Hni Corporation · NYSE:HNI
Hni — Q1 2021 Earnings Presentation
30 slides from Hni's earnings presentation, Apr 29, 2021
Slide 1: HNI Corporation Investor Presentation Q121
HNI Corporation Investor Presentation Q121 1
Slide 2: Forward-Looking Statements
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 th
Slide 3: Investment Thesis
Investment Thesis Revenue to benefit from cyclical recovery, secular post-pandemic drivers, and HNI- 1. Organic revenue growth specific initiatives associated with our Strategic Framework. Maintain industry-leading profitability in Residential Building Products; focus on 2. Margin expansion margin e
Slide 4: Company Overview
Company Overview Segment 2020 Revenue Breakdown Segment 2020 Non-GAAP EBITDA Breakdown* HNI Corporation is a manufacturer of commercial furnishings and residential building products. The company operates under two segments. The workplace furnishings segment is a leading global designer and provider
Slide 5: Track Record
Track Record Revenue History EBITDA History 25% 300,000 14% 2,500,000 • FCF consistently exceeds net income 15% 12% 250,000 2,000,000 5% 10% • FCF-to-net income trend improved in 2018-20; 200,000 strong in 2020 1,500,000 -5% 8% 150,000 -15% 6% • 65+ years of continuous dividends 1,000,000 100,000 -2
Slide 6: Investment Focus – History & Outlook
Investment Focus – History & Outlook 2016-2018, we focused on: • Executing our ERP implementation. • Reconfiguring our manufacturing footprint. • Confronting new market dynamics. We emerged better positioned for future growth, but short-term results were negatively impacted. 2018-2019, our attention
Slide 7: Profitable Growth Strategic Framework
Profitable Growth Strategic Framework While HNI’s unique Member-Owner culture remains our foundation, our corporate-wide focus and members’ efforts going forward are centered on the following three pillars: 1. Customer 1st Mindset 2. Effortless Winning Experiences 3. Own Operational Excellence New f
Slide 8: Strategic Framework – Customer 1st Mindset
Strategic Framework – Customer 1st Mindset Focus on the Customer. The journeys customers take in our markets continue to rapidly evolve—presenting us with new opportunities to better serve them. The key to capitalizing on these changes is a deep understanding of our customers. To that end, we are br
Slide 9: Strategic Framework – Effortless Winning Experiences
Strategic Framework – Effortless Winning Experiences Simplify the Buying Process. Customers continue to raise their expectations and demand more effortless experiences. Buying office furniture and hearth products can be complicated and time consuming. Based on our work to deeply understand the custo
Slide 10: Strategic Framework – Own Operational Excellence
Strategic Framework – Own Operational Excellence Leverage Our Lean Heritage. All HNI member-owners embrace the principles of lean manufacturing. Members utilize Rapid Continuous Improvement (RCI)—where we scrutinize every facet of our business to identify areas of waste, and then refine and streamli
Slide 11: Workplace Furnishings
Workplace Furnishings Furnishings 2020 Revenue Mix Our office furniture segment is now our Workplace Furnishings Segment. We believe the name better captures the ever-expanding breadth in this segment, which includes office and home workplace furnishings. As we recover from the pandemic, there are b
Slide 12: Industry Structure – Workplace Furnishings
Industry Structure – Workplace Furnishings Our price point breadth and channel reach are unmatched. --Approximately half of our Workplace Furnishings Segment targets small and medium-sized businesses. 12
Slide 13: Macro Cyclical Drivers – Workplace Furnishings
Macro Cyclical Drivers – Workplace Furnishings Small Business Optimism CEO Confidence Index 80 110 105 70 100 60 95 50 90 40 85 30 80 20 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-19 Jan-20 Ja
Slide 14: Secular Trends – Workplace Furnishings
Secular Trends – Workplace Furnishings Number of Spend per Refresh Rate Demand Employees Employee Current Strong Secular Long-Term Trends Post COVID Work-from-home Post COVID Opportunity recovery De-densification reconfigurations Pre-COVID Secular Trends Post-COVID Secular Trends • War for talent (+
Slide 15: Strategic Initiatives – Workplace Furnishings
Strategic Initiatives – Workplace Furnishings Enhance Leadership with Small to Mid-Sized Offices • More than half of HNI’s workplace furnishings segment targets small to mid-sized offices—unique among public office furniture companies • Working to enhance leadership position through new products, di
