HNI Corp (HNI) 2022 Q4 法說會逐字稿

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the HNI Corporation Fourth Quarter Fiscal 2022 Results Conference Call. (Operator Instructions) Mr. McCall, you may begin your conference.

早安.我叫奧德拉，今天我將擔任你們的會議操作員。此時此刻，我歡迎大家參加 HNI 公司 2022 年第四季財報電話會議。 （操作員指示）McCall 先生，您可以開始會議了。

Good morning. My name is Matt McCall. I'm Vice President, Investor Relations and Corporate Development for HNI Corporation. Thank you for joining us to discuss our fourth quarter fiscal 2022 results. With me today are Jeff Lorenger, Chairman, President and CEO; and Marshall Bridges, Senior Vice President and CFO. Copies of our financial news release and non-GAAP reconciliations are posted on our website. Statements made during this call that are not strictly historical facts are forward-looking statements, which are subject to known and unknown risks. Actual results could differ materially. Financial news release posted on our website includes additional factors that could affect actual results. The corporation assumes no obligation to update any forward-looking statements made during the call. I'm now pleased to turn the call over to Jeff Lorenger. Jeff?

早安.我叫馬特‧麥考爾。我是 HNI Corporation 的投資者關係和企業發展副總裁。感謝您與我們一起討論 2022 財年第四季的業績。今天與我在一起的有董事長、總裁兼執行長傑夫洛倫格 (Jeff Lorenger)；以及資深副總裁兼財務長馬歇爾‧布里奇斯 (Marshall Bridges)。我們的財務新聞稿和非 GAAP 調整表的副本發佈在我們的網站上。本次電話會議中所做的並非嚴格歷史事實的陳述屬於前瞻性陳述，可能會受到已知和未知風險的影響。實際結果可能存在重大差異。我們網站上發布的財務新聞稿包含可能影響實際結果的其他因素。該公司不承擔更新電話會議期間所做的任何前瞻性陳述的義務。我現在很高興將電話轉給傑夫·洛倫格。傑夫？

Thanks, Matt. Good morning, and thank you for joining us. On the call today, I will highlight 4 key topics. First, we delivered strong earnings growth in the quarter despite a soft macro environment. Second, our Workplace Furnishings margin expansion initiatives are delivering results. Third, we are prepared for 2023. And fourth, we are positioned for strong growth beyond 2023. Following those comments, Marshall will review our outlook. I will then conclude with some general closing commentary. We will then open the call to your questions. Moving to the first topic. We delivered strong earnings growth in the quarter even though we experienced a softer demand environment. We generated solid year-over-year margin expansion and 47% year-over-year non-GAAP earnings growth in the fourth quarter. This was despite volume pressures associated with macroeconomic concerns. Consolidated gross and operating margins expanded on a year-over-year basis, led by favorable price costs, which continued to improve in the quarter. And for the full year, we fully recovered the price/cost shortfall driven by the rapidly rising inflationary pressures we experienced in 2021. Fourth quarter profit improved in both segments. Residential Building Products operating margin expanded 170 basis points year-over-year, reaching nearly 20%.

謝謝，馬特。早安，感謝您加入我們。在今天的電話會議上，我將強調 4 個關鍵主題。首先，儘管宏觀環境疲軟，我們在本季實現了強勁的獲利成長。其次，我們的工作場所家具利潤擴張計劃正在取得成果。第三，我們為 2023 年做好了準備。第四，我們準備在 2023 年後實現強勁增長。在這些評論之後，馬歇爾將審查我們的前景。然後我將發表一些一般性的結束語。然後我們將開始電話詢問您的問題。轉到第一個主題。儘管我們經歷了需求疲軟的環境，但我們在本季實現了強勁的獲利成長。第四季度，我們的利潤率實現了穩健的同比增長，非 GAAP 盈利同比增長了 47%。儘管存在與宏觀經濟擔憂相關的數量壓力，但情況仍然如此。在有利的價格成本的帶動下，綜合毛利率和營業利潤率同比擴大，本季繼續改善。全年來看，我們完全彌補了 2021 年通膨壓力快速上升帶來的價格/成本缺口。第四季度這兩個部門的利潤都有所改善。住宅建築產品營業利潤率年增 170 個基點，達到近 20%。

Our fourth quarter results demonstrate the strength of our differentiated business model in residential building products. In Workplace Furnishings, fourth quarter non-GAAP operating profit more than doubled despite lower sales. The year-over-year top line decline was driven by divestitures and restructuring activities implemented earlier in 2022. Excluding these actions, fourth quarter year-over-year segment revenue growth was just over 4%. Although these streamlining efforts negatively impacted our top line, they contributed to our margin expansion, reflecting our commitment to improving profitability in workplace furnishings. That leads to the second topic. Our initiatives to expand workplace furnishing margins are delivering results. Non-GAAP operating margin expanded 150 basis points year-over-year in the fourth quarter and in the second half of 2022. Favorable price cost and benefits from our cost reduction and simplification efforts drove the improvement.

