Good day, everyone, and welcome to the HNI Corporation third quarter fiscal 2023 results conference call. Today's call is being recorded. 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, simply press star one on your telephone keypad, and if you would like to remove yourself, please press star one again. I will now turn the conference over to Matt McCall. Please go ahead. 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 third quarter fiscal 2023 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 or forward-looking statements, which are subject to known and unknown risks. 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? Thanks, Matt. Good morning. Thank you for joining us. During the third quarter, our profit transformation actions continued to accelerate, reflecting the focus and dedication of our members. We delivered 31% year-over-year growth in non-GAAP earnings per share, despite facing top-line headwinds from ongoing macroeconomic pressures. On the call today, I will highlight three key topics. First, we continue to deliver strong margin expansion in Workplace Furnishings. However, we are not finished and see more opportunity ahead. Second, the divestiture of Poppin will drive immediate financial benefits, and the integration of Kimball International is progressing nicely. KII accretion exceeded our expectations in the quarter, and we expect the rate of accretion to increase over time. Third, we demonstrated the resiliency of our Residential Building Products business model in the face of housing market weakness. Cost reduction actions enacted last quarter helped operating margin in the segment remain unchanged compared to the same period of 2022. This was despite a year-over-year revenue decline of 22%. Following those highlights, Marshall will review our outlook. I will then conclude with some general closing comments before we open the call to your questions. Moving to the first topic, we continue to deliver strong margin expansion in Workplace Furnishings. When excluding KII and Poppin, non-GAAP operating margin in the segment expanded 820 basis points year-over-year to 10.7% as our profit transformation plan continues to deliver results. This was the sixth straight quarter of year-over-year operating margin improvement. Both operating profit margin and operating profit dollars reached the highest level since the third quarter of 2019, despite lower industry volume. We made strong progress with our profit transformation initiatives. However, there is still work to be done, and we have line of sight to additional improvement opportunities. As we have discussed on previous calls, our profit transformation plan and our legacy Workplace Furnishings business consists of four primary actions. First, we are driving increased productivity. Our focus on lean, cost reduction, and better efficiencies continues to deliver improvement, and we expect our recent investments in Mexico to provide outsized benefits as they mature over the next couple of years. Second, we have streamlined our cost structure. On last year's third quarter call, we announced a $30 million corporate-wide cost savings program. 12 months later, not only have we achieved that goal, we have added to it. Our cost savings run rate now totals approximately $50 million across the corporation. More specifically, in Workplace Furnishings, $25 million of that total is contributing to our margin expansion in 2023. Third, we continue to simplify our business as we focus our efforts on the most attractive markets. Examples of portfolio simplification actions taken over the past year include exiting Poppin, divesting our China business, and rationaling, rationalizing our e-commerce offering, all of which are contributing to our improved margins. And fourth, price cost improvement continues to benefit our profitability. These actions and our recent results demonstrate our profit transformation plan does not require volume growth. However, despite a mixed near-term picture, we continue to see encouraging trends related to future Workplace Furnishings demand, particularly given our market position. We continue to see growth in the small to medium-sized customer segment, where we have an unmatched competitive position. SMB orders grew 6% year-over-year in the third quarter and are up 9% year-to-date. In general, this segment has benefited from healthy dynamics. Small and midsize firms have accounted for nearly 100% of net post-pandemic hiring. The segment has also benefited from population shifts to smaller secondary metros, where office visits are nearly back to pre-pandemic levels. We believe this segment will continue to outperform. Switching to contract, recent demand has been down modestly. However, we are seeing encouraging signs for the future. Orders from contract customers were down 4% year-over-year in the third quarter and have declined 3% on a year-to-date basis. Those rates are consistent with lower return to office rates in the larger markets and lagging hiring activity by large companies. Looking forward, we see dynamics which support an increase in furniture buying events. I'll remind you that furniture events are the primary driver of demand in our industry. Replacing office furniture is an episodic event, generally driven by an office move or need to refresh an environment for employee recruitment and retention. Going forward, the predicted acceleration of lease expirations and the need for companies to adapt their spaces for hybrid work support an increase in these events. Hybrid work has become the new normal. According to a recent Gallup survey, more than half of all remote-capable employees are now working in hybrid