Slide 16: Design Public Group Acquisition
Design Public Group Acquisition Acquired digitally-native organization Design Public Group (DPG) Consumer Direct • Closed in December 2020 • DPG is a leading e-commerce distributor of high design furniture and accessories for the office and home • DPG accelerates HNI’s digital and e-commerce strateg
Slide 17: Residential Building Products
Residential Building Products Building Products 2020 Revenue Mix Our hearth products segment is now our Residential Building Products Segment. This change: 1. Better represents the way we look at this high-margin/high-returns business, today and going forward. 2. Reduces investor confusion. The oppo
Slide 18: Industry Structure – Building Products
Industry Structure – Building Products New Construction Channel Remodel/Retrofit Channel Installing Distributors Specialty Dealer DIY HNI Brands ` ` ` ` Innovative Hearth Products (IHP) Key Napoleon Competitors Travis Niche Competitors Core, sweet spot Our price point breadth and channel reach is un
Slide 19: Macro Cyclical Drivers – Building Products
200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Jan-05 Jul-05 Jan-06 Jul-06 Source: U.S. Census Bureau Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Single Family Housing Starts Jul-15 Single Family Housing Starts Jan-16 Ju
Slide 20: Secular Trends – Building Products
Secular Trends – Building Products Housing Supply and Demand 150 140 130 120 Million Units 110 100 90 80 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Housing Stock Housing Demand Source: U.S. Census Bureau, BLS, The Benchmark Company Source
Slide 21: Strategic Initiatives – Building Products
Strategic Initiatives – Building Products New Home – Expand Category • 66% of homebuyers have fireplace as a “must have” feature, but less than 40% choose one • Enhancing the connection with prospective homebuyer – digital marketing and touch points, consumer marketing, model home experience • Expan
Slide 22: Environmental, Social, and Governance
Environmental, Social, and Governance We are committed to continuing our sustainability, social responsibility, and governance initiatives. We have systematic processes to: • Reduce our energy consumption by 10% from our 2017 baseline; • Achieve zero landfill waste at two or more of our manufacturin
Slide 23: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow Historical Leverage Cash Flow & Cash Uses 300,000 2.5x 400,000 350,000 250,000 2.0x 300,000 1.5x 200,000 250,000 1.0x 200,000 150,000 150,000 0.5x 100,000 100,000 0.0x 50,000 50,000 -0.5x 0 FY'10 FY'11 FY'12 FY'13 FY'14 FY'15 FY'16 FY'17 FY'18 FY'19 FY'20 FY 00 FY 02 FY 0
Slide 24: Investment Thesis
Investment Thesis Revenue to benefit from cyclical recovery, secular post-pandemic drivers, and HNI- 1. Organic revenue growth specific initiatives associated with our Strategic Framework. Maintain industry-leading profitability in Residential Building Products; focus on 2. Margin expansion margin e
Slide 25: Appendix – Non-GAAP Reconciliations
Appendix – Non-GAAP Reconciliations 25
Slide 26: Non-GAAP Reconciliations
Non-GAAP Reconciliations HNI Corporation Reconciliation (Dollars in millions) Operating Income Non-GAAP Non-GAAP Depreciation Net Debt / (EBIT) as reported Adjustment Operating and Non-GAAP Debt / EBITDA EBITDA (GAAP) s Income (EBIT) Amortization EBITDA Debt (non-GAAP) Cash Net Debt (non-GAAP) FY 20
Slide 27: Non-GAAP Reconciliations
Non-GAAP Reconciliations HNI Corporation Workplace Furnishings Reconciliation HNI Corporation Building Products Reconciliation (Dollars in millions) (Dollars in millions) Operating Income Non-GAAP Operating Income Non-GAAP (EBIT) As reported Non-GAAP Operating Income Depreciation and Non-GAAP (EBIT)
Slide 28: Non-GAAP Reconciliations
Non-GAAP Reconciliations HNI Corporation Non-GAAP ROIC Reconciliation (Dollars in millions) Non-GAAP Return on Non-GAAP Operating Profit Invested Capital Operating Interest Non-GAAP After Tax Shareholders Invested Capital Average (NOPAT / Avg Income (EBIT) Expense, Net Tax Rate (NOPAT) Debt Equity (
Slide 29: Non-GAAP Reconciliations
Non-GAAP Reconciliations HNI Corporation Non-GAAP FCF Reconciliation (Dollars in millions) Proceeds from sale and Operating Cash Capital Capitalized license of property, plant, and Flow Expenditures Software equipment, and intangibles Free Cash Flow FY 2000 $ 204.9 $ (59.8) $ (2.2) $ - $ 142.9 FY 20
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