HNI Corporation (HNI) Q4 2022 Earnings Call Transcript

HNI Corporation (NYSE:HNI) Q4 2022 Earnings Conference Call February 23, 2023 11:00 AM ET

Company Participants

Matt McCall - VP, IR & Corporate Development

Jeff Lorenger - Chairman, President & CEO

Marshall Bridges - SVP & CFO

Conference Call Participants

Rex Henderson - Water Tower Research

Budd Bugatch - Water Tower Research

Reuben Garner - The Benchmark Company

Steven Ramsey - Thompson Research Group

Greg Burns - Sidoti

Operator

Good morning. My sanction is Audra, and I will beryllium your convention usability today. At this time, I would for illustration to invited everyone to nan HNI Corporation Fourth Quarter Fiscal 2022 Results Conference Call. All lines person been placed connected shut up to forestall immoderate inheritance noise. After nan speakers' remarks, location will beryllium a question-and-answer session. [Operator Instructions].

Mr. McCall, you whitethorn statesman your conference.

Matt McCall

Good morning. My sanction is Matt McCall. I'm Vice President, Investor Relations and Corporate Development for HNI Corporation. Thank you for joining america to talk our 4th fourth fiscal 2022 results. With maine coming are Jeff Lorenger, Chairman, President and CEO; and Marshall Bridges, Senior Vice President and CFO.

Copies of our financial news merchandise and non-GAAP reconciliations are posted connected our website.

Statements made during this telephone that are not strictly humanities facts are forward-looking statements, which are taxable to known and chartless risks. Actual results could disagree materially. Financial news merchandise posted connected our website includes further factors that could impact existent results. The corp assumes nary responsibility to update immoderate forward-looking statements made during nan call.

I'm now pleased to move nan telephone complete to Jeff Lorenger. Jeff?

Jeff Lorenger

Thanks, Matt. Good greeting and convey you for joining us.

On nan telephone today, I will item 4 cardinal topics. First, we delivered beardown net maturation successful nan 4th contempt a soft macro environment. Second, our workplace furnishings separator description initiatives are delivering results. Third, we are prepared for 2023. And fourth, we are positioned for beardown maturation beyond 2023. Following those comments, Marshall will reappraisal our outlook. I will past reason pinch immoderate wide closing commentary. We will past unfastened nan telephone to your questions.

Moving to nan first topic. We delivered beardown net maturation successful nan quarter, moreover though we knowledgeable a softer request environment. We generated coagulated year-over-year separator description and 47% year-over-year non-GAAP net maturation successful nan 4th quarter. This was contempt measurement pressures associated pinch macroeconomic concerns.

Consolidated gross and operating margins expanded connected a year-over-year ground led by favorable value costs, which continued to amended successful nan quarter. And for nan full-year, we afloat retrieve nan value costs shortfall driven by nan quickly rising inflationary pressures we knowledgeable successful 2021.

Fourth 4th profit improved successful some segments. Residential building products, operating separator expanded 170 ground points year-over-year, reaching astir 20%. Our 4th fourth results show nan spot of our differentiated business exemplary successful residential building products.

In workplace furnishings, 4th fourth non-GAAP operating profit much than doubled contempt little sales. The year-over-year top-line diminution was driven by divestitures and restructuring activities implemented earlier successful 2022. Excluding these actions, 4th fourth year-over-year conception gross maturation was conscionable complete 4%. Although these streamlining efforts negatively impacted our top-line, they contributed to our separator description , reflecting our committedness to improving profitability successful workplace furnishings.

That leads to nan 2nd topic. Our initiatives to grow workplace furnishings margins are delivering results. Non-GAAP operating separator expanded 150 ground points year-over-year successful nan 4th fourth and successful nan 2nd half of 2022. Favorable value costs and benefits from our costs simplification and simplification efforts, which drove nan improvement. As we person discussed connected anterior calls, we are driving aggregate initiatives to grow margins successful workplace furnishings. These efforts are successful 3 wide categories. First, we are simplifying our business to attraction connected our astir charismatic markets. Actions taken successful 2022, including nan waste of Lamex, nan e-commerce business restructuring, and nan discontinuation of a mini workplace brand, bespeak our efforts to thrust profit betterment done simplification and focus.

