HNI Corporation ($HNI)

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the HNI Corporation First Quarter 2026 Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. McCall. Please go ahead.

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 first quarter 2026 results. With me today are Jeff Lorenger, Chairman, President and CEO; and VP Berger, Executive Vice President and CFO. Copies of the 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?

Thanks, Matt. Good morning, and thank you for joining us. Our members delivered solid first quarter results that exceeded our internal expectations in a difficult and dynamic environment. The momentum of our strategies, the benefits of our diversified revenue and profit streams, our ongoing focus on items within our control and the merits of our customer-first business model continued to deliver strong shareholder value. The takeaway from today's call is we expect a strong year in 2026 with the fifth straight year of double-digit earnings improvement and modest revenue growth in both segments. On today's call, I will break my comments into 3 sections. First, our quarterly results. Again, we delivered solid results despite ongoing geopolitical and macro uncertainty. Second, the remainder of 2026. Despite softer-than-anticipated revenue patterns to start the year, we expect net sales to grow in 2026 with another year of double-digit non-GAAP EPS growth anticipated. And third, our outlook beyond 2026. We project double-digit EPS growth again next year as we maintain multiple years of elevated earnings visibility beyond 2027. Following those comments, VP will provide more details about the first quarter, our outlook and our cash flow and balance sheet. I will close with some additional color commentary before we open the call to your questions. I will start with some highlights from the first quarter. Our members continue to focus on controlling the controllables through focused cost management and benefits from price cost and [Audio Gap] this was despite demand softness to begin the year, especially in Workplace Furnishings, amid concerns related to the conflict in the Middle East, the U.S. economy broadly and the impact of tariffs specifically. In our legacy Workplace Furnishings businesses, first quarter net sales were down about 5% year-over-year on an organic basis with modest growth in our businesses focused on small- and medium-sized customers. We saw weakness early in the quarter with large corporate customers as the impacts of global macro uncertainty were most prevalent during January and February. However, we saw organic segment orders turn positive in March with additional acceleration thus far in the second quarter. This supports our bullishness for the remainder of the year, which I will discuss more in a moment. As we finished the quarter, it is important to note the integration of Steelcase is going well. Synergy capture and accretion are on track and our cultures are melding nicely. Including Steelcase, Workplace Furnishings segment non-GAAP operating profit in the first quarter totaled almost $49 million, nearly double the prior year level. We continue to expect modest accretion from Steelcase in 2026 and we remain confident in our projected total synergy-driven accretion of $1.20 when fully mature. In Residential Building Products, revenue increased more than 2% versus prior year period. These are strong results given the ongoing weakness in the new home market. Our growth investments are bearing fruit, and we are outperforming the market. Our new construction revenue was down mid-single digits year-on-year which compares favorably to single-family permits, which declined in the high single digits. Our remodel retrofit revenue was up 13% on a year-over-year basis. First quarter segment operating profit margin expanded 190 basis points year-over-year, reaching 17.6%. Despite expectations of ongoing uncertainty, we remain encouraged by our opportunities and we continue to invest to grow our operating model and revenue streams. In summary, HNI's first quarter performance demonstrates the strength of our strategies, our ability to manage daily uncertainty through varying macroeconomic conditions, all while remaining focused on investing for the future. And we continue to expect strong results in the full year, driven by margin expansion and modest revenue growth. That leads me to my comments on our outlook for the remainder of 2026. I will start with legacy Workplace Furnishings, where we expect segment revenue to increase at a low single-digit pace for the full year, with high single-digit growth in the back half. Additionally, for the Steelcase business, we expect full year revenue to grow slightly. Our outlook is supported by external industry metrics and by our internal pipeline data. Specifically, in addition to strengthening orders over the past 1.5 months, our order funnel, bid quotes, design activity, all improved later in the quarter. From an earnings perspective, we expect Steelcase to be net neutral in the first half and turn modestly accretive in the second half and for the full year. In Residential Building Products, our structural changes organizing around the customer and consumer, along with our growth investments, are expected to drive continued market outperformance. For 2026, we expect modest price-driven revenue growth in the second half despite expectations of ongoing housing market softness. From a profitability perspective, we expect both our Workplace Furnishings and our Residential Building Products businesses to expand margins in 2026. While we are optimistic about the year and expect another year of double-digit non-GAAP EPS growth, we will remain focused, conservative and ready to adjust as required. Our earnings outlook is supported by the anticipated benefits of our ongoing visibility story and our proven ability to manage through changing economic conditions. Moving on to my third point, a few comments on our outlook beyond 2026. We project double-digit EPS growth again in 2027, driven primarily by expected synergies from Steelcase and legacy network optimization projects. Further, we continue to have multiple years of elevated