environments, with that number expected to move to 60% in coming quarters. And office lease rollover activity is expected to more than double next year and remain elevated through 2028. These factors, taken together, support an increase in furniture buying events. Moving to my second topic, we completed the divestiture of Poppin, and the integration of Kimball International is progressing nicely. Excluding Poppin, KII added approximately $0.06 of non-GAAP EPS in the quarter. These results exceeded our expectations. Moreover, KII generated a strong operating margin of 10.6%. This was despite incurring $5 million of incremental purchase accounting costs during the quarter. Our confidence in the strategic and financial benefits of the combination with Kimball International continues to build. KII better positions us to lead in the evolving workplace environment and provides new opportunities for profit growth. And importantly, we continue to see the previous announced annual run rate synergy amount associated with the KII acquisition of $25 million as a floor, with a strong potential for upside. The sale of Poppin, which we completed in early September, provides immediate financial benefits. Recall, Poppin had an annual operating loss of nearly $20 million prior to the sale. While KII's operating margin is already in double digits, cost synergies, elimination of Poppin losses, and ongoing productivity efforts point to additional margin expansion opportunity in the months and years ahead. My third topic is we demonstrated the resiliency of our Residential Building Products business model in the face of housing market weakness. Third quarter operating margin in this segment remained unchanged versus the prior year and was up sequentially. This was despite a year-over-year revenue decline of more than 20%, as this segment continues to face volume pressure in line with the overall weakness in the broader housing market. We continue to see $15 million-$20 million of our targeted cost savings benefiting Residential Building Products this year, with another $5 million-$10 million of benefit next year. These cost reduction efforts, along with normal seasonal patterns, will result in further improvements to segment profitability in the fourth quarter of this year. Importantly, demand trends in this segment continue to stabilize. Third quarter orders were 18% below year-ago levels, which represents an improvement compared to rates seen in the first half, when segment orders declined 29% year-over-year. Both new construction and remodel retrofit activity have shown similar sequential improvement. Additionally, the improvement has continued in the early part of the fourth quarter. Although mortgage rates and affordability continue to weigh on housing, single-family new construction has been a bright spot. Year-over-year growth in new single-family permits averaged 5% in the third quarter, which supports further new construction improvement in 2024. Despite the near-term headwinds, we are bullish on the intermediate to long-term dynamics for the segment. The demand fundamentals remain strong. U.S. housing is undersupplied. Demographic trends point to robust future construction growth. Renovation activity will benefit from an aging housing stock, and there are indications that renovation activity will accelerate as existing homeowners are less likely to relocate, given the current mortgage environment, with many having attractive lower interest rates. In addition to the strong long-term market fundamentals, we have unique growth opportunities. We continue to invest in our initiatives aimed at expanding the market, including in the areas of category awareness, new product innovation, online capabilities, and the expansion of our wholly owned installing distributor footprint. The market's fundamentals, our unique growth opportunities, and our category-leading positions point to the return of growth. I will now turn the call over to Marshall to discuss our outlook. Marshall? Thanks, Jeff. Let's start with our expectations for demand in the fourth quarter. In Workplace Furnishings, we expect organic revenue to be approximately flat with fourth quarter 2022 levels. That outlook is consistent with recent order patterns. It excludes Kimball International, and it assumes continued SMB outperformance. In Residential Building Products, we expect revenue declines to further moderate in the fourth quarter, with revenue declining at year-over-year rate in the high single digits to low teens. That outlook assumes new construction will outperform or remodel retrofit. Let's shift to the expected impact of Kimball International. For the fourth quarter, we expect KII to add $140 million-$150 million of revenue. We also project KI accretion will be consistent with third quarter results. An additional note on KII: earlier, Jeff mentioned $5 million of incremental purchase accounting costs in the third quarter. Of that $5 million, approximately $3 million is associated with inventory step-up and should be considered one-time in nature. That points to an adjusted, adjusted operating margin for KI of approximately 12.5% in the third quarter. Fourth quarter non-GAAP EPS is expected to solidly increase year-over-year and be modestly below our just reported third quarter results. This is consistent with normal seasonal patterns. Recall, we typically see lower sequential volumes and margins in Workplace Furnishings as we move from the third quarter to the fourth. Shifting to the balance sheet, we ended the third quarter with total debt of $509 million, which was down significantly from the $598 million outstanding a quarter ago. Our working capital