HNI Corp (HNI) 2024 Q3 法說會逐字稿

Thank you for standing by.

My name is Amy, and I will be your conference operator for today.

At this time.

I would like to welcome everyone to the HN I Corporation.

Third quarter, fiscal 2024 results conference call, all lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question-and-answer session.

If you would like to ask a question during this time, please press the star followed by the number one on your telephone keypad.

If you would like to withdraw your question again, press star and the number one, it is now my pleasure to turn the call over to Mr. McCall.

Please go ahead.

Good morning.

My name is Matt McCall, I'm Vice President, investor relations and corporate development for H&I Corporation.

Thank you for joining us to discuss our third quarter fiscal 2024 results with me today are Jeff Lorenger, Chairman, President and CEO Marshall Bridges, Senior Vice President and CFO and BP Berger, Executive Vice President 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 risk.

Actual results could differ materially.

The 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.

Good morning and thank you for joining us.

I'm going to divide my commentary today into three sections.

I will start by providing some highlights on our third quarter results which were strong non-GAAP EPS of $1.03 exceeded our internal expectations and was 11% higher than the prior year period despite continued revenue pressure, then I will discuss our expectations for the fourth quarter where we expect the near-term demand pause to impact results.

Finally, I will cover why we are confident in our ability to continue to drive profit growth in the upcoming years.

Specifically, I will highlight three key points that underscore our positive outlook for 2025 and 2026.

We have elevated EPS visibility through 2026, our workplace demand outlook remains encouraging and our unique position and strong long term market fundamentals provide reasons for optimism in residential building products.

Following those highlights, Marshall will review our outlook and discuss our strong financial position.

I will conclude with some general closing comments before we open the call to your questions.

Let's start with the third quarter.

Our members again delivered strong profit growth.

Our 11% non-GAAP EPS growth in the third quarter was on top of a very strong year ago comparison when profit grew more than 30% year over year.

Third quarter, EPS has more than doubled in the past three years and we delivered those results without top line support.

In the workplace, furnishing segment our profit transformation plan and acceleration of KI I synergies drove segment Non GAAP operating profit margin to a 20 year high for the third quarter and residential building products despite ongoing housing market volatility, Non GAAP operating profit margin expanded year over year and exceeded 18% for only the third time in the third quarter.

Our strategies, our dedicated member owners, our customer first business model and our proven ability to manage through all parts of the economic cycle again helped deliver strong results.

Next, a few comments about the fourth quarter, we are optimistic about the opportunities that we see in both segments.

However, in the very near term, we are seeing a pause in demand across our businesses as a result fourth quarter profit is expected to decline versus the same period of 2023.

In workplace furnishings, we are seeing demand moderate with small and medium sized customers, within the SMB space our transactional business has been particularly soft as you may recall our transactional business primarily flows through wholesalers and national supplies dealers.

This business can be volatile, the selling cycle is short, it typically involves smaller item purchases and historically has been very sensitive to changes in the economy and general business sentiment.

Currently, economic and election concerns have small business leaders increasingly hesitant about discretionary spending.

Indicative of this sentiment is the September small business optimism survey.

The monthly uncertainty index hit a record high ahead of the US elections.

We expect business leaders hesitation to moderate as we move past the elections and into next year.

In the contract furniture space, we are seeing further project delays and continued lengthening of the selling cycle.

Encouragingly, activity and dealer sentiment are improving.

However, customers are still being cautious, and our fourth quarter shipments will be negatively impacted.

A recent Deloitte survey illustrates these concerns of 130 large company CFOs that were surveyed only 12%.

So now is a good time to take greater risks.

This is the lowest level in the past 10 years, even lower than the worst stages of the pandemic.

But again, we view these pressures as temporary.

Finally in the residential building project segment during the quarter builder and homeowner sentiment was negatively impacted by interest rate volatility, ongoing inflation and affordability issues and the same economic and political uncertainty that is impacting our workplace business.

Reflecting these concerns the housing market index fell to 39 in August after reaching a peak of 51 in March and April.

As 2025 develops we do expect interest rate reductions to eventually result in increasing housing turnover and improved demand for our products in both new construction and R&R.

Moving to my first point highlighting our optimism beyond the fourth quarter, we have two initiatives underway Mexico and KII synergies that by themselves will deliver USD0.70 to USD0.80 of EPS growth in 2025 and 2026.

