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DATE

Thursday, July 24, 2025 at 11 a.m. ET

CALL PARTICIPANTS

Chairman, President, and Chief Executive Officer — Jeff Lorenger

Executive Vice President and Chief Financial Officer — Marshall H. (VP) Berger

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TAKEAWAYS

Non-GAAP EPS: $1.11 non-GAAP earnings per share for Q2 2025, representing 41% year-over-year non-GAAP EPS growth compared to Q2 2024, driven by better-than-expected volume growth in both segments.

Consolidated Non-GAAP Gross Margin: Consolidated non-GAAP gross margin expanded 90 basis points year over year to 42.9% in the second quarter of 2025.

Consolidated Non-GAAP Operating Margin: Consolidated non-GAAP operating margin expanded 200 basis points year over year to 11% in the second quarter of 2025, the highest ever for a second quarter, supported by KII synergies and profit transformation.

Workplace Furnishings Organic Net Sales: Increased by more than 8% year over year in Q2 2025, with contract brand revenue up nearly 15% year over year and SMB revenue was slightly up year over year.

Workplace Furnishings Non-GAAP EBIT Margin: Workplace Furnishings non-GAAP EBIT margin increased 120 basis points year over year to 13.1% in Q2 2025.

Residential Building Products Revenue: Grew more than 5% year over year in Q2 2025, with new construction up over 4% year over year and remodel/retrofit sales up over 7% year over year.

Residential Building Products Operating Margin: Residential Building Products operating margin expanded 190 basis points from the same period of 2024 to 15.7%. Segment operating profit rose 20% year over year.

Workplace Furnishings Orders: Rose across all major office brands; contract brands up 5% year over year (excluding hospitality) and SMB orders were up 3% year over year.

Total Segment Backlog: Total segment backlog is up 5% year over year in Workplace Furnishings.

Residential Building Products Orders: Decreased approximately 2% year over year, with sequential improvement in May and June 2025 following an April pull-forward impact.

EPS Growth Outlook: Management expects a fourth consecutive year of double-digit non-GAAP earnings growth in 2025, with “modestly increased” full-year 2025 guidance compared to the previous quarter.

KII and Mexico Initiatives: Cumulative $0.24 EPS benefit recognized so far (as of Q2 2025), with $0.50–$0.60 of additional EPS expected over the next eighteen months and the 2025 earnings outlook moving slightly higher compared to prior disclosures.

Q3 2025 Guidance: Workplace Furnishings organic revenue is expected to grow at a mid-single-digit rate in Q3 2025 and consolidated non-GAAP earnings per share is projected to rise slightly from 2024 levels; investments will partially offset productivity benefits.

Q3 Margin Guidance: Workplace Furnishings margin expected to expand modestly, while Residential Building Products operating margin is projected to contract modestly year over year in Q3 2025, due to increased investment and a slight volume decline.

Full-Year Volume Expectations: Raised in Workplace Furnishings, though lower price realization linked to tariffs tempers total sales outlook; Residential Building Products net sales are expected to grow at a mid-single-digit rate for the full year 2025, excluding the extra week impact.

Balance Sheet and Capital Deployment: Gross debt leverage at 1.4x; nearly $40 million in share repurchases were executed in Q2 2025, alongside ongoing quarterly dividends.

Free Cash Flow Outlook: Management expects cash flow generation of $200–$210 million in 2025, with a roughly $35 million improvement in projected cash flow for 2025 over last quarter’s projection primarily due to volume growth and tax timing.

Incremental Margin Guidance: Workplace Furnishings incremental margins are expected in the 35%-40% range, before investment spend.

SUMMARY

Management attributed non-GAAP EPS outperformance in Q2 2025 to stronger-than-forecasted volumes in both key segments and highlighted record-setting non-GAAP operating margins from synergy and transformation programs. The company raised its full-year non-GAAP EPS outlook for 2025, underpinned by improved visibility from operational initiatives and a $0.50-$0.60 incremental EPS benefit expected over the next eighteen months from Mexico and KII actions (non-GAAP). Guidance calls for mid-single-digit organic revenue growth in Workplace Furnishings in Q3 2025 and mid-single-digit net sales expansion in Residential Building Products for FY2025, after excluding the benefit of the extra week in the fourth quarter, with price being the early-year driver but volume improvement anticipated in the back half. Strategic capital deployment continued through $40 million in buybacks in Q2 2025 and steady dividends, supporting stated confidence in future cash flow and balance sheet flexibility.