earnings growth visibility beyond 2027. During the first quarter, we made certain key decisions pertaining to the Steelcase integration that will have positive longer-term implications. As an example, we terminated Steelcase's multiyear ERP implementation project. This move is part of a broader effort at Steelcase to streamline priorities to focus on profitable growth while also avoiding disruption, eliminating substantial future ERP investment and redeploying resources back into the business toward customer-focused initiatives. Also during the quarter, we began smartly managing costs across all our businesses in response to a softer start to the year, driven by the current geopolitical backdrop. These new actions are in addition to the previously announced $120 million of synergies associated with the integration of Steelcase, which as I stated earlier, are on track. At the same time, our current synergy projections are focused on the Americas business only and assumed no revenue synergies. And importantly, we remain laser-focused on minimizing any front-end disruption across our Workplace Furnishings businesses. Finally, as we discussed last quarter, we continue to expect an additional $30 million of savings from network optimization in our legacy Workplace Furnishings businesses over the next 3 years. The combination of our disciplined cost management, Steelcase synergies and our ongoing legacy network optimization projects continue to strengthen our earnings visibility story. Now I will turn the call over to VP to provide more details about the first quarter, our outlook and our cash flow and balance sheet. 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'll start with some additional comments about the first quarter [Audio Gap] of $0.55. On a non-GAAP basis, diluted EPS totaled $0.34 which was slightly ahead of our internal expectations. Our non-GAAP results exclude several items totaling $88 million, the majority of which was tied to the impacts of purchase accounting associated with the Steelcase acquisition. While volume activity was negatively impacted by the geopolitical conditions, especially in the Workplace Furnishings segment, expense control, price cost and productivity benefits offset volume softness and continued investment in initiatives aimed at driving future growth. Total net sales in the quarter increased 125% overall or down 3% on an organic basis. From a Q1 orders perspective, in our Workplace Furnishings segment, orders from small- to medium-sized customers were up low single digits. Orders from contract customers, including both legacy Workplace and Steelcase were down mid-single digits versus the first quarter of 2025 levels. As Jeff mentioned, we saw order patterns improve late in the quarter. Orders in the Residential Building Products segment increased 4% compared to the first quarter of 2025. Remodel retrofit orders outperformed those from the new construction channel. The year-over-year average order growth rate over the final 5 weeks of the quarter was in line with the rate for the quarter overall. Looking ahead, we expect second quarter 2026 net sales in the legacy Workplace Furnishings to increase at a low single-digit rate year-over-year. Including Steelcase, total Workplace Furnishings net sales are expected to grow approximately 155% to 160% versus the prior year period. In Residential Building Products, second quarter 2026 net sales are expected to decrease at a low single-digit rate compared to the same period in 2025. The impact of the recent order strength includes increased long lead time orders versus the prior year. These orders will ship in the fall and benefit the back half results. Non-GAAP diluted earnings per share in the second quarter of 2026 are expected to decline modestly from 2025 levels. The addition of Steelcase is expected to be net neutral to moderately accretive to dilutive -- modestly accretive to diluted non-GAAP earnings per share in the quarter. The year-over-year non-GAAP earnings pressure is expected to be driven by lower organic volume and continued investment. Our outlook for 2026 full year earnings reflects expectations for mid-teens percent non-GAAP EPS growth from 2025 full year of $3.53, with accelerating double-digit earnings growth in the second half of the year. Given the timing of synergy recognition and cost management savings, we now expect non-GAAP diluted earnings per share to be roughly equal in the third and fourth quarters. Productivity, cost management, network optimization initiatives, Steelcase accretion and price/cost benefits are expected to more than offset operating profit headwinds associated with volume pressure and continued investments. As we look to 2027 and beyond, as Jeff mentioned, we expect double-digit non-GAAP EPS growth again next year and we have multiple years of elevated earnings growth visibility beyond 2027. Steelcase accretion and legacy Workplace network optimization initiatives continue to support elevated levels of visibility. In total, these items are expected to yield savings exceeding $70 million in 2027 and more than $150 million when fully mature. These totals do not include the benefits of our new cost management saving efforts. Next, a few additional items to assist you in your 2026 modeling. Combined depreciation and amortization are expected to be approximately $150 million to $155 million, excluding purchase accounting impacts of approximately $105 million. Net interest expense is expected to total between $75 million and $80 million. Our tax rate should be approximately 25%. Finally, from a cash flow and balance sheet perspective. The benefits of the Steelcase acquisition, the strength of our strategies and our financial discipline are expected to drive free cash flow, which will help us quickly deleverage our balance sheet over the next couple of years. As a result, leverage is expected to return to pre-deal levels in the 1 to 1.5x range within 2 years of the deal closing. Finally, we remain committed to payment of our long-standing dividend and continuing to invest in the business to drive future growth. I will now turn the call back over to Jeff for some longer-term thoughts and closing comments.

