Hni Corp (HNI) Q3 2026 Earnings Call Transcript

Good day, and thank you for standing by. Welcome to H&I Corporation third quarter fiscal year 2026 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised. To answer your question, please press star 11 again. Please Please be advised that today's conference is being recorded. I would 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 H&I Corporation. Thank you for joining us to discuss our third quarter 2026 results. With me today are Jeff Loringer, Chairman, President, and CEO, and VP Berger, Executive Vice President and CFO. Copies of our financial news release and non-GAAP Good morning, everyone.

Thank you for joining us. In the third quarter, we drove volume growth in both segments while our members continue to demonstrate focus and diligence. In addition to the benefits of operating leverage from the higher volume, cost and expense management, legacy productivity benefits, and price-cost favorability drove third quarter results that significantly exceeded our expectations. Encouragingly, our internal leading indicators, pre-order activity, orders, and backlog continue to provide reasons to be optimistic. The positive momentum of our strategies, both revenue and cost-focused, the benefits of our diversified revenue streams, the merits of our customer-first business model, and the integration of Steelcase continue to deliver strong shareholder value. And we expect a fifth consecutive year of double-digit earnings improvement in 2026 and full-year organic revenue growth in the low single digits in both segments. On today's call, I'm going to break my comments into three sections. First, our quarterly results surprise to the upside. Second, our revenue backdrop remains strong and is expected to support a solid fourth quarter. And third, we have elevated visibility into profit growth as we look to 2027 and beyond. Following my comments, VP will provide more details about the third quarter, our outlook, cash flow, and balance sheet. I will close with some additional commentary before we open the call to your questions. I will start with some highlights from the third quarter. Non-GAAP EPS of $1.62 exceeded our internal expectations and was up nearly 50% year over year. Both segments reported volume and order growth in the quarter, while we continued to effectively manage the middle of the income statement. Profit improvement versus the prior year was driven by the steel case acquisition, operational productivity benefits, price costs, and organic volume growth. Revenue overall was in line with our projections, with building products nicely exceeding our forecast and offsetting a slight miss in workplace. In our legacy workplace furnishings businesses, our profit transformation efforts are working and revenue is continuing to grow. Third quarter net sales were up 6% year over year on an organic basis. We remain optimistic about the industry backdrop and our internal indicators continue to provide reasons to be encouraged about future top line trends. Non-GAAP segment operating margin, excluding Steelcase, expanded 390 basis points year-over-year, reaching a third-quarter record of 16.2%. And when including Steelcase, non-GAAP operating income was more than double the prior year level. For the full year, 2026, we continue to expect solid margin expansion in our legacy workplace businesses, resulting from strategic cost transformation initiatives and leverage on volume improvement, while we continue to invest to drive future growth. At Steelcase, our integration efforts are on track, synergy capture is ahead of plan, net sales and orders improved on a year-over-year basis, and we saw accretion from Steelcase in the third quarter. From a Synergy's perspective, we now expect total capture to reach at least $130 million when fully mature versus our original target of $120 million. And the original target of $120 million is now expected to be achieved by the end of year four, earlier than previously expected. In residential building products, our organizational realignment and growth initiatives are working and fueled 5% net sales growth in the quarter, strong results given the headwinds in the housing markets. This growth exceeded our expectations communicated on the second quarter call as the benefits of structural changes organizing around the consumer and growth investments drove continued market outperformance. Revenue from the remodel retrofit business increased double digits, and more than offset continued market-driven weakness in the new construction channel. The top-line strength in our lean model drove operating profit and margin upside, with 180 basis points of margin expansion and 16% profit growth on a year-over-year basis. We remain encouraged about the opportunities tied to our growth initiatives, despite expectations of ongoing housing market headwinds. And importantly, we continue to invest to grow our unique operating model and diversified revenue streams, including ongoing go-to-market changes to organize around our consumer. In summary, for H&I overall, the strength of our growth strategies and ability to stay focused on our profit levers, despite ongoing macroeconomic uncertainty, was evident in our third quarter results. And we expect strong profit growth again in the fourth quarter. That leads to my comments on our outlook for the fourth quarter of 2026. Again, our revenue backdrop remains strong in the third quarter. From a segment perspective, beginning in our legacy workplace businesses, orders in the third quarter saw a solid increase compared to the prior year period. As a result, we expect net sales growth again in the fourth quarter versus the prior year in legacy workplace. Our segment outlook continues to be supported by external industry metrics and by internal pipeline data. Specifically, in addition to strengthening orders in the quarter, pre-order metrics remained encouraging, including project funnel, bid quotes, and design requests. For Steelcase, order growth exceeded our legacy workplace businesses, consistent with the strong pre-order activity and accelerating order momentum we discussed on the second quarter call. And, as I mentioned, our synergy capture is running ahead of plan. In 2026, the synergy upside will be partially offset by temporary price-cost pressure from accelerating inflation. Importantly, we expect our pricing actions will bring price-cost neutrality in 2027. In addition, in Steelcase's international markets, the benefits of our ongoing cost actions and profit improvement plans are being partially offset by geopolitical turmoil, slowing the rate of earnings improvement in 2026. We will continue to aggressively manage the cost structure with a focus on profitability in these markets. So with a new leadership team in place, a focus on growth, and disciplined management, the Steelcase business is positioned for a strong 2027. In residential building products, our members continue to drive market outperformance. Segment orders grew solidly compared to the third quarter of 2025. For the full year, we continue to expect modest price-driven revenue growth with volume improvement adding to the pricing benefits in the second half. Again, that's despite the persistent housing market headwinds that have been with us all From a profit perspective, we expect residential building products' non-gas operating margin to significantly expand again in the fourth quarter and for the full year overall. The fourth quarter will mark the anniversary of our skill case acquisition and a full year of our consolidated results. This will also mark an operating margin trough for the combined company. As we move forward with substantial revenue and profit opportunities, we expect significant margin expansion ahead. Now moving on to my third point, our outlook for 2027 and beyond. Cost management initiatives and efforts to streamline priorities across the organization to focus on profitable growth will deliver improved profitability over the remainder of 2026 and in 2027. This is despite expectations of ongoing geopolitical and macro uncertainty. Further, we continue to expect manufacturing network optimization savings and our legacy workplace furnishings businesses total nearly $30 million. We expect to recognize about a We have a third of this savings in 2026, with the remaining two-thirds benefiting 27 and 28 equally. In addition, synergies associated with the integration of Skillcase are progressing ahead of plan and are now expected to add at least $130 million of operating profit when fully mature. As a result, from an earnings perspective, we expect double-digit EPS growth again in 2027. And while our outlook for double-digit EPS growth in 2027 is not reliant on top-line growth, we do expect net sales improvement again in 2027. Beyond next year, the combination of our disciplined cost management, steel case synergies, and ongoing legacy manufacturing optimization projects will continue to support our earnings A couple of additional items to note. First, our current synergy projections are focused only on the Steelcase Americas business. Second, we are assuming no benefits from revenue synergies. However, we are increasingly confident in the benefits tied to our H&I portfolio initiative, which are focused on increasing sales of the H&I open line brands across our dealer networks. We will provide additional commentary throughout 2027 on this topic. And third, as I discussed earlier, we will continue to aggressively manage the cost structure and profitability in Steelcase's international markets. Now I will turn the call over to VP. VP?

