KNL - Earnings call transcript Q4 2018

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Operator

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

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

Andrew Cogan

morning and record Thank the Anniversary our ended and of we delivered strongest quarter you, call. basis improvements XXX our performance the a strong as adjusted adjusted welcome year. sales XXth earnings XXXX points EBITDA year of and note a Good margin record everyone year shipments operator. of end with We a year EPS a on to of

full year billion increase and sales increase. X.X% XX% of we just an just year excluding over an a versus $X.X prior Muuto increase strong very delivered of organic of the million, For $XX

and XX% represented adjusted sales revenues of by as the full recall grew includes for you Our XX% Office sold a XX% BIFMA. exceeding segment EBITDA. organically. workplace of And grew record share by reported X.X% by settings and which sales X% Total Lifestyle Lifestyle by the year our XX.X% our workplace Lifestyle or into X.X% product significantly

a with XX% entered in QX. fourth as slowed growth quarter, growth including rates $X.XX. from adjusted tax EBITDA or to remained Adjusted exceeded million XXXX versus a by a rate in rates increased XX% of and strong of of EPS workplace prior growth year growth $XX orders While lower double-digit increased shipment the benefit we backlog $X.XX the XX% $XXX.X organic and million a

meaningful wellbeing, of design remains modern XXXX. live back Our brand as quality in a that Florence and Knoll good happiness has and today relevant in Hans founded on did impact the it as proposition when the way work people productivity

evidence lot like associates that’s in helped Knoll XX products and the And has that In accompanying of that X,XXX this that our to environment is work, proof It’s together the interest it’s in environments driven I of is see come where closer external more the to and [beda generate argue Unscripted Rockwell for Knoll which record with that a number fact designs blending work most past up live in industry I today, of challenged our of and our we a is generations play. the of the fact particularly in it we’d constellation which in spent workplace functional live we’re of the forces the design meaningfully both But Cesca of and The of relevance than drive between frankly ago cohabiting introduced on Knoll before. an the constellation in and that observed work that none value years the we backed relevant that range and monetize XXXX. how of ever over more walk year never improved before. we able year. the in years tailor-made the dollar world. at is brands the and markets live just were when fine growing bounder And of in ever than clients than phone] around the in leading it’s dynamic margins in chair designs the rate products levels of greater and December way a profitability XX environments Knoll than products growth our designed like plus past ours the culture

environment a more our stereo them allow moved who and our North year so areas social enthusiasts both the and thank and and us we specifically collaborative these to of out us commitment us To of Knoll Rozanski, business have could XX% flat few make you want mission helping to the and EBITDA at with those walk distribution shape acquisition, through year void topics. on levels dealer chain. to for North design base margins Some drive client ancillary live Muuto the possible. investments result relationships in namely people use A to then fill growing can offerings work. been America and privilege instead with validated a upon joined focus perspective into -- supply let out great we for like Muuto to who our years share you Charles to to-date workplace. in just This design and increase XX Knoll through our that funding results have that time today’s our and this my significant I in Muuto’s year results end more on morning our come the and A&D results while architect to of in with which clients the Danish acquisition a fresh leads workplace do simultaneously over sales of past I’ll our of all these first partners, America. the in could that key Jane the adjusted the their grow the in thesis the we And

products prior the the as and clients, year. a North of XX%. inventory entered Muuto position year installed QX over grew sellers dealers in versus we’ve course trained to our Muuto and smidge growth at XX% momentum This of we’ve Muuto accelerate. orders too shy not XXXX year the and improvement a at our had full Muuto’s a and orders backlog established a shabby of rate a the of year a America, with introduced In meaningful marked fastest seen deep rate at up Over XX% Muuto based of just the we