dynamics continued to improve and return to historical levels that drove free cash flow per share of more than $2 in the third quarter. In terms of leverage, our gross debt to EBITDA at the end of the quarter was 2.2 x. Our reasonable leverage and strong cash generation will continue to provide flexibility for the dynamic environment and ongoing investment. I'll now turn the call back over to Jeff. Thanks, Marshall. Our strategies are delivering results. Operating margin and Workplace Furnishings continues to expand, reaching 10% in the third quarter. Our profit transformation initiatives have momentum, and we expect continued year-over-year profit improvement in the segment. The integration of Kimball International is going well. KI is already strengthening our business and delivering earnings accretion, which will only increase as our synergies mature. KI better positions us to lead in the evolving workplace environment and provides new opportunities for profit growth. We are increasingly confident in the combination's strategic and financial benefits. In Residential Building Products, we have adjusted the cost structure and demonstrated the resiliency of our margins while continuing to invest in our growth strategies, leading brands, and operating platforms. Although the near term remains dynamic, we are uniquely positioned to drive high-margin growth as housing recovers. In summary, we remain committed to our core strategies of continuing to expand margins at Workplace Furnishings and drive long-term, high-margin revenue growth in Residential Building Products. I want to thank all HNI members, including our new members from KI. Our results reflect their collective effort and dedication. We will now open the call to your questions. Thank you. As a reminder, everyone, that is star one to ask a question. We'll take our first question from Steven Ramsey with Thompson Research Group. Hi, good morning. Maybe, to look at SMB up again and outperforming contract, do you expect this to persist for a few more quarters, even though contract is stabilizing? Is there anything in the pipeline that may show directionally how the two customers drive results in the next few quarters? Yeah, Steven, I mean, look, I think we continue to think SMB will outperform. You know, as I laid out in the prepared remarks, I mean, we have a strong position there. That's part of it. The market is healthy. They've been hiring, return to office. They're still... Even though they've returned, they're still looking at furniture events in those spaces. So, our belief at this point is SMB will continue to outperform and contract will stabilize. That's, I think that's a good way to think about it. Okay, helpful. And then on the population shift, it's clearly helping the workplace segment, as you've discussed for a few quarters now. Can you talk to how this is or could help the Resi segment over time? Do you have the distribution in place where the population shift is occurring? Yeah, that's a good question, Steven. We do. We've added, we first of all, we have a strong independent network, that is, you know, services those markets. And we've also added some wholly owned distributor footprint in some of those markets recently, and we continue to be active, you know, keeping an eye on all of that. So I do believe that the population shift will also benefit over time, the Resi business. Okay, helpful. Then last one for me, again, on the Resi business. Curious, the dynamic you're hearing on the ground for the R&R side of Resi. Hearing from others that it's sluggish, but steady out there and not continuing any kind of demand degradation on a sequential basis. But I'm curious if that's how you would describe spending on fireplaces. Yeah, I think overall, Steven, we're seeing demand kind of declines moderate. New construction is the relative bright spot there, specifically related to remodel retrofit. We're also seeing declines moderate, but not nearly as much as they are in new construction. You know, we still have a pretty low existing home turnover, which drives remodeling events, and of course, consumer sentiment is not helping there. But certainly, the trend is improving, although still down year over year. Okay, that's helpful. Thank you. We'll take our next question from Ruben Garner with Benchmark Company. Thank you. Good morning, everyone. Good morning. Congrats on the strong quarter, guys. So, maybe on the workplace margins to start, Jeff, I think you said, I think the words were, "There's room to run or more to go there." Can you talk about... I see the savings or heard the savings have come in better than anticipated. So, that $50 million, was that a recognized to date number or run rate? And when you say there's more to go, I mean, is this 10%+ kind of legacy number sustainable without, you know, a volume acceleration? Because of your initiatives, or was there anything kind of mix driven or one time in this quarter that kind of boosted it? Yeah, Ruben, so several questions in there. The first one is that the $50 million that Jeff Lorenger mentioned is our cost savings program that was really enacted starting earlier this year, and we had another tranche kind of mid-year. $40 million-$ 45 million dollars of that will hit 2023, with another $5 million-$10 million rolling over into 2024. The part that rolls over into 2024 is mostly associated with the Residential Building Product segment. As it relates to Workplace Furnishings, got about $25 million of that total $50 million that hits that segment, all of which hits this year. In terms of where the margins can go, we see continued opportunity. The reason we were up so much year-over-year