KNL - Earnings call transcript Q3 2018

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Operator

Good morning, everyone, and welcome to Knoll Incorporated Third Quarter 2018 Conference Call. This call is being recorded. This call is being webcast. Presentation slides accompany the webcast.

In addition, the call may offer statements that are forward-looking, including without limitation, statements regarding Knoll's future outlook for the industry and economy and expectations with respect to future leverage. company's based a the uncertainties, number which beyond are are expectations certain statements are to subject of the forward-looking largely company's on and of These control. risks and Commission. from its Actual results of factors, Securities other report described filings the including on forward-looking and Exchange as and identified Knoll's a with many risks the factors in may result statements Form materially differ annual XX-K and and Commission. The is Exchange financial included Securities on references non-GAAP call the today also and measures most to and the financial are these GAAP of slides Reconciliations presentation included to will measures comparable in the the accompanied be webcast. I’ll of to Andrew Knoll. now Cogan, CEO the and President And call turn the over Chair, Thank you.

Andrew Cogan

superior categories of ancillary workplace, design-driven design, XX% of with initiatives that the the launch welcome the selling you businesses, now our design Unscripted we capacity increase share of brands very have earnings within Muuto, continue third to the to good past acquisition growth. trends us our the profitability. with reorganization that of and platforms of respond quarter our penetrate new report we and I'm expansion bold taken durable changing represent we've to year the faster-growing top the high-margin concurrent everybody a Thank and to our actions revenues, and from and in constellation from unique global space and high Rockwell derive revenue Coupled competitive like to building drive lifestyle allocation call. approximately of line which and advantages to morning enabled pleased of are

EPS team to offset by of with points XX% $X.XX expansion $X.XX. favorable adjusted XXX our EBITDA XX.X% and continued initiatives inflationary from quarter, This supply realization price combined adjusted led XX.X% these and to of basis from margin growth of to pressures the efforts to chain benefit

did of metrics mix our accretion organic improvement favorable the margin margins, as these adjusted too and in operating showed adjusted margin. and our EBITDA Muuto benefit adjusted on growth Excluding EPS

couple to Growth of our the We remains EBITDA next quarter of years. margins over the segments. both continue as in across XX% target our business mid-term goal spread

expanded of by Muuto the being them XX levels XXXX, an Office they XX.X% of As increased as lifestyle Muuto would the in some acceleration basis points overall we constellation the in in to sales lap grew exposure best over year. part just the that to to segment QX compared stronger saw XX.X% from as not XX.X% anticipated, that favorably X% X% prior reported, XXXX growth with over from in XX% as of its as growth And able benefit in been a XX% of and quarter America in X% margins and realize. momentum benefits their XX%; of and revenue simply QX reported under total are comps grew or Lifestyle the began our from just continue our adjusted of segments. the acquisition quarter growth would EBITDA commensurate acceleration to our organically sales have we the strong the own, we of growth in QX. organic organically to North year Knoll on under

our Muuto surface to brand. the at North and we designs and American level our to the taking to evenly the just see Muuto America. for quadrupled That beyond displays our saw see showroom introduction in of and way fit as more Muuto’s retail they corporate, even orders impact sales lifestyle long extended double-digits. not North grow more complementary should the very we overall very, corporate scratching dealer on said the to on in sign confidence Knoll’s of continue largest the Muuto was America to markets. depth growing, day Globally, grow differentiated and dealer the Muuto’s and standards, double-digit impact, on segment. we and rear XX% with bigger European are contract than in-stock in alone, consumer/residential growth, we as experienced over sourcing, in modern spaces. In realizing and it North significantly. with continue large And saw our in clients the engagements With dealers globally both Muuto designs, on position with Muuto’s strong beyond. hospitality mirror accounts to split and XXXX it's Now we expanded warranty, – some view Overall, NeoCon across a penetration breadth quarter Muuto’s September DatesWeiser end and favorable shipping, potential well of our studio pretty between day ancillary