Thanks, Jeff. I'll start with some additional comments about the third quarter. GAAP diluted EPS was $1.23. On a non-GAAP basis, diluted EPS totaled $1.62, which was ahead of our internal expectation. Organic volume rebounded in the corner, with both segments reporting year-over-year volume growth. Workplace net sales increased 6% year-over-year organically, with volume up 2%. Residential building products net sales grew 5% year-on-year, with volume growing 4%. Total net sales in the quarter increased 133% overall. From an organic standpoint, total net sales were up 6% on a year-over-year basis. Moving to Q3 orders, in the workplace furnishing segment, orders in the third quarter increased 6% compared to the prior year period. Order growth rates from contract customers solidly outperformed those from small and medium-sized businesses, and steel case order growth was stronger than legacy workplace furnishings. Over the most recent five-week period segment, order growth has continued. Orders in the residential building product segment were up 4% compared to the third quarter of 2025. Solid remodel retrofit order growth offset modest declines from the new construction channel. However, both segments continue to outperform the respective markets. Over the most recent five-week period, segment order growth has continued. Before I discuss our fourth quarter net sales and profit outlook, a reminder that our fiscal 2025 includes an extra week in the fourth quarter. The extra shipping days in the year-ago fourth quarter are estimated to create a 3% point revenue growth headwind in the fourth quarter of 2026. For the fourth quarter of 2026, net sales and legacy workplace furnishings are expected to increase at a low single-digit rate year-over-year, including the negative impact of the extra week a year ago. Excluding the impact of the extra week, fourth-quarter segment sales are expected to increase at a mid-single-digit rate, Including Steelcase, total workplace furnishings, net sales are expected to nearly double from the prior year period. In residential building products, fourth quarter, 2026 net sales are expected to be roughly unchanged versus the same period in 2025, again, including the negative impact of the extra week last year. Excluding the impact of the extra week, fourth quarter segment sales are expected to increase at a low single-digit rate. Don Gap diluted earnings per share for the fourth quarter of 2026 are expected to increase at a rate in the mid-20% range from the fourth quarter 2025 levels. The addition of steel case, productivity savings, expense management, and the benefits of tax planning are expected to more than offset modest year-over-year volume pressure, a temporary price cost drag resulting from the accelerated inflation, and continued investments to drive future growth. As Jeff noted, we saw solid EPS accretion from Steelcase in the third quarter as our synergy capture initiatives gained momentum. However, given the international profit pressures and expectations of temporary price-cost headwinds in the fourth quarter, we now expect Steelcase to be neutral to earnings per share for 2026 overall. For Consolidated H&I, we continue to expect full-year non-GAAP EPS growth of 20% to 25% above 2025 full-year of $3.46. As Jeff mentioned, we expect double-digit diluted non-GAAP EPS growth again next year, and we have multiple years of elevated earnings growth visibility beyond 2027. Next, a few items to assist in your 2026 modeling. Net interest expense is expected to total about $80 million, and full-year tax rates should be approximately 24%. Finally, from a cash flow and balance sheet perspective, our balance sheet is strong, and we remain committed to maintaining significant financial flexibility to fund ongoing business investments to drive growth and payment of our long-standing dividends. Strong free cash flow was used to meaningfully reduce net debt levels during the quarter. Quarter-ending debt leverage was a 2.0 times, down from 2.4 times last quarter. We expect leverage to move back to pre-steel case acquisition levels at or below 1.5 times on an annualized basis within 18 to 24 months of the closing of the deal in December of 2025. I will now turn the call back over to Jeff for some longer-term thoughts and closing comments.