That represents approximately 25% of EPS growth on top of our already strong results.

Even with the slower fourth quarter, we expect to generate record non-GAAP EPS in 2024 which will be our third consecutive year of double-digit non-GAAP EPS growth.

This means that without help from the cycle, we expect our three year double digit earnings growth streak to extend through at least 2026.

Remember, our workplace furnishings, profit transformation plan does not require revenue growth, and our recent margin expansion has been achieved without cyclical top line support.

In addition, we continue to adjust our cost structure and residential building products to align with the current demand environment.

Early in the fourth quarter, we took actions that will lower our cost structure by approximately $5 million in residential building products.

Most of that benefit will be recognized in 2025 further adding to our profit visibility.

Before moving to my second point, I'll cover a few additional comments on KII and the recognition of synergies KII continues to be highly accretive and was a major contributor to our strong third quarter profit and total synergies expected to result from the Kimball International acquisition have increased another $10 million and now are expected to total $60 million with 30 million to be realized in 2025 and 2026.

KII is also providing us with new revenue growth opportunities and is highly complementary.

Kimball International's workplace offering improves our post pandemic product and geographic positioning and KII hospitality and health care businesses are well positioned with an attractive expanding segment, and both are generating growth.

Our confidence in the combination of strategic and financial benefits continues to prove out and accelerate.

Moving to my second point supporting our optimism, the outlook for workplace furnishings demand remains encouraging segment orders have continued to improve early in the fourth quarter after growing 1% in the third quarter.

I'll now comment on the order trends of SMB and contract separately.

Our SMB activity moderated in the quarter consistent with small business sentiment trends and our exposure to transactional business.

SMB orders declined 3% year over year in the third quarter against the challenging comp in the third quarter of 2023 SMB orders grew 6% year over year.

As you may recall, SMB has been an area of strength for us for some time.

This segment of our business has generated consistent order growth over the past two years, and we remain bullish about the fundamental backdrop specifically healthy dynamics including population shifts to secondary tertiary geographies and relatively higher office usage in those markets point to a return to growth in 2025.

In our core contract business, we see growth on the horizon.

The combination of contract and KII orders were up 5% on a year over year basis.

In the third quarter, we have seen large projects reactivate and continued strength in the hospitality space.

As a result, orders over the past two months have improved.

However, most of these projects will ship next year, further supporting our outlook quarter ending workplace backlog is up 5% versus the prior year.

Additionally, our contract sales funnel for 2025 continues to be encouraging and is up over 10% year over year.

Looking out, we believe we are particularly well positioned to benefit as the workplace furnishings market continues to improve, we have unmatched product and pricing breadth and depth we have products that work for customers ranging from small businesses to the largest multinationals our brands are distributed widely across geographies from tertiary markets to the top MSAs and we can broadly meet the needs of workplaces, schools, health care facilities and hotels.

Moving to my third reason for optimism, we continue to see positive long term market fundamentals and residential building products.

Single family housing remains under supply and demographics will support additional demand growth.

Over the next year, we expect these fundamentals combined with anticipated interest rate reductions to eventually flow through.

Driving increased housing turnover and improved demand for our products in both the new construction and R&R spaces.

In addition to the strong market fundamentals, we continue to invest in unique growth opportunities these include new product innovation such as electric fireplaces, efforts to become more intimate with builders, homeowners and homebuyers online capabilities and the expansion of our wholly owned installing distributor footprint.

I will now turn the call over to Marshall to discuss our outlook for 2024.

Marshall.

Thanks Jeff.

I'll start by summarizing our outlook for demand and profit beginning with demand.

Fourth quarter revenue in workplace furnishings is expected to decline at a low to mid-single digit rate year over year our new outlook represents a reduction from what we provided in our July earnings release which implied fourth quarter growth.

Moving to residential building products we expect fourth quarter revenue to decrease at a low single digit pace versus the same period in 2023 this is also down from our prior outlook which anticipated growth in the fourth quarter.

Shifting to our profit outlook we expect margins in workplace furnishings to move modestly lower year over year, driven by lower volume margins in residential building products are expected to be mostly unchanged to down slightly.

In total fourth quarter earnings are expected to decline year over year despite that decline, we expect full year EPS to increase and extend our streak of growing full year EPS by 10% or more to three years.