Second, we are lowering our costs structure. We announced nan $30 cardinal costs simplification scheme past quarter. That scheme is good underway and we are now connected way to trim costs $30 cardinal to $35 cardinal successful 2023. Approximately $25 cardinal of that full will effect workplace furnishings this year.

Third, we are driving productivity and we'll spot early use from ongoing operational investments. Our 4th fourth productivity improved versus nan anterior twelvemonth arsenic we proceed to use from our thin actions successful improving proviso concatenation health. We expect our productivity momentum to proceed and perchance effect 2023.

Regarding investments, our largest operational finance is our caller installation successful Mexico. In 2021, we started up a caller seating works successful Saltillo, Mexico. We scheme to grow that cognition and displacement to a larger building during 2023. Although these actions person negatively impacted our short-term results, they will thrust separator description arsenic they mature.

The 3rd taxable is we are prepared for immoderate headwinds successful 2023. In workplace furnishings, we expect to thrust profit betterment notwithstanding anticipated top-line pressures. Our separator description initiatives focused connected simplification, costs and productivity will proceed to summation traction this year. We expect those efforts, erstwhile mixed pinch favorable value costs; will much than offset little measurement driven by macroeconomic concerns and inconsistent agency reentry patterns. In residential building products, we are prepared for a slowing near-term request environment. Cost actions and favorable value costs will partially offset measurement pressures, while we proceed to position for maturation beyond 2023. Overall, our costs building is improved. Our equilibrium expanse is beardown and we expect a beardown free rate travel twelvemonth contempt an wide weaker request situation successful 2023.

That brings maine to my 4th taxable for today. We expect and are positioned for beardown maturation beyond 2023. In workplace furnishings, our investigation indicates nan marketplace will retrieve and request patterns will alteration successful a measurement that aligns pinch our marketplace positions. Specifically, organization migration patterns towards secondary and tertiary geographies, affirmative employment and request trends pinch mini to mid-size offices and feedback from ample firm customers regarding return to agency plans and take of hybrid activity models, each align pinch our beardown marketplace sum and merchandise and value point, breadth and depth, and constituent to nan return of sustained measurement maturation station 2023.

In residential building products, we are continuing to put successful our maturation initiatives successful nan areas of class awareness, caller merchandise innovation, online capabilities, and nan description of our wholly-owned installing supplier footprint. Overall, nan lodging marketplace has beardown fundamentals. It is undersupplied and demographic trends support early request growth. Additionally, an aging lodging banal will thrust remodeling activity. The mean location is now 40-years-old, supporting robust renewal growth. Given nan marketplace beardown fundamentals, our unsocial maturation opportunities, and our class starring positions, we are bullish astir our maturation successful this precocious margin, precocious return business beyond 2023.

I will now move nan telephone complete to Marshall to talk our first outlook for 2023. Marshall?

Marshall Bridges

Thanks, Jeff.

Let's commencement pinch seasonality. This is important because we are expecting 2023 seasonality to beryllium different than what occurred successful 2022, and that quality will distort quarterly year-over-year comparisons of income and profit. Specifically, we expect income and earning seasonality successful 2023 to beryllium much successful statement pinch pre-pandemic trends that follows 3 years of abnormal seasonality. 2022 seasonality was peculiarly different successful that quarterly gross peaked successful nan 2nd 4th and first half gross exceeded 2nd half revenue. That different shape was chiefly driven by backlog dynamics that positively impacted nan first half and deteriorating workplace furnishings request that negatively impacted nan 2nd half of 2022. As a result, our first half comparisons will beryllium much challenging connected a year-over-year ground and our 2nd half comps little so.

