HNI - NYSE

Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to HNI Corporation Fourth Quarter and Fiscal Year-End 2025 Conference Call. [Operator Instructions]. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to Matt McCall. You may begin.

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 Fourth Quarter and fiscal year 2025 results. With me today are Jeff Lorenger, Chairman, President and CEO; and VP Berger, Executive Vice President and CFO. Copies of our financial news release 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 risks. Actual results could differ materially. The financial news release 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 Lorenger. Jeff?

Good morning, and thank you for joining us. 2025 was a seminal year for HNI Corporation. Our members delivered excellent results as we reported a fourth straight year of double-digit non-GAAP EPS growth despite persistent soft and uncertain macro conditions. The positive momentum of our strategies, the benefits of our diversified revenue streams, our ongoing focus on items within our control, and the merits of our customer-first business model continued to deliver strong shareholder value. And late in the year, we completed the acquisition of Steelcase. This combination will not only transform our company, but also the Workplace Furnishings industry. On today's call, we will review our fourth quarter and full year 2025 results and provide some commentary around our expectations for 2026 and beyond including the benefits of the Steelcase acquisition. Before I discuss our recent performance, I want to reflect on the fundamental improvements we have driven at HNI. Our transformation has taken multiple steps in years. I will begin with Workplace Furnishings where margins have been reset. Three years ago, our legacy Workplace Furnishings business launched a profitability improvement initiative that was instrumental in expanding operating margin nearly a 1,000 basis points. In 2023, price/cost recovery following the period of elevated inflation drove the first phase of expansion. Since then, multiple portfolio management moves, ongoing network optimization efforts, KII synergies and the benefits of ramping our Mexico facility have supported consistent profitability improvement. Based on the initiatives already underway, including the recently announced plans to close our Wayland New York manufacturing facility, we have line of sight to continued operating margin expansion in the coming years. And our margin expansion story is increasingly supported by affirming macroeconomic picture in our Workplace Furnishing segment. I will provide more macro commentary later in the call. Shifting to our Residential Building Products segment, our evolution started with the strategic shifts following the great financial crisis. Since then, we have adjusted our cost structure, fully embraced lean manufacturing and continue to pursue a vertically integrated business model with the leading brands in all product categories. The result was more than a 1,000 basis points of operating margin expansion over the decade post 2009. In addition, since 2019, the efficiency, nimbleness and uniqueness of our Building Products business have supported consistently strong profitability with sustained operating margins in the mid- to high teens. This consistency of both margins and cash flow, our foundational elements to HNI's financial strength. We expect this profitability and cash generation to continue into 2026 and beyond. More recently, our focus in Residential Building Products has shifted to the front end of the business and on driving top line growth. Structural changes have been implemented to organize around the customer and ensure we have laser-focused go-to-market strategies to support our growth initiatives. These front-end investments are paying off in the absence of cyclical support. In 2025, we reported segment revenue growth of 6% despite continued weakness in the new home market. We expect to outperform again in 2026. This historical context helps set the stage as we enter the next exciting chapter of the HNI story. The acquisition of Steelcase unites two industry leaders to meet the dynamic marketplace and evolving needs of the workplace and accelerating in office work trends. We have brought together two highly respected companies with shared values, talented teams, strong financial profiles and highly complementary capabilities, innovation, thought leadership and operational excellence, chief among them. This strong foundation combined with expected synergies will accelerate our ability to invest in long-term operational enhancements, digital transformation, customer-centered buying experiences and products to meet evolving customer needs. Our integration efforts are underway, and we are leveraging a disciplined and proven approach informed by recent experience, while continuing to build on the iconic brands for which both companies are widely respected. HNI will now have total revenue of more than $5.8 billion, including all synergies, total adjusted EBITDA will be nearly $750 million and annual free cash flow will approximately be $350 million. We are now the market leader in both of our industries, Workplace Furnishings and hearth products. I can report that the integration of the Steelcase acquisition is off to a strong start. Six months following the announcement, we're even more confident in our move to add Steelcase to the HNI family. The complementary go-to-market nature of the two businesses from a capability, product, brand, customer and cultural perspective, has been reinforced as we have begun to work together. We also remain confident in our ability to deliver the targeted synergies of $120 million and drive margin expansion at Steelcase. Our current synergy projections are focused on the Americas business and do not include any revenue synergies. And importantly, we are laser-focused on minimizing any front-end disruption across our Workplace Furnishings businesses. As we have consistently stated, there are no plans to change dealer partnerships, sales forces or brand distribution. And as I've been traveling and engaging with our teams, it is clear that this continuity is being received positively by customers, industry influencers and our dealers. Now I will turn the call over to VP to provide some additional detail about 2025, discuss our outlook for the first quarter of 2026 and give some thoughts on how we see the full year playing out. I will then provide a longer-term perspective on the opportunities surrounding our businesses before we open the call to your questions. VP?

