HNI Corporation

Good morning. My name is Jason, and I will be your conference operator today. I would like to welcome everyone to the HNI Corporation's second quarter fiscal 2020 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, simply press star, then the number one on your telephone keypad. If you have already done so, please press the pound sign now. Then press star 1 again to ensure your question is registered. If you would like to withdraw your question, press the pound key. As a reminder, today's conference call is being recorded. Thank you. Mr. McCall, you may begin your conference.

Thank you. 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 second quarter fiscal 2020 results. With me today are Jeff Loringer, 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. I'm now pleased to turn the call over to Jeff Warnsher. Jeff?

Thanks, Matt. Good morning, everyone. Let me start by saying our members did a great job of managing through challenging second quarter conditions. We aggressively managed costs and drove productivity offsetting much of the impact from lower volumes. We kept our focus on our customers and also played offense, generating and seizing market opportunities where we could. Moreover, through this experience, we have developed new and better ways to operate our businesses that will benefit us in the future. We delivered solid profitability in the second quarter. Our cost containment efforts combined with the top-line benefits from our diversified revenue streams the breadth of our price points, our channel reach, and our ability to quickly pivot all contributed to the better-than-expected results. While we told you in the first quarter call that we expected a loss in the second quarter, the combination of these items helped us deliver a quarterly profit. Moreover, given our solid results in the second quarter, our year-to-date earnings per share is actually up slightly versus the first half of 2019. This is a great accomplishment given the many headwinds we are facing, and it demonstrates again what is unique about H&I. Last quarter, we told you we have two priorities when it comes to our pandemic response. First is the health and well-being of all H&I members. Second is to successfully navigate the pandemic in the short term by supporting cash flow and maintaining our strong balance sheets while remaining focused on our long-term strategies. So far, we have successfully navigated both priorities. We quickly adjusted our facilities and were able to operate safely and effectively to serve our customers. In addition, as we began returning to our offices, we implemented multiple safety measures to ensure a safe process for all members. Our members' safety remains paramount. We also further strengthened our balance sheet. We generated free cash flow in excess of prior year levels and significantly lowered our already modest debt level. We have the financial strength and cost structure to successfully weather this crisis and any aftershocks for a prolonged period. Given our financial strength and demonstrated ability to flex costs, we are making two changes. First, we are restoring salaries to their pre-pandemic levels. 60 to 90 days earlier than initially anticipated. If you recall, we implemented temporary salary reductions as part of our balanced approach to the pandemic. Our members over-delivered on multiple fronts in the second quarter. I'm grateful for their efforts and happy that we are able to restore salary levels about a quarter earlier than originally anticipated. Second, we are accelerating our investment levels. I would like to note that these actions are a direct result of our financial position and the efforts of our members. It is not an indication that the crisis is over, and we acknowledge our markets continue to be dynamic. That notwithstanding, we see opportunities and are using our strong financial position to invest. I will now share some thoughts on the demand picture across our businesses, what we experienced in Q2, what we are experiencing currently, and how we view the future. First, our Q2 year-over-year order activity. Here is what we have been seeing recently. Orders in domestic workplace furnishings, excluding our e-commerce business, were down 36% in Q2. Over the past five weeks, they are down 33%. We are generally seeing a seasonal uptick in orders, but our year-over-year declines have remained relatively constant and are in line with what we have experienced in previous recessions. E-commerce orders were up 114% in Q2 and up 87% over the past five weeks. We are confident this business will still deliver strong growth both in the near and long term. Residential building products orders were up 2% in Q2, and we continue to see positive growth rates over the past five weeks. We believe the secular trends discussed last quarter, which I will detail again in a moment, are providing consistent tailwinds. We are keeping an eye on land and labor shortages for builders, which could slow down production. However, indications are encouraging thus far. Again, revenue streams, price point breadth, and channel reach are unique to H&I, and our recent growth rates reflect these benefits. Next, as we discussed last quarter, we are seeing several positive trends that should provide near-term and post-pandemic revenue support. In our workplace furnishings segment, we see the potential for multiple supportive secular trends. First, increased office floor plate resets as organizations work to adjust to the new social distancing environment. Second, increased demand for our architectural products platform, which can quickly create physical separation with minimal construction time while maintaining natural light. And third, more demand tied to work from home, and from increased smaller satellite office locations. H&I is uniquely positioned to benefit from these trends, given the value orientation of many of our brands. Generally, these trends will take some time to gain momentum. Most of them will require a broader and more meaningful return to the office than we are currently seeing. Customers are generally assessing their options right now and are still in a mode of figuring out next steps. These trends won't be enough to offset near-term cyclical pressure, especially with the new growth in COVID cases nationally. However, H&I is particularly well-positioned to take advantage of these secular opportunities as they develop. In our residential building product segment, the positive order trends reflect our strong competitive position in the market and specifically with large national builders. In addition, trends tied to de-urbanization, elevated nesting and work-from-home trends, record low mortgage rates, and low housing inventory all support positive demand patterns and should provide cyclical and secular support going forward. We are excited about the cyclical strength, secular opportunities, and company-specific initiatives within our residential building product segment. I will now turn the call over to Marshall to discuss our second quarter results and our current financial position. I will then come back and give some concluding thoughts. Marshall? Marshall?