I'll wrap up with you with a few comments on our balance sheet we improved our all our already strong financial position gross leverage at the end of the quarter was 1.1 times as calculated in accordance with our debt agreements that ratio was down from 1.5 times at the end of the second quarter due to higher profit and lower debt levels.

I would also like to point out that we are very near the same leverage ratio that we had before the Kimball International acquisition, so it took us just over five quarters to deliver which is a testament to our ability to consistently generate strong free cash flow.

During the quarter we also accelerated our share repurchase activity with more than $11 million of buybacks.

The combination of our strong balance sheet and consistent cash flow generation pro provides a high degree of financial flexibility and capacity for capital deployment.

Our current priorities for cash deployment remain reinvesting in the business funding dividends and pursuing share buybacks and M&A opportunities.

I'll now turn the call back over to Jeff.

Thanks Marshall.

We remain committed to expanding margins and workplace furnishings and driving long term revenue growth in residential building products.

We drove strong results through the first three quarters of 2024.

Delivering year-to-date earnings growth of 33% and we anticipate record EPS for the full year.

Beyond this year, we are positioned for continued success.

In summary, we have elevated earnings visibility in 25 and 26 broad and diverse product and market coverage in workplace furnishings and market leading positions in residential building products, all supported by a strong balance sheet and the ability to drive continued free cash flow.

I want to thank each HNI member for their continued dedication and congratulate them on delivering another quarter of excellent results.

Before we take your questions, today will be Marshall's last earnings call as CFO.

Marshall joined HNI 23 years ago and he and I have worked side by side now for close to 15 years on behalf of the board of directors and the entire HNI team.

I want to thank Marshall for his many contributions to the corporation through the years.

While Marshall will no longer be our CFO, we are happy he will continue to be part of HNI and we would be working in a part time role, assisting with strategic projects focused on artificial intelligence.

VP Berger, who's on the call with us today will be taking over as CFO at year end VP led our residential building products business for the last nine years and has been part of the organization for 27 years, serving in various financial operational leadership roles.

We are fortunate to have VP ready to step into the role and expect a seamless transition.

Thank you again, Marshall.

Good luck in semi retirement.

We will now open the call to your questions.

Thank you.

The floor is now open for questions and as a reminder if you have dialed in and would like to ask a question, please press star and the number one on your telephone keypad to raise your hand and enter the queue.

We'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Reuben Garner with benchmark.

Your line is now open.

Thank you.

Good morning, everybody and congrats Marshall and VP look forward to working with you.

So let's see where should we start the, the residential building products?

Near term kind of softness that you're seeing?

Can you go into a little more detail there?

What exactly you're seeing?

Is it more new construction slow down we saw over the summer kind of hitting you.

Now, is it more on the R&R side just continued with rates being elevated and then any signs of further de stocking?

I know last year there was, it's not a heavily inventory product, but last year there was a bit of a reset to normalize any signals that there's more of that by chance.

Yeah, Ruben, I think, and this is a piece our outlook, it really falls into three equal weighted pieces and you're asking about one of them you know, of, of reduction in near term demand.

And it's, it's really in our stove business, which is a large part of our remodel retrofit business.

II, I think I'll let VP provide some color on what's happening with stoves.

Sure.

Ruben, I think that I think we start with the business itself.

It's a short cycle purchase, you know, anything like that provides obviously low visibility.

But historically, the demand for this business has been pretty predictable outside of extreme oil prices or then obviously the pandemic so as we firmed up, thinking through the second half, we did expect this to stabilize and if with stabilizing actually would show some pretty strong growth in the fourth quarter year over year because of how we finished in 2023 as you recall, the prior year comps were pretty low backlog was starting to deteriorate and come down and as we thought, the inventory de stocking that was happening across the business went through, we would favorably see that in the back half of this year.

So all of that's happening, it's just normalizing a little bit slower than we thought and as we unpack it, whether it's the economy, you know, warm weather, certainly dependent upon this business with the products and even the election so I would say it's all kind of playing out as we thought, just a little slower than we thought, but also on the new construction side, not just the stoves, we are seeing some growth.

It's just growing slower than we thought.

We came into this plan, thinking about the, the third quarter shooting for a 4% growth that actually came in at two.