我們第四季的業績證明了我們在住宅建築產品方面差異化業務模式的實力。在工作場所家具領域，儘管銷售額下降，第四季非公認會計原則營業利潤仍增加了一倍以上。營收年減的原因是 2022 年初實施的資產剝離和重組活動。排除這些行動，第四季部門營收年增略高於 4%。儘管這些精簡工作對我們的營收產生了負面影響，但它們促進了我們的利潤率擴張，反映了我們對提高工作場所家具獲利能力的承諾。這就引出了第二個話題。我們擴大工作場所家具利潤的措施正在取得成果。 2022 年第四季和下半年，非 GAAP 營運利潤率年增 150 個基點。有利的價格成本以及我們降低成本和簡化工作帶來的收益推動了這項改善。

As we have discussed on prior calls, we are driving multiple initiatives to expand margins in workplace furnishings. These efforts are in 3 broad categories. First, we are simplifying our business to focus on our most attractive markets. Actions taken in 2022, including the sale of Lamex, the e-commerce business restructuring and the discontinuation of a small workplace brand reflect our efforts to drive profit improvement through simplification and focus. Second, we are lowering our cost structure. We announced the $30 million cost reduction planned last quarter. That plan is well underway, and we are now on track to reduce cost $30 million to $35 million in 2023. Approximately $25 million of that total will impact Workplace Furnishings this year. Third, we are driving productivity, and we'll see future benefit from ongoing operational investments. Our fourth quarter productivity improved versus the prior year as we continued to benefit from our lean actions and improving supply chain health. We expect our productivity momentum to continue and positively impact 2023.

正如我們在之前的電話會議中所討論的那樣，我們正在推動多項措施來擴大工作場所家具的利潤。這些努力分為三大類。首先，我們正在簡化業務，專注於最具吸引力的市場。 2022年的行動，包括出售美時、電商業務重組、終止一個小型辦公品牌等，都體現了我們透過簡化和專注來推動利潤提升的努力。其次，我們正在降低成本結構。我們宣布上季計劃削減 3000 萬美元的成本。該計劃正在順利進行中，我們現在預計在 2023 年將成本降低 3000 萬美元至 3500 萬美元。其中約 2500 萬美元將影響今年的工作場所家具。第三，我們正在提高生產力，我們將看到持續營運投資的未來效益。由於我們繼續受益於精益行動和改善供應鏈健康狀況，我們第四季度的生產力較上一年有所提高。我們預計我們的生產力成長動能將持續下去，並對 2023 年產生正面影響。

Regarding investments, our largest operational investment is our new facility in Mexico. In 2021, we started up a new seating plant in Saltillo, Mexico. We plan to expand that operation and shift to a larger building during 2023. Although these actions have negatively impacted our short-term results, they will drive margin expansion as they mature. The third topic is we are prepared for some headwinds in 2023. In Workplace Furnishings, we expect to drive profit improvement, notwithstanding anticipated top line pressures. Our margin expansion initiatives focused on simplification, cost and productivity will continue to gain traction this year. We expect those efforts, when combined with favorable price cost will more than offset lower volume driven by macroeconomic concerns and inconsistent office reentry patterns. In residential building products, we are prepared for a slowing near-term demand environment. Cost actions and favorable price cost will partially offset volume pressures while we continue to position for growth beyond 2023. Overall, our cost structure has improved. Our balance sheet is strong, and we expect a strong free cash flow year despite an overall weaker demand environment in 2023.

在投資方面，我們最大的營運投資是我們在墨西哥的新工廠。 2021 年，我們在墨西哥薩爾蒂約開設了一家新的座椅工廠。我們計劃在 2023 年擴大該業務並搬遷至更大的建築。儘管這些行動對我們的短期業績產生了負面影響，但隨著業務的成熟，它們將推動利潤率的擴張。第三個主題是我們為 2023 年的一些逆風做好了準備。在工作場所家具領域，儘管存在預期的營收壓力，但我們預計將推動利潤改善。我們專注於簡化、成本和生產力的利潤擴張計劃今年將繼續受到關注。我們預計，這些努力與有利的價格成本相結合，將足以抵消宏觀經濟擔憂和不一致的辦公室重新進入模式導致的銷售下降。在住宅建築產品方面，我們為近期需求放緩的環境做好了準備。成本行動和有利的價格成本將部分抵消銷售壓力，同時我們將繼續為 2023 年以後的成長做好準備。總體而言，我們的成本結構有所改善。我們的資產負債表強勁，儘管 2023 年需求環境整體疲軟，但我們預期自由現金流將會強勁。

That brings me to my fourth topic for today. We anticipate and are positioned for strong growth beyond 2023. In Workplace Furnishings, our research indicates the market will recover and demand patterns will change in a way that aligns with our market positions. Specifically, population migration patterns towards secondary and tertiary geographies, positive employment and demand trends with small to mid-sized offices and feedback from large corporate customers regarding return to office plans and adoption of hybrid work models, all aligned with our strong market coverage in product and price point breadth and depth and point to the return of sustained volume growth post 2023. In residential building products, we are continuing to invest in our growth initiatives in the areas of category awareness, new product innovation, online capabilities and the expansion of our wholly owned installing distributor footprint. Overall, the housing market has strong fundamentals. It is undersupplied and demographic trends support future demand growth. Additionally, an aging housing stock will drive remodeling activity. The average home is now 40 years old, supporting robust renovation growth. Given the market's strong fundamentals, our unique growth opportunities and our category-leading positions, we are bullish about our growth in this high-margin, high-return business beyond 2023. I will now turn the call over to Marshall to discuss our initial outlook for 2023. Marshall?

