second half of 2022.

• Workplace Furnishings revenue: pricing benefits, backlog normalization, and assumed market improvements are expected to drive revenue growth rates in the high teens to low twenties for 2022.
• Residential Building Products revenue: pricing benefits, inorganic revenue from acquisitions closed in 2021, and continued benefits from multiple growth initiatives are expected to fuel growth rates in the high teens for 2022, on top of 25 percent organic growth generated by the segment in 2021.
• Seasonality: earnings seasonality is expected to be more weighted to the back half of 2022 than in recent years when approximately 70 percent of total profit was generated during the second half.
• Second Quarter 2022: the Corporation expects second quarter profitability to be near levels generated in the first quarter of 2022. On a sequential basis, the benefit from additional Workplace Furnishings volume is expected to be mostly offset by the normal seasonal step-down in Residential Building Products sales and labor capacity investments.
• Balance Sheet: the Corporation expects to maintain a strong balance sheet throughout 2022. Low leverage and continued free cash flow generation are expected to provide ample capacity for continued investment, M&A, dividend payments, and share buyback activity.

Concluding Remarks

“I remain optimistic about our opportunities to grow revenue and earnings despite inflationary pressures and a dynamic environment. We continue to take actions to improve the long-term profitability of our Workplace Furnishings segment, where we are focused on margin expansion. In our Residential Building Products segment, we remain focused on driving strong top line growth, by leveraging our differentiated business model,” Mr. Lorenger concluded.

Conference Call

HNI Corporation will host a conference call on Thursday, April 28, 2022 at 10:00 a.m. (Central) to discuss first quarter fiscal year 2022 results. To participate, call 1-855-761-5600 – conference ID number 7175411. A live webcast of the call will be available on HNI Corporation’s website at https://investors.hnicorp.com/events-and-presentations. A replay of the webcast and call will be made available from Thursday, April 28, 2022 at 1:00 p.m. (Central) through Thursday, May 5, 2022, 10:59 p.m. (Central). To replay the webcast, go to the link above. To replay the call, dial 1-800-770-2030 or 1-647-362-9199 – Conference ID: 7175411.

About HNI Corporation

HNI Corporation (NYSE: HNI) is a manufacturer of workplace furnishings and residential building products, operating under two segments. The Workplace Furnishings segment is a leading global designer and provider of commercial furnishings, going to market under multiple unique brands. The Residential Building Products segment is the nation’s leading manufacturer and marketer of hearth products, which include a full array of gas, electric, wood, and pellet-burning fireplaces, inserts, stoves, facings, and accessories. More information can be found on the Corporation’s website at www.hnicorp.com.

Forward-Looking Statements

This release contains "forward-looking" statements based on current expectations regarding future plans, events, outlook, objectives, financial performance, expectations for sales growth, and earnings per diluted share (GAAP and non-GAAP), including statements regarding the expected effects on the Corporation’s business, financial condition and results of operations from the COVID-19 pandemic. Forward-looking statements can be identified by words including “expect,” “believe,” “anticipate,” “estimate,” “may,” “will,” “would,” “could,” “confident”, or other similar words, phrases, or expressions. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Corporation’s actual future results and performance to differ materially from expected results. These risks include but are not limited to: the duration and scope of the COVID-19 pandemic, including any emerging variants of the virus, and its effect on people and the economy; potential disruptions in the global supply chain; the effects of prolonged periods of inflation; potential labor shortages; the levels of office furniture needs and housing starts; overall demand for the Corporation’s products; general economic and market conditions in the United States and internationally; industry and competitive conditions; the consolidation and concentration of the Corporation’s customers; the Corporation’s reliance on its network of independent dealers; change in trade policy; changes in raw material, component, or commodity pricing; market acceptance and demand for the Corporation’s new products; changing legal, regulatory, environmental, and healthcare conditions; the risks associated with international operations; the potential impact of product defects; the various restrictions on the Corporation’s financing activities; an inability to protect the Corporation’s intellectual property; impacts of tax legislation; and force majeure events outside the Corporation’s control, including those that may result from the effects of climate change. A description of these risks and additional risks can be found in the Corporation’s annual and quarterly reports filed with the Securities and Exchange Commission on Forms 10-K and 10-Q. The Corporation assumes no obligation to update, amend, or clarify forward-looking statements, except as required by applicable law.

Non-GAAP Financial Measures

This earnings release includes certain non-GAAP financial information as defined by Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, reconciliations of this non-GAAP financial information to HNI’s financial statements as prepared in accordance with GAAP are included below and throughout this earnings release. This information gives investors additional insights into HNI’s financial performance and operations. While HNI’s management believes the non-GAAP financial measure is useful in evaluating HNI’s operations, this information should be considered supplemental and not in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, this earnings release contains the following non-GAAP financial measures: organic sales, gross profit, operating income, operating profit, income taxes, net income, and net income per diluted shares (i.e., EPS). These measures are adjusted from the comparable GAAP measure to exclude the impacts of the selected items as summarized in the following tables. Generally, non-GAAP EPS is calculated using HNI's overall effective tax rate for the period, as this rate is reflective of the tax applicable to most non-GAAP components.

The sales adjustments to arrive at the non-GAAP organic sales information included in this earnings release exclude the impact of acquiring residential building products companies. The transactions excluded for purposes of other non-GAAP financial information included in this earnings release include restructuring charges and COVID-19 costs in the Workplace Furnishings segment. Restructuring charges incurred in the current period presented are comprised of adjustments related to inventory valuation in connection with business simplification efforts, and relocation and new facility setup costs in connection with capacity expansion initiatives. COVID-19 costs incurred in the prior period presented include showroom exit charges.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220426006292/en/

Marshall H. Bridges, Senior Vice President and Chief Financial Officer (563) 272-7400

Matthew S. McCall, Vice President, Investor Relations and Corporate Development (563) 275-8898

Source: HNI Corporation