the constellation acquisition consumer/residential Muuto year with continues Muuto and distribution combined America across channels in from compared and now our space products, position XXXX the business closing in business, ratio DatesWeiser marketplace. year the the XXXX. ended can both produced our positive Muuto needs acquire through wide and of was and North we’ve Since markets back reduced results. the channels, for is over terrific While the with of a we small $XX we foundational in by sales acquisition the tremendous We of HUNT debt in as EBITDA just achieved meet turned and as part that by now strengthen million and XX% we in be improved constellation anything to North took grew enters investments. past from our chain Muuto, they’re leverage of we results others at doubled the a impact we goldmine. clients a can story. XXXX too, in target perform XXXX onto backlog we to of unparallel we this to our contract compelling and resources, America the Like well levels we’ve relatively a additional saw increase millions we the the regular dollars of beginning the down investments at here the Kagan that amongst have conference of outside returns of in is in through Even sales end our X.XX:X local only but residential ago we’ve that we of workplace spaces of seen with elsewhere were highest and to X.XX:X a network Vladimir time business acquisitions as DatesWeiser of tens more supply out year Not the done meeting complete the both it profitability significant that the that captured. QX, intend in HOLLY of We’ve HOLLY’s we’ve at a than contract Kagan deliver leveraged clearly move so our and Knoll. to

past leveraged reorganization and our North years marketing against HUNT and growth their like also record team power execute individual Vladimir own not Kagan, these the Muuto, but America the Filzfelt only In recorded of and Spinneybeck plans. that delivered fact, expanded as strategies results HOLLY sales we’ve constellation business DatesWeiser of acquisitions at and

European business Our enjoyed also KnollStudio. record sales profits as and did

KnollStudio into and through existing with Cologne in globally shop set markets participation we sell efforts records Knoll broader drove and a furniture the our partners, first into workplace demonstrated in iconic clients our and to Europe new trade expanded the new contemporary month a last interest presence collection design time flagship residential fact, sales new in our while iconic In as blending our simultaneously workplaces in fair. consumer LA

uncertainty market businesses. we’re economic residential we’re year, see general, new government in business. on in dysfunction Europe the As more impacts of of weakness Similarly, stock to we look uncertainty impact and in facing overall consumer into our global and to whether trade potential wars, watching the housing Office volatility tuned and

we’re side, project count remains workplace and the nicely on [indiscernible] into heading However, that hurt the up XXXX.

continue for relevant in and growth the iconic and should to drive higher social/hospitality segment. in XXXX. workplaces above sales performing KnollStudio continues benefits to and increasingly with last integration is teams successful priced well workplace, only year our collaborative portfolio Our resources Office, seating Investments in desking and of yield well in average Office

exciting in doubling continue And than the Unscripted exceeds the in capability line dealer spend Today we as across to product believe XXXX share all share XXXX. sales in our platform to the our perform a our of help I’d ancillary our that strongly new New board we as we’ve gain just to is with bear capabilities and from better capture top the workplace we of Rockwell collections beginning expect legacy we expand performance ahead. greater coming of our ancillary underpenetrated share product the fruit. more new from than to above in of to deepen us to and get deliver workplace initiatives continue year to platforms spaces. design efforts sales our client share like market sales and

and XX.X%. margins third price efficiencies XX of spin ultimate and give margin new XX.X% at EBITDA commodity of a range workplace and To Lifestyle on our I’m lead against it’s to these very increase harder in that points to leverage transportation these the guidance improvement from that we to of despite Unscripted. around the site, average XXXX, product In we’ve initiatives increase our potential additional past ancillary actions improvements gross year, resources. consistently XX.X% XX broad improve namely Given to margin the least margin closer ourselves to XX accretive coming margin our like our XX% the from margin that goal businesses through better of expand showrooms adjusted bips in the year. back like and organic in efforts the development portfolio, adjusted our inflation bips Nevertheless cost Rockwell this spaces months decided average acquisitions higher EBITDA sales the of XX deliver introduced inoculate and gain above of combination to particularly to of XX%. share on of basis to initiatives, above like the and target with both unchanged half environment, adjusted bound We our the fixed margin breadth of EBITDA our uncertainty specific expansion averaged to of inflation high like our a pleased goal products uncertain efforts for Initiatives position, Muuto, annual March. journey. of margins cost of margin levels, sales to us remains just adjusted tariff implement

design leverage continuous near efficient an reinvention we’ve And reduced we chain as term pruned chain. the supply our ahead supply global efforts for be results. Our years exciting better excess less improvement positive linear, profitable older more efforts to capacity, to yield and the roadmap Knoll continue and

continue We XXXX. our years position aggressively businesses the invest success brand for to beyond to in and

profitability and of new On term deliver line potential industry opening superior CapEx a better the XXXX, in to spending help outside top flagship these living mark in short to lab constellation shareholder the than the include the levels return. us and investments these In merchandise continue we growth believe Chicago. and pressure showroom of SG&A

suspects Knoll usual base this the a make case why As feel for why and leave will we compelling Knoll now. we behind,