Due to nan alteration successful seasonality, we expect much than 85% of our yearly profit will beryllium generated successful nan 2nd half of 2023. That compared -- compares to 60% successful nan 2nd half of 2022.

All right. Let's move connected to our outlook for nan first quarter. In workplace furnishings, we expect first 4th gross to diminution astatine a year-over-year complaint successful nan low-20s. This diminution is nan consequence of past year's different seasonality, nan continued antagonistic effect of broader macroeconomic concerns, and nan waste of Lamex.

With respect to seasonality first 4th 2022 benefited from nan unwind of backlog built up during 2021. That unwind will not repetition successful this year's first 4th and accounts for much than 10 percent points of our expected year-over-year income decline.

In addition, nan waste of Lamex will little maturation successful workplace furnishings by 5 percent points aliases $17 cardinal successful nan first quarter.

First 4th residential building products gross is expected to diminution astatine a year-over-year complaint successful nan mid-to-high teens. It is important to statement that conception backlog is presently approaching normal levels, which intends our gross aft nan first 4th should inclination much intimately pinch pre-pandemic seasonality and beryllium afloat impacted by weakening caller building and remodel retrofit activity.

In full consolidated gross for HNI wide is expected to diminution astatine a high-teens complaint successful nan first quarter. We expect consolidated non-GAAP operating income to beryllium astir breakeven successful nan first 4th of 2023.

Let's move to our outlook for 2023 overall. During 2023, we scheme to thrust $80 cardinal to $85 cardinal of year-over-year profit support done improved value cost, amended productivity, and reduced structural cost. These items will partially offset nan net unit associated pinch top-line trends. Importantly, our efforts do not travel astatine nan disbursal of early growth. We will proceed to put passim 2023.

Looking astatine nan segments, we expect nan $80 cardinal to $85 cardinal of profit support to thrust profit maturation successful workplace furnishings and offset overmuch of nan antagonistic effect from little measurement successful residential building products that's being driven by nan weakening lodging market.

Shifting to nan equilibrium sheet. We person a beardown financial position, which provides elasticity for finance and positions america good for a slowing economy. Gross debt-to-EBITDA arsenic calculated per our indebtedness covenants was 0.7 astatine nan extremity of nan 4th quarter. We person nan history of generating beardown free rate travel done a assortment of economical conditions, and we expect free rate travel successful 2023 to use from a return to much normal moving superior levels. Our debased leverage and continued free rate travel procreation will supply elasticity for nan move situation and continued investment.

I'll now move nan telephone backmost complete to Jeff.

Jeff Lorenger

Thanks, Marshall.

Before we return your questions, I want to return a infinitesimal to mention that successful December HNI was again named 1 of America's astir responsible companies, ranking number six successful Newsweek's 4th yearly database of America's 500 astir responsible companies. These rankings are based connected nationalist information that analyzes nan apical capacity crossed environmental, social, and firm governance categories. Important components successful our HNI members' regular efforts see a committedness to reducing our biology impact, making a affirmative societal impact, and practicing bully firm governance.

Our extremity of enhancing wherever group work, unrecorded and stitchery shines a ray connected our decade's agelong committedness to sustainability and bully firm citizenship. And astir importantly, connected nan committedness and efforts of each HNI members who make a affirmative quality each day.

In closing, we stay focused connected our 2 superior semipermanent objectives: improving nan profitability of our workplace furnishings conception by driving separator description , and delivering beardown top-line maturation successful residential building products by leveraging our differentiated business model.

We'll now unfastened nan telephone to your questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions].

And our first mobility comes from Rex Henderson astatine Water Tower Research.

Rex Henderson

Good greeting and congratulations connected a really awesome quarter. Terrific separator performance. I did person immoderate questions astir first of each bid trends successful nan 2 segments arsenic coming retired of December into January and February, what -- directionally what are you seeing successful those bid trends successful nan 2 segments?