in the third quarter is really three things: had favorable price cost, we had better productivity, and we had better SG&A efficiency. And we see opportunity in all three of those to continue, maybe not all the same rates. And on top of that, we have this investment in Mexico that we're making that will begin to mature and help out subsequent years. Okay. And then, on the residential side, you mentioned existing home sales. Just curious, how much, fireplace activity, retrofit activity is tied to inspections. Is that a big part of what, what can drive demand, and if we do see a rebound in, in home sales when the rates, drop, that can kind of get the R&R segment turned around? Yeah, I'm not sure we have precise data on inspections, but we do know that remodeling events are pretty highly correlated with the purchase of a new home. Usually, remodeling events occur within a year or two after the purchase. Given that new homes are not selling as much, existing homes are not selling as much, we're definitely seeing some softness in that segment. But if we do see existing homes tick up, we would see remodeling tick up eventually. Okay, and last one for me. A nice snapback in margins in the residential business. I think if I'm looking at it correctly, comparable to a year ago on much lower base. Is there any positive price cost in there as well, or is all of that from the initiatives you put in place earlier in the year? Yeah, we were flat at 17.7% operating margin in Residential Building Products in the third quarter. Yeah, there's multiple factors there, kind of the same three factors I mentioned. We did have favorable price costs there. We also had better productivity, as well as some better SG&A efficiency. Okay, great. Thanks, guys. Thanks. We'll take our next question from Greg Burns with Sidoti & Company. Good morning. The outlook for flattish workplace growth, I think last quarter you were talking about low single digit growth in the second half, so a little bit of a reduction there. Can you just talk about, you know, what changes you're seeing in the demand environment there to lower your outlook? Greg, I'm not sure I'd characterize it as a major change. We did talk about low single digits. I think the organic revenue in workplace, excluding KI and Poppin, was 1.7% in the third quarter, so right in that range. And then flattish, maybe puts us at the low end of low single digits for the back half, but I wouldn't call it a major change. Okay. And I know Kimball had a good-sized healthcare business. Could you just talk about maybe some of those adjacent markets, like healthcare, education, where maybe you could drive incremental growth if the core office segment isn't recovering to pre-COVID levels? Like, what initiatives do you have in place? And I guess, specifically, how was Kimball's healthcare business this quarter? Yeah, Greg, good question. I think the activity has been pretty solid throughout the year, and it's starting to build in the healthcare segment. And KI had quite a bit of product pipe in that piece of the business that will be coming online in 2024 as well. So we like that position, and we do believe that's an opportunity for growth overall. Education, they've been strong in education, similar to our legacy business. Both have had pretty solid years to date. We see the education vertical as an opportunity for growth going forward as well. And then I would mention they have a hospitality business that's competing well at this point, and we see some good second-half growth in their hospitality business. Kind of pent-up demand to catch up from kind of the post, post-COVID remodel activity, you know, refresh rates for, for hotels. So all, all three of those, healthcare, education, hospitality, we, we can rotate into and lean into, notwithstanding core commercial. Okay, great. Thank you. We'll take our next question from Budd Bugatch with Water Tower Research. Good morning, and thank you for taking my question, and congratulations on a very good quarter to your team and to your members. Really impressive. Marshall, I would love to get, maybe if you could walk, on, on the workplace, the legacy workplace, even just on the GAAP basis, from a $5.6 million operating profit in last year to a $39.6 million this year. And I can't remember if the $5.6 included much of Lamex or a drawdown of that. I thought that might have been included all, all balled into the, into the gain number. So maybe you could give us, some more color on, on that, on a walk from that, those, those margins, 'cause that's pretty impressive. Yeah, but there is a bit of Lamex in the GAAP numbers in the prior year, both sales and profit, as well as the gain. If you look at the non-GAAP, it's probably a little cleaner. The segment, excluding and Poppin, up $31 million in operating profit year-over-year. Right. There's really two big items there. Got price costs favorable, about $21 million, and net productivity was up about $11 million, and so there's some rounding there, but that, those two things really drove that $31 million dollar profit improvement in the segment. So the 11 continues, or is that a... That, that, that continues, and then anniversaries and the 21, how do, how do we think about that going forward? How do we think about that kind of, 2:1 kind of ratio? Well, the productivity is gonna continue. We certainly see benefits from our ongoing lean initiatives as well as the Mexico investments we look out. Price cost, you know, this is we're anniversarying some lower price periods, and we got pretty stable commodities, so I don't think that's gonna continue at the same rate, but it's not going away immediately. Commodities, are