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Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

Thematic (Sector/Industry)

<ul><li>This note addresses the Monthly Market Pulse (MMP) of incoming orders and sales for March 2023 issued by the Business Institutional Furniture Manufacturers Association (BIFMA).</li><li>About 50+ BIFMA member companies voluntarily submit monthly sales and orders to a national accounting firm that aggregates and reports composite data.</li><li>Neither BIFMA nor any individual member has access to the raw data. We show the monthly data from 2019 to March 2023 under Industry Statistics.</li></ul>

This note addresses the Monthly Market Pulse (MMP) of incoming orders and sales for March 2023 issued by the Business Institutional Furniture Manufacturers Association (BIFMA).About 50+ BIFMA member companies voluntarily submit monthly sales and orders to a national accounting firm that aggregates and reports composite data.Neither BIFMA nor any individual member has access to the raw data. We show the monthly data from 2019 to March 2023 under Industry Statistics.

Commercial/Contract Furniture/Consumer Hardlines : Orders Remain Lower Y/Y, but at Moderating Pace

Equity Bottom-Up

<ul><li>On May 9, HNI reported better-than-expected results, boosted by unexpected strength in Workplace Furnishings (WF) sales and a strong defense of margins in Residential Building Products (RBP) despite weak Hearth Products sales.</li><li>1Q23 GAAP EPS was $0.04 and $0.13 non-GAAP (adjusted) versus consensus of ($0.02) GAAP and ($0.03) non-GAAP (adjusted). Our non-GAAP (adjusted) forecast was ($0.02).</li><li>Management noted improving results in its WF segment, driven by productivity and cost-cutting.</li></ul>

On May 9, HNI reported better-than-expected results, boosted by unexpected strength in Workplace Furnishings (WF) sales and a strong defense of margins in Residential Building Products (RBP) despite weak Hearth Products sales.1Q23 GAAP EPS was $0.04 and $0.13 non-GAAP (adjusted) versus consensus of ($0.02) GAAP and ($0.03) non-GAAP (adjusted). Our non-GAAP (adjusted) forecast was ($0.02).Management noted improving results in its WF segment, driven by productivity and cost-cutting.

HNI Corporation - HNI Handily Beats Estimates on WF Sales, Hearth Margins

<ul><li>Before market open on March 8, HNI announced the acquisition of Kimball International (NASDAQ: KBAL), a smaller competitor of HNI’s Workplace Furnishings segment.</li><li>HNI will pay about $485 million, consisting of cash ($9/KBAL share), stock (0.1301 HNI/KBAL share), and ~$46 million in KBAL net debt.</li><li>We see the deal as an excellent fit on strategic and cultural levels. </li></ul>

Before market open on March 8, HNI announced the acquisition of Kimball International (NASDAQ: KBAL), a smaller competitor of HNI’s Workplace Furnishings segment.HNI will pay about $485 million, consisting of cash ($9/KBAL share), stock (0.1301 HNI/KBAL share), and ~$46 million in KBAL net debt.We see the deal as an excellent fit on strategic and cultural levels. 

HNI Announces Acquisition of Kimball International; Focus on Strategic and Cultural Alignment

<ul><li>Before market open on February 23, HNI reported 4Q22 results that were better than we expected on both the top line (a modest beat) and margins (a significant beat).</li><li>Results were also ahead of consensus. HNI reported 4Q22 sales of $569 million versus $603 million in 4Q21, ahead of our estimate by $7.5 million and consensus by $9 million.</li><li>Adjusted EPS was $0.63, or $0.17 ahead of our estimate of $0.46 (also consensus).</li></ul>

Before market open on February 23, HNI reported 4Q22 results that were better than we expected on both the top line (a modest beat) and margins (a significant beat).Results were also ahead of consensus. HNI reported 4Q22 sales of $569 million versus $603 million in 4Q21, ahead of our estimate by $7.5 million and consensus by $9 million.Adjusted EPS was $0.63, or $0.17 ahead of our estimate of $0.46 (also consensus).

Margin Improvement Evident in 4Q22; Sales Headwinds Remain into 2023

Challenges and Opportunities of “Hybrid Work” for HNI Workplace Furnishings; Variations Across Customers and Markets

United States

HNI Corporation manufactures and markets office furniture as well as hearth products. The Company's products are sold primarily through dealers, wholesalers, and retail superstores. HNI has operations in the United States and Canada.

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HNI Corp (HNI US)

Commercial/Contract Furniture/Consumer Hardlines : Orders Remain Lower Y/Y, but at Moderating Pace

This note addresses the Monthly Market Pulse (MMP) of incoming orders and sales for March 2023 issued by the Business Institutional Furniture...

Water Tower Research

HNI Corporation - HNI Handily Beats Estimates on WF Sales, Hearth Margins

On May 9, HNI reported better-than-expected results, boosted by unexpected strength in Workplace Furnishings (WF) sales and a strong defense of...

Water Tower Research

HNI Announces Acquisition of Kimball International; Focus on Strategic and Cultural Alignment

Before market open on March 8, HNI announced the acquisition of Kimball International (NASDAQ: KBAL), a smaller competitor of HNI’s Workplace...

Water Tower Research

Margin Improvement Evident in 4Q22; Sales Headwinds Remain into 2023

Before market open on February 23, HNI reported 4Q22 results that were better than we expected on both the top line (a modest beat) and margins (a...

Water Tower Research

Challenges and Opportunities of “Hybrid Work” for HNI Workplace Furnishings; Variations Across Customers and Markets

KEY POINTS On December 1, Water Tower Research hosted executives of HNI Corporation to discuss the hybrid office and its impact on HNI. The call...

Water Tower Research

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