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HC

HNI CORP (HNI)·Q2 2026 Earnings Summary

Executive Summary

  • Pre-earnings view for Q2 2026: Wall Street consensus expects revenue of $690.5M and EPS of $1.16, implying growth vs Q2 2025 actuals ($667.1M revenue; GAAP EPS $1.02; non-GAAP EPS $1.11)*. Elevated EPS visibility remains through 2026 from KII synergies and Mexico ramp ($0.75–$0.80 2025–2026) .
  • Operating performance into late 2025 was strong: Q3 2025 non-GAAP operating margin reached a record 10.8% and EPS was $1.10, supported by productivity and expense control .
  • Commercial furniture demand indicators improved (orders/backlog up; RTO/office absorption trends positive), with SMB showing signs of rebound and contract strength; hospitality volatility tied to tariffs persisted .
  • Near-term catalysts: continued synergy realization (KII/Mexico), backlog conversion, and secular office cycle improvement; watch tariff pass-through, investment-driven SG&A, and hospitality demand normalization .

What Went Well and What Went Wrong

What Went Well

  • Record margin execution: Q2 2025 non-GAAP operating margin hit 11.0% (highest Q2 on record), driven by volume, profit transformation, and KII synergies .
  • Broad-based segment strength: Workplace Furnishings organic net sales +8.5%, segment non-GAAP margin 13.1%; Residential net sales +5.3%, margin +190bps YoY to 15.7% .
  • Management confidence and visibility: “We expect strong results to continue... driven by our margin expansion efforts and continued volume growth” — Jeff Lorenger .

What Went Wrong

  • Tariff-driven volatility: hospitality demand paused; management highlighted price-cost headwinds and surcharge transition period .
  • Investment drag near-term: CFO flagged increased investment levels and insurance-related expenses; SG&A expected to grow as a percent of sales in 2025 .
  • Residential orders dipped ~2% in Q2 2025 due to Q1 pull-forward; rebuild improved as quarter progressed .

Financial Results

Consolidated performance and consensus

MetricQ4 2024Q1 2025Q2 2025Q3 2025Q2 2026E
Revenue ($USD Millions)$642.5 $599.8 $667.1 $683.8 $690.5*
Gross Margin % (GAAP)40.5% 39.7% 42.9% 42.1% n/a
Gross Margin % (Non-GAAP)40.9% 40.0% 42.9% 42.2% n/a
Operating Margin % (GAAP)8.5% 4.1% 10.2% 9.4% n/a
Operating Margin % (Non-GAAP)9.3% 5.3% 11.0% 10.8% n/a
Diluted EPS (GAAP)$0.79 $0.29 $1.02 $0.88 $1.16*
Diluted EPS (Non-GAAP)$0.87 $0.44 $1.11 $1.10 n/a

Values with asterisk retrieved from S&P Global.

Segment breakdown

Segment MetricQ2 2025Q3 2025
Workplace Furnishings Revenue ($M)$516.0 $516.9
Workplace Furnishings Operating Income ($M)$65.8 $62.5
Workplace Furnishings Operating Margin % (GAAP)12.8% 12.1%
Workplace Furnishings Operating Margin % (Non-GAAP)13.1% 12.3%
Residential Building Products Revenue ($M)$151.1 $166.9
Residential Building Products Operating Income ($M)$23.7 $30.0
Residential Building Products Operating Margin % (GAAP)15.7% 18.0%

KPIs

KPIQ1 2025Q2 2025Q3 2025
WF Orders YoYUnchanged +1% (ex hospitality/pull-forward) -3%; +2% adjusted (ex hospitality & prior price pull-forward)
WF Backlog YoY+16% (Q1) +5% (Q2) +7% adjusted (Q3)
RBP Orders YoY+8% -2% +2%
Gross Debt Leverage1.3x (Q1) 1.4x (Q2) 0.9x (Q3)
Buybacks ($M)~$40 ~$40 Reduced debt ahead of SCS close