Jeff Lorenger specifically connected earnings guidance momentum to progressing network optimization and synergy projects, stating, we are able to say with confidence that we think this is going to drive a modest increase in the full-year EPS outlook for 2025 from where we were.

VP Berger set targeted operating margin potential for Workplace Furnishings at 12% return business, underpinned by the KII synergies and the Mexico ramp.

Product and channel diversification was cited as providing insulation against market softness, as illustrated by residential building products revenue growth outpacing underlying housing permits and new construction trends in the first half of 2025.

Cash flow improvements in 2025 will be split between operating volume growth and changes in tax payment timing, according to Berger.

INDUSTRY GLOSSARY

KII synergies: Operational efficiency and cost savings derived from the integration of Kimball International Inc. (“KII”) following its acquisition by HNI Corporation.

SMB: Small and medium-sized businesses targeted within the workplace furnishings segment, accounting for a significant portion of segment sales.

Backlog: The value of orders received but not yet fulfilled, used as a forward indicator of future revenue in manufacturing businesses.

Incremental margin: The percentage of additional operating profit generated from an increase in revenue, excluding the effect of new investments.

Full Conference Call Transcript

Jeff Lorenger: Good morning. Thank you for joining us. I am going to divide my commentary today into three sections. First, I will provide some comments about our second quarter results. Non-GAAP earnings per share increased more than 40% year over year with solid revenue growth in both segments. Next, I will discuss our expectations for the remainder of 2025. Our earnings outlook has modestly increased from what we provided on our last quarter call. We continue to anticipate a fourth consecutive year of double-digit non-GAAP earnings improvement. And finally, I will provide additional detail about recent demand activity and how we see our markets playing out over the rest of the year.

I have also discussed the confidence we have in our strategies and an update on our elevated EPS growth visibility. Following those highlights, VP will provide additional color around our third quarter and updated full-year outlook. He will also comment on our strong balance sheet. I will conclude with some closing comments before we open the call to your questions.

Jeff Lorenger: Let's begin with the second quarter. Our strategies are working. Our members delivered another excellent quarter. The benefits of our diversified revenue streams and the merits of our customer-first business model continue to deliver strong shareholder value. For the quarter, we delivered non-GAAP earnings per share of $1.11. The 41% year-over-year EPS growth was ahead of our internal expectations. Much of the earnings upside was driven by better-than-expected volume growth. Both segments generated year-over-year top-line growth in excess of 5%, with both modestly exceeding the expected ranges we discussed on last quarter's conference call. Profitability in the second quarter was also strong. Consolidated non-GAAP gross margin expanded 90 basis points on a year-on-year basis to 42.9%.

Our non-GAAP operating margin expanded 200 basis points year over year to 11%. This EBIT margin was the highest on record for the second quarter, driven by the impact of volume growth along with our profit transformation efforts and KII synergies. In the workplace furnishing segment, organic net sales increased more than 8% year over year, fueled by broad-based growth across the portfolio. We experienced noteworthy strength in our contract brands, with revenue up nearly 15% year over year. We also saw a return to growth in our brands focused on small and medium-sized businesses, where revenue was slightly up year over year.

From a profitability perspective, workplace furnishing's non-GAAP EBIT margin expanded 120 basis points year over year to a strong 13.1%. Our profit transformation efforts and realization of KII synergies continue to deliver benefits, driving segment EBIT margin to record second-quarter levels. Broadly, while there was some revenue and profit pull-forward activity driven by pricing actions, the impact during the quarter was modest. Finally, in residential building products, second-quarter revenue increased more than 5% year over year. Revenue from the new construction channel was up more than 4%, and remodel retrofit sales grew over 7%, both on a year-over-year basis.

We delivered this top-line growth despite continued challenging housing market dynamics, as we are competing well and our internal growth investments are beginning to bear fruit. Residential building products' profitability was also strong in the quarter. Segment operating profit grew 20% year over year, and segment operating margin expanded 190 basis points from the same period of 2024 to a solid 15.7%. The consistently strong profit margins in this segment are evidence of the business's unmatched price point breadth and channel reach, along with the benefits of its vertically integrated business model and overall operational agility.