As accommodate at to moved with strong larger to to our significantly needs continued of benefit Muuto, and we a from mostly the business. corporate this growth. delivered HUNT flat clients warehouse sales HOLLY to the distribution. KnollTextiles both Relatively during Spinneybeck timing related and they as quarter exposure expanded top-line Filzfelt, were

between and America direct we mix residential As recall, is New as note network backlog space HOLLY York XX% Orders today and Knoll’s up versus significantly to showrooms for important is into we total Muuto LA of the in HUNT year. a business versus consumer lifestyle North break products to and HUNT were down. as year. these about multiples sales XX% increasingly sales twice high residential same trend. see North acquired across from Knoll. when a and office in channels play note, to and double positioned in Today our particularly consumer and these that at constellation profitable of It's the workplace our our now up settings. into own multiple of sales lifestyle that boundaries into digits of significant home lifestyle light this prior our you margin believe we Equally we as half the business. and the important opportunity may the HOLLY the Europe that approximately workplace plus and our the of to Including rigid residential online benefit HUNT network Europe With and uniquely partners HOLLY retail lifestyle extensive XX% from with larger business residential prior did go shops businesses growth approximately and of brands, of resimmercialization in role current and are the in to we is grow sell opportunity sales our as America

relevant lifestyle our segment our In office portfolio half half sales how growth. just reporting This This fact, one under in our that also of lifestyle workplace share the the with aside includes reason contractor of our QX, you is plus is performed. experienced we to business think that XX% DatesWeiser, segment to Spinneybeck these and sold the these instance, even are office represent when opportunities suggests Muuto, Remember the for market with almost office furniture or project. same now contract in market. too includes on total [indiscernible] that KnollTextiles half client Filzfelt of that redefinition ancillary projects, the conjunction an of KnollStudio, workplace

many Unscripted their we sales workplace into of too even leaders, in than tied note Office quarter the Rockwell These reported portion in growth below and just Important legacy capabilities range sales have reported workplace Growth height continued our represent products. have upgrading grew regional both these strong of segment with legacy incentive our wood exceed growth for growth. XX% total not was the of consolidation then in achievement our and performance and the segment of responsibility by Here is of to with Office our continued portion. and margins stabilization just contract X%. we particularly just the of more that workplace the is office half our of supported Office that the sales XX% our Year-to-date industry of businesses adjustable results made our X% total the in segment have pure tables. those QX, significantly of growth this plus our under now products though platforms up Muuto broadened our newer outpacing our investments approximately including

experienced sales Our growth. day dealer day to our driven program Essentials also strong partners’ Knoll by

our penetration at dealer accelerate we're day As we investments and XXXX, within selective partners. both day to entered ancillary to looking our sales of

segment, deliver year-to-date initiative, Office adjusted our able offset from Within leverage challenging benefit cost last volumes and our as realization margins inflation commodity together to adjusted here recent of in of QX with XX absorption our the improvement we're increase from ongoing to higher bps CI and margins the price improvement nice plus expanded fixed year’s from to XX.X% from EBITDA a EBITDA inflation margin XX.X% transportation XX.X%. this lean quarter,

and may pressures put by of While inflationary are the tariffs have one additional profitability. impact also price why we increase. we It's the the are – progress, increase mid-year through additional heartened this an reason we aware on

of transformational more initiatives entire That lean As on opportunity that each redesign our into other quarter and that release, clear re-envision continued our noted is become supply it's product and square announced of and the there these a we the also build on better profitable third to chain. study our assets some discontinuation to part last as footage are our products just first to Morrison use. including actions, our in less in system the to inefficient put shed of effort plants XXXX the

XXXX recently year our led joined ourselves and announced over into context, where just work kinds larger career and development earlier North will in of Chris, Chief XXXX, leading their move both or making a In we community. his XXXX. management expand teams to good month a we dealer business. result moves was helps pleased in President in very the reporting to at more are plus They Chris A&D Office has and business XX manufacturing year I'm our experience these Operating most strong as to and partners savings Baldwin talented hard of execution product optimization XX our bath sales, leadership career and kitchen a the to The large we're team whose As after this marketing, with for Chris results strategy. reflect of the Kohler, has have of team. that position bandwidth comes than Officer working be America. of he this solid us particularly more addition