這就是我今天的第四個主題。我們預計並準備在 2023 年後實現強勁成長。在工作場所家具領域，我們的研究表明市場將會復甦，需求模式將會發生變化，與我們的市場地位一致。具體來說，人口向第二和第三地區的遷移模式、中小型辦公室的積極就業和需求趨勢以及大型企業客戶關於重返辦公室計劃和採用混合工作模式的反饋，所有這些都與我們強大的產品市場覆蓋率一致且價格點的廣度和深度，並指向2023 年後銷售持續成長的回歸。在住宅建築產品方面，我們將繼續投資於品類認知、新產品創新、線上能力和擴展我們的業務領域的成長計劃。全資擁有安裝分銷商的足跡。整體而言，房地產市場基本面強勁。它供應不足，人口趨勢支持未來的需求成長。此外，老化的房屋存量將推動改造活動。現在，房屋的平均使用年限為 40 年，這支持了強勁的裝修成長。鑑於市場強勁的基本面、我們獨特的成長機會以及我們在類別中的領先地位，我們對2023 年以後這一高利潤、高回報業務的增長持樂觀態度。我現在將把電話轉給Marshall，討論我們的初步前景2023 年。馬歇爾？

Thanks, Jeff. Let's start with seasonality. This is important because we are expecting 2023 seasonality to be different than what occurred in 2022. And that difference will distort quarterly year-over-year comparisons of sales and profit. Specifically, we expect sales and earnings seasonality in 2023 to be more in line with pre-pandemic trends. That follows 3 years of abnormal seasonality. 2022 seasonality was particularly unusual in that quarterly revenue peaked in the second quarter and first half revenue exceeded second half revenues. That unusual pattern was primarily driven by backlog dynamics that positively impacted the first half and deteriorating workplace furnishing demand that negatively impacted the second half of 2022. As a result, our first half comparisons will be more challenging on a year-over-year basis and our second half comps less so. Due to the change in seasonality, we expect more than 85% of our annual profit will be generated in the second half of 2023, that compares to 60% in the second half of 2022. All right let's move on to our outlook for the first quarter.

謝謝，傑夫。讓我們從季節性開始。這很重要，因為我們預計 2023 年的季節性將與 2022 年不同。這種差異將扭曲季度銷售額和利潤的同比比較。具體來說，我們預計 2023 年的銷售和獲利季節性將更符合疫情前的趨勢。這是在經歷了三年異常季節性之後。 2022 年的季節性特別不尋常，季度收入在第二季度達到頂峰，上半年收入超過下半年收入。這種不尋常的模式主要是由於積壓動態對上半年產生了積極影響，而工作場所家具需求惡化對2022 年下半年產生了負面影響。因此，我們上半年的比較將比去年同期更具挑戰性，我們下半場的表現就不那麼好了。 Due to the change in seasonality, we expect more than 85% of our annual profit will be generated in the second half of 2023, that compares to 60% in the second half of 2022. All right let's move on to our outlook for the first四分之一.

In Workplace Furnishings, we expect first quarter revenue to decline at a year-over-year rate in the low 20s. This decline is the result of last year's unusual seasonality, the continued negative impact of broader macroeconomic concerns and the sale of Lamex. With respect to seasonality, first quarter 2022 benefited from the unwind of backlog built up during 2021. That unwind will not repeat in this year's first quarter and accounts for more than 10 percentage points of our expected year-over-year sales decline. In addition, the sale of Lamex will lower growth in Workplace Furnishings by 5 percentage points or $17 million in the first quarter. First quarter Residential Building Products revenue is expected to decline at a year-over-year rate in the mid- to high teens. It is important to note that segment backlog is currently approaching normal levels, which means our revenue after the first quarter should trend more closely with pre-pandemic seasonality and be fully impacted by weakening new construction and remodel retrofit activity. In total, consolidated revenue for HNI overall is expected to decline at a high teens rate in the first quarter.

在工作場所家具領域，我們預計第一季營收將年減 20 左右。這一下降是去年不尋常的季節性、更廣泛的宏觀經濟擔憂和美時出售的持續負面影響的結果。就季節性而言，2022 年第一季受益於 2021 年累積的積壓訂單的減少。這種減少不會在今年第一季重複，並且占我們預期銷售額同比下降的 10 個百分點以上。此外，出售美時將導致第一季工作場所家具的成長下降 5 個百分點，即 1,700 萬美元。第一季住宅建築產品收入預計將年減 10% 左右。值得注意的是，該部門的積壓目前已接近正常水平，這意味著第一季後的收入應與疫情前的季節性趨勢更加接近，並充分受到新建和改建改造活動減弱的影響。總體而言，預計第一季 HNI 的綜合收入將以十幾位數的速度下降。

We expect consolidated non-GAAP operating income to be approximately breakeven in the first quarter of 2023. Let's move to our outlook for 2023 overall. During 2023, we plan to drive $80 million to $85 million of year-over-year profit support through improved price cost, better productivity and reduce structural costs. These items will partially offset the earnings pressure associated with top line trends. Importantly, our efforts do not come at the expense of future growth, we will continue to invest throughout 2023. Looking at the segments, we expect the $80 million to $85 million of profit support to drive profit growth in Workplace Furnishings and offset much of the negative impact from lower volume in residential building products that's being driven by the weakening housing market. Shifting to the balance sheet. We have a strong financial position, which provides flexibility for investment and positions us well for a slowing economy. Gross debt to EBITDA as calculated for our debt covenants was 0.7 at the end of the fourth quarter. We have a history of generating strong free cash flow through a variety of economic conditions, and we expect free cash flow in 2023 to benefit from a return to more normal working capital levels. Our low leverage and continued free cash flow generation will provide flexibility for the dynamic environment and continued investment. I'll now turn the call back over to Jeff.