Thanks, Jeff. I will start with some additional comments about 2025. Fiscal 2025 non-GAAP diluted earnings per share for our legacy business was $3.74, which increased 22% from 2024 levels. Again, this was our fourth consecutive year of double-digit earnings growth with the average annual growth rate exceeding 15%. Total net sales for the year increased 12% overall and 6% on an organic basis. Excluding all impacts from Steelcase, full year adjusted operating margin for HNI expanded 80 basis points, reaching 9.4%. The improvement was driven by volume growth, productivity gains, Kimball International synergy capture and price cost benefits. From a segment perspective, in our legacy Workplace Furnishings business, full year organic net sales increased 6% year-over-year, fueled primarily by the strength of our contract brands and the benefit of an extra week in fiscal 2025. Full year profitability, excluding the Steelcase stub period benefit from volume growth, our profit transformational efforts, KII synergy capture while we continue to invest in future growth initiatives. Full year non-GAAP operating profit margin expanded a 100 basis points year-over-year to 10.5%, as we delivered on our previously stated goal of achieving double-digit operating margin. Non-GAAP operating margin has expanded nearly 900 basis points over the past three years. Looking ahead, we expect revenue growth and margin expansion in our legacy Workplace Furnishing business for the full year 2026 even as we continue to invest to drive growth. In Residential Building Products, fourth quarter revenue grew more than 10% versus the same period of 2024. Driven by the strength in the remodel retrofit market and the benefits of the extra week. For the full year, revenue increased nearly 6% versus 2024. New construction revenue was flat with the remodel retrofit up a double-digit pace with solid volume improvement. Segment non-GAAP operating profit margin in 2025 expanded 60 basis points year-over-year to a strong 18.1%. We remain encouraged about the long-term opportunities tied to the broader housing market, and we continue to invest and grow our operating model and revenue streams. As we look to 2026, we expect modest segment revenue and profit growth despite ongoing challenges in the new construction market. Overall, as Jeff mentioned, 2025 was an outstanding year for HNI. Before I move to our outlook, a couple of comments about Steelcase's impact on the quarter. We completed the acquisition of Steelcase on December 10. Thus, we consolidated Steelcase's performance for the final three weeks of December into our reported results. The second half of December is a lower shipment and production period for our industries. Consequently, that stub period included seasonally lower levels of daily shipment activity while were more than offset by the recognition of full cost and expenses for the period. We excluded this impact from our adjusted results as it does not provide any fundamental insight into our performance. And as Jeff mentioned, the expected timing and magnitude of our projected $120 million of synergies and $1.20 of accretion are unchanged and unimpacted by the stub period. For the fourth calendar quarter, Steelcase generated strong results. Revenue grew approximately 5% year-over-year, and earnings grew about 9% from the fourth quarter 2024 levels, absent purchase accounting, restructuring and acquisition-related costs. Now I'll transition to our outlook. For 2026, as Jeff mentioned, we expect a fifth year of double-digit non-GAAP EPS growth. Revenue growth is expected to continue while we drive bottom line improvement. In addition, our network optimization efforts continue to support our ongoing earnings visibility story we've been discussing with you. Our favorable fourth quarter '25 results included accelerating the benefits of these efforts. Looking forward, these initiatives, which include KII synergies, the ramp-up of our Mexico facility, the closure of Hickory and the planned closure of Wayland are expected to yield an incremental $0.25 to $0.30 over the next three years. Approximately $0.10 of this will be recognized in 2026. Finally, we now are expecting modest EPS accretion from Steelcase in 2026, excluding the impact of purchased accounting. Finally, a few additional comments to assist you with your 2026 modeling. Combined, depreciation and amortization is expected to be approximately $175 million to $180 million. Interest expense is expected to be between $75 million and $80 million, and our tax rate should be approximately 25%. For the first quarter of 2026, we expect total net sales to increase by more than 130% year-over-year. Non-GAAP EPS is expected to decrease slightly from 2025 levels. Temporarily, first quarter earnings pressure is expected to be driven by revenue and expense recognition timing and the increased investment. Modest year-over-year revenue pressure in workplace is expected to be limited to the first quarter and we expect mid-single digits for the full year. Building Products revenue is expected to be up low single digits for the first quarter and the full year, and we expect year-over-year adjusted earnings per share to return in the second quarter and accelerate as the year progresses. Finally, a comment on cash flow and the balance sheet. Post the closing of the Steelcase acquisition, our balance sheet ended the year with a net debt-to-EBITDA ratio of 2x. We expect our cash flow strength to continue and accelerate with the addition of Steelcase. As a result, leverage is expected to return to pre-deal levels in the 1 to 1.5x range in the next 18 to 24 months. Finally, we remain committed to payment of our long-standing dividend and continue to invest in the business to drive future growth. I will now turn the call back over to Jeff for some long-term thoughts and closing comments.