that to to drive our offset to look special mix planning teams As pressures which million continued XXXX the forward supported business by the the in tariff continued X Overall growth tracking, very continued ancillary single the mid business by in pivot opportunities of to and organic recently are dollars driven we headwinds, digit solid I total in We've over funnel uniquely are of with targeting million we will gains begun Chris, of be the increase brand. both share kicking our and to business. hedges points hand of towards seating margin help next year fit XXX favorable global from day product improvement, office margin XX primarily of spike potential reins to significant to inflationary I help in process Furthermore, our basis interest points and design expansion day spaces, working time continuous our realization, any absorption in Knoll from of basis up rates will mix. aggressively us continued and rates. our high XX insulate more of high our quantity business price

you the walk detail. in Now, to over let through Charles me our call results turn to more Charles?

Charles Rayfield

Andrew. third XX.X% The initiative to segment, operating XXXX. increase was percentage compared increased was to Acquisition $X.X the margin to gross rates. employees, included three Knoll, as growth. related XXXX. Muuto XXXX effective supply net of The Inc. to a sales $XX.X the primarily charges sales. Interest and which Gross sales. in from or Knoll, reversal greater from quarter combined lower increased $XX million primarily a from segment million incremental acquisition higher investments margin HOLLY of acquisition the increased interest increased and Adjusted EBITDA expenses we of in for optimization a retention from result related of adjusted the of million, allowance key foreign primarily increase lifestyle quarter impacted jurisdiction was percentage operating tax third segment XX.X% growth XXXX. warehouse to related ago. the were evaluation million Muuto in continued of quarter The were $X.X the favorably higher volume you, ago expenses Edelman compared QX improvement excluding increase sales $X.X Effective as to of XX.X% up reduction assets. third lifestyle Total primarily agreements as expansion realization in total third rate intangible expenses larger believe margin of adjusted margin quarter of of in and Muuto sales XX.X% tax Inc. of million rate third up was as both year $XX.X higher customary in $X total operational a was and deferred will XX% to to million a certain that efficiency. was result of chain for in margin the with Inc. sales and from to quarter well a The for expenses operating stronger the liability. XX.X% million year EBITDA was inclusion Knoll, Thank expense XXXX. margin charges net for related as or expenses the office an the operations. Muuto, costs the due XX.X% lifestyle of Adjusted of a in operating by levels create XXXX. due adjusted The will the segments the million primarily HUNT as price $XX.X assets for for adjusted third the was debt the EBITDA $XX.X tax in restructuring percentage quarter showroom in of and in due acquisition million. of Muuto down of acquisitions XXXX foundation of months XX.X% quarter The lifestyle in related the acquisition amortization restructuring against costs, was and of the EBITDA in businesses, quarter our due expenses the XXXX The represents due third to for

the the decreased net acquisition of Jobs allowance from XXXX million $XX.X for third expects pension primarily December restructuring last and reversal million, same previously the Excluding quarter XXXX, effective significantly impact for related the million XXXX of tax-affected period year. third charge. up of due is the of to passage net Tax was acquisitions, in the adjustments the that exclusive the XXXX charges, earnings U.S. for to of Cuts rate from the to Adjusted discussed quarter of diluted income between third share a The also tax Adjusted rate expenses for earnings settlement valuation related company in amortization earnings were quarter expenditures quarter XXXX. of Act quarter rate our related earnings tax XXXX. states XX% effective information pretax by year of effective and primarily were varying $XX.X and from million full technology the we rates the was and in $X.X mix infrastructure third XX% of for third the of in affected the and equipment. tax be the XXXX operate. million Capital XXXX. per $X.XX Capital countries its in $X.X The year to for quarter and $X.XX net manufacturing the the was and which fiscal Adjusted and respectively. $X.X to expenditures XXXX compared in tax of

in excess and cash $X.X financing cash with cash We our cash activities of $XX.X activities down quarters, quarter the was with financing Operating million. quarter million $XXX the flow, million. the of provided dividends to past operating – Regarding approximately of cash outstanding quarter cash of in compared leverage cash approximately dividends balance the invest $XX.X we finished from and XXXX use were was balance and in reduced ratio during quarterly the total end and $XX.X sheet the equivalents X.XX. million We quarter Total prior of in to pay million million. cash in our used the to third year. outstanding and million debt to activities debt activities the at and $XX.X debt. reduce to $X.X third Consistent pay used generated business,

and our end expect grow to the We'll the of you. Thank Looking continue expand to any our leverage. margins year, take business, now ahead the questions. reduce we to

Operator

question from first Our Greg and Instructions] Sidoti [Operator Burns comes from Company.