Thanks, VP. In the first quarter, our members remain focused on our strategies. We managed our businesses well, and we delivered a solid quarter that modestly exceeded our internal expectations. Looking forward, we remain focused on driving growth and expanding margins and we will continue to invest for the future with confidence. As I mentioned, we saw a slower start to the year than we had anticipated, particularly in the Workplace segment where demand activity was clearly impacted by the conflict in the Middle East and U.S. macro uncertainty. However, from a demand indicator perspective, the fact pattern we have discussed in the last couple of quarters is unchanged, and we remain bullish about the segment's demand environment. Return to office continues to be a positive driver of activity with levels of remote work expected to fall further in 2026. Office leasing activity grew for the third straight quarter in Q1 with annual leasing activity up more than 7% year-over-year. Net absorption of office space, which has historically been a good leading indicator of future industry demand, was also positive for the third straight quarter with nearly 3.5 million square feet absorbed. Thus, while supply of new office space will remain a headwind, we see multiple cyclical drivers of growth outside of new construction. These encouraging external industry drivers are consistent with our recent order patterns and internal preorder metrics in both legacy Workplace and Steelcase. Our funnel continues to expand with bid quotes up year-over-year and with the number of large dollar projects increasing versus the prior year period. Design activity also strengthened during the first quarter, and jobs won, but not yet ordered, are up double digits as well. Customers remain engaged, activity is robust with both dealers and end users and our businesses are positioned to win. Moving on to housing. Headlines continue to point to ongoing softness, especially in new build space. Interest rates remain relatively elevated. Prices remain high and affordability concerns persist and we expect continued new construction weakness in 2026. However, our structural go-to-market initiatives and growth investments will allow us to continue to outperform the market. In remodel retrofit, we are assuming modest market growth in 2026. This is consistent with LIRA projections. In addition, we expect continued market outperformance in our R&R business and we expect ongoing margin and cash flow consistency from this segment. In conclusion, as we discussed in detail last quarter, we are a transformed and fundamentally stronger organization. Upon recognition of all targeted Steelcase synergies, network optimization savings and cost management benefits, HNI will have substantially higher earnings, stronger margins, greater cash flow and a continued strong balance sheet. This will enable us to continue to deliver exceptional value to our shareholders, customers, dealers, members and communities. I want to thank all HNI members and specifically the Steelcase employees as they have engaged enthusiastically to begin their HNI journey. 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, the change in the Workplace outlook for the full year, it sounds like things actually got better later in the quarter and to start the second quarter. Can you just walk through, I guess, the progression of orders through Q1 and what you saw in April? And if things are improving of late, what kind of other internal indicators that are making you take that outlook down? Or is it just the slower start that's going to be hard to catch up? Or is it conservatism? So just any thoughts there would be helpful.

