On Wednesday, HNI (NYSE:HNI) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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The full earnings call is available at https://events.q4inc.com/attendee/270412612

Summary

HNI delivered solid first-quarter results that exceeded internal expectations despite a challenging environment, with revenue down 5% year-over-year on an organic basis.

The company expects double-digit earnings growth for 2026, driven by margin expansion and modest revenue growth, with further double-digit EPS growth projected for 2027.

The integration of Steelcase is progressing well, with synergies on track, and the acquisition is expected to be modestly accretive in 2026.

Residential building products revenue increased by over 2%, outperforming the market, with significant growth in remodel/retrofit revenue.

Management remains optimistic about the remainder of 2026, citing strong order trends since March and improved internal pipeline data, despite a slow start to the year.

Full Transcript

Matt McCall (Vice President Investor Relations and Corporate Development)

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 Loringer, Chairman, President and CEO and BP 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.

Jeff Loringer (Chairman, President and CEO)

I'm now pleased to turn the call over to Jeff Loringer. Jeff thanks Matt. Good morning. 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 continue to deliver strong shareholder value. The takeaway from today's call is we expect a strong year in 2026 with a 5th straight year of double digit earnings improvement and modest revenue growth in both segments. On today's call I will break my comments into three 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. This was despite demand softness to begin the year, especially in workplace furnishings amid concerns related to the conflict in the Middle east, the US 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 finish the quarter, it is important to note the integration of Steelcase's is going well. Synergy capture and accretion are on track and our cultures are melding nicely. Including Steelcase's 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's 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's 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 month and a half, our order funnel bid quotes design activity all improved later in the quarter. From an earnings perspective, we expect Steelcase's 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 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 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's 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's integration that will have positive longer term implications. As an example, we terminated Steelcase's's multi year ERP implementation project. This move is part of a broader effort at Steelcase's 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's which as I stated earlier are on track. At the same time, our current synergy projections are focused on the Americas business only and assume 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 furnishing businesses over the next three years. The combination of our disciplined cost management Steelcase's 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.

BP Berger (Executive Vice President and CFO)

I'll start with some additional comments about the first quarter GAAP EPS 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 furnishing 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 five 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 and 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 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 reflect 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 to in the third and fourth quarters. Productivity cost management network optimization initiatives, Steel case 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 deal case 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 to 150 million $155 million excluding purchase accounting impacts of approximately 105 million dollars. Net interest expense is expected to total between 75 and 80 million dollars. 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 FL 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 1.5 times range within two 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.

Jeff Loringer (Chairman, President and CEO)

Thanks vp. In the first quarter our members remained 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 US 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 three and a half 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 pre order metrics in both legacy workplace and Steelcase. Our funnel continues to expand with bid quotes up year over year and with a 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 RNR 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 H and I members and specifically the Steelcase employees as they have engaged enthusiastically to begin their H and I journey. Thank you again for joining us. We will now open the call to your questions.

OPERATOR

At this time I would like to remind everyone in order to ask a question, press Start, then the number one on your telephone keypad. Your first question comes from the line of Reuben Garner with the Benchmark Company. Your line is open.

Reuben Garner

Thank you. Good morning everyone. 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?,

Jeff Loringer (Chairman, President and CEO)

can you just walk through, I guess the progression of orders through Q1 and what you saw in April and I, you know 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 the actual order numbers. So if we looked at the first quarter, you know, overall legacy workplace side was down 3%. The contract side was off a little bit more, both for Steelcase as well as the legacy H and I, approximately 5%. But the, the important point, it was a slower start, which for sure is taking 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 five weeks, that momentum has continued across the different segments. So the way we're thinking about it, Ruben, that, you know, we're going to kind of show this first quarter down, you know, 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 quarter. And I think as we think about the full year we, 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 digits 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. Yeah, I think that's a good summary. I think the other thing, Ruben, is some of these order trends with the Steelcase business, some of the larger projects are, you know, they're spaced out a little bit more, you know, you know, they just so we're kind of, you know, dialing in timing on when the revenue hits. I had mentioned that our, 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 It's 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.

Reuben Garner

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, consistent, you know, our goal is to, you know, offset, you know, 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. We've done in the past. So, you know, I know it's dynamic. I mean, things are changing. If you think even the IPA pricing came off and then we added the new, the new section 232s. Even with all that, we expect to offset it and we'll probably have a couple million dollars ahead when 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, what's going on there, why that move and what the benefits of the change will be to the organization.

Jeff Loringer (Chairman, President and CEO)

Yeah, I'll hit the erp, Ruben. I mean, you know, a couple things drove that. One, you know, 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 2, 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, etc. Across the network. So we step 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. Yeah. And I think the second part of your question about, you know, cost management, you know, 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, in all the business segments. We all looked at, you know, open headcount, we looked at discretionary spend. Obviously with the termination of the business transformation going on with, with Steelcase, we actually had some headcount adjustment. So it's never in one spot. And the whole idea of that is to still protect, you know, our goal and our target of double digit EPS growth. So if you try to, you know, you de lever what's happening if you're pulling sales down mid single digits was the forecast for workplace. We're coming down the low Single digits. We, we adjusted our cost structure to ensure that we can still have the double digit EPS over the prior year non gaap.

Reuben Garner

Thanks for the detail guys and good luck.