Your is line open.

Greg Burns

Good morning.

American you mentioned So the percent relative be was in kind then when – How kind that? a for your about just What bought you can you expectations And just thought rate – selling currently you Thank that North performing you of could growth asset? business of guess maybe at channel among but number. dealers? where terms business, I missed Muuto talk just time? your I this of if relative the year-over-year of I to your think your will the you. uptake to the is could repeat

Andrew Cogan

performing. how are Yeah, Greg. thanks, is very we Great, very, pleased Muuto with

talked the I being think XX% of I on call their script growth in up over the just quarter. about

they’re but growth I really own exciting at very they're continued where look on growing, think of impact what's is nicely, when incremental we're bringing growth. their we the

So organic of the we've getting the our of them is been penetration big engagements because now Every Muuto when our a of Muuto and our we're also a network. to moving growth growth, month The month because greater of We're Xth starting think dollars of of our strong. misleading numbers, XXth some exciting and Muuto. through some it's those look on you in engage our we're standards chunk even very largest has getting I almost dealers owning the at they're our to number get now or is seen seen we've corporate grow. project. What's dealers of

of So we for XXXX, the to will at to doing. backlog start we're of a flow Muuto they're through as of starting business see look what real project that millions dollars pipeline

four overall a in. The where uptake come was the what to results margins in we're September Again XX%. script, and is. we on amongst business really get really year has been up to positive U.S. very up continue in Muuto I encouraged were start So the times orders are our the The mentioned be as Muuto strong. seeing the call ago and extremely dealers

what we better do through fulfilling that's And warehouse a to We're frankly in move the respond We're demand coming. our to the Europe. exciting would additionally, move of and own Muuto year, now thought we furniture as into we the we customize exactly to initially happen We've U.S. new that in the see bulk that's beyond Muuto of very which that as lot other [COM] [ph] time. orders products. So of importantly ability want of to a coming. started increasing large a in warehouse made the system. anticipated their to short working Mutto’s – is And lead got momentum process in products the is we we so what on accelerating clients very pipeline fabric has is

tariff And some so other more subject be will any think to that of that the Danish brands not stuff of I we’ll are suffer. Chinese-based the

tell, So that Knoll. we're, team can collaboratively very you as it's excited. management has our great worked And folks here a with at

Greg Burns

segment, maybe of Okay, Office like workplace And delineated workplace give office of a But kind for growth what great, then just in just sales. kind of the a give sense you Office a to lifestyle some for us there's guess a flowing view I near-term through for could the segment you’ve as it of thanks. flipping sounds and quarter business the as demand. kind the whole? your on Thanks. or maybe order Just us outlook

Andrew Cogan

Orders I consistent. shipments think everything. in pretty very aligned much and was are all it

I a So there. don't think there much of disconnect

I think is it important.

forward go we penetration. of we [indiscernible] increased ancillary As were some week. involved was last to see was And visiting exciting the what I was and in level

some of our office of it introductions. grow which Rockwell terms not part continues metrics going about mostly led to this it's number So we're because of newer of continues business, more we'll now regularly growth. I We the workplace think to about the just is talking be need kill – to one by about thinking and in all traditional be accelerating the to

this But are drive All of think lifestyle really the given rates ancillary half to those that growth adjustability, about what's and the all that's higher penetration sales. and things going the investments good. is I

as aligning on going that we I and And think so not are and forward. with what segment Knoll’s the well. can you focused but be a bigger everything I it's that it's do important as and want doing. to doing, Chris here. Office is to we're important And That's you aligned how what you the tell I part and business are thinking of moving I is just we're about, know, workplace think focus all internally

Greg Burns

Okay.

disclosures, color view office giving detail In detail and will we terms street? around guess you Or view you sounded but the realigned I giving of – on to more what's – along or how know do be that forward? kind I just your workplace it going of lifestyle,

Andrew Cogan

structure workplace classification a we you a how because terms so of an different the sales mixes it a a of of into can from segments together kind office. make in or give a more of will you into and we’ll – application that's it reporting the not get sense in going, Yeah, businesses but use frankly formal

sales take EBITDA you So that a will we not give P&L I we'll growth standpoint, number to think but or a from it standpoint.