So that's, encouraging that we're actually seeing some activity there, but fundamentals haven't changed and as we go into the four quarter, we see that this is continued to be an area for us to grow, just probably not at the same pace as we are right now.

So, the reason for that is, really about home buying conditions you know, they haven't improved to the point where we thought they would.

Although there are things that to Jeff's point to why we believe that we should, should know that there's optimism there as we go.

Forward.

And, so, would you, I know you're not providing 25 guidance yet, but would you expect that this softness might persist into the early part of next year until we can get to kind of the spring building season and see where rates and, and the builders and the consumer lands at that time.

Yeah, I don't, we don't see something that's going to change the conditions radically from where we are right now.

I think we're a bit premature to project anything in 2025 given all the uncertainty that we're facing here in the upcoming weeks.

But I think that's a pretty good assessment.

Okay and then on the workplace side and forgive me for the near term questions, but these are the two kind of items that, that seem to change this quarter that the transactional business versus the order trends you're seeing is that is, dichotomy something you've seen before, the transactional typically lead the orders and, and maybe therefore you're anticipating some, negative order growth in the fourth quarter.

Just walk me through how those two relate historically.

Yeah, I think that's a good point, but just to level set for, you know, we're seeing basically, you know, why is the outlook for fourth quarter change?

and it's really, I want to start with, you know, we've, before I get into those details, we continue to drive profit growth without topline support.

So, I think we're really, as I said in my prepared remarks, 25 and 26 we have a lot of visibility to and we, we've shared those numbers shifting to your question there's, three areas we've just commented on one of them.

They're probably equally weighted in the fourth quarter and the transactional businesses represents about a third of, you know, that weighting and you're right, this is this business flows through wholesalers and national supplies dealers.

It's roughly 20% of our S&B sales, but it, it can be volatile it's, it's more discretionary purchases it's much more short cycle and historically, it remains, historically, has been, it still remains sensitive to changes in the economy.

So, we, don't see that as a growth driver we do think it'll stabilize but it is, the piece that is really, leading, you know, the short cycle stuff right now and it's economic driven we've seen this in the past, whether it's indicative right now of, of anything else, I think that there's, there's enough dynamics in the economy that I wouldn't say it's a leader or a lager.

It's really, we believe more of a temporary kind of economic short term election cycle what's going to happen and it's more reflective of that than it is a lead lag situation.

And then, and the second, area I should comment on is the, the other third waiting's changed in our outlook is the contract business.

And as I, we continue to see solid indications of growth, the timing of shipments and orders continue to push out.

So what we're seeing currently is, our sales levels up 10% more than 10% the dealers are increasingly confident our order trends are improving the combination of North American contract and KII orders was up 5% in the third quarter and the return to office efforts continue to ramp up across most large MSAs, lease turn continues to accelerate as tenants, you know, take advantage of lease economics and non-viable spaces kind of coming off the market.

So, however, the activity is predominantly landing in 25 due to customer requests.

So, on the positive side longer timing is driving an increase in backlog.

So, our backlog is up 5% year over year, giving us better visibility to next year but what we have seen with this lengthening, and we've talked about this for a couple of quarters now.

So let me, provide a couple more comments and a bit more color on this, this this dynamic of order to ship dynamic.

There are multiple drivers that we are seeing when we talk to customers, customers are still sorting through complex and dynamic real estate and return to office decisions they're wrestling with many factors as the attempt to figure out the most productive floor plates that support their return to office initiatives and candidly, there's more decision makers in the process than there historically has been and so customers are asking for more data to facilitate decision making.

So all that lengthens this sales process, the only thing that's going on is inflation has challenged some of the budgeting and by the time the furniture is getting spaced budget challenges drive additional design iterations as customers do more value engineering, which by the way is good for us, given our breadth and depth of price points and product coverages.

So then the final dynamic that there on this lengthening order to ship is they remember the disruptions caused by supply chain issues.

And so when they finally order, they're ordering earlier, extending times between order and install.

So, all this results in, you know, more specs, more design iterations, extended sales cycles and then finally this, you know, economy, election timing not adding, you know, is kind of adding to the delay.

So that's really what's going on.

I wanted to take a minute and kind of give you a view on what we mean and what's behind, you know, kind of the dynamics of the expanding cycle.

Very helpful.

Thanks for the color and good luck to you.

Thanks.

The next question comes from the line of Greg Burns with Sidoti.