Thanks VP. Our fourth quarter and 2025 results demonstrate the strength of our strategies and our ability to manage through uncertain macroeconomic conditions, while we remain focused on investing for the future. We expect strong results to continue in 2026 driven by our margin expansion efforts, synergy recognition and continued revenue growth. As we look forward, the timing was right for the acquisition of Steelcase from a strategic, financial and cyclical perspective. We are increasingly bullish about the Workplace Furnishings demand dynamics as the macroeconomic picture continues to firm. Return to office continues to be a positive driver of activity with levels of remote work expected to continue to fall in 2026. Office leasing activity established a new post-pandemic high in the fourth quarter with annual leasing activity up more than 5% for the full year 2025 and net absorption of office space, which has historically been a leading indicator of future industry demand was meaningfully positive in the second half of 2025. In fact, JLL believes a new expansionary cycle in the office space has begun. While new supply of office space will remain a headwind, we see multiple cyclical drivers of growth outside of new construction. Moving to housing. Headlines continue to point to ongoing softness, especially in the new build space. Interest rates remain relatively elevated, prices remain high and affordability remains low. As a result, we expect continued new construction weakness in 2026. However, our structural changes and growth investments should allow us to continue to outperform the market. In remodel retrofit, we are assuming modest growth in 2026. This is consistent with the LIRA projections. In addition, we expect continued market outperformance in our R&R business. And importantly, we expect ongoing margin and cash flow consistency in this segment. Finally, our optimism continues to build around the addition of Steelcase to the HNI family. As I stated earlier, we are confident in our projected synergies of $120 million and accretion of $1.20. And as VP mentioned, we now expect modest accretion in 2026. We entered 2026 a transformed and fundamentally stronger organization. Upon recognition of all targeted synergies, the profile of HNI will include substantially higher earnings, stronger margins, greater cash flow and a continued strong balance sheet. This will enable us to deliver exceptional value to our shareholders, customers, dealers, members and communities. Thank you again for joining us. We will now open the call to your questions.

[Operator Instructions] Your first question comes from the line of Reuben Garner with The Benchmark Company.

Maybe to start just the clarification about the outlook for the year, given the stub period and your efforts to kind of show what the underlying business in the fourth quarter. Are the revenue and double-digit earnings growth comments for next year? Are they off of the base without Steelcase or the base with Steelcase?

Perfect, Reuben. I'll kind of walk through the pieces. I think if you look at the -- on the face of the [ $346 million ], that's including the Steelcase stub as well as all the purchase accounting, which is close to $4.6 million headwind, if you take out the purchase accounting, it's $3.53. That's what you're going to want to compare to for the future years, because that's what's ran through the P&L. And if that specific number is going to actually be up 16% if you talk about the growth. And then if you look at the $3.74, that's excluding purchase accounting and the Steelcase stub period.

And the double-digit growth for '26 would be off of which 1 of those 3 numbers.

$3.53.

Perfect. Okay. And then your comments about Workplace Furnishings in the first quarter. I don't think I heard you mention weather just seeing what's happening in some of the major cities in the Northeast and knowing that New York in particular is playing a role. Is that in the recovery? Is that driving the kind of flattish, I think you said first quarter? And what gives you confidence about the acceleration that you're expecting as the year progresses in the mid-single-digit full year guide, is there any kind of backlog or order numbers from Steelcase and HNI legacy that kind of gives you confidence in a pretty meaningful acceleration as the year moves on.