Jeff Lorenger

Okay. Rex, fto maine commencement pinch workplace. We benignant of -- I'll look astatine it successful 3 buckets. In benignant of our mid-market segment, it remains strong. Orders successful nan Q4 and year-to-date are some were up beardown double-digits. It's -- we -- it's accordant pinch what's going connected successful nan marketplace really migration patterns, ample cities losing agency jobs, smaller cities gaining employment trends, mini mid-size businesses, adding jobs. So that's what we're seeing successful that information of nan market.

And past we spell to our statement segment. It is stabilizing to improving orders are level year-to-date. I would opportunity their pre-sale activity is improving arsenic group attraction connected hybrid environments. I deliberation we're looking for much of a 2nd half betterment there.

And past third, we person our transactional business is still down. Those trends are now double-digits. And those are existent short cycle, mini orders that are really delicate to macro situation headwinds.

Rex Henderson

Okay.

Marshall Bridges

And Rex, arsenic it relates to --

Jeff Lorenger

Yes. Go ahead.

Marshall Bridges

Residential building products, our orders were down 18% successful nan 4th quarter, and we saw immoderate unit successful some nan caller building arsenic good arsenic remodel retrofit. They were down likewise now we do expect caller building to beryllium down much than remodel retrofit during 2023.

Rex Henderson

Okay. So you've already answered my -- 1 of my different questions, which is immoderate differentiation betwixt what's happening successful caller build and retrofit and remodel successful nan RBP -- RBP segment. And truthful caller constructions worse than nan retrofit business, is that right?

Marshall Bridges

Yes. We expect it to beryllium worse traditionally, astatine slightest historically, nan remodel retrofit business is conscionable not arsenic volatile. And we fundamentally way azygous family building activity caller -- successful nan caller location broadside exactly. So we're seeing immoderate unit there, expect it to really beryllium afloat impacted successful nan 2nd 4th and nan quarters thereafter.

Rex Henderson

And past 1 different question, your gross separator capacity present was really rather impressive. I'm wondering if you're opening to spot immoderate competitory unit aliases customer pushback connected prices arsenic commodity prices travel down. Are you seeing anybody pushing backmost connected prices astatine all?

Jeff Lorenger

Rex, that's a bully question. We show that beautiful closely. We haven't seen thing yet. As I deliberation there's immoderate successful these spaces, peculiarly successful nan workplace broadside are still announcing value increases. And we're benignant of successful line; we've been successful statement pinch what we've seen successful nan market. So -- but we support an oculus retired for that. But truthful acold location hasn't really been I deliberation nan -- it was specified a daze to nan strategy that I deliberation successful general, group were benignant of successful hitting -- getting deed pinch ostentation crossed nan Board. So it's truthful acold been accepted.

Rex Henderson

Okay.

Marshall Bridges

And Rex, there's still inflationary pressures retired location that, that we person to cover. And we are still recovering our margin, truthful we're still making advancement there. And it seems for illustration nan marketplace is behaving beautiful similarly.

Rex Henderson

Okay. Very good. Thanks. I'll walk connected to questions to personification new. Thanks.

Jeff Lorenger

Thank you.

Operator

We'll move adjacent to Budd Bugatch astatine Water Tower Research.

Budd Bugatch

Yes. Good morning, and besides convey you for taking my questions. I dream everybody's good there. I conscionable want to follow-up connected Rex a small spot pinch nan -- successful position of Hearth, we seeing immoderate alteration successful nan merchandise mix. I cognize you've done a awesome occupation connected nan logistics, but I'm wondering are we seeing thing successful position of penetration, successful position of caller housing, and is merchandise operation for illustration electrical making a alteration connected what are making an effect there?