Greg Burns

Thank great. Okay, you.

Operator

Bugatch from comes from Our Raymond next James. Budd question

Your line is open.

Budd Bugatch

for Good my morning, Andrew. Thanks taking questions.

$XX.X I sales, understand so much came that posted what – out you U.S. the making base? – sure how of far in that in what numbers Just dealer million the of quarter the Muuto U.S. of third dealer in

Andrew Cogan

that, I'm is but Muuto specifically increasing Muuto like overall overall break not significantly out probably twice growing. say is can – it's and of an fast business Right, Muuto’s the as growing business as I to what share going

Budd Bugatch

Let U.S. or QX was me pretty from all much $X.X you… Muuto about it Sequentially, that to can way. grew QX, try this million

Andrew Cogan

say. probably that's to think fair I

Budd Bugatch

And How of to in our project about we QX? model what do do Okay. will next, you think that do for… Muuto kind think

Andrew Cogan

XXXX. Muuto. next think and we’re look of at will having is again, year. really corporate the we out and and I with won't sequentially they're start now activity, as on won to standards rolling both I a of very And continue Muuto’s strong those I the projects the until And programs mean pipeline – October year-over-year into year Muuto accelerate Muuto on basing the move and balance that through

but see that anything, that says I accelerating. don't So anything doing is

Budd Bugatch

look workplace gave slides… at the you us the residential Okay. in And reconciliation as we

Andrew Cogan

Yeah…

Budd Bugatch

[indiscernible]? much Is map pretty for that to that reporting BIFMA does that workplace BIFMA, – as now is

Andrew Cogan

is will you to provide that and question. we that reminding Greg's forward for webcast. reconciliation webcast going me the That in the just Thank in and

maps there. pure being So, that the not I number think office number, And It's BIFMA is yes, yes, the data new but the that is to reported. data that that's anymore.

growing as at So, Xx you when BIFMA reported the data. we're to BIFMA I our that, compare I know, workplace look

Budd Bugatch

Okay. discontinuing And in What's does what to are going you of the next base represent legacy Morrison you that the back sales? are nervous And about And in year. discontinuing office, beginning installed just Morrison? it?

Andrew Cogan

mean, I of is or today our Yeah, Morrison sales. X% less than X%

don't I worked impact the starting We've last a middle So XXXX. as see with on people to been that's be move huge closely really And clients. of been This raising and there. we've really through for something going we've and worked been it has our away. two with or three producing years the – prices probably will

clients working of and we're So installed but really now meaningful down with, giving clients transition handful to bases. with opportunity to it's closely a ample very we’re

there moves years fine So, over our to next footprint that that's of of the are made. transformation we've footage the be some up the frees few think I that's East beginning significant go Greenville. going out that in square to facility in And identified

Budd Bugatch

is at It that equity clients may or that and – incorrectly? it so will to able is remind me Morrison, that do compatible is least with handle I have recall be that you rev,

Andrew Cogan

just all ago. equity or four discontinued years think we of – can First five we I

Budd Bugatch

where – okay, my Oh I it shows am.

