HNI Corp. (NYSE:HNI) Q3 2020 Earnings Conference Call - Final Transcript

Oct 19, 2020 • 11:00 am ET


HNI Corp. (NYSE:HNI) Q3 2020 Earnings Conference Call - Final Transcript


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Good morning, my name is Lisa and I'll be your conference operator today. I would like to welcome everyone to the HNI Corporation Third Quarter Fiscal 2020 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's conference call is being recorded. Thank you, Mr. McCall, you may begin your conference.

Matthew S. McCall

Thank you, Lisa. 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 2020 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, earnings presentation, 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 earnings presentation 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. Now, I'm pleased to turn the call over to Jeff Lorenger. Jeff?

Jeffrey Lorenger

Good morning and thank you for joining us. Our members delivered another solid quarter in an environment that remains challenging. And again, our results demonstrate much of what is unique about HNI. As we look ahead, we are prepared to confront the near-term macro challenges and we also see opportunity and signs that our strategies are gaining momentum. You will notice some changes to our normal quarterly earnings report and call format. Specifically, we have included more detail around our third quarter results and fourth quarter expectations in the release. This allows us to focus our call commentary on the key highlights of the quarter, the key issues and opportunities going forward, and our strategic efforts aimed at pursuing long-term revenue growth, margin expansion, and free cash flow generation.

Now, I will start with four key highlights from the third quarter. First, our Residential Building Products segment delivered strong year-over-year growth. We generated 9% year-over-year revenue growth in the third quarter or 8% excluding the impact of acquisitions. This is a substantial improvement from the second quarter 6% year-over-year revenue decline. Our third quarter order patterns indicate these positive volume trends should continue. Orders increased 13% year-over-year and consistent with most new home construction and remodeling indicators, order growth remains strong throughout the quarter. Our unique model in this business continues to provide a competitive advantage. Our focus on operational excellence, our vertically integrated structure, and our investment in regional distribution centers have allowed us to take advantage of accelerating demand. We 're competing better than ever in this space and we continue to drive strong financial returns with third quarter operating margins expanding 270 basis points year-over-year to a third quarter record of 19.6%.

The second highlight of the third quarter was