To summarize our collective results, our revenue growth and profit improvement demonstrate the strength of our strategies, our customer-first business model, and the resilience of our members and our proven ability to manage through varying macro conditions.

Jeff Lorenger: That leads me to my comments about our outlook for the remainder of 2025. Our margin expansion efforts and expectations for continued revenue growth will support ongoing year-over-year EPS improvement as we move through the second half of the year, all while we continue to invest to drive future growth. In workplace furnishings, orders grew in the quarter across all major office brands. We saw a return to order growth in the SMB space, with orders up 3%. Our contract brands outperformed, with orders growing 5% year over year when excluding hospitality. We are excluding hospitality for the metric, as the business experienced a meaningful tariff-related pause in activity during the quarter, which has temporarily skewed results.

I will discuss our positive outlook for the hospitality market more in a moment. As was the case with revenue and profits, we did see some order pull-forward in the quarter. However, adjusted segment orders, which exclude hospitality and the impact of pull-forward activity, were still up for the quarter on a year-over-year basis. In addition, total segment backlog is up 5% year over year. So we continue to see encouraging signs that support our view of volume improvement while at the same time, we are increasingly focusing our investments on driving revenue growth in this segment. Moving to residential building products, orders in the second quarter decreased approximately 2% year over year.

Going back to the first quarter, we saw some order pull-ahead in March, which negatively impacted order growth in the month of April. However, as the impact of pull-forward activity abated, year-over-year order improvement returned in both May and June. Builder sentiment continues to reflect the impacts of elevated interest rates, ongoing affordability issues, and weaker consumer confidence. And housing trends have broadly followed builder sentiment. Despite the current environment, however, we believe in the long-term opportunities tied to the housing market and in the strength of our market-leading positions and profitable operating model. This supports our ongoing level of investment.

I will finish by making a few comments about our markets and provide additional detail around our elevated 2025 EPS growth visibility. On our last two earnings calls, we highlighted an increased focus on investing to drive growth in both segments. Our first-half 2025 revenue strength and encouraging leading indicators provide added support for our growth initiatives. As we look at our workplace furnishing segment, we experienced solid revenue and order growth across all major office brands. SMB orders rebounded and grew in the quarter after a brief pause in late 2024 and early 2025. We remain bullish about the fundamentals of this business.

We believe our strength in the SMB space and our broad price point breadth continue to be competitive differentiators. This is especially true as more cost-conscious customers embrace price mixing across projects, increasingly commingling SMB products in the contract settings. In our contract business, we expect growth to continue in the back half of 2025. We see encouraging signs associated with larger projects across all our key verticals and saw customers return to a business-as-usual mentality. We believe we are seeing the release of pent-up demand as a focus on in-office work continues to highlight the need to refresh and reset spaces to adapt to the new ways work is done and to more people in office.

As a result, presale activity, orders, and backlog were all up. Finally, I will comment on our hospitality business. As I mentioned, we saw a tariff-related demand pause during the quarter. This business relies heavily on imported products, primarily from Vietnam and China. As a result, many customers tapped the brakes on new projects as tariff uncertainty spiked. We have seen an improvement in activity, and our pipeline has rebounded significantly. So while this business can be lumpy, we remain enthusiastic about hospitality's demand prospects as macro volatility subsides. Looking ahead, we believe we are particularly well-positioned to benefit as the workplace furnishings market continues to improve.

We have a portfolio of brands with unmatched product and pricing breadth and depth, allowing us to meet any furniture need a customer has. We have products that work for customers ranging from small businesses to the largest multinational. Our brands are distributed widely across geographies, from tertiary markets to the top MSAs. We can broadly meet the needs of workplaces, schools, healthcare facilities, and hotels. Moving to residential building products, we continue to believe in the positive long-term market fundamentals. We are performing well despite an ongoing soft new construction and R&R environment. And we acknowledge a market-driven revenue recovery will take time. We are, however, optimistic about our opportunities to increase revenue through our growth initiatives.

Specifically, we continue to invest in developing market-leading new products that offer customers more options and features. We are driving new programs to increase homeowner and homebuyer awareness of their fireplace options, ensuring our products are considered in all remodel and new construction projects. And we are strengthening our already strong relationships with builders across the country, helping them deliver the best overall value to the homeowner. Encouragingly, we are driving growth in this segment while still being in the early days of each of these initiatives. And while we invest in growth, we will continue to deliver high-margin results and strong profits in this business. Longer term, single-family housing remains under-supplied, and demographics will support additional demand growth.