Andrew Cogan

strongly, is dividends platform That's catch And very, continues largest Budd, rev really system been our well. perform now, you got really up, here. gone – we well been awhile. can very to – to and for doing That’s do

are of Morrison lots help who we that have clients, buying transition can into. things we So

X% So I anything it's it's our don't but impactful that is relationships. or or expect. revenue Yeah, headwind, on material X% going client be to not

I we And footage think square frees do. it's of better a again, up use for. have the lot right that thing it to

Budd Bugatch

are two $XX a got XX% I've do it. of $XX that's That's Tariffs is number, million goods cost a think, there increase? And we X%, just about I that? are sold. if of the you to headwind. price quickly. much offset How offsets? get or other How Got areas more million

Charles Rayfield

Yes, is sure, Charles. Budd. This

million tariffs. million impact XXXX tariff into maybe to discussed, the as expecting to going offset $XX to $X up when several we're looking So XX%. you the We're goes options to

price through I into out of have some February as clarity you still some mentioned we of You coming And numbers Obviously, call. a price XXXX. give the we're go we’ll increase beginning can at more and running increases. the think

of Some chain sourcing with alternative looking other things of suppliers supply our and the strategic doing that negotiations we're the are at option.

we're on working try things several there's the to impact. reduce that So

Budd Bugatch

help move some to all? the Does you at does of And offset the RMB RMB that? help

Charles Rayfield

I very don't think no. much,

Budd Bugatch

And of made Okay. lastly backs acquisition. and fourth quarter? we the we for quarter? fourth do some do foresee restructuring add you’ve What What like the the in me, in look adjustments

Charles Rayfield

Sure.

quarter So continue the probably which a I think as thing, and is costs primary probably fourth fairly we’ll remaining for related probably some the obviously [indiscernible] have from to XXXX. amortization minimal go our straggling the acquisitions, few restructuring acquisition we forward into

Budd Bugatch

that is slides. shown that number the amortization And in

Charles Rayfield

that shows you. by back. amortization that in for and add don't earnings the numbers we break specifically that’s depreciation being total in but back added there amount acquisition, the of the I release an have out know We it

Budd Bugatch

which it’s expenses, I Well, would X.X plus other amortization for be related, the acquisition think right? the would

Charles Rayfield

That's right.

Budd Bugatch

out the acquisition just it. we that's take to so okay, – need related, So

Okay, that you. get Charles. later We’ll thanks, from

Charles Rayfield

Sure.

Andrew Cogan

Thanks, Budd.

Operator

Matt from Seaport comes question McCall next from Our Securities. Global

Your is open. line

Matt McCall

everybody. you. Thank morning Good

Andrew Cogan

Good morning.

Matt McCall

about, let's talked you Andrew, margin. see start I'll So, with

is front. basis to margin You EBIT you correctly talked Can heard basis of about XX for a points the into bogey being I go if to you're more be part kind gross detail year, get comes any mix expansion what then next there, margin expected And know we're savings that I assuming, expansion going of little on XXX benefits? year SG&A? next some volume, versus points you to the the

Andrew Cogan

margins. talking we're all, I of about first Well, Sure. EBITDA think

that’s we’ve think to move where tried I conversation… the

Matt McCall

Okay.

Andrew Cogan

sequential we've year, margin as fourth. through this moved in would that rate improvement increasing of continue I'm EBITDA And we've that pleased to seen an the to expect year-over-year I expansion the

up What that is some made It's is of, So of of made couple a running kind pieces. of it that momentum. of Matt?

of we getting of lifestyle benefit, to a continue our XX% EBITDA a XX% That that's grow mix are revenue. piece revenue. more First, to will our up and margins to I now about XX% mean sales at as

we're a favorable drive margin So are we're CI Number plus one. the faster. price That's mix we improvement where the are tariff spite gross piece we as as the of, getting benefit number from getting you two, we inflation, continuous of know, nice realization. our efforts improvement both in growing and and

to within the of to smaller from is of mix shift projects, margins. more at day more business function fewer a projects better day the business price realization large Some also

new in So, shift the add you mix newer that stuff from know, platform. our going would I And to then platforms, the think I higher legacy on. margins newer we Matt have

you put our mix trends business are all favorable. if together margin So the in all in

as think whole the a benefits. flat will try that and and nice then I On this So would the that's that it. then big try job to Muuto in things number would the I some move tariffs XX% you I chunk again things million of by that take of CI and gross going of have able core XX% a with have we’ll a our done with managing kind I inflation layer we $XX and other imagine that forward million be mix a of some And you and think inflation, got been in or SG&A, the growth to and our combination without – we've basically expand of our of sales largely core if here. to stick and and we're range of think we'll to $XX year favorable offset of offset we expand ratio margins a