Sounds good, Reuben. I'll kind of walk you through. Jeff mentioned the actual order numbers. So if we looked at the first quarter, overall legacy Workplace side was down 3%. The contract side was off a little bit more both for Steelcase as well as the legacy HNI closer to 5%. But the important point, it was a slower start, which, for sure, has taken our full year expectation down a little bit. But in March, it did pick up. And as it continued to progress through the quarter, it actually got stronger. And if I look at the last 5 weeks, that momentum has continued across the different segments. So the way we're thinking about it, Reuben, that we're going to kind of show this first quarter down 5%. And then in the second quarter, we're going to pivot back to growth. So we're -- we've got low single digits pivoted for the second quarter, which is supported by our recent order trends, as well as how we finished the [ third ] (sic) [ first ] quarter. And I think as we think about the full year, we have enough indicators and Jeff will talk to the internal metrics and some of the other external metrics, that say the back half actually has strong high single-digit growth. So we think we caught an air pocket and the order trends that are coming in now are supporting growth for the second quarter as well as even stronger growth for the back half.

Yes. I think that's a good summary. I think the other thing, Reuben, is some of these order trends with the Steelcase business, some of the larger projects are -- they're spaced out a little bit more. They just -- so we're kind of dialing in timing on when the revenue hits. I had mentioned that our order book is solid. Some of the ship dates are kind of moving around. The other thing we've noticed, though, once we kind of -- it's kind of like we got out of this air pocket and customers have concluded -- they learned their lesson during COVID is like we can't wait. We're going to have to -- we got capital deployed, and we want to get moving. And so that's really what we saw. But it definitely was a slower start to the year than we had anticipated. But we think we're behind that now.

Okay. And then embedded in your second quarter outlook, how much kind of near-term price/cost noise is there from the quickly rising transportation and energy situation? And how quickly can you offset? Or can you talk about what pricing tactics you use to offset those costs?

Sure. I think, Reuben, consistently our goal is to offset whether it's tariff costs or general inflation over the periods of time. Your specific question, there's about $2 million of headwind in Q2 that we will catch back up in Q3 and Q4 through price surcharge, similar to what we've done in the past. So I know it's dynamic. I mean things are changing. If you think even the IEEPA piece came off, and then they added the new Section 232s, even with all that, we expect to offset it, and we'll probably have a couple of million dollars of headwind in Q2.

Okay. And then last one for me. The comments about the cost management efforts tied to the slower environment. Can you elaborate on some of the moves that you're making there? And then if I heard you correctly, I think you used the word terminate for Steelcase's ERP project, it wasn't delayed. Just a little more detail on what's going on there, why that move and what the benefits of the change will be to the organization?

Yes. I'll hit ERP, Reuben, I mean, a couple of things drove that. One, now that we're a combined entity, we wanted to step back and take a look at it, what the best program was going to be for the HNI network. Two, they had quite a ways to go in that project, and we felt like stepping back from that and kind of resetting, reexamining was the best for the business. And also those take a lot of effort, and we have a lot in front of us that we can make -- we can redeploy assets to grow the business, whether it be in product development or sales, just other network optimization, et cetera, across the network. So we stepped back from that. We think it's going to be an unlock relative to being able to focus the business on customer-centric growth initiatives. And that's really without a lot of downside to be candid.

Yes. And I think the second part of your question about cost management, similar to what we've done in the past is we want to control the controllables. We got out of the gate slow with some revenue pressure. So yes, where? It was in all areas of the business, actually, Reuben, it's in all the business segments. We all looked at open headcount. We looked at discretionary spend. Obviously, with the termination of -- the business transformation going on with Steelcase. We actually had some headcount adjustments. So it's never in one spot. And the whole idea of that is to still protect our goal and our target of double-digit EPS growth. So if you try to -- you delever what's happening if you're pulling sales down, mid-single digits was the forecast for Workplace, we're coming down to low single digits. We adjusted our cost structure to ensure that we can still have the double-digit EPS over the prior year, non-GAAP.

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

Was the impact from the war in the Middle East localized to that region? Or did it create a more global impact for your office business? I just wanted to kind of better understand the commentary about how that impacted demand in the quarter.

Yes. I think it's a little of both, Greg. I mean we're watching the international businesses closely in monitoring that -- those impacts. But I think it was more of a general kind of feeling that customers just kind of hit pause but all our channel checks now are consistent that we're back in the game, just -- the optimism is there. But -- so it's hard to pinpoint exactly where it hit other than it kind of was broad-based across all our businesses. We have -- we play in most markets. We play in all the verticals. We play small, medium, we play large corporate and with the short -- with a little bit of exception being some of the small business stuff continued on, but everything else kind of took a step back in January and February. So -- but we believe it was a combination of the war, just kind of uncertainty. And then as I stated earlier, in engaging with customers, they're like, yes, the boss said to slow down for a minute and now he or she is like let's keep this moving. And so that's really the bottom line. It was kind of a broad-based kind of macro kind of slowdown that now seems to be behind us.