The results of our ongoing investments, which will enhance our connection to customers and build on our leading brands, will fortify our position of strength in the industry. Finally, and importantly, we continue to have elevated earnings visibility this year and next. Our outlook for 2025 continues to include full-year revenue growth in both segments. In addition, our earnings per share outlook moves modestly higher. We continue to have high visibility to significant growth driven by operational efficiencies. As a reminder, we have two initiatives underway in this area: Mexico and KII. In recent quarters, we highlighted an expected benefit of $0.70 to $0.80 of additional EPS through 2026.

To date, we have recognized approximately $0.24 of EPS benefit, leaving $0.50 to $0.60 to be recognized over the next eighteen months. This is a modest increase from our previously communicated range and continues to provide visibility into a fifth consecutive year of double-digit EPS growth. I will now turn the call over to VP to discuss our outlook for the remainder of 2025.

VP Berger: Thanks, Jeff. I will start by discussing our outlook for revenue and profit. Beginning with the top line, third-quarter revenue in workplace furnishings is expected to increase at a mid-single-digit rate year over year organically. Including the impact of divestitures, workplace furnishings revenue is expected to increase at a low single-digit pace. The benefits of improving orders and backlog are expected to drive the revenue growth in the third quarter. For Residential Building Products, third-quarter net sales are projected to increase at a low single-digit rate compared to the same period in 2024. Pricing actions are expected to be the primary driver of growth. However, for the second half overall, we continue to expect volume growth for this segment.

We are projecting revenue improvement in 2025 without market growth. Shifting to our third-quarter profit outlook, non-GAAP earnings per share in the third quarter are expected to increase slightly from 2024 levels. This improvement is expected to be driven by productivity benefits and volume growth, which should be partially offset by increased investment levels. In the third quarter, we expect operating margin in workplace furnishings to expand modestly year over year, driven by volume improvement and continued profit transformational benefits partially offset by increased investment. Residential building products operating margin is expected to compress modestly year over year in the third quarter as a result of slightly lower volume and increased investments.

Again, we still are expecting overall non-GAAP earnings per share in the third quarter to increase slightly from 2024 levels. Moving to the full year, in workplace furnishings, we expect year-over-year mid-single-digit net sales growth excluding the benefit of an extra week in the fourth quarter. Our full-year volume expectations move higher. However, the overall segment sales outlook is essentially unchanged as now we see lower projected price realization primarily related or driven by reduced impacts from tariffs. In residential building products, our outlook improved slightly, with net sales now expected to grow at a mid-single-digit pace again, after excluding the benefit of the extra week in the fourth quarter.

From an earnings perspective, our outlook for 2025 increases modestly, with double-digit percent EPS growth expected for the fourth straight year. I will wrap up with a few comments on our balance sheet and cash flow. Quarter-ending gross debt leverage was at 1.4 times as calculated in accordance with our debt agreements. During the quarter, we continued to deploy cash through our longstanding quarterly dividend and through stock repurchases of nearly $40 million, demonstrating our continued confidence in our future earnings and cash flow generation. The combination of our strong balance sheet and consistent cash flow generation will continue to provide a high degree of financial flexibility and capacity for investment.

Our capital priorities remain reinvesting in the business, paying dividends, pursuing share buybacks, and exploring M&A opportunities. I will now turn the call back over to Jeff.

Jeff Lorenger: Thanks, VP. We remain focused on investing to drive revenue growth and on expanding margins. We have multiple avenues to drive growth, and we will continue to invest. And we expect to extend our track record of consecutive years of double-digit percent EPS growth. And beyond 2025, we are positioned for continued success. We have elevated earnings growth visibility through 2026, broad and diverse product and market coverage in workplace furnishings, market-leading positions in residential building products, and we continue to invest to drive growth. All this is supported by our strong balance sheet and the ability to generate continued free cash flow.

I want to thank each HNI member for their continued dedication and congratulate them on another excellent quarter. We will now open the call to your questions.

Operator: At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from Reuben Garner with Benchmark.