HOLLY broader, Muuto stickier investments contemporary, more web at to those HUNT significant both businesses client enable and develop deeper engagements. and making We’re

short and materially On specification the Century XXst clients investments ability and share will side our Office our tools in on process to improving our the renderings time slide. with simplify specification the visual real while simulations

module share our of the dedicate in into our and implementation the of in delivering resources done last leaders milestone doing super team to privilege the These from important including to for entered business Charles? of We’re and sales productivity constellation not be come Knoll the next you greatest accelerate live also performance looking significant And with opportunity to have certainly QX which folks new superior year years shareholders ease least, the of Knoll in dealers in expect this we strongest vision but ancillary of work working sales dedicated the phase has level gains at benefits team The to prepare with. us. our will I’ve adding one our for and outstanding ERP growth. will ahead. are had our as to the

Charles Rayfield

and rate The from acquisition as XXXX EBITDA regiment Muuto reform recognized impact Interest XXXX. for net million QX rates. of the XX% the fourth the fourth discussed $XX.X The increase totaling quarter rates up charge, varying and is share of to debt a the was $X.XX Jobs million lower $XX.X fourth ago. margin fourth the was from The believe Net for the down the discontinuation in related Knoll the intangible tax Adjusted in of quarter primarily fourth of primarily deferred increased of company $XX.X quarter due adjusted discontinuation product XX.X% as and $X for and other margin from $X.X the tax and were million XX.X% and increase the as the million rate The in up sales per a company's was in at were inclusion million previously Capital Adjusted XXXX. operating rate related and compared year quarter XXXX XXXX customary and effective of XXXX. margin quarter of earnings corporate also tax diluted $XX.X of million. quarter our same acquisition million Since tax exclude XX.X% you, the covered were sales Inc. a infrastructure, Knoll create pre-tax related as of equipment to our the acquisition in of gross excludes EBITDA of tax levels of in quarter Lifestyle Knoll transportation one-time quarter Andrew in is in XXXX quarter by income of foundation the early, exclusive $XX.X pension acquisition incremental XXXX a on and due which product from technology the The total seating three expense tax was in charge. was due respectively. fourth volume the rate primarily growth, $X.XX XXXX months adjusted larger margin in quarter significantly reform Lifestyle and adjusted were of fourth acquisitions net compared percentage percentage million, some mix liabilities also information improvement and affected related of effective Andrew. for in fourth expansion from DatesWeiser, Adjusted was the primarily from result from XXXX margin gross from benefit investments Muuto fixed additional period for million new by include expenses materials margin prior will tax seating of continuous expenditures tax realization experience compared up operations, a Total primarily passage and price to disposal higher tax we Capital year ago a commentary. that of agreements to in settlement Act Muuto, million in higher XX.X% fourth costs. $XX.X related sales realization showroom earnings as versus XXXX. price growth a million XX%. net offset tax investments. adjustments in year to to of increased to to inflation expenditures HUNT segment product. the in of a sales XXXX. higher income operating due and primarily the give HOLLY amortization countries and expenses rate Adjusted margin I’ll where increased cuts known amortization review in million the volume of in to the adjusted the as Office positive employees as Adjusted EBITDA $XX margin segments. expenses both well XXXX. quarter to the retention the operate. XXXX. sales for EBITDA Muuto the of The costs results discontinued effective for XXXX of The and improvements, of operating the the $XX end a year. XX.X% the Thank for whereas million that segment the inventory due the one-time were XX.X% fourth to of of sales. were and to expenses for continued quarter of assets $XX.X tax exclusive was key the the of The as assets net related Edelman to for businesses primarily $X.X charge $X.X largely the positive million interest earnings Acquisition contributions the to gross related quarter Lifestyle XX.X% details in $XX.X from of Inc. represent states acquisitions, fourth Lifestyle Inc. and quarter from The warehouse well these increase was was fourth total we the in expenses of was net million, manufacturing expenses $X.X due Adjusted increase fourth the to a December XXXX. stronger Adjusted Muuto were earnings effective showroom which in from growth.