OPERATOR

Your next question comes from the line of Greg Burns with Sidoti and company. Your line is open

Jeff Loringer (Chairman, President and CEO)

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, you know, how that impacted demand in the quarter. Yeah, you know, it. I think it's a little of both, Greg. I mean we're watching the international businesses, you know, closely in monitoring that those impacts. But I think it was more of a general kind of feeling that see customers, you know, just kind of hit the pit pause. But you know, all our channel checks now are consistent that, you know, we're back in the game. And it just, you know, 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, you know, we play in most markets, we play in all the verticals. We play small medium, we play large corporate. And you know, with the short, with a little bit of exception being some of the small business stuff, you know, 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, yeah, the boss said to slow down for a minute. And now he's. He or she is like, let's, let's keep this moving. And so that, 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.

OPERATOR

Your next question comes from the line of David McGregor with Longbow Research. Your line is open.

David McGregor

Yeah. Good morning everyone. Thanks for taking my questions, Jeff. I guess I want 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. Were people still doing mock ups? I mean, was kind of business as usual there. That would give you a little more confidence in the longer term view.

Jeff Loringer (Chairman, President and CEO)

Yeah, 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, they were ready to go. Was more of a slight delay, but. But, you know, in placing the po. But orders were. Were rolling. I mean, I mean, quoting was rolling. Activity was high at dealers, activity was high in the sales force. Optimism was. Was kind of still there. It never really muted. It's just the order book didn't flow as likely anticipated. So that's why we're, you know, we're pretty bullish here based on all the indicators and now based on what we're seeing start to flow, you know, for the full year.

David McGregor

Right. And did you see any order cancellations? Was there much in the activity there?

Jeff Loringer (Chairman, President and CEO)

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

David McGregor

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

Jeff Loringer (Chairman, President and CEO)

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

David McGregor

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

BP Berger (Executive Vice President and CFO)

David, we're actually, you know, getting more and more up to speed on that business, you know, every day. We understand their go to markets now. We're locked in with, you know, 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.

David McGregor

Okay, thanks, vp. 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 a clearance of any inventory and if so, how should we think about the potential margin headwind both in terms of maybe magnitude and timing?

BP Berger (Executive Vice President and CFO)

Are you speaking specifically on the stove side, David? Yes, yes I am. Thanks. Yeah, we're in a three. It's actually going really well. It's been an introduction 18 months ago to put an overarching brand called Forge and 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'll 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.

David McGregor

Okay, great. Thanks very much. Good luck.

BP Berger (Executive Vice President and CFO)

Thank you.

OPERATOR

Your next question comes from the line of Katherine Sampson with Sampson Research Group. Your line is open. Good morning and thank you for taking my questions today. 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, US versus Europe and how you expect it to shape through the year. And are there any ways where you can benefit more specifically as we look at the broad reindustrialization Trend in the U.S. thank you.

Katherine Sampson

Couple 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 into 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, they're hanging in there across both in market for market as well as the global business accounts.

Jeff Loringer (Chairman, President and CEO)

Yeah, you know, the longer term outlook, that's, you know, Catherine, that, that is, it's a little early to tell, but we're pretty agile in our thinking about where we shift 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 know, you listened a lot about enterprise networks and where people are making investments. You know, manufacturing is actually doing pretty well right now. So 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 H and I network it gives us a lot more geographic coverage for diversity to do that.

Katherine Sampson

Yeah. And so when you kind of following up on that, when you think about like the different type of construction projects, you know, beyond kind of what I would say traditional, what we're 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 with end market. Have you changed or have you, have you thought about doing anything differently in terms of winning different types of business, getting this dynamic market that we're in?

Jeff Loringer (Chairman, President and CEO)

You know one thing I would say is probably the way we get at that a bit is co development. You know 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 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 the 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 co development and setting up manufacturing flows in order to be more versatile and agile around making product. That is maybe, let me say non standard 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.

Katherine Sampson

Yep, that's helpful. Final question, Silk sat still case following up on their small mid sized business growth initiatives 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 Steelcases strategy to that end market?

BP Berger (Executive Vice President and CFO)

Yeah, 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 H and I if you look over the last few quarters. So I think 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, 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.

Jeff Loringer (Chairman, President and CEO)

Yeah, and long term, I mean, you know, we'll obviously look for opportunities as we go. I think BP to clarify that a bit and to say it again is their SMB metrics size type of job. You know, 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 they, 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, you know, sudden adjustments to that till we kind of see how that all flows and where there's leverage and where there's just nice, you know, new business that we didn't have or that obviously they didn't have.

Katherine Sampson

Great, thanks so much and best of luck.

BP Berger (Executive Vice President and CFO)

Thank you.

OPERATOR

Your next question comes from the line of David McGregor with Longbow Research. Your line is open.

David McGregor

Yeah, thank you for taking my follow up questions. 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'll 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?

BP Berger (Executive Vice President and CFO)

Yeah, David, I don't know if we've 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, you know, with relatively flat first half and mid single digits in the second half.

David McGregor

Okay, that's helpful. Thank you for that, vp. 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 All Steel?

Jeff Loringer (Chairman, President and CEO)

Yeah, good question. We really haven't seen that David. I mean our premise going in and it seems to have been playing out is you know they both are in the contract space but 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 All Steel. And some of our contract brands are maybe a little click 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 8020 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.

David McGregor

Great. Good to hear. Thanks very much and good luck.

Jeff Loringer (Chairman, President and CEO)

Yep, thanks.

OPERATOR

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

Jeff Loringer (Chairman, President and CEO)

Thank you for joining us today. You know we're going to look forward to speaking to you again in July. Appreciate your time. Thanks so much.

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