Reuben Garner: Good morning. You referenced, I think, modestly increasing your earnings outlook a couple of times, if I heard that right. And then you referenced the $0.50 to $0.60 over the next eighteen months of visibility being, I think you said, higher than you expected. Can you elaborate on what is driving that increased visibility or that increased earnings outlook?

Jeff Lorenger: Yeah. I mean, I think we continue to get more confidence in how our network optimization and our synergy work has developed here, Reuben. So we are, based on our first half and what we have in the hopper, we are able to say with confidence that we think that is going to drive a modest increase in the full year on the EPS from where we were at.

Reuben Garner: Got it. Got it. Excuse me. And then, the SMB business showing some signs of life, I guess, is one way to put it. In the past, I think that has been a pretty good barometer of just general sentiment improvement. Does it feel different this time? Was it, you know, maybe some things were not triggered earlier in the year with the tariff dynamics going on, and this is kind of some catch-up, or do you think this is a sign of maybe some acceleration to come in both sides of your office business?

Jeff Lorenger: You know, that is a great question, Reuben. And for you, you have been around a bit, as have I. And I think it is a little, I think there is some of that. I also think it was more of a, that business has been performing pretty well the last couple of years, and I think it was more of a lull in the tariff impact, like we said, the end of last year, beginning of this year. So I do not know that it is a traditional pattern in that respect. Because I say, you know, our contract business is performing well right now.

And so I think it is really SMB returning from that temporary kind of shock to the system and getting back online more so than it is kind of traditional, goes in first, comes out first mentality.

Reuben Garner: Yeah. Reuben, we talked last time, you know, three straight quarters of that contracting and about an average of 5%. We started to see that rebound early in the second quarter. So I think it is a sign of, you know, usually that goes in first and comes out, goes in first and then out. So it supports the thoughts there.

Reuben Garner: Got it. And then last one for me on the residential side. Even with the pull-forward dynamic, orders down 2% is pretty good in this environment, with what we are seeing in new construction in particular. Can you talk about where you think you are getting the outperformance? Is it more on the new side? Is it some progress in the R&R space? Anything, you know, is it driven by the new products? Is it a combination of everything? Can you just kind of dive into that a little?

Jeff Lorenger: Yeah. Reuben, I think we can probably both comment on this. I would say from my vantage point, we are really competing well. I mean, our teams are focused. You know, it is our growth initiatives, again, it is early days there, but we have got, you know, investments rolling on top of that. So we have just, the team is really focused on market connectivity in both the R&R and the new home areas. We have set, you know, we have got gap inserts rolling. We have got some new product impacts with the electric category. We have looked at some new channels in the home improvement retail space.

So, again, all these are early days, but I would say baseline, we are competing really well. We are really focused. And our investments are just starting to take root. So that is, I think, why we are able to kind of front-run the market dynamic. Although they are still there, there is no doubt about it.

VP Berger: Yeah. I would add to that. For the details then. Oh, go ahead. You asked about which side of the market. It is in both sides, both new home and remodel. And if you look at permit activity through the first four or five months of the year, it is actually down, yet, you know, we are showing revenue up. So I think it is a sign of our, a bit of our unique model and the new construction side with own distribution, as well as the initiatives that we are getting in place with dealers on the remodel side.

Reuben Garner: Great. Thanks, guys. Good luck going forward.

Operator: Your next question comes from Greg Burns with Sidoti and Company.

Greg Burns: Good morning. You gave us some color around where the growth investments are on the building products side of the business. On the workplace furnishings side, where are you investing there? And maybe give us a little bit of color on the growth investments you are making there. Thank you.

Jeff Lorenger: Yes, Greg. So really, we have got a couple things rolling. One, just people capacity, both on the external and internal. Secondly, we are really trying to streamline the dealer experience, simplify and streamline our connectivity with dealers, you know, automating things to make it easier to do business with, which we see as a bit of an unlock. And then new products. We have got a lot of teams focused on increasing product cycle times and getting products to market sooner and being really focused on that. So those are, you know, in-house, so to speak, those are some examples of kind of what we are doing to start to drive growth.

And I remind you that we said we were going to pivot to growth, and that is, you know, we are going to continue to do that, and we are going to continue to make investments in these spaces.

Greg Burns: Alright. Great. And then in terms of the margin profile on the workplace business, impressive margin this quarter. Is there a target margin range you think that business should operate in? Is there room, obviously, it seems like with some of the profit initiatives you have, there is room for margin expansion. But how should we think about maybe the longer-term margin range that you think that business can operate within?