Yes, Reuben, that's a good question. I mean, weather is always can be a impact. We don't really hang our hat on that. I mean I think it probably has some impact. It's been a little choppy. Even in the fireplace business, the hearth business, because they are outside and getting the homes to install. So there's a little pent-up there probably at a little headwind. But the bottom line is both when you look at legacy and Steelcase we've got really strong, healthy activity, bid counts, both number and dollars, particularly in the contract side or in the high teens. The funnel, our funnel metrics are up in count and in dollars and particularly in large projects, over $5 million. And I'd say these are consistent across what I would call both legacy and the Steelcase business, if you look at it. And that's what's kind of driving our confidence in addition to the macro topics that I talked about firming up on office and net absorption and things like that. So you got that going on macro and micro internally, we see these big numbers and presale activity numbers all trending nicely positive.

And then, Jeff, you've had a little over 60 days, I think, if my math is right, since the deals closed as you've been able to kind of get in and meet with people, see how they do things. What have you learned? What kind of has surprised you to the upside or downside? What opportunities do you think you've kind of developed or seen over the last couple of months?

Yes, it's a good question, Reuben. I spent a lot of time with the teams in Grand Rapids and a lot of time -- a lot of time in the market. And I would say first of all, confidence continues to grow on why we did this transaction. If you look at the customer reach and the complementary nature of the brands and the geographies go to markets, the talented teams are working well together. We're out of the gates quick. And then I would tell you that the positive response we've seen from customers, dealers, sales force, influencers, basically, people in the value chain as I've gone out in the market and talk to them are very positive on this combination. And so that's -- that's been a real -- I mean, we predicted that to be the case, but actually going to talk to customers in their locations. And here in the questions they ask and the enthusiasm they've shown for this. It's been really strong.

All right. And I'm going to sneak one more in. I'm not going to count that first one as a full question. So the Building Products space. Your outlook for low single-digit growth is super encouraging, very impressive given how you performed in '25. It looked like you've changed some things up about how you're selling or displaying the product down at the builder show a couple of weeks ago. I guess, talk about what's driving your outperformance of the industry. There's not a lot of categories in building products, talking about kind of even flattish volume environments for this year. So for you guys to do it on top of what you did in '25, something has to be working for you. Can you just kind of dig into what you're doing there? .

Yes, we can -- VP can comment on us as well. I mean I think we've started to talk about this a while ago, Reuben, which is really getting closer to the builders and the customer engaging in the market being laser-focused on what we can bring to the table for our customers. And it's been -- it's early days, but it's being really well received. I mean, we've got a great product lineup. We hit all price points, all fuel types. And as we get in and engage more specifically from a manufacturer side alongside our industry best-in-class distribution partners, the two things are really starting to have an impact. And combine that with the service model that we have in our large installing distributors, independent and our [ FHH ]. What I would tell you is it's, it's moving the needle. And so we got a good product pipe we're talking about in the electric category. And all these things are really starting to catch hold. And I think that's really what's going on. I mean it's, it's nothing more than really customer intimate focus where customers want to be met, whether it be in the R&R segment or in the new home segment. I don't know VP if you've got any other...

Yes, Jeff, I'd add and the way we measure this, Reuben, is you can -- everybody sees the news of permits down 7% year-to-date, and they see contracting markets. We actually measure market by market and the initiatives that Jeff is talking about the intimacy, we can see that we're seeing better results on that. So those are share gains and in some cases, get more fireplace spec. So it's the controlling the controllables. And on the remodel side, we've done a nice job on the [ spoke ] side of our business. We've gone to a single brand to consolidate it. We've been able to get a lot more reach a lot more reach into the retail in the big box. So that was an area for growth that's inside the numbers as well. So the long-term investments are paying off. We still have a lot more to do to get to more markets and more builders, but we certainly are not pulling victim to a down 7% permit number.

Great. Thanks for the detailed guys. Congrats on the strong close to the year and the strong outlook, the stock markets been a bit rational today, but I assume all this will work itself out and good luck in '26.

Your next question comes from the line of Steven Ramsey with Thompson Research Group.

Good morning, everyone. I wanted to start on the synergy number, $120 million being Americas focused. A couple of things on that. First, I would -- given your past execution, I think there could be upside to that. I'm curious kind of what points or targets you would need to reach to potentially raise that down the road? And then secondly, it being America's focused seems to imply that Steelcase International is still projected to be a negative offset -- could that be a source of upside in the future?