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

Jeff, I guess I wanted to just explore during January and February, it seems like people, as you say, hit pause on releasing purchase orders. Can you just talk about what you were seeing otherwise underneath that in the market? Was quoting activity continuing? Or people still doing mockups? I mean was it kind of business as usual there that would give you a little more confidence in the longer-term view?

Yes, David, that's right on. I mean, it was a little bit of a feeling that we first saw when we -- out of COVID, I think where people were still active. I think the difference in this case is they've been through that now, and they were ready to go. It was more of a slight delay, but -- in placing the PO, but orders were rolling. I mean, quoting was rolling, activity was high at dealers, activity was high in the sales force. Optimism was kind of still there. It never really muted. It's just the order book didn't flow like we had anticipated. So that's why we're pretty bullish here based on all the indicators. And now based on what we're seeing start to flow for the full year.

Great. And did you see any order cancellations? Was there much -- any activity there?

No. No, we really did not. We did not. That's a good question. We monitor that as well. If anything, we saw this general slowdown. And then we got our normal project delays with construction and things like that, but no, no cancellations.

Okay. Great. And then are you conducting any repricing of backlog orders?

We are not. So we confirm the orders, David, we let them flow out. That creates a little bit of the headwind of a couple of million bucks in the short term, but our process has it covered that we catch it back up.

Okay. And then are you far enough along now in terms of your thinking around Steelcase that you can talk about international and just what actions you may be contemplating aimed at achieving higher levels of profitability from that business?

David, we're actually getting more and more up to speed on that business every day. We understand the go-to markets now. We're locked in with how we forecast their business. And I think the key there is what we talked about before. They had already started some pretty significant profit improvement plans, which included some restructuring and transformation. They were in the late innings of that. And we feel good about the overall profit improvement year-over-year that, that business is actually going to drive shareholder value.

Okay. Last question for me is just on the RBP business. Can you just talk about the brand consolidation and how that's being received in the channels? And will there need to be sort of clearance of any inventory? And if so, how should we think about the potential margin headwind both in terms of maybe magnitude and timing?

Are you speaking specifically on the stove side, David?

Yes. Yes, I am.

Yes. We're in a -- it's actually going really well. It's been an introduction 18 months ago to put an overarching brand called Forge & Flame over top of all of our biomass products. So that was more of a digital way to get to the consumer. So we're in the journey now to actually talk about how we're going to badge those different brands and then use their names as technology. So we don't see any downside with this. It certainly makes us -- we already were the industry leader. Now we're clearly the industry leader from a digital standpoint. But it will take us probably another 18 months to get all the way through, and we're not going to strand inventory. We're taking our time with it. It's actually that business is performing very well. If we look at year-over-year, we continue to take market share. It's where a lot of our initiatives are. So I think you'll just see this kind of play out behind the scenes.

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

Could you talk a little bit more about what you're seeing in terms of demand trends for non-office verticals in the quarter and really, if you could break it down, not just by end market but by geography, U.S. versus Europe and how it is expected to shape through the year? And is there any ways where you can benefit more specifically as we look at the broad reindustrialization trend in the U.S.?

A couple of points in there, I guess. On the office verticals, we're seeing positive trends, obviously, in health and education. We're getting lots of higher ed businesses that are leaning in to not only our Steelcase but our Allsteel side. We're actually positioned well with the federal government on the Steelcase side. We're seeing positive trends there. As it relates to international, year-over-year, their orders are actually up. So they're hanging in there across both in market, for market as well as the global business accounts.

Yes. The longer-term outlook that, Kathryn, that is -- it's a little early to tell, but we're pretty agile on our thinking about where we ship resources. What we have is we have breadth and depth to cover all these -- all these markets, all the verticals, core customer. We got geographies covered now. We've got really strong distribution. So we're kind of monitoring that. You listen a lot about enterprise, networks and where people are making investments. Manufacturing is actually doing pretty well right now. We're -- so we're -- we've got strong research and we got strong ability to pivot as those markets develop right now. We're playing all the bases, and we haven't really went overweight on any of them, but we will when the hot hand appears. That's kind of been our history. And with the Steelcase adder to the HNI network, it gives us a lot more geographic coverage for diversity to do that.