Thanks, VP. Our members continue to manage our business as well, delivering another strong quarter with improving top-line trends and earnings that exceeded our expectations. We reported volume growth in workplace furnishings, residential building product segment continued to over-deliver in the quarter, and our order patterns in both segments showed solid year-over-year improvement during the quarter. The integration of Steelcase is going well, with Synergy Capture We're progressing ahead of expectations, and a new leadership team, strategic cost resets, and pricing actions have the Steelcase business in a great position as we move toward 2027, and we remain confident and expect significant accretion next year and beyond. The benefits of the Steelcase acquisition, the strength of our strategies, and our financial discipline are expected to drive increasing free cash flows, even as we manage through worsening inflation and softness in the international markets. And while we remain focused, conservative, and ready to adjust as required, our outlook and investment posture continue to demonstrate our confidence in revenue improvement, our ongoing profit growth visibility story, and our ability to manage through dynamic economic conditions. I will finish with some commentary around our demand indicators. The workplace furnishings backdrop we have discussed the last few quarters is unchanged, and we are encouraged about the demand environment. In short, our customer interactions indicate that good markets, quality buildings, and specific industries are creating real opportunity for us, despite the macro noise. Return to office continues to be a The positive driver with Class A peak day occupancy in the top 10 MSAs now back above 95%. Office leasing activity grew for the fifth straight quarter in Q3. Net absorption of office space, a historically good leading indicator of future industry demand, was also positive for the fifth straight quarter with more than 6 million square feet absorbed in Q3. And non-viable space continues to be removed from the market with 10 million square feet taken offline in the third quarter. We continue to view this as a positive catalyst for furniture events as more tenants are forced to move. And while the supply of new office space remains subdued, we believe furniture demand only follows occupied seats and lease events, not only construction cranes. Our customer interactions indicate several drivers of demand, despite very little new space under construction. Some customers, unable to find new space in their existing markets, are looking to fit more employees in their existing space. Some are looking for space in suburban areas adjacent to their existing markets, while others are looking to migrate to other primary or secondary markets where space is available. Encouragingly, each of these drivers creates a unique furniture event, with the result often being higher furniture spend per square foot. As I mentioned earlier, these encouraging industry drivers are consistent with recent order patterns and internal pre-order metrics in both Legacy Workplace and at Steelcase. Our funnel continues to expand with third-quarter bid quotes up solidly year-over-year. Customer visits, RFPs, and design requests were all strong during the quarter. Our teams are competing well, and win rates are improving. Moving on to housing, headlines continue to point to a challenging environment, especially in the new-build space. Interest rates remain elevated, prices remain high, and affordability concerns are not going away. As a result, we expect continued new construction weakness for the remainder of 2026, And that 2027 will be another challenging year. Despite this backdrop, we are confident that our go-to-market initiatives and growth investments will allow us to continue to outperform the market. And remodel retrofit, we are assuming modest market growth over the remainder of 2026 and for that to continue as we head into the first half of 2027. We also expect continued market outperformance in our R&R business. And, as was the case for this business in 2026, we expect ongoing margin and cash flow consistency in the residential building product segment. In conclusion, post the acquisition of Steelcase, we are a transformed and fundamentally stronger organization. The early-on benefits of the Steelcase acquisition, the strength of our strategies, and our financial discipline are expected to continue to drive strong free cash flow and help us maintain a strong balance sheet. This will enable us to continue to invest with confidence to grow and deliver exceptional value to our shareholders, customers, dealers, members, and communities. I want to thank all H&I members for their continued focus and commitment. Thank you again for joining us. We'll now have the call to your questions.

Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. You'll hear that automated message advising your hand is raised. We also ask that you wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question will be coming from the line of Greg Burns of Sedoti. Please go ahead.

Good morning. So, I just wanted to, I guess, better understand the international dynamics that are occurring in the market. Is there a demand destruction happening there, or is it mainly a margin issue? And I thought you had mentioned – I don't know if I heard this correctly, but the $130 million of steel case synergies are mainly tied to North America, and that's not really considering international. Do you have plans for the international markets maybe to improve the profitability there?

Yeah, Greg, a lot there. First, let me start with this. Yes, we do have plans. Yes, the synergy, the 130 number is not involving the international markets. It's America's only. And yeah, I mean, really what's going on over there is, you know, there's a lot of turmoil. Markets are disrupted. We got to, and so we're managing it closely for profit, looking at, you know, our structures and what the demand environment's going to look like. And the bottom line is we got less profit improvement out of that than we thought. And it's really demand driven, to be candid. The actions we're taking are on track, but the market softened up, you know, with the war and some other turmoil that's happening there. So that's really what's going on there. But we'll continue to focus on that as we go forward.

Okay. And I know the main focus or driver since you acquired Steelcase has been mostly from a profit cost perspective. Now with the new management team in place, how should we think about maybe the revenue synergy opportunities and the timing of when those might become more evident in the results?

Yeah, that's a good question, Greg. I mean, look, we're definitely turning our attention to revenue synergies. I'd say early on, we wanted to kind of look at it organically, and we've seen some encouraging signs. And right now, we're really spinning up some test and learn. We call it the H&I Portfolio Initiative, where we're looking to drive our open line H&I brands, you know, across all our dealer networks. You know, it includes a collection of initiatives. Some are in pilot form to sell across those networks, and we'll be focused on testing, learning, and quickly scaling those efforts as we see traction. But, again, that was, you're right, a secondary benefit and a secondary focus that's now coming online.

Okay. Thank you.

Thank you. One moment for the next question. Our next question is coming from the line of Ruben Gardner of StoneX. Please go ahead.

Thank you. Good morning, everyone. So, let's see. So, you mentioned pricing actions, a little bit of near-term price cost pressure in the fourth quarter. What exactly – what pricing actions are you guys taking? Is it largely steel and diesel or are there other costs that – cost increases that you're facing? And talk about, I guess, the timeline of when those pricing actions start to flow through to kind of get you back to neutral.

Yeah, Ruben, you know, obviously this price cost has been dynamic, and we've maintained that we're looking for price cost neutrality over time. We've been able to do that over the last two years, even when the tariff started. So the pricing action started in Q2. We went out with, you know, an increased surcharge as well as individual list price changes in all of our businesses. Based on the best assumption that we had, and we actually got price cost favorables, remember, at the end of Q2 as a positive, you know, even after having some headwinds in our legacy business. So what happened in Q3 is fuel ran more, diesel ran more, steel ran more. So we've gone out again and taken additional actions. Our backlog is the biggest at that point of this time of year. So as a result, we honor those. So there's going to be a drag in the fourth quarter that we will incur, but our strategy hasn't changed. So there's a 10 to 15 cent drag in the fourth quarter that we will get back between Q4 actions we're taking as well as Q1 to have 2027 to be price-cost neutral. And to answer your second question, it'll take a quarter or a quarter and a half in the 2027 to catch it. So all the businesses are doing activity here, and it's still a mix between fuel surcharge and lift.