Perfect, Steven, I'll take it kind of in two pieces. The first, the $120 million that we originally announced is through our disciplined approach that we've learned through the KII process. You heard Jeff say we're still comfortable with that number. It takes every bit of three to six months to get the team working on the specific projects of how we're going to go execute it, which is why I've talked about accretion of $0.60 in the second year once these projects are up and running. And so to your question about timing, six months in, if we've learned more, we'll share more. But right now, we're focused on making sure we understand the buckets between procurement, logistics, SG&A and network optimization, and that we'll share with you as we learn more as we go. But I think the key thing from the last time we talked is we expected it to be neutral in year one. And now that we're in there, this is actually going to be modestly accretive in year one. And that's really good considering the capital structure and the additional shares that were issued that, it doesn't change our total target, but it shows that we'll start seeing the benefits of a little quicker. That's kind of question one. Question two, on International, that is not offsetting anything. This $1.20 stands on its own. The international business has very good assets. As Jeff said, with the business and the teams working together, we're getting up to speed on that business, whether it's APAC or EMEA, we're getting lots of insight of how the businesses in their go-to-market and their advantages. And I'd tell you the teams are energized right now to drive profit improvement plans. They're in place in all of those areas, and that will not be a drag on the $1.20.

Okay. That's great color. Wanted to think about the resi growth investments, and you talked about that being a consistent margin. Is the implication that 2026 resi margin is flattish with sales up? And is there a cadence for the year on the resi margin profile?

Yes. I think that's the right way to think about it, Steven. That business is extremely flexible in profitability as you've seen it from whether it's $500 million or $850 million, it tracks between the 17% 18%. We are going to continue to make the investments Jeff was talking about with builder and getting closer to the builder. So we would expect those margins with the revenue growth to stay right around the same area.

Okay. And then maybe you can share a bit more on the resi growth investments and if those have shifted in the last year or so as you've started making those, it's clearly working and your -- it sounds like you're saying it's geared towards builders yet R&R is the growth drivers. Maybe you can kind of connect the dots there on the investments being more to builders, but the growth being from R&R.

Yes. I think there's a couple of things on this one, Steve. One, when we talk about investments, this has been a three-year journey. The operational excellence of this business is what's allowed us to deliver the results. In the last three years, we've moved to a front-end structure. We brought in leaders running each of these business units that bring those front-end points of view. And they're the ones leading the charge in each of the intimacy models in both new home and existing home. We've also made a significant amount of investments in product and innovation. Part of this success and our offset against the market is we are entering new categories and new areas. Specifically, an example would be wood stoves and DIY. That's a large market. We didn't have a place in. So we're making investments with go-to-market there. It's allowing us to do it as well as what Jeff said on the electric side. So I think you're seeing investments on the new home and the remodel side as well, and they just pace to how they come in through the revenue streams are not always at the same time.

Yes, I think it's a great point. I also would -- we're getting really good. I think someone else mentioned at the IBS show is a different look from what we've had in the past. We're connecting more to designers, interior designers. I mean there's a lot of focus there relative to design as well, Steven. So it's kind of across the board -- and I lump it all back to getting much closer and intimate with our geographic areas, design trends, customer intimacy in all the while working that with the changes VP talked about. It's been a couple, three-year run, and it's starting to pay dividends, and we're going to keep investing.

Your next question comes from the line of Greg Burns with Sidoti & Company.

I was just hoping to get a little bit more color on the profit headwinds in the first quarter. What exactly are they? And why are they going to be rolling off as we move through the balance of the year?

Yes, Greg, it first starts with just some timing of the revenue. It's a little choppy on kind of how some of the contract side of the business, everything that Jeff talked about on the backdrop is all good and favorable for us. And if I look at even how orders came in, in the fourth quarter, the workplace was actually up 5% and Steelcase's actually showing up good order trends as well. It's just the timing of when that stuff is going to shift. So -- the revenue is the first piece, and we have a couple of comps just from last year that we're up against. That's why we do believe it's a short-term issue and the full year is more important. I think on the expense side, there's really two things happening bringing in the Steelcase family, there's a comp timing that's hitting in the first quarter that would have hit in the second quarter under their P&L. So that's a little bit of expense pressure. And we're still balancing our investments. We're still making sure that we're thinking about the long game and the macroeconomics tells us still to keep investing. So I think the revenue growth, the timing of the expense and that's continuing investment puts the short-term pressure, but more importantly, as we go through the year, you're going to see the double-digit EPS growth accelerate in Q2, Q3 and Q4 based on not only volume but the visibility story we're talking about.