我們預計 2023 年第一季合併非 GAAP 營業收入將大致達到損益兩平。讓我們展望 2023 年的整體前景。 2023 年，我們計劃透過改善價格成本、提高生產力和降低結構成本，推動 8,000 萬至 8,500 萬美元的年比利潤支持。這些項目將部分抵銷與營收趨勢相關的獲利壓力。重要的是，我們的努力不會以犧牲未來的成長為代價，我們將在2023 年繼續投資。從各個細分市場來看，我們預計8,000 萬至8,500 萬美元的利潤支持將推動工作場所家具的利潤成長，並抵消大部分房地產市場疲軟導致住宅建築產品銷售下降的負面影響。轉向資產負債表。我們擁有強大的財務狀況，這為投資提供了靈活性，並使我們能夠應對經濟放緩的情況。截至第四季末，根據債務契約計算的 EBITDA 總負債為 0.7。我們有著在各種經濟條件下產生強勁自由現金流的歷史，我們預計 2023 年的自由現金流將受益於恢復到更正常的營運資本水準。我們的低槓桿率和持續的自由現金流產生將為動態環境和持續投資提供靈活性。我現在將把電話轉回傑夫。

Thanks, Marshall. Before we take your questions, I want to take a moment to mention that in December, HNI was again named one of America's most responsible companies, ranking #6 in Newsweek's fourth annual list of America's 500 most responsible companies. These rankings are based on public data that analyzes the top performance across environmental, social and corporate governance categories. Important components in our HNI members daily efforts include a commitment to reducing our environmental impact, making a positive social impact and practicing good corporate governance. Our goal of enhancing where people work, live and gather shines a light on our decades-long commitment to sustainability and good corporate citizenship and most importantly, on the commitment and efforts of all HNI members who make a positive difference every day. In closing, we remain focused on our 2 primary long-term objectives, improving the profitability of our workplace furnishings segment by driving margin expansion and delivering strong top line growth in residential building products by leveraging our differentiated business model. We will now open the call to your questions.

謝謝，馬歇爾。在回答大家的問題之前，我想花點時間提一下，12 月，HNI 再次被評為美國最負責任的公司之一，在《新聞周刊》第四屆美國500 家最具責任公司年度排行榜中排名第六。這些排名是基於分析環境、社會和公司治理類別中最佳表現的公共數據。我們 HNI 成員日常工作的重要組成部分包括致力於減少對環境的影響、產生積極的社會影響以及實行良好的公司治理。我們改善人們工作、生活和聚集環境的目標彰顯了我們數十年來對永續發展和良好企業公民的承諾，最重要的是，彰顯了每天都在做出積極改變的所有HNI 成員的承諾和努力。最後，我們仍然專注於我們的兩個主要長期目標，透過推動利潤率擴張來提高工作場所家具部門的盈利能力，並透過利用我們的差異化業務模式實現住宅建築產品的強勁營收成長。我們現在將開始電話詢問您的問題。

(Operator Instructions) And our first question comes from Rex Henderson at Water Tower Research.

（操作員說明）我們的第一個問題來自 Water Tower Research 的 Rex Henderson。

Congratulations on a really impressive quarter. Terrific margin performance. I did have some questions about, first of all, order trends in the 2 segments is coming out of December into January and February, directionally what are you seeing in those order trends in the 2 segments?

恭喜您度過了一個令人印象深刻的季度。出色的利潤率表現。我確實有一些問題，首先，這兩個細分市場的訂單趨勢是從 12 月到 1 月和 2 月，您在這兩個細分市場的訂單趨勢中看到了什麼？

Okay, Rex. Look, let me start with Workplace. We kind of -- I look at it in 3 buckets in kind of our mid-market segment, they remain strong. Orders in the Q4 and year-to-date are both were up strong double digits. We -- it's consistent with what's going on in the market, actually, migration patterns, large cities losing office jobs, smaller cities gaining employment trends, small, midsized businesses, adding jobs. So that's what we're seeing in that portion of the market. And then we go to our contract segment is stabilizing to improving. Orders are flat year-to-date. I would say their presale activity is improving as people focus on hybrid environments. I think we're looking for more of a second half improvement there. And then third, we have -- our transactional business is still down. Those trends are down double digits. And those are real short cycle, small orders that are really sensitive to macro environment headwinds.

好的，雷克斯。聽著，讓我從工作場所開始。我認為我們的中端市場分為三個部分，它們仍然很強勁。第四季和年初至今的訂單均達到兩位數強勁成長。實際上，這與市場上正在發生的事情是一致的，即移民模式、大城市失去辦公室工作、小城市獲得就業趨勢、中小型企業增加就業機會。這就是我們在這部分市場中看到的情況。然後我們的合約部門正在穩​​定改善。今年迄今訂單持平。我想說，隨著人們關注混合環境，他們的預售活動正在改善。我認為我們正在尋求下半年的更多改進。第三，我們的交易業務仍在下降。這些趨勢下降了兩位數。這些都是真正的短週期、小訂單，對宏觀環境的不利因素非常敏感。

kay. And Rex, as it relates to Residential Building Products, our orders were down 18% in the fourth quarter, and we saw some pressure in both the new construction as well as remodel retrofit, they were down similarly. Now we do expect new construction to be down more than remodel retrofit during 2023.

凱。至於Rex，就住宅建築產品而言，我們的訂單在第四季度下降了18%，我們看到新建和改建都面臨一些壓力，它們也出現了類似的下降。現在，我們確實預計 2023 年新建工程的降幅將超過改造工程。

 Okay. So you've already answered one of my other questions, which is some differentiation between what's happening in new build and retrofit and remodel in RBP segment. And so new construction is worse than the retrofit business. Is that right?