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
WF Net Sales GrowthFY 2025 (ex extra week)Mid single-digit Mid single-digit; lower price realization due to reduced tariff impacts Maintained; pricing realization lowered
RBP Net Sales GrowthFY 2025 (ex extra week)Low-to-mid single-digit Mid single-digit (slightly improved) Raised
Q3 2025 Non-GAAP EPSQ3 2025Increase solidly vs 2024 (Q2 outlook) Increase slightly vs 2024 Tempered
FY 2025 EPS Growth (Non-GAAP)FY 2025Double-digit Double-digit; visibility through 2026 Maintained
Capital DeploymentOngoingReinvest, dividends, buybacks, M&A Same priorities Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Tariffs & pass-throughSurcharge approach discussed; temporary Q1 drag Pricing actions; tariff-related demand pause in hospitality Continued tariff volatility; adjusted orders/backlog positive Stabilizing with pass-through; demand normalizing
Return-to-office/Office cycleEncouraging indicators; backlog up double-digits Contract orders up; SMB rebound Secular office absorption up; macro backdrop improving Improving cycle supports contract
SMB vs ContractSMB softness late-2024 SMB up 3%; contract up 5% Similar growth rates SMB/contract SMB improving; contract steady
HospitalityTiming/large project impact Tariff-related demand pause Expect flat 2025; pipeline building for 2026 Volatile near-term; constructive pipeline
KII/Mexico synergies$0.70–$0.80 EPS through 2026 ~$0.24 recognized H1; remaining $0.50–$0.60 next 18 months Total $0.75–$0.80 over 2025–2026 Visibility strengthened
SG&A/InvestmentsSG&A managed; growth investments planned Invest in people, dealer experience, product cycles SG&A as % sales up from insurance/investments Investment phase underway

Management Commentary

  • “Our non-GAAP operating margin expanded to the strongest second quarter-level on record. We expect solid mid-single digit revenue growth in both segments and double-digit non-GAAP diluted EPS growth for the fourth consecutive year” — Jeff Lorenger (Q2 2025) .
  • “Non-GAAP earnings per share in the third quarter are expected to increase slightly from 2024 levels… partially offset by increased investment levels and higher incentive comp accruals” — VP Berger (Q2 2025) .
  • “We have elevated earnings growth visibility this year and next… Mexico and KII synergies are expected to contribute a total of $0.75 to $0.80 of EPS in the 2025–2026 period” — Jeff Lorenger (Q3 2025) .
  • “We’re streamlining the dealer experience, automating connectivity, and accelerating product cycle times to drive growth” — Jeff Lorenger (Q2 2025 Q&A) .

Q&A Highlights

  • Synergy/visibility: Management leaning toward the high end of the $0.70–$0.80 EPS synergy range; increased confidence from network optimization and synergy execution .
  • SMB dynamics: SMB rebound viewed as normalization post tariff/lull; historically volatile but expected to turn on quickly when macro stabilizes .
  • Residential outperformance drivers: Share gains via owned distribution; dealer activation; new products (electric, inserts); DIY/big box placements; expect volume to kick in back half .
  • Cash flow: 2025 operating cash flow targeted at $200–$210M with working capital neutral and tax timing benefits .
  • Incremental margins: Workplace incrementals targeted 35%–40% before investments, supported by KII/Mexico projects .

Estimates Context

  • Q2 2026 consensus: Revenue $690.5M; EPS $1.16; EBITDA $101.0M; EPS estimates count: 4; Revenue estimates count: 3*.
  • Q1 2026 consensus: Revenue $623.8M; EPS $0.48; EBITDA $63.0M; EPS estimates count: 4; Revenue estimates count: 3*.
    Values retrieved from S&P Global.
MetricQ1 2026EQ2 2026E
Revenue ($USD Millions)623.8*690.5*
Primary EPS (USD)0.48*1.16*
EBITDA ($USD Millions)63.0*101.0*
EPS – # of Estimates4*4*
Revenue – # of Estimates3*3*

Implication: Consensus implies solid sequential growth and year-over-year expansion vs Q2 2025 actuals ($667.1M revenue; $1.11 non-GAAP EPS), consistent with ongoing margin initiatives and backlog conversion .

Key Takeaways for Investors

  • Margin play remains intact: Record non-GAAP margins in Q2/Q3 2025, with continued efficiency and synergy tailwinds; monitor investment-driven SG&A and insurance costs .
  • Demand narrative improving: Contract and SMB trends supportive; office absorption/lease metrics indicate cycle turn; backlog elevated, supporting near-term revenue .
  • Tariff management: Surcharge mechanism and supplier concessions aim to neutralize tariff pressures over 2025; temporary drags may occur during backlog repricing windows .
  • Residential durability: High-teen margins with initiatives to grow volume despite housing uncertainty; retail/DIY and owned distribution underpin share gains .
  • Synergies/visibility: KII/Mexico with $0.75–$0.80 EPS contribution across 2025–2026 provide multi-year EPS floor; watch execution cadence .
  • Capital allocation: Strong cash generation, dividend continuity, and selective buybacks; deleveraging ahead of strategic actions .
  • Q2 2026 setup: Consensus implies growth vs Q2 2025; key swing factors are backlog conversion, tariff pass-through, and cadence of growth investments* .