Matt McCall

that’s So helpful. very

CI focused in closer any as does changes, as your so continuous you to annually the to than more that on savings the footprint impact – C&I effort these footprint have able move maybe generate been you've efforts? on are ongoing folks improvement efforts So

Andrew Cogan

so. think don't I No,

I nice we're using discontinuation the doing that larger footprint, or of efficient space changes between of plus freeing footprint of actually more and there's down think inefficiently up lean frees terms the work road. then the our up do platforms the less in infrastructure to overall are a correlation up

moves front of would logical. we’re to at know, XXXX sequential focus over next So that, things they're in I you lean say again the probably CI bigger prerequisite some kind more And think I think all XXXX. is and a of look I and the to in and that could of the continue we year

Matt McCall

about think I lifestyle so, half - The said office. you Okay. was

As I don't I Representative I've want the say… Unidentified to always thought… about way think Company

Andrew Cogan

ahead, ahead… go Go

Matt McCall

Okay…

Andrew Cogan

– I broadly to say but as workplace workplace. about we a of applications including find hospitality, goes the just of say would retail, that I half Yeah, area, variety yeah, wanted into also lifestyle

Matt McCall

Okay, that's clarification. fair. That's fair. Good

this the were and which to So I they business, margins. increase guess I the changed models, and dynamic guess but high question coverings margins, about all? lifestyle consistent the exposure way – always when the studio at meant the Does thought in variable there you that workplace is pretty were has cost I've

Andrew Cogan

No.

are businesses manufacturing have general in characteristic integration little these the So terms them. in is us of really very they vertical

don't and collectively volume are XX% EBITDA lot. the all a margins that, So to XX% all of terms margin in businesses. basis fluctuate also They a

some unique that that putting doesn't of So I change. It's do engagement. individual we the extent. them workplace to in we're into time profitability think Knoll which these improves that's just applications, every And every client

Matt McCall

pie show the your me, penetrated stands So, update okay, Muuto Any with new XXXX you and the product the shows of given Unscripted I your had and introductions? The from growth on of you've now XX% some based that that where some are had ancillary Rockwell numbers ancillary that thank one dealers, these to success while, business. that chart for for deck in you know you. only a you've about – last

Andrew Cogan

it now. Well, can going I the dealers this trend specific every point, year, because and but look again number. look performing the against is at We're Xx the of don't doing positive I We will that positive portfolio how are number. when it's imagine our year continue has over at have a tell businesses you I those to we be data up BIFMA and calculate directionally only been share last workplace but I

So of when I where client we go we're it used areas see then still visit in. more And be should seem have in be that lots I to not of where in. installations Knolls share I designs that be category. areas And gaining see in not we to I we and

space to is and driver for and we’ll of us the continue So there expand product and been ahead. think be years into development white I that's in our ample to the strategy acquisition

Matt McCall

Andrew. you, Okay, thank

Andrew Cogan

Thank you, Matt.

Operator

from next Thompson Kathryn Our Thompson Research. from Instructions] question [Operator comes

is open. line Your

Kathryn Thompson

back a step taking looking and for questions take really you Thank XXXX. into I today. to want my forward just

get thoughts Q&A. follow You could tailwinds and give a your a into and question But the to the XXXX some projects. standpoint commentary after you. up a color just on from head we initial on wanted then in the I and volume headwinds and prepared the both as price Thank have cost that

Andrew Cogan

that's of about. of continue to that all kind everyone and both terms terms in metals costs headwinds, be stuff I think in say transportation has of in Inflation – kind of been talking I problematical. the of Kathryn. Sure,

Although as of the bit, roll over. some a we little is maybe out to say starting increase will I look in of that rate

rate. be certainly So won't at that haven't we increasing are same faced. headwind the additional tariffs an The maybe

Our XXXX nice price to job to did the there. implement in protect of ourselves a decision yet those. another we team help And is really addressing increase doing early proactively make

a chain. dependent to think ability I We're we supply have pretty any move the So some will we means have – by Asia we diverse not stuff and overly around.