they stable, or are they starting to, or have they fallen, and are we having to do any, are we worrying anything about pricing having to be retraced? For the year, commodities are pretty stable. We had some inflation when you include everything early in the year, and we had a little bit of deflation here recently. As we look to the fourth quarter, we're starting to see a little bit of pressure from diesel and some other commodities, but in general, input costs are pretty stable. With the pricing, you know, pricing, Budd, will kinda hold in there where it's at today, where that's kinda what we're seeing in the marketplace. We typically do a once-a-year price increase. Do we not usually have that adjustment? Is that usually a beginning-of-the-year kind of thing? And I know in this environment, nothing is usual, but trying to... I'm showing my age. Yeah. But yeah, it's typically kind of in the first quarter. I'm, you know, it moves around a bit, depending on the cycle, but it's typically in the first quarter. Okay. And this has been part of your strategy, Jeff, of getting the Workplace Furnishings margins back to this kind of level. So the other side is RBP and having that grow, keeping the kind of great profitability you have there. Are there any new programs that you are anticipating to try to maybe spark a little bit more of the RBP stuff, or is it- Yeah, well- - the environment just too tough? No, well, look, we're continuing to invest in that. You hit it right on the head, Budd. We're—this has been our goal is to reset, you know, margins and have a line of sight for more. And that's what we start. We've been talking about that for a couple of years, and that will continue. RBP, look, we like our operating model. We're gonna continue to invest in that business because it's only a matter of time. And the fact that we've been able to kinda hold our margin profile in that business, notwithstanding the demand decline, we like where that can go. I'd say the third piece of this, though, is the integration of KII. That's where we're, you know, we're working hard there. I commented on their, their business in healthcare and hospitality, and also, integration and synergy. So that's, I, I would say the two, the two items we've been talking about continue. We're, we're continuing to lean in to workplace margins and RBP growth investments, and then bring KII on and, and, kinda mine that, those, that profit and that model. It's got strength, but there's more to do. Well, that's... Yeah, you got right to my third area of questioning was on Kimball. What kind of RCI programs do you see going for that? They have had a number of divisions that might not have been performing up to snuff. Anything that you feel comfortable talking about at this point in time? Yeah, Budd, you know, really, all I would say is we have, you know, we dispossessed the Poppin thing. That was kinda job one as we got in there. And now we're, you know, we're getting our arms around the synergies and the team, and they're doing great. And there'll be more. We'll probably have more details on that going forward, but right now I'd say, you know, 50,000 feet, it's going great. Love the team and what they bring to the table, and we're continuing to invest in that business as well. Okay. Yeah, but I would just- I- I would just add to that, and, look, healthy margins in that business right now, it's very strong. We do see synergies moving forward. In the run rates we see right now, and their profitability is about $10 million of annual improvement related to duplicative corporate costs. So that's $10 million of the $25 million of synergies that we expect as a floor, and so the other $15 million we see coming over the next couple of years. And so, real clear line of sight to that, and as Jeff mentioned, it is strong potential for more that we'll communicate as we get further into it. How does that factor in? I mean, how much have we seen so far, and how much does, how much factors in over the next couple of quarters for quarterly rate? Yeah, we're, we're averaging about $2.5 million a quarter right now. So we've got, you know, about a $10 million run rate as we, as we sit right now. Probably add $5 million-$8 million next year, and then we get the full incremental 15 in 2025 for a $25 million run rate. And when you take that $25 million plus the, the $20 million benefit from exiting Poppin, plus the strong profitability that KII had before the acquisition, again, we're, we're looking at a, a EV to EBITDA multiple on the acquisition of near 5. It really speaks to the value creation opportunity that we have. Wow! Okay. And last for me is corporate overhead, is this, is this the current run rate of $20-some million, or how do we think about that on a quarterly basis? And how much of that was variable comp? Yeah, you know, if you looked at a fourth quarter, we do think it's gonna be up $6-$7 million, being that $21 million-$22 million range, not just up a little bit from the third quarter. Yeah, the big drivers of the year-over-year increase are variable comp. It was pretty low last year, and it's rebounded this year. We got some variation in insurance programs that also contribute to that variation. Okay. Thank you very much. Congratulations again on a really impressive performance in the third quarter. Thanks, Budd. There are no further questions at this time. I'd like to turn the call back over to Jeff Lorenger for any additional or closing remarks. Great. Thanks, everybody, for joining us today. Again, once again, thanks to all HNI members. Have a great day. That concludes today's presentation. Thank you for your participation, and you may now disconnect.