Okay. Great. I think last quarter, you called out some hospitality orders or the timing on hospitality orders. Could you just maybe update us on the hospitality market and if there's any any change there?

Yes. No, there is not. The hospitality market is solid. We were up against the comp. But look, say similar to the contract market, pipeline is strong. Our business is making investments performing well. They have a market leader position in in-room furniture. And so we like that business a lot, and we expect that it will perform at or above prior year so.

Your last question comes from the line of David MacGregor with Longbow Research.

I guess from our dealer conversations this quarter, it's pretty clear that demand for design support has accelerated pretty dramatically. And so just wondering if you can talk about the amount of work that you believe is developing in the pipeline, but maybe not yet in the order backlog -- and how you're thinking about the timing of that were converting to orders and then to sales dollars?

Yes, that's the question, isn't it, David. I think you're hearing the same stuff that we're seeing, which is there's a lot of activity. It's -- I believe it's real. And we're actually -- just to get upstream on that a little bit, a lot of our businesses are deploying additional resources to help dealers and customers get things through the pipe, because that does become a backlog area relative to the ability to get things designed. We're also working on some AI tools and some other digital tools to be able to help that as well for the long game. But look, we -- historically, this business has had a pretty stable conversion kind of spec to order cycle. And post-COVID, it's been a little bit all over the map, and it hasn't really settled down. But I would tell you that once these things start and you see the commitment, particularly on the larger projects, they come in. It's just sometimes they don't fall perfectly in the areas. And the other thing that we're seeing with the Steelcase acquisition is their exposure to the large stuff that once it gets lit, it goes, it's robust. Now we're still working with them on how they view their timing and predict the order to revenue cycles and the spec to order cycles. So I can't really give you a great answer on -- it's 90 days or 60 days or it's 30 days. But it's real and it's volatile relative to when it gets put in. But we're bullish.

Yes, it's out there. There's no doubt about it. Second question, really just around the discussion around synergies and you talked about the $120 million -- it seems like you're bumping the '26 expectation a little bit. And I'm mindful that you haven't any change to the $120 million. But I guess the question is, is the better outlook on '26 a function of maybe incremental synergies that you've identified? Or is it really timing? And then I guess, related to that is the whole discussion on commercial synergies, which I fully understand why you don't want to get into too much detail around that at this point. But I'm wondering if you can just discuss it at a very high level kind of the actions you're taking to facilitate the eventual capture of those commercial synergies.

Yes, I'll take the first part of that, David. The timing and the dollar of year one actually hasn't changed as it relates to the synergies. We had predicted a little bit more transition costs and some offsets in our original accretion analysis as you put the businesses together. So it's just -- as a result, we'll just get a little bit more of that that 2-year look of $0.60 a little bit earlier. So I would tell you that our philosophy hasn't changed, and our approach hasn't changed as we've set that number.

Yes, David. And then on the synergies, yes, you're right, it's early days. And we -- what I would tell you, though, as I've traveled, we're seeing some nice, what I would call, organic connections between our networks to support revenue synergies, particularly with some of our open line brands. And so that when that formalizes more and gets more structured to it. We're going to kind of let it play out a little bit and see kind of how the natural system works, and then we can look more at that. But look, I mean it's going to -- we see some organic pull for some of that revenue. And it's early days, but we'll probably be talking about that down the road. But right now, it's -- I'm encouraged by what I see. .

Can I squeeze maybe one more in. And just maybe for the model, if you will, working capital in 2026 and how we should be modeling working capital. .

We're going to -- we benefited with the pooling on the Steelcase balance sheet. We're actually sequentially improved a little bit. And just with the timing of expenses, we're going to need to make a little bit of an investment, David, but not significant when you think about the net working capital as we go into 2026 and beyond. .

So -- but I think one more comment there, though. The operational discipline inside of the HNI piece as we bring into that balance sheet, I would tell you there's opportunity as we get into the out years.

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

Thank you for joining us today and your interest in HNI. We look forward to speaking with you again in April. Have a great day.