好吧。因此，您已經回答了我的其他問題之一，即 RBP 領域新建與改造和改造之間發生的情況之間的一些區別。因此，新建業務比改造業務更糟。是對的嗎？

Yes. We expect it to be worse traditionally, at least historically, the remote retrofit business is just not as volatile. And we basically track single-family construction activity in the new home side exactly. So we're seeing some pressure there. I expect it to really be fully impacted in the second quarter and the quarters thereafter.

是的。我們預計傳統情況會更糟，至少從歷史上看，遠端改造業務只是沒有那麼波動。我們基本上準確地追蹤了新房一側的單戶建築活動。所以我們看到了一些壓力。我預計它將在第二季度及之後的幾個季度真正受到全面影響。

 And then one other question. Your gross margin performance here was really quite impressive. I'm wondering if you're beginning to see any competitive pressure or customer pushback on prices as commodity prices come down? Are you seeing anybody pushing back on prices at all?

然後還有一個問題。你們這裡的毛利率表現確實相當令人印象深刻。我想知道隨著大宗商品價格的下降，您是否開始看到競爭壓力或客戶對價格的抵制？您是否看到有人壓價？

Rex, that's a good question. We monitor that pretty closely. We haven't seen anything yet as I think there's some in these spaces, particularly in the workplace side, are still announcing price increases. And we're kind of in line. We've been in line with what we've seen in the market. So -- but we keep an eye on for that. But so far, there hasn't really been -- I think it was such a shock to the system that, I think, in general, people were kind of getting hit with inflation across the board. So it's so far been accepted.

雷克斯，這是個好問題。我們非常密切地監控這一點。我們還沒有看到任何事情，因為我認為這些空間中的一些人，特別是在工作場所方面，仍在宣布價格上漲。我們有點排隊。我們的情況與我們在市場上看到的情況一致。所以——但我們會密切關注這一點。但到目前為止，還沒有真正發生過——我認為這對整個系統造成瞭如此大的衝擊，我認為，總的來說，人們受到了通貨膨脹的全面打擊。所以目前為止已經被接受了。

And Rick, there's still inflationary pressures out there that we have to cover, and we are still recovering our margins. So we're still making progress there and it seems like the market is behaving pretty similarly.

里克，我們仍然必須應對通膨壓力，而且我們仍在恢復利潤。因此，我們仍在這方面取得進展，而且市場表現似乎非常相似。

Okay. Very good. I'll pass on the question to someone else.

好的。非常好。我會把這個問題轉給其他人。

We'll move next to Budd Bugatch at Water Tower Research.

我們將搬到水塔研究中心的巴德·布加奇旁邊。

Yes. also thank you for taking my questions. I hope everybody is well there. I just want to follow up on Rex a little bit with the -- in terms of hearth -- are we seeing any change in the product mix? I know you've done a great job on the logistics, but I'm wondering are we seeing anything in terms of penetration, in terms of new housing? And is product mix like electrical making a change on what are making an impact there?

是的。也感謝您回答我的問題。我希望那裡的每個人都一切都好。我只是想跟進一下雷克斯的情況——就壁爐而言——我們是否看到產品組合有任何變化？我知道你們在後勤方面做得很好，但我想知道我們在滲透率和新住房方面是否看到了什麼？像電氣這樣的產品組合是否會改變正在產生影響的因素？

Yes Budd, good question. I mean I think we are -- we've been working on that for a bit. And when it comes to electric, for example, look, we're seeing a lot of opportunity there. We're launching a lot of new products in that category. It's expanding the category. We've got examples where we've got places in the country where the IR rate was 0, and it jumps to 50% just because of the electric availability on that unit. So it's really an expansion of the category, not a replacement of the category. And so that -- and then we also are seeing some traction, as we've talked in the past on our insert business as that because as customers become more aware of their ability to do an insert that's easier than having to blow up a whole remodel and replace maybe an old wood burner with an insert gas that's made for an easy install. We're starting to see a lot more traction there as well. And that's really category expansion because otherwise, they weren't going to be looking out a remodel just yet. So it's a way that we can get a unit in there without doing a full remodel.

是的，巴德，好問題。我的意思是，我認為我們——我們已經為此努力了一段時間。例如，當談到電力時，我們看到了許多機會。我們正在該類別中推出許多新產品。它正在擴大類別。我們有一些例子，在該國有些地方的 IR 率為 0，而僅僅因為該設備的電力可用性，IR 率就躍升至 50%。所以它其實是品類的擴展，而不是品類的替代品。因此，我們也看到了一些吸引力，正如我們過去談論過我們的插入業務一樣，因為隨著客戶越來越意識到他們有能力做一個插入，這比炸毀整個插入更容易改造並更換舊的木材燃燒器，並使用易於安裝的插入式氣體。我們也開始看到那裡有更多的吸引力。這確實是品類擴張，因為否則，他們還不會考慮進行改造。所以這是一種我們可以在不進行全面改造的情況下獲得一個單元的方法。

Jeff, that incident rate jump sounds really fantastic. Do you -- is it really moving the needle? Is it of a size yet to make a difference in the overall category? Or is it still too small?

傑夫，事故率的跳躍聽起來真的很棒。你——這真的能起到推動作用嗎？它的規模是否還不足以對整個類別產生影響？還是還是太小了？

It's still in its early innings, but I'd say we're in the first -- bottom of the first. But I think we're seeing -- I believe it's going to be a material contributor to our business going forward. But the -- we're off a low base right now.