Your line is now open.

Good morning with the leverage now back down to I guess pre-Kimball levels.

How should we think about maybe your capital allocation priorities or our acquisitions now a consideration again and seems like you're buying back stock here also, maybe you could just talk about just generally how you think about the balance sheet leveraging that and using that to maybe grow inorganically.

Yeah, Greg, as I mentioned in our prepared remarks, you know, we're going to generate some strong free cash flow this year we expect free cash flow to be somewhere in the USD180 to USD185 million range for the year, which is, you know, above 375 a share.

So just point out that's a strong level in excess of net income.

Now what to do with it you know, we remain committed to reinvesting in the business of course, the dividend is important to us and then after that, we continue to assess share repurchase and M&A opportunities on a case by case basis, we have been ramping up our share repurchases and anticipate continue to do that.

There's really not a need to deliver from here, we feel very comfortable with the leverage we have.

Okay.

And you talked about the revenue visibility highlighting Mexico and Kimball synergies.

I I know you typically on a year to year basis, have, you know, your ongoing profit initiatives?

Like is there anything you could any maybe color you could add in terms of maybe next year or how that might contribute to profit growth next year?

Well, you know, if you look at our history, we typically generate something like, you know, USD10 to USD12 million of year over year profit benefit from productivity initiatives now, I'm not sure what that means for next year, Greg because we have a lot going on we got the, the Mexico ramp up we're finishing off the hickory consolidation.

So we're going to have some of our resources and executing those initiatives, but we would expect to generate year over year productivity regardless and I, I think that we, would be able to expand margins in 2025 2026 through the two initiatives, Jeff mentioned earlier as well as productivity benefits.

Okay.

And in terms of the maybe both segments, first on the office segment, do you have a goal in mind in terms of where you think you can get those margins, given the profit improvement initiatives you have in place and then maybe with, you know, a little, maybe a little bit of volume help and then similarly, on the, the building product segment, I know you're taking out some costs here do you have a goal in mind or a level in mind or where you target operating that business regardless of where volumes may shake out for next year?

Well, Greg, it's a good question, I think you know, it, we are going to continue as you just talked about to, expand margins and drive profit growth.

So in the near term, we're, going to continue to see this benefit.

We have momentum.

I'll point out that our operating margin and workplace furnishings is now over 9.5% when looking at our last four quarters.

So, you combine that with more visibility to margin expansion in the upcoming quarters and years it's going to drive record EPS this year and then that's going to add strong free cash flow for next year.

The, you know, target is, I think if you just do the math of 45 to 50 million of synergies in our Mexico facility ramp, when fully operational will drive an additional or approximately 250 bits of margin expansion and workplace furnishings that would put workplace furnishings, operating margin near 12% in 2026 without the benefit of other initiatives which we will continue to do as Marshall just referenced.

So, you know, consolidated margin would be over 10%.

So that would be our expectation.

All right, great.

Thanks for the call.

Thanks.

Your next question comes from the line of Steven Ramsey with Thompson Research Group.

Your line is now open.

Good morning, guys.

I wanted to think about workplace and, appreciate all the color on the LinkedIn timelines there as you look forward and get past this near-term pause.

Is there any key cog that you think would recompress the timelines or is this just kind of a state of business that you expect last even through 2025?

That's a good question, Steven, I mean, you know, I think this initial wave of activity will probably kind of stay in this length and cycle until you know, people kind of run a project through and then we may start to see it return.

But it, it's pretty dynamic right now and I think it's more near term and in, most of next year, we think the cycle will remain, will remain lengthen now, having said that, like I said, we see we should demand activity that will go into the funnel that should add to this and then you just have to tune your business to the length and cycle.

We see that a little bit in the home building side with, you know, permits and, and how long it takes to build houses that that's recently lengthened out from seven months to nine months.

So it's really about predicting the rhythm of the business and getting it right and watching the funnel activity, but whether it returns to where it was pre pandemic or even a couple of years ago, it's tough to say, I don't think it will immediately in the near term.

Okay.

Helpful.

And then thinking about workplace, if there's a way to parse it out between office and non-office demand and, and you alluded to some of this in, in hospitality but think about non office demand is the sentiment and activity between office and non-office demand moving in tandem with one another or is there any notable divergence maybe near term?

and then how you see it evolving kind of post this year.