Okay, great. And then the incremental synergies that you found, can you talk about what buckets those come in? And then, you know, it sounds like – well, yeah, just what buckets did those come in? Sorry.

Yeah, you heard Jeff say we're actually ahead of plan. So the day one public company cost, and that's G&A, we made good traction there. We got a little more out of that than we expected. But if you look at where the additional increases going forward are really on the operational side. As we've lagged out our project plans, we talked about last quarter, there's more opportunity in procurement. There's more opportunity in logistics, and there's more opportunity, obviously, in network optimization. So that gives us confidence to move from the $120 to $130 for an at-least. So kind of all four buckets are seeing some benefit, but the real juice in the future will be on the off side. I think the other key, you know, as a result, we've been talking about $0.60 in year two. For Steelcase, we're now taking that up to $0.70.

Great. And then last one for me, the hearth performance, very strong, obviously, in this environment, Especially on the repair and remodel side, can you just remind us and walk through, you know, double-digit growth is pretty impressive. You're not seeing a lot of building product categories see that kind of growth in this market. So can you just remind us, you know, the products, the strategies, the investments that you're making and kind of, you know, how those benefits are flowing through? Is it new customers? Is it just deeper penetration with existing customers? Just, you know, any color would be helpful. Thanks.

Yeah, look, Ruben, it's a little bit of all of that. I mean, we're getting really, really tight focus. We've done some brand work. We've done some new product work. We've focused on our go-to-market model and a little more intimacy. And, you know, I think the other thing that's going on here, We got some benefit from the oil prices on some of our stove business, you know, from pellet and wood. So, you know, fundamentally, I mean, we are really focused overall on this business, notwithstanding even the new home side, on the front end of this business. And so there's a lot of investments going in and a lot of focus, everything from bringing people into the organization with a different lens to branding work to new product investment and to customer tools to make decisions quicker. So that's really what's driving that. And I would say that, you know, we're going to continue to invest with confidence there, because we are seeing results, and the markets are going to do what they do, but we think there's a lot of opportunity to take share and to grow the category.

Great. Thanks, guys. Good luck.

Thank you. One moment for the next question. The next question is coming from the line of Stephen Ramsey of Thompson Research Group. Please go ahead.

Good morning, everyone. This is Chris calling in for Stephen today. So the difference between workplace contractor and SMB switched this quarter, I believe, where SMB outperformed in Q1 and Q2. This quarter, contractors solidly outperformed, you say. So is SMB slowing? Was it timing? Just hoping you can give us a little bit of understanding of what the real trend is here.

Yeah, I think you're on the trend as it relates to performance. I'd say S&B has been resilient for the last two years. If you look at the growth rates, we've shown eight quarters where that's hung in there. So that's obviously distribution, mix of products, and the backdrop of the market. Jeff talked about the macro indicators and what's happening. We play well in that space. So that's actually, I would say, is continued. What's happened with contract is really the macro of large commercial coming back, the return to office, the absorption. All those things are supportive of what I would call a large contract return to office, and as a result, you're seeing that stuff accelerate. And that's generally what's happening both on the steel case as well as the legacy H&I business.

Yeah, I would agree. I don't have a lot to add. I think it's less about SMB. It does have it flow a little bit. It's quicker to react to, you know, it's a shorter cycle business, so you'll see it, but it's still resilient. I think VP is the right term there. But this is more about the core commercial contract business, you know, getting traction based on, you know, all the things we've been seeing the last couple quarters, including even some of the verticals. So I think that's really how we think about it and position, you know, how you could probably think about it.

Yeah, thank you. Very helpful. And we're also hearing that the return to office is kind of driving growth in some of the other products that we cover, like flooring. So just the final follow-up on this question is, is this something that you see extending into 2027 and beyond?

Yeah, for sure. We do believe that. We're bullish. I mean, you know, short of, you know, anything crazy that nobody can see. But yeah, I think that is lined up. It started. I think, as we commented, there's a lot of lease expirations coming due that, you know, that we will start to pop over the next 18, 24 months. So, you know, at the end of the day, you know, we think we're in a good cycle. We think that the combination of steel case in the family gives us even more exposure to play all the bases as the cycle goes, whether it be some of the verticals, you know. So I think that's absolutely what we're competing well on, and that's what customers are really talking to us about.