現在還處於早期階段，但我想說我們處於第一局——第一局的墊底。但我認為我們正在看到——我相信這將對我們未來的業務做出重大貢獻。但我們現在的基礎較低。

Okay. And do you see much more in the way of M&A activity in that segment in that business unit in terms of additional dealers?

好的。您是否認為該業務部門的該細分市場中的併購活動更多地增加了經銷商？

Yes, that's a good question. I think, look, we do have a unique model and our wholly owned installing distributor network is a really nice asset in this business. And we do see lots of -- there's a lot of opportunity out there for that aspect of our business. And we aren't -- we operate in tandem with our distribution, our independent, and it's always we -- but there's succession events, there's geographical expansions. So we absolutely have that in our quiver, and it's a focus of ours, and I do believe that would be something that you'll see more of down the road.

是的，這是一個好問題。我認為，看，我們確實有一個獨特的模式，我們全資擁有的安裝經銷商網路是這個行業的一個非常好的資產。我們確實看到了很多——我們業務的這方面有很多機會。我們不是——我們與我們的發行、我們的獨立公司一起運作，而且始終是我們——但是有繼承事件，有地理擴張。所以我們絕對有這個在我們的箭袋裡，這是我們的焦點，我相信這將是你在未來會看到更多的東西。

Okay. Great. And last for me, I know commodity inflation, and particularly in steel was was unwelcome and had to be covered over the last post-covid period. Are we seeing some retreating there? And Marshall said, we're still seeing inflationary pressures, but I wonder if you can pinpoint where it is or maybe quantify what we're seeing in that.

好的。偉大的。最後對我來說，我知道商品通膨，尤其是鋼鐵通膨，是不受歡迎的，必須在後疫情時期解決。我們看到有人撤退了嗎？馬歇爾說，我們仍然看到通膨壓力，但我想知道你是否能找出通膨壓力在哪裡，或量化我們在其中看到的情況。

Yes, Budd. But so look, we're seeing inflation in 2 broad categories. The first one is wages. I would say that the wage inflation has moderated, but we're still seeing year-over-year increases like you do in any given year. And then there's a second bucket where there's kind of a broad set of commodities that are still under some pressure. A lot of that's carried over from the prior year. So we're seeing some inflation from those 2 buckets. That's been partially offset by lower steel costs. But the net of the 3 is that we're seeing inflation, roughly speaking, we're expecting input cost inflation to be up in the $15 million to $20 million range for the year.

是的，巴德。但你看，我們看到的通膨有兩大類。第一個是工資。我想說的是，薪資通膨已經放緩，但我們仍然看到同比增長，就像任何一年的情況一樣。然後還有第二個類別，其中有大量商品仍然面臨著一定的壓力。其中很多都是前一年遺留下來的。所以我們看到這兩個桶子出現了一些通貨膨脹。這已被鋼鐵成本下降部分抵消。但這三者的淨值是我們看到了通貨膨脹，粗略地說，我們預計今年的投入成本通貨膨脹將在 1500 萬美元至 2000 萬美元的範圍內上升。

Got you. But like the return to seasonality, that's not significantly different than we see almost every year, which we cover with a small price increase once a year annually. Is that a fair way to look at it?

明白你了。但就像季節性回歸一樣，這與我們幾乎每年看到的情況並沒有太大不同，我們每年都會小幅上漲一次價格。這是一個公平的看待它的方式嗎？

Absolutely. That's very fair.

絕對地。這非常公平。

Okay. Great. Thank you very much. And let me add my congratulations to Rex's. The margin performance is impressive. Thank you very much and good luck on 2023.

好的。偉大的。非常感謝。讓我向雷克斯表示祝賀。利潤率表現令人印象深刻。非常感謝，祝 2023 年好運。

We'll go next to Ruben Garner at the Benchmark Company.

接下來我們將採訪 Benchmark 公司的魯本‧加納 (Ruben Garner)。

 Maybe to start, you referenced profit improvement in workplace kind of in the face of the volume headwinds. Can you give any detail on exactly how much volume decline you can withstand with some of these changes or a way to think about decremental margins kind of ex the price cost and savings and productivity initiatives that you have?

也許首先，您提到了面對銷售逆風時工作場所的利潤改善。您能否詳細說明您可以承受其中一些變化所帶來的銷售下降多少，或者考慮如何考慮利潤率下降（除價格成本以及您所擁有的節省和生產力計劃之外）？

Yes, Ruben, we do expect to see volume improvement -- I'm sorry, profit improvement despite the lower volumes. I think maybe the way to answer your question is that we're roughly thinking that workplace volume for the year in terms of total top line would be down on an organic basis in the low to mid-single digits and that would be a big decline in the first half followed by some moderation in the second half. So under those conditions, we have enough profit support to drive our operating profit growth that we mentioned. In terms of decremental margins or incremental margins in the workplace, on average runs around 35%. And of course, we have offsets to help mitigate that. So really, the decremental margins for Workplace would not really be calculable, right? We're expecting lower volume, lower sales and higher profit.