VP Berger: Yeah. I think the other jump-off here was about a nine and a half percent business. We think there is between a 200 to 250 basis point, Greg, just based on the current initiatives that we have already talked about, between the KII synergies and the Mexico ramp. And then, obviously, we will continue to have our normal productivity that we drive in there annually to offset, you know, any inflation. So we still think there is a lot of runway there to push that thing towards a 12% return business.

Greg Burns: Okay. Great. And then just lastly, could you just remind me what percent of the workplace business is SMB?

VP Berger: Just, yeah. Great. Forty, forty-five percent. So certainly still an important part here.

Greg Burns: Okay. Great. Thank you.

Operator: Your next question comes from Steve Ramsey with Thompson Research Group.

Steve Ramsey: Hi. Good morning. Wanted to think about the workplace comment on the commingling of SMB products in the contract settings. Can you maybe parse that out, add some nuance to why that is happening, and then put some context around that activity as it is happening in 2025 versus the prior couple of years?

Jeff Lorenger: Yeah. Steven, that is a good question. I mean, I think what we have seen, if you back way up, just kind of the post-COVID environment. You know, a lot of the dynamics have gotten jumbled up, and then as people have come back online, there has been a lot of study. There has been a lot of, you know, hybrid. There has been a lot of, you know, remote versus in-office. And all these things have been developing over the last bit of time. And I think it kind of shocked people out of their traditional mindset and into maybe new ways of thinking about how to configure, how to do things.

And as they have done that, I think they have become kind of a blank slate and a clean sheet of paper in solving for, you know, their in-office productivity, work demands, etcetera. And it has afforded an opportunity to say where they really, you know, where they want to go long and spend more, where they want to maybe mix in, you know, different price points. And it is really just a shift in how that is being done.

And so that is where we see it coming in, and we just see, we see dealers, we see customers being open to, you know, looking at different versions of what maybe they had not considered before, and that is where we are seeing it. On a percent basis, I cannot really tell you, you know, it has gone from x to y. We just see it. We see it in presale metrics. We see it flowing through based on what customers and what dealers sell what products. And so that is kind of contextually, you know, how we see this developing and happening, what the background for that, that color commentary on that comment.

Steve Ramsey: Okay. That is interesting. I mean, I would think you guys have an advantage to play a part of that trend given you play strongly in both categories. So interesting to hear that.

Jeff Lorenger: Yes. I think that is right.

Steve Ramsey: Yep. Okay. And then flipping to the resi segment, this was touched on earlier that the sales were strong. Orders in May and June were good despite the environment. Do you attribute that to share gains? Or maybe some comps help on the R&R side? But how would you describe the outperformance?

VP Berger: Yeah. I think part of it, you know, you have got to break it apart here, Steven, on the new construction side. We think we are starting to see our initiatives come through. Permits are down, and our unit volumes are better than that, that is a signal that we are expanding the market or taking share. So I feel that is happening. And I think we have been about on the remodel side, there have been a lot of initiatives around, you know, dealer activity, dealer activation, more improvement in the DIY space or home improvement retail, and we are getting more placement there.

So it is kind of why we are saying we expect growth regardless of what is happening with the markets themselves. And I will also comment on the investments side. This is also where we are making, you know, longer-term incremental investments in similar areas Jeff talked about on the workplace side with, you know, more people capacity and adding to the selling model. So I think we are uniquely positioned to outperform the market.

Steve Ramsey: Okay. Great. And maybe to add on to that, on your vertically integrated part of the resi segment where you have distribution, can you talk about how that is performing versus your external sales?

VP Berger: If you look at it from a unit standpoint, Steven, we can see that, you know, where we own distribution is performing well. It is the absolute delta compared to not only distribution's hard because each market is different, and where we own distribution, we are primarily the main distributor, but we certainly think it is performing as good or if not better than independent.

Steve Ramsey: Okay. That is great. And then one last one for me. Strong EPS growth is good to see. Thinking about the inputs of operating cash flow generation and CapEx, do you expect free cash flow growth year over year to be similar to the earnings per share change? Or how do you think about the cash flow dynamics in 2025?