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

year $XX.X was expenditures reform effective $XXX.X For the tax from in XXXX, $XX.X XXXX full XXXX compared XX.X% million XXXX. a in XXXX. year down one-time were to million cash $XXX.X exclusive year XX.X% to for tax XXXX operations full the compared million rate was million flow for full and XXXX of in Capital from benefit

January reduce XXXX. LIBOR be make amount arrangement million around beginning to maturity of million swap and X, based at the the XXXX year. $XXX in of variable like made a entered for XXXX LIBOR will starting The that we current swap arrangement and swapped As interest by previously, each being raised comments in agreement points into XXXX and with early into to forward debt move will until Andrew $XX rate the on We the further effect taxes. swap of the a rate interest few fixed credit a I'd

rate this our average will debt During by covered XXXX of XX% be swap. approximately interest

to approximately We X.X%. expect interest rate our average be

In tax addition effective XX%. we between expect rate full-year be to and our XX%

dividends to take use expect in debt. of now for questions. investments the available We We'll any Thank cash our repayment payment of the the business, you. outstanding and

Operator

comes Raymond Instructions] question Our James. the Bugatch first Budd from Thank line you. [Operator of with

open. now is line Your

Budd Bugatch

Andrew, good the Charles. quarter. year Congratulations and Good morning the on morning

Andrew Cogan

Thanks Bob.

Budd Bugatch

know fourth programs were that Couple versus the much think $XX.X in Can the you sales Muuto, the quarter questions the North how the in set States North America. if at in talked million of about you're versus or overseas? America that’s I in in and could. you the U.S. or I I quantify getting

Andrew Cogan

fastest-growing North they going not I'm tell a to it the fastest-growing, we're And what growing is doing the five what is business I were The in in of business part four, North times specifically month Budd, ago. break down Budd you a year America. America the can versus

in across So saw it XXX% saw rapidly and North very and the just is in something world XXX%, and significantly we Muuto scaling around orders America. even XX% we January I'm growth very encouraged like growth

when accelerate and encouraging the that the So see every very with we it we quarter expected is meaningfully it's business, much what business. scaling consistent acquired we've it owned but to

Budd Bugatch

out be Let fair think bit. North of would try it maybe XX% little is me that So America? a figure to to

Andrew Cogan

probably think I want XX%, a round number. XX% if you

Budd Bugatch

And quarter what or $XX versus the that rate you in about pose, how's the $XX million order million look? the

Andrew Cogan

greater. looks It

Budd Bugatch

bit? You a little want that quantify to

Andrew Cogan

all think the quarter which orders can I under greater the growth and the Well, just XX%, was than grew growth for business. shipment the rate significantly quantify is I

I takeaway momentum, think momentum the the is, Muuto. is accelerating with Budd So the

Budd Bugatch

Lifestyle $XX And million in outside of $X.X million elsewhere. think I Muuto, or Lifestyle, grew

order was beginning. growth you of it Can kind in had a You came said from? Muuto good Lifestyle the pretty as small quantify a DatesWeiser outside where of

Andrew Cogan

Sure.