是的，魯本，我們確實預計銷量會有所改善——抱歉，儘管銷量有所下降，但利潤仍會有所改善。我想也許回答你問題的方法是，我們粗略地認為，就總收入而言，今年的工作場所數量將有機地下降到低至中個位數，這將是一個很大的下降上半場有所緩和，下半場則有所緩和。因此，在這些條件下，我們有足夠的利潤支持來推動我們所提及的營業利潤成長。就工作場所的遞減利潤或增量利潤而言，平均約為 35%。當然，我們有抵消措施來幫助緩解這種情況。所以實際上，Workplace 的遞減利潤實際上是無法計算的，對嗎？我們預期銷量會減少，銷售額會減少，利潤會增加。

Okay. And that low to mid-single-digit decline in Workplace. Last quarter, you talked about strength you were seeing in mid-market. That low to mid-single digit seems like a relatively modest decline relative to what the industry orders have been in recent months. Can you update us there? Is mid-market still outperforming? And is that kind of what gives you confidence that maybe you'll do something better than what we've seen of late.

好的。工作場所出現低至中個位數的下降。上個季度，您談到了您在中端市場看到的實力。與近幾個月行業訂單量相比，這個低至中個位數的下降似乎相對溫和。你能在那裡更新我們的情況嗎？中階市場仍然表現出色嗎？這就是給你信心的東西，也許你會做得比我們最近看到的更好。

Yes, there's 2 things there, maybe to point out is, first of all, our orders in the fourth quarter when you exclude the restructuring of the e-commerce business and divesture lanes were up 3%. So we did see fourth quarter activity that's in line with that expectation. Secondly, just to remind everyone that we saw a pretty significant step down in demand in the back half of 2022. So as we anniversary that step down, it's not that we expect a lot of demand growth where we are right now, but we'll certainly see lower comps that are going to be easier to compare against.

是的，有兩件事需要指出，首先，如果排除電子商務業務的重組和資產剝離，我們第四季度的訂單增長了 3%。因此，我們確實看到第四季的活動符合預期。其次，只是想提醒大家，我們看到2022 年下半年的需求出現了相當大的下降。因此，在我們下台週年紀念日之際，並不是說我們預計現在的需求會出現大幅增長，而是我們「肯定會看到較低的比較，這將更容易進行比較。

Yes. And I think, Ruben, as I commented earlier, that the mid-market, for lack of a better term, is year-to-date is running up strong double digits. Presale activity points to continued strength there. And so we just believe the migration patterns and employment trends align with our strengths. And so that's really maybe offsetting some of the other areas of the business.

是的。我認為，魯本，正如我之前評論的那樣，由於缺乏更好的術語，中端市場今年迄今正在以兩位數的強勁增長。預售活動顯示該市場持續走強。因此，我們相信移民模式和就業趨勢與我們的優勢相符。因此，這確實可能抵消了業務的其他一些領域。

Okay. And then on the housing side, new construction, I think, is a little bit easier for us to get a handle on or at least kind of guess where the market is going. Can you give us any color on the R&R side of your business? How you expect that to hold in? Any kind of other puts and takes, whether it be share gain opportunities or any other drivers outside of the market specific to your fireplace business.

好的。然後在住房方面，我認為，新建築對我們來說更容易掌握或至少猜測市場走向。您能為我們介紹一下您的 R&R 業務嗎？您希望這種情況能持續下去嗎？任何類型的其他看跌期權，無論是份額收益機會還是特定於您的壁爐業務的市場之外的任何其他驅動因素。

 I think Jeff mentioned a couple of the strategic growth initiatives that probably had a little more on the R&R side than they do on the new construction side. And as I mentioned earlier, Ruben, the R&R side is historically less volatile. So we're expecting new construction decline, like I said, in line with single-family housing activity and the existing home or remodel retrofit side of the business to be down less, expecting a little pressure in both sides. That's for sure, though.

我認為傑夫提到了一些策略性成長舉措，這些舉措在 R&R 方面的作用可能比在新建設方面的作用要多一些。正如我之前提到的，Ruben，從歷史上看，R&R 方面的波動性較小。因此，正如我所說，我們預計新建築的下降與單戶住房活動一致，而現有房屋或改建改造業務的下降幅度將較小，預計雙方都會承受一些壓力。不過，這是肯定的。

We'll move next to Steven Ramsey of Thompson Research Group.

接下來我們將請湯普森研究小組的史蒂文·拉姆齊 (Steven Ramsey) 發言。

Sorry, if I'm repeating myself getting on a little bit late here, but I'm curious how much of your inventory currently is still carrying higher costs from inflation and how that works its way through the P&L early in 2023 to benefit margins? And maybe as a follow-on to that, how do you think about past generation this year and is working -- net working capital a tailwind there?

抱歉，如果我重複的話有點晚了，但我很好奇您的庫存目前有多少仍然承受著通貨膨脹帶來的較高成本，以及這如何透過 2023 年初的損益表影響利潤率？也許接下來，您如何看待今年的上一代以及淨營運資本是否成為那裡的推動力？

 Steven, the quick answer to your inventory question is that our inventory was essentially flat on a year-over-year basis. So we've normalized a lot of inventory that we brought in during 2022. So I don't -- it's not going to have a material impact on our margins. The second part of your question about working capital, that's a continued focus for us. We have used working capital for the last 2 years as we dealt with all the supply chain disruptions. We brought in some inventory to buffer against that. We are working inventory efficiency as well as overall working capital efficiency. As I touched on in our prepared comments, we expect to have more normalized working capital levels during 2023, and that should be a source of cash for us this year.