Thank you. And final one for me, I appreciate you taking my questions. Just wondering if you can speak a little bit about the regionality of both workplace and resi. Are you seeing growth in certain regions, or are you seeing it pretty much the same across the nation? That's a good question.

I would say in workplace, it's pretty broad-based right now. You know, there's different pockets that kind of come and go, but generally speaking, the trends we're seeing and the activities and the lease expirations and the return to office is kind of across the board. In Resi, I do think you see some pockets. It's a little more regionalized, and it has been. It was a little weak in the upper Midwest and weaker, a little weaker in the Northeast to start. And then the South and West were stronger. That's kind of been how it's played out the last couple of years. Now, with the remodel business going, I was kind of talking more new home. You talk about remodel retrofit, that's more like workplaces, pretty broad-based.

That's helpful. Thank you very much, guys. Thanks.

Thank you. One moment for the next question. Our next question is coming from the line of David McGregor of Lobo Research. Please go ahead. Longbow, excuse me.

Good morning, everyone. Congratulations on the strong quarter. Great results. Very encouraging. Thank you. Jeff, I wanted to ask you just how you're thinking about the strong order book and all the strength you're seeing right now in the pre-sale indicators versus your talk about volume pressure outlook and 4Q. And is this just really kind of the project calendar building for 2027? Or just talk a little more about that timing and kind of the mechanics of this.

Yeah, it's a good question. I mean, we have seen where we've got strength in the presale and the order book is also a large project. And we've seen some project push. Some of what we're hearing kind of across the board is some tightness with labor. Even though, you know, even though we're not talking about new construction, we are talking about labor that, you know, to do jobs. And so we've seen some of the push there. So I don't, we're not really, you know, worried about it. It's there. It's just kind of timing on that, and that's the strongest piece to business right now. And I would tell you, also, we have seen, like I said, we've got strength there. We've got strength in what I would call core commercial contract. SMB's been resilient. Healthcare's been strong. But we also have seen some weakness in the education space and the state and local space. As you can well imagine, you know, post-COVID money and bond money, the education is kind of taking a breather. Right now, we're competing well, but it's taking a breather, and state and local governments are also kind of reengineering their budgets as we go. So, you know, I think those two things are kind of leaning on some of this softness as well, but those are lesser parts of the business.

Right, right. No, I appreciate that detail. How much of this do you think is just the impact of cost inflation on customer project budgets and people just kind of running out of budget capacity here in 26 and saying, well, we'll address that in 27 or we'll divide the project up and we'll do the rest of that in 27?

You know, that's good. We hear anecdotal evidence about that from time to time. I think that some of that's out there for a repricing exercise. That's not all bad for us with our open line to be candid with this revenue center GP. So, you know, I think people may have started out on one budget and got reduced to another, but it doesn't, we haven't really seen people saying it's an all stop. It's really, well, we can't maybe do what we thought we wanted to do, so we're going to take another look at this. And that stretches some of this out as well. I think. But again, I think the long game is that's not all bad for us. We don't mind that exercise one bit.

No, I think I understand that. That's good. I also wanted to get you to maybe drill in a little further on that 390 basis points of adjusted margin, operating margin, workplace furnishings, excluding steel case. Can you just bridge that for us and talk about the big pieces just to help us understand the composition of that? I mean, it's an impressive number. I'm just trying to understand the composition.

Yeah, I mean, if you look at Q3, David, you know, the ETF being up 47%, it wasn't one lever. So there's about 60 cents if I kind of bucket it between pushing off some price cost stuff. Our productivity, Jeff talked about our transformational efforts and resetting our footprint, continues to deliver significant value creation. We had volume come back for the first time in both of the businesses. You had volume in residential show up at 4%. You had volume show up at 2%. in the workplace side, and then, obviously, we got the acquisition, you know, you said legacy piece. We got the acquisition of the accretion of steel case. You really had four or five levers coming through, and they came through, if I compared expectations, even a little bit better on our streamlining, our priorities, as well as our productivity. So, all of that, I would say, is sustainable. So, I think if you look to, you know, how do we think about the business in the long term, you know, we did return to growth, and the legacy business to continue to grow.

Great execution. Keep it up. Thank you.

Thank you. Thank you. And that was the last question for today. I would like to go ahead and turn the call back over to Mr. Loringer for closing remarks. Please go ahead.

Great. I appreciate everybody's time today. Thanks for taking the time to join us. We look forward to speaking to you again in February. Thanks.

Thank you all for joining. You may now disconnect.