Yes. And so when you -- kind of following up on that, when you think about like a different type of construction projects, beyond kind of what I would say traditional. What we are seeing in the market are different type of players. So for instance, it could be a company that had made racking systems for hospitals that are now pivoting to data centers. But working creatively with builders and importantly with developers, the end market, have you changed or have you thought about doing anything differently in terms of winning different types of business kind of this dynamic market that we're in?

One thing I would say is probably the way we get at that a bit is co-development. We have some teams that engage with customers early and businesses early. I mean you're upstream of that when you talk kind of construction, but that sometimes leads to how people are thinking, how they want their workspace to be branded. What I will say is we're seeing a lot more engagement from customers the last couple of years, it's less cookie-cutter and more dynamic around what they need, whether it be to get members and employees back in the office or what they want their brand to be or the new ways of working. And so what I would say is we have shifted resources to what I would call more dynamic codevelopment and setting up manufacturing flows in order to be more versatile and agile around making product that is maybe, let me say, nonstandard, if you will. So I'd say that's kind of how we're evolving our business model a bit to be more dynamic and play these different elements as they appear because they shift and move and they're shifting and moving fairly quickly.

Yes. That's helpful. Final question, [ you said ], Steelcase following up on their small midsized business growth initiatives is ongoing. Can you compare how they're doing in that segment versus what core HNI is doing and how or if you're making -- adjusting any Steelcase's strategy to that end market?

Yes, very, very similar businesses. We definitely are not adjusting strategy related to the Steelcase SMB and the legacy SMB and they're both -- they're performing very similar. I mean the SMB business has been resilient in both Steelcase as well as the legacy HNI if you look over the last few quarters. So I think when they're going to continue to win on those smaller projects, the difference -- the main difference in the Steelcase SMB is they play in some cases, on seats that are more than our traditional SMB plays on. But other than that, they're very similar in how they go to market and actually how they're performing.

Yes. And long term, I mean, we'll obviously look for opportunities as we go. I think VP did clarify that a bit and to say again, is their SMB metrics, size, type of job, order book, average order size is a little bit higher than our traditional, so they're both called kind of SMB to start, but I would think that -- what it's really done is stretch the coverage model. So we have no gaps in what we -- what someone -- depending on how you define SMB. So that's the benefit. That's why we're not making any sudden adjustments to that till we kind of see how that all flows and where there's leverage and where there's just a nice new business that we didn't have or obviously, they didn't have.

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

I guess I just wanted to think about second half of this year. It seems as though there's going to be some push forward benefit against some fairly stiff compares from last year, and that will help you. But I'm thinking about the government shutdown in 2025, and you should be comping against that, that should be a source of benefit as well. Is there any way to dimension that for us?

Yes, David, I don't know if we specifically thought about it that way. I think if we just think about how the volume is going to play out, you're right. We'll have some comps that if I get into the fourth quarter, we could see mid-single-digit volume year-over-year versus just price in the third and fourth quarter. So whether it's through government, whether it's through SMB or whether it's through large global or corporate accounts, we do believe that sets us up for a strong back half and actually supports what we're saying with a relatively flat first half and mid-single digits in the second half.

Okay. That's helpful. And then secondly, I'm just wondering, and it's still early, obviously, but I'm wondering to what extent you may be seeing, if at all, any kind of cannibalization between Steelcase and Allsteel?

Yes, good question. We really haven't seen that, David. I mean, our premise going in, and it seems to be playing out is they both are in the contract space, but Steelcase plays with a certain type of customer and has strength in markets where we historically have maybe not been as strong. They're stronger with large corporate, big customers, global customers with large networks and still -- Allsteel and some of our contract brands are maybe a little clip down from that. So we haven't really seen -- not saying there isn't some out there on a project here or there. But on an 80/20 macro basis, I mean, it's complementary and that was the pre-deal kind of going in premise, and that's what we've seen so far.

I'll now turn the call back over to Mr. Lorenger for closing remarks.

Thank you for joining us today. We're going to look forward to speaking to you again in July. I appreciate your time. Thanks so much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.