史蒂文，對您的庫存問題的快速回答是，我們的庫存同比基本持平。因此，我們已經對 2022 年期間引入的大量庫存進行了標準化。所以我不會——這不會對我們的利潤率產生重大影響。關於營運資金的問題的第二部分是我們持續關注的焦點。過去兩年，我們一直在使用營運資金來應對所有供應鏈中斷問題。我們引入了一些庫存來緩衝這種情況。我們正在研究庫存效率以及整體營運資金效率。正如我在準備好的評論中提到的那樣，我們預計 2023 年營運資本水準將更加正常化，這應該成為我們今年的現金來源。

 Great. And then thinking about cash generation for this year as well as a low leverage level, can you talk about cash deployment, the willingness to do acquisitions on the resi side of things in an uncertain period if people are willing to deal and how you think about share buybacks in the slower time period.

一個了不起的。然後考慮今年的現金產生以及低槓桿水平，您能談談現金配置，如果人們願意交易的話，在不確定的時期內進行收購的意願以及您的想法在較慢的時期進行股票回購。

Yes, Steven, we -- as I said just a bit ago, I think on the resi side, we are always kind of looking at the marketplace and trying to decide if there is what opportunities are out there. And we've shown an ability and an appetite to do that in the past, and that will continue as we see attractive opportunities on the resi side for sure.

是的，史蒂文，我們 - 正如我剛才所說，我認為在黃金方面，我們總是關注市場並試圖確定是否存在機會。我們過去已經表現出了這樣做的能力和興趣，隨著我們肯定在渣油方面看到了有吸引力的機會，這種情況將會繼續下去。

 And in terms of our priorities, Steven, look, we expect to deploy capital. Historically, our primary objective is to invest in the business. We also look to maintain and modestly grow our dividend, and then we pursue M&A insurer purchase a case-by-case basis depending on conditions and opportunities, and we should continue to do that.

史蒂文，就我們的優先事項而言，我們希望部署資本。從歷史上看，我們的主要目標是投資業務。我們也希望維持並適度增加股息，然後我們根據條件和機會逐案尋求併購保險公司，我們應該繼續這樣做。

And we'll go next to Greg Burns at Sidoti.

接下來我們將前往 Sidoti 的 Greg Burns。

Marshall, you mentioned the backlog normalizing on the building products side of the business, and that will kind of get the business more back to a normal cadence. Can you just talk about what historically the typical seasonality that business is? And I guess, maybe what you're expecting in terms of like the current demand trends there?

馬歇爾，您提到了建築產品業務方面的積壓正常化，這將使業務更多地恢復到正常節奏。能談談歷史上商業的典型季節性是什麼嗎？我想，也許您對那裡當前的需求趨勢有何期望？

 Yes. So historically, residential building products sort of hit a trough in the second quarter and then builds in the back half and then it starts to decline again and then again, bottoms out in the same quarter. So that did not happen last year. Last year, if you look at our quarterly revenue, we were pretty consistent from quarter-to-quarter, and that's because the backlog buffered the seasonality. We had more demand than we really had capacity. And so we pretty much had the same revenue plus or minus a few percent each quarter. So this year, in the first quarter, we're basically normalizing the backlog. So as we enter the second quarter, we're going to start to experience that typical seasonal debt as well as start to begin to feel the impact of the housing market declines.

是的。從歷史上看，住宅建築產品在第二季觸底，然後在後半段開始回升，然後開始再次下降，然後在同一季度觸底。所以去年並沒有發生這種情況。去年，如果你看看我們的季度收入，我們每季的收入都非常穩定，這是因為積壓的訂單緩衝了季節性。我們的需求超過了我們的實際能力。因此，我們每季的收入幾乎相同，上下浮動幾個百分點。所以今年第一季度，我們基本上讓積壓正常化。因此，當我們進入第二季時，我們將開始經歷典型的季節性債務，並開始感受到房地產市場下滑的影響。

 Okay. And then you did talk about the improved profitability you expect on the Workplace Furnishing side of the business, but in total, I guess, with the $80 million to $85 million of savings you're projecting, do you expect to grow earnings next year?

好吧。然後您確實談到了您期望工作場所家具業務方面盈利能力的提高，但總的來說，我想，隨著您預計的 8000 萬至 8500 萬美元的節省，您預計明年的收入會增長嗎？

In Workplace Furnishings, we do expect to expand margin and grow profit dollars in the segment.

在工作場所家具領域，我們確實希望擴大該領域的利潤率並增加利潤。

I mean on a consolidated basis, like are you going to be able to offset the declines in volume on the building products side of the business and generate consolidated earnings growth next year?

我的意思是，在綜合基礎上，您是否能夠抵消建築產品業務量的下降，並在明年實現綜合盈利增長？

Our expectation right now is that there's a pretty significant decline in residential building products, which is going to -- even though we're going to offset a good chunk of it with our actions, that the net impact of that is going to be more than the profit growth in workplace furnishing. So consolidated earnings, we expect to be down, just maybe not nearly as down as you might think given the amount of volume that was being declining.

我們現在的預期是，住宅建築產品將出現相當大的下降，儘管我們將透過我們的行動抵消其中很大一部分，但其淨影響將更大高於工作場所家具的利潤增長。因此，考慮到交易量的下降，我們預計綜合收益將會下降，但可能不會像你想像的那麼下降。

And that does conclude our question-and-answer session at this time. I would like to turn the conference back over to Mr. Lorenger for closing remarks.

我們的問答環節到此結束。我想將會議轉回由 Lorenger 先生致閉幕詞。

All right. Well, thanks, everybody for joining us today. Have a great day, and we'll talk to you next time.

好的。好的，謝謝大家今天加入我們。祝你有美好的一天，我們下次再和你聊。

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

今天的電話會議到此結束。感謝您的參與。您現在可以斷開連線。