I offset to good year. some that, of we'll the of move through $XX million able we be million $X to So as of those a XX% impact think

So are headwinds. think obvious those I pretty the

think at of you side, revenue the been has some – I data, data, look leasing sequential that has of year-over-year been the activity. in absorption mean On the there of of some listen, some some there I slowing

a nicely, little be slower. growing growing still So bit still it's growing. it may but It's

will, and I to key I world. as the move and So that that we doing white continue well and be of the win plenty a as – I going clients I there's we're think I is of think as will within lot to can said think business again and for yes I space that our yes I think And determinant into. think can because to us will think we but is for – the share gain is it the we with ancillary be be I what within our both us thing think dealers power within

at to to cover saw like, our over more fewer we year investment So an headcount more we selling and projects so, last are or I for And large that. into addition help people more as organization think overall need drive projects. the of much looking – the

focus the make I business opportunity to front think these dealers selective of to some particularly we an particularly investments have in on ancillary end within headcount and in our the areas.

And nice so, I test we've beta, kind we're we've see from of seen basis, done the on think now those do that process numbers, a a initiatives. that's in you'll those but where down returns of some us nailing on when something

So would dice kind how of the I that's tailwinds. slice and headwinds,

Kathryn Thompson

Yep. And assuming the am continued I any of takeout, tailwinds realization and… have cost you thoughts

Andrew Cogan

tailwinds the the think within I business. Well, shift really is mix biggest the

So, growing again, the growing are than categories faster the are margin are categories higher slower. all that that

get margin So things again don't a think I continue benefit. challenges and we want face. like shift natural I But underestimate mix of to that that kind to the we

Kathryn Thompson

Great.

Andrew Cogan

our But midterm XX% all – through through CI toolkit. is mix – in our tools remains EBITDA through our goal both all margins goal the the

Kathryn Thompson

this that your in general as the And a And smaller size. that are jobs non-res trend talked we've seen about you or more, more is broader commentary, in commercial also in market. prepared end going in after something

Andrew Cogan

Yeah.

Kathryn Thompson

a trends seeing the XX project as in versus what either you're talk growth. – and Thank from months today maybe steep And not comment What’s geographies Could markets about seeing you're robust where and different on seeing also size? you're seeing others you. you're ago? where say then you where maybe

Andrew Cogan

Sure.

mean some project and a size that, of terms stabilization. In I there's all

at and of looking average think points and office the a down project business number size projects few up the was points. I I'm just few the was a

So rate we of it's seeing. the that not decline at were

were dollar projects maybe – before the good, was the So I getting seeing quarter think in number like of to that's we you're million plus flat year-over-year.

in be there stabilization that to think So some trend. that I seems

and very to the I tech, areas of like geography, good those of we on kind We're accounting, terms sales kind well coasts of you the pretty that. have legal, been stuff do In doing can us. finance. for and well continue mean and

flagship. of hometown, better. in where have I is central a the think stunning we lot can We We're which investing opportunity do powerful and part, a in very people's other

of will move flagship to one decision and and mark out going bold to the in then of our Midwest be Chicago think and frankly of kind national I statement. a made growing merchandise become really And of on Chicago. we strike bold think and the I it exciting areas own to that's our the in fastest most out a

in some We've against in team those opportunity have So better we our we're markets. had I think and to that's investing changes where some that. made

it done, – with we've the So real don't is pleased things maybe around everything very in we're that area, how into Texas. its think down focus. and perimeter but I and I a we've significant south coasts market doing and and got a opportunity whether know I'm the

Kathryn Thompson

thank Okay, much. you very

Andrew Cogan

Thank you.

Operator

to showing remarks. no turn now questions closing I over time. Andrew further at am call to Cogan would the this I like for

Andrew Cogan

Great, appreciate thank the we good questions the for call really the and you everyone joining dialogue today. and

we thank everybody. if before. in So Take all and for you again February your see not continued interest care, will you

Operator

gentlemen, program. and This you thank participating in concludes the Ladies conference. today's for

a have wonderful day. and may You disconnect

Knoll (KNL) 30 Oct 182018 Q3 Earnings call transcript