Jeff Lorenger

Yes. Hey Budd, bully question. I mean, I deliberation we are -- we've been moving connected that for a bit. And erstwhile it comes to electric, for example, look, we're seeing a batch of opportunity there. We're launching a batch of caller products successful that category. It's expanding nan category. We've sewage examples wherever we've sewage places successful nan state wherever nan IRR complaint was zero and it jumps to 50% conscionable because of nan electrical readiness connected that unit. So it's really an description of nan category, not a replacement of nan category. And truthful that's -- and past we besides are seeing immoderate traction, arsenic we've talked successful nan past connected our insert business. As that go -- arsenic customers go much alert of their expertise to do an insert that's easier than having to rustle up a full remodel and switch possibly an aged wood burner pinch an insert state that's made for an easy install. We're starting to spot a batch much traction location arsenic well. And that's really class description , because different they weren't going to beryllium looking astatine a remodel conscionable yet. So it's a measurement that we tin get a portion successful location without doing a afloat remodel.

Budd Bugatch

And Jeff, that, that incident complaint jumped sounds really fantastic. Do you -- is it really moving nan needle? Is it a -- of a size yet to make a quality successful nan wide class aliases is it still excessively small?

Jeff Lorenger

It's still successful its early innings, Budd; I'd opportunity we're successful nan first bottommost of nan first. But I deliberation we're seeing, I judge it's going to beryllium a worldly contributor to our business going forward. But nan tally we're disconnected a debased guidelines correct now.

Budd Bugatch

Okay. And do you spot overmuch much successful nan measurement of M&A activity successful that segment, successful that business portion successful position of further dealers?

Jeff Lorenger

Yes. That's a bully question. I think, look, we're -- we do person a unsocial exemplary and our wholly-owned installing supplier web is simply a really bully plus successful this business. And location -- we do spot tons of -- there's a batch of opportunity retired location for that facet of our business. And we aren't -- we run successful tandem pinch our distribution, our independent and it's ever we -- but there's succession events, there's geographical description s. So we perfectly person that successful our quiver, and it's a attraction of ours and I do judge that would beryllium thing that you'll spot much of down nan road.

Budd Bugatch

Okay. Great. And past for maine I cognize commodity ostentation and peculiarly successful alloy was unwelcome and had to beryllium covered complete nan past post-COVID period. Are we seeing immoderate retreat successful there? And Marshall said we're still seeing inflationary pressures, but I wonderment if he tin pinpoint wherever it is and possibly quantifies what we're seeing successful that.

Marshall Bridges

Yes. Budd, truthful look, we're -- we're seeing ostentation successful 2 wide categories nan first one's wages. I would opportunity that nan costs ostentation has moderated, but we're still seeing year-over-year increases for illustration you do successful immoderate fixed year. And past there's a 2nd bucket wherever there's benignant of a wide group of commodities that are still nether immoderate pressure. A batch of that's carryover from nan anterior year. So we're seeing immoderate ostentation from those 2 buckets that's being partially offset by little alloy costs. But nan nett of nan 3 is that we're seeing inflation, astir speaking, we're expecting input costs ostentation to beryllium up successful nan $15 cardinal to $20 cardinal scope for nan year.

Budd Bugatch

Got you. And but for illustration nan return to seasonality, that's not importantly different than we spot almost each twelvemonth successful which we screen pinch a mini value summation erstwhile a twelvemonth annually. Is that a adjacent measurement to look astatine it?

Marshall Bridges

Absolutely. That's very fair.

Budd Bugatch

Okay. Great. Thank you very much. And fto maine adhd my congratulations to Rex's nan separator capacity is impressive. Thank you very overmuch and bully luck connected 2023.

Jeff Lorenger

Great. Thanks, Budd.

Operator

We'll spell adjacent to Reuben Garner astatine The Benchmark Company.

Reuben Garner

Thanks. Good morning, guys. Maybe to start, you referenced profit betterment successful workplace benignant of successful nan look of this, nan measurement headwinds, tin you springiness immoderate item connected precisely really overmuch measurement diminution you tin withstand pinch immoderate of these changes aliases a measurement to deliberation astir decremental margins benignant of ex nan value costs and savings and productivity initiatives that you have?