VP Berger: Yeah. What I will answer that two ways. One, we expect to, you know, maintain neutral on working capital with growth. Two, we are going to take our cash flow generation up probably $35 million that we talked about last quarter. $10 million of that is because of true volume growth. So now we are in the $200 to $210 million range. And another $25 to $30 million is going to be because of the new tax bill. So the timing of when we are going to pay stuff. So it should improve.

Steve Ramsey: Excellent. Thank you.

Operator: Your next question comes from David MacGregor with Longbow Research.

David MacGregor: Yes. Good morning, everyone, and congratulations on strong results. I apologize if these questions have been addressed. I had a little technology challenge getting on here. But I guess I want to start off by just asking about workplace furnishings and specifically the volume leverage. And, you know, I think the expectation had been that, you know, Kimball and Mexico would drive volume leverage above the historical mid-thirties level. But you are also seeing the negative price cost working against that. So can you just talk about how much improvement you are seeing in the absolute volume leverage in workplace furnishings if we were to separate out the price cost pressures?

VP Berger: Yes. I think it is, David, the obvious incremental improvement on our two projects is what you are referring to on the first piece, which is going to accelerate volume. But we should still think now that we are in the 35% to 40% in incrementals with volume, and we should expect to see that. But that is before we do our investment. And I think we have talked a lot about making sure we stay on our growth investments and stay out in front of the selling models and capabilities. But 35% to 40% would be the incremental before investments.

David MacGregor: Okay. Good. And I guess so you are still seeing progress there that gives you confidence in those numbers. That is great. And I guess you had also in the release discussed the savings from Kimball in Mexico. Mexico at $0.24 for the first half. Guess with all the progress to date and the volume growth, how would you handicap the likelihood of upside to those numbers?

VP Berger: I think Jeff signaled, you know, that there is a little bit of upside just based on us taking our outlook up. So gave a range of $0.70 to $0.80, as we started to kick off those projects. I think it is fair to say we are leaning closer to the $0.80 based on where we are and what is in flight. So, I would push on the right side of that range, and if not, a little bit more.

David MacGregor: Okay. And then just on the share repurchase activity, $40 million in the quarter, kind of matched the first quarter pace. Should we be modeling kind of $150 million to $160 million for the full year, or was there something that you thought of as being maybe opportunistic in the first half? How should we be modeling that?

VP Berger: Yeah. I think the modeling is, you know, how we are going to use our free cash flow, but we reevaluate that, David, every quarter. And that is going to be a quarter-by-quarter decision.

David MacGregor: Okay. Perfect. Thank you very much.

Operator: And your final question comes from Brian Gordon with Water Tower Research.

Brian Gordon: Good morning, everyone. I also had some technical issues connecting earlier, so I will also apologize if these questions have been asked before. I guess my first question would be, when you are talking with the large contract customers, how are they feeling about business conditions? And maybe more explicitly, how are they feeling about their CapEx decisions going forward? And how would that differ maybe from what you are seeing in the SMB side of the business?

Jeff Lorenger: Well, you know, I cannot speak customer by customer on CapEx. What I can tell you, though, is that I kind of said there the mentality is, you know, they are investing in, I use the term business as usual, which, you know, contextually means what we are seeing is they are moving out. In our space, they probably moved out in others, you know, other investment categories depending on what business it has been. But on the in-office and the workflow and productivity, they are viewing that as, you know, business as usual, and they are making the investments.

I think they are, you know, I think you used the term that, you know, there are some people coming off the sidelines, if you will, and we do not see a lot of hesitation there. Most of these customers are in the game and wanting to move forward, so we use the term, you know, kind of studying over the last couple of years. Some customers were evaluating, reevaluating, and I think we are past that point now. And people are deploying capital to do projects to support their in-office model, whatever it may be.

Brian Gordon: Great. Thank you. Second question that I have today is on the RVP side. How much of this is volume versus how much is pricing?

VP Berger: Yeah. It is primarily price, Brian. I think you looked at the first half of the year, it is probably one-third volume, two-thirds price. But if you look at the full year, you will see the volume kick in with more volume, you know, happening in the back half.

Brian Gordon: Okay. Great. Thank you very much.

Operator: That concludes the Q&A session. I will now turn the conference back over to Mr. Lorenger for closing remarks.

Jeff Lorenger: Appreciate everybody taking the time to join us today. Have a great day. Thanks so much.

Operator: This concludes today's conference call. You may now disconnect.