Yeah, I think this year, you know, if you did the look back, I think you could say that, you know, there's been some verticals, education comes to mind health care comes to mind even some of the state and local has been running a little ahead of general office.

I think with the demand metrics we're seeing on the horizon that those things could probably more converge in a positive manner.

Now, having said that, you know, some of these verticals, you know, education continues to be pretty strong, healthier continues to be strong, but I think they'll come closer together.

Steven is the way I think about it, but there's probably going to be, you know, some front runners there and I don't think office will probably lead it, but I think office will probably, you know, catch up to what some of these other verticals have been as we head into next year.

Okay, helpful and then last one for me, I know it's maybe too early to talk about the sales outlook for 2025 and clearly volumes matter on this question but I'm thinking about cash flow generation you've got the operational moves to raise margins with the plants and the shifting of operations.

How do we think about the working capital impact and the CapEx needs for 2025?

But just trying to in order of magnitude, maybe think about cash generation next year.

Yeah, working capital is, pretty well normalized at this point if you look at, sequentially, we, improved working capital, but we're pretty similar where we were last year.

Remember last year, we freed up over USD70 million from working capital.

So, we're not anticipating any kind of working capital usage on a year-to-year basis and of course, we'll have that the seasonal fluctuation.

CapEx this year we're running a little bit below what we had planned.

So in that USD180 to USD185 million of free cash flow, we expect to join this year.

That's includes about $65 million of CapEx, I would expect that to go up a bit next year as we kind of catch up to the projects we've been working on and finish out the operational moves that we've talked about before, but still think we're going to have a healthy level of free cash flow next year and plenty of cash to deploy in a positive way.

Great.

Thank you, Marshall.

The next question comes from the line of Brian Gordon with Water Tower Research.

Your line is now open.

Hi, everyone.

Thank you for taking my question this morning I just want to follow up on the last set of questions looking out kind of towards, you know, the intermediate to the longer term.

How should we think about workplace furnishings, of the breakdown of business between the S&B the contract and the other categories, the government; the hospitality; the health care.

Are you talking kind of demand patterns or just sort of.

Overall, yeah, overall percentage of the business.

We're a little higher in you know, contract KII versus S&B.

So, I think if you look forward the growth rates and those are going to move around depending on conditions, what we're seeing in the near term is that the contract business is showing a lot of strength, we're expecting that we're seeing a lot of that order pattern trend upwards and reflects kind of all these return to office mandates that we're seeing lease, etcetera that we mentioned earlier.

So I think you got some strength in the near term from that and I think S&B we feel well positioned there, we still have some population migration going on so really well positioned to take advantage of the, of the strength there now, in the short term, we've got this transactional headwind that that we discussed but I think it's a little premature call, a major mix shift between those businesses I think we're going to benefit as the market recovers and from our own unique initiatives as well.

Okay, I mean that, definitely makes sense.

When we're looking at the contract business specifically within workplace furnishings any sort of breakdown between, the projects that, you know, clients are coming to you about, between Greenfield and maybe kind of more refurbishment for, you know, getting people back to office or work from home.

You know, I think we're seeing, we're seeing activity pretty healthy activity in both buckets you know, you've got the, at the least that we talked about people, you know, moving up in class a building and that's kind of becomes a green field but you got a lot of people who are, have campuses and are set in place and they are, you know, looking at how do they redo that campus or redo a building on the campus and, and trial it out there, we see a lot of, you know, trial and, you know, experimentation, so to speak.

So I think it's both, I think that the people on return to office, whether they have the least advantage that drives something they're,active because of the lease we've always talked about a furniture event and then they go into the, return to office dynamics and others are just trying to figure out how to make the office more productive in the hybrid work environment, you know, as they age in place, so to speak.

Great.

Thank you very much that that's all I have today.

At this time.

There are no further questions.

I would like to turn the call back over to Mr.Lorenger. Please go ahead.

Thank you.

Before we end the call this summer, we lost a long-time analyst and friend Budd Bugatch passed away unexpectedly in August for many decades Budd was a great supporter of HNI and our industry in general, he was an outstanding analyst mentor and friend.

He was supportive but also unafraid to challenge and he earned the respect of those lucky enough to know him.

Budd will be severely missed.

Thank you for joining us today.

Have a great day.

This concludes today's conference call.

You may now disconnect.