Marshall Bridges

Yes. Reuben, I mean, we do expect to spot measurement improvement, I'm sorry profit betterment contempt nan little volumes. I deliberation possibly nan measurement to reply your mobility is that, we're astir reasoning that workplace measurement for nan twelvemonth successful position of full top-line would beryllium down connected integrated ground successful nan debased to mid-single-digits and that that would beryllium a large diminution successful nan first half followed by immoderate moderation successful nan 2nd half. So nether those conditions we person capable profit support to thrust our operating profit maturation that that we mentioned.

In position of decremental margins aliases incremental margins successful a workplace connected mean runs astir 35%. And of course, we person offsets to thief mitigate that. So really nan decremental margins for workplace would not really beryllium calculable, right? We're expecting little volume, little income and higher profit.

Reuben Garner

Okay. And to that, that debased to mid-single-digit diminution successful workplace nan past quarter, you talked astir spot you were seeing successful mid-market that debased to mid-single-digit seems for illustration a comparatively humble diminution comparative to what nan manufacture orders person been successful caller months. Can you update america there? Is mid-market still outperforming and is that benignant of what gives you assurance that possibly you'll do thing amended than what we've seen of late?

Marshall Bridges

Yes. There's 2 things there, possibly to constituent retired is, first of all, our orders successful nan 4th fourth erstwhile you exclude nan restructuring of nan e-commerce business and divestiture Lamex were up 3%. So we did spot 4th fourth activity that's successful statement pinch that expectation.

Secondly, conscionable to punctual everyone that that we saw a beautiful important measurement down successful request successful nan backmost half of 2022. So arsenic we day that measurement down, it's not that we expect a batch of request maturation erstwhile we are correct now, but we'll surely spot little comps that are going to beryllium easier to comparison against.

Jeff Lorenger

Yes. And I deliberation Reuben, arsenic I commented earlier, that nan mid-market, for deficiency of a amended word is year-to-date is moving up beardown double-digits, pre-sale activity points to continued spot there. And truthful we conscionable judge nan migration patterns and employment trends align pinch our strengths. And truthful that's really possibly offsetting immoderate of nan different areas of nan business.

Reuben Garner

Okay. And past connected nan lodging side, caller building I deliberation is simply a small spot easier for america to get a grip connected aliases astatine slightest benignant of conjecture wherever nan markets going. Can you springiness america immoderate colour connected nan R&R broadside of your business? How you expect that to clasp successful immoderate benignant of different puts and takes, whether it'd beryllium stock summation opportunities aliases immoderate different drivers extracurricular of nan marketplace circumstantial to your fireplace business.

Marshall Bridges

I deliberation Jeff mentioned a mates of nan strategical maturation initiatives that astir apt deed a small much connected nan R&R broadside than they do connected nan caller building side. And arsenic I mentioned earlier Reuben, nan R&R broadside is historically little volatile. So we're expecting caller building diminution for illustration I said, successful statement pinch single-family lodging activity and nan existing location aliases remodel retrofit activity broadside of nan business beryllium down little expecting a small unit successful some sides that's for judge though.

Operator

We'll move adjacent to Steven Ramsey astatine Thompson Research Group.

Steven Ramsey

Hi, bully morning. And sorry if I'm repeating myself getting connected a small spot precocious here, but I'm funny really overmuch of your inventory presently is still carrying higher costs from ostentation and really that useful its measurement done nan P&L early successful 2023 to use margins. And possibly arsenic a follow-on to that really do you deliberation astir rate procreation this twelvemonth and is moving -- networking superior a tailwind there?

Marshall Bridges

Steven, nan speedy reply to your inventory mobility is that, our inventory was fundamentally level connected year-over-year basis. So we've normalized a batch of nan inventory that we brought successful during 2022. So I don't -- it's not going to person a worldly effect connected our margins.

The 2nd portion of your mobility astir moving capital, that's a continued attraction for us. We person utilized moving superior for nan past 2 years arsenic we dealt pinch each nan proviso concatenation disruptions. We brought successful immoderate inventory to buffer against that. We are moving inventory ratio arsenic good arsenic wide moving superior efficiency. As I touched connected successful our prepared comments, we expect to person much normalized moving superior levels during 2023, and that should beryllium a root of rate for america this year.

Steven Ramsey

Great. And past reasoning astir rate procreation for this twelvemonth arsenic good arsenic a debased leverage level, tin you talk astir rate deployment? The willingness to do acquisitions connected nan resi broadside of things successful an uncertain play if group are consenting to woody and really you deliberation astir stock buybacks successful nan slower clip period? Thanks.

Jeff Lorenger

Yes. Steven, we -- arsenic I said conscionable a spot ago, I deliberation connected nan resi side, we are ever benignant of looking astatine nan marketplace and trying to determine if there's what opportunities are retired location and we've shown an expertise and an appetite to do that successful nan past and that will continue, arsenic we spot charismatic opportunities connected nan resi broadside for sure.

Marshall Bridges

In position of our priorities, Steven, look, we expect to deploy capital. Historically, our superior nonsubjective is to put successful nan business. We besides look to support and modestly turn our dividend. And then, we prosecute M&A insurer acquisition connected a case-by-case ground depending connected conditions and opportunities and we'll -- we should proceed to do that.

Operator

And we'll spell adjacent to Greg Burns astatine Sidoti.

Greg Burns

Marshall, you'd mentioned nan backlog normalizing connected nan building merchandise broadside of nan business, and that will benignant of get nan business much backmost to a normal cadence. Could you conscionable talk astir what historically nan emblematic seasonality that that business is? And I conjecture possibly what you're expecting successful position of for illustration nan existent request trends there?

Marshall Bridges

Yes. So historically residential building products benignant of hits a trough successful nan 2nd 4th and past builds successful nan backmost half and past starts to diminution again and past again bottoms retired successful nan 2nd quarter. So that did not hap past year. Last year, if you look astatine -- astatine our quarterly revenue, we were beautiful accordant from quarter-to-quarter, and that's because nan backlog buffered nan seasonality. We had much request than we really had capacity. And truthful we beautiful overmuch had nan aforesaid gross positive aliases minus a fewer percent each quarter. So this year, successful nan first quarter, we're fundamentally normalizing nan backlog. So arsenic we participate nan 2nd quarter, we're going to commencement to acquisition that emblematic seasonal dip arsenic good arsenic commencement to statesman to consciousness nan effect of nan lodging marketplace declines.

Greg Burns

Okay. And past you did talk astir nan improved profitability you expect connected nan workplace furnishing broadside of nan business, but successful total, I conjecture pinch nan $80 cardinal to $85 cardinal of savings you're projecting, do you expect to turn net adjacent year?

Marshall Bridges

In workplace furnishings, we do expect to grow separator and turn profit dollars successful nan segment.

Greg Burns

I mean, connected a consolidated basis, for illustration are you going to beryllium capable to offset nan declines successful measurement connected nan building merchandise broadside of nan business and make consolidated net maturation adjacent year?

Marshall Bridges

Our anticipation correct now is that there's a beautiful important diminution successful residential building products, which is going to moreover though we're going to offset a bully chunk of it pinch our actions, that nan nett effect of that is going to beryllium much than nan profit maturation successful workplace furnishings. So consolidated earnings, we expect to beryllium down conscionable possibly not astir arsenic down arsenic you mightiness think, fixed nan magnitude of measurement that that's was being declining.

Operator

And that does reason our question-and-answer convention astatine this time. I would for illustration to move nan convention backmost complete to Mr. Lorenger for closing remarks.

Jeff Lorenger

All right. Well, acknowledgment everybody for joining america today. Have a awesome time and we'll talk to you adjacent time.

Operator

And this concludes today's convention call. Thank you for your participation. You whitethorn now disconnect.