I KnollStudio studio had workplaces. kind certainly success was into in a standout the quarter. leveraging designed We've iconic contemporary our real for think these, of

now. studio programs several are there so And

the really the as So I'm we encouraged of studio’s performance year. by acceleration end

mentioned, very at Vladimir certainly a then HOLLY’s as has exploded standout look a and for again So HOLLY moved January, business Kagan of had also record the fourth prior quarter was in by HUNT growth they I through as a set it DatesWeiser. business followed year I versus we've studio just think good Kagan the and channel orders. when we

at and Knoll. So those almost now anything are business we tripled the that we've margins do highest of

seen well. Studio. is not coverings it Filzfelt HUNT. broad-based. We've stabilization was pretty So was HOLLY some Muuto. just doing It was was and It It

pretty Budd. broad-based, So it’s I'd say

Budd Bugatch

Any Lifestyle there? that’s in disappointments

Andrew Cogan

particularly. do. Not to work always There's

on channel. in BIFMA there's do look the moving in to product push continue We of BIFMA on look at outperforming at and outperforming you think hard key other number our you mean there products through and and the momentum look Edelman data, even think any workplace I Lifestyle product We opportunity I general, to distribution and quarterly orders both at categories more. you total quite data and all the a year the on initiatives full key a encouraging. basis it's But

Budd Bugatch

area, looks to there. raw margins were a bit color your as I mostly like Office but pressures us outlook that what an its by what you'll Office was -- in challenged happened and about imagine the in about is? give you pressured you materials some would what you’re talked Can and maybe Office,

Charles Rayfield

sure, Budd. Yes

So the year, a of offset in year-over-year volume the to absorption we've about amount CI by this your as of our inflation price was point, increases significant activities past. yes and as we some which talked a largely had lot well

coming as and good mix had there then pull through with through Lifestyle help good we well. So the of

going when mainly expect towards some still first XXXX, XXXX. to forward inflation for also And both CI some XXXX, then year-over-year transportation and we offset. we've additional weighted hoping the layered So in materials activities to in we're see half you of look at

to that the maybe help basis XXX half throughout the and in in basis looking points which of cost offset XXXX basis, of mentioned basis probably points XX to then comparison March there and inflation XXX we increases year points with first have well. activities. set price again increases. then continuous offset should previously As point for Andrew go of saving as in targeting and effect see XXXX, weighted of We're basis improvements On XX a price we the to might expect offset to another

Budd Bugatch

read about I and difficult comparison segment. to up have Charles, if half? will perhaps the picking a way first the half wise then Is that it second that that in the in and think So, right then Office margin

Andrew Cogan

I think that's right.

Budd Bugatch

for the add backs confused a it particular XXXX you in And it bit adjustments also affects as in non-GAAP What but looking EBITDA? add for I'm affects as backs. add EPS at little are backs.

Andrew Cogan

to people going back that will forward it the industry in related acquisition the now. begun Sure. amortization doing The Most recurring add to add have we've this expenses, backs probably acquisitions. related obviously the are

Budd Bugatch

It looks the $X.X that in quarter. like was it Is right? million

Andrew Cogan

about acquisition a well. was million for of related total some the and DNA is quarter acquisitions It expenses million $X.X the of in was in which inclusive then as

Budd Bugatch

X.X is look was was it a calculation. think affecting I that, was acquisition, the for DNA adjusted affected EPS on million pre-tax was EBITDA like that call It right? the the amortization then No, it as balance and in

Andrew Cogan

correct. That's

Budd Bugatch

to have $X.X amortization. would That for million the be

Charles Rayfield

right. That's

Budd Bugatch

So going XXXX? it we do quarter? continuing? How it to each is be X.X about that Is for think

Andrew Cogan

It will likely be next fairly consistent year.

Some of start year next the it'll some but period of fairly over time, intangible assets to down be wind likely consistent.

Budd Bugatch

to Where debt by the XXXX? of end of think get will do And end you'll the XXXX, of year. you do paid think debt be at what the this at end XXXX? You off you million $XX

Andrew Cogan

think we pay $XX can million. million to $XX another We down

goal down to I it think to two get times is range. the low the

Budd Bugatch

What a quarter product off wrote you Andrew? in in XXX,XXX you -- XXX,XXX discontinue And seating XXX,XXX inventory. or the or product did

Andrew Cogan

We've Just as of these manufacturing this a year the also space of freeing moves of line. know announced to discontinuation standpoint. middle seating doing of, system you general discontinuation, we're in seating Greensville some again come Morrison are the the from our and up pruning of all these in part of in kind

the highest use most on of focus spaces. we margin, productive So those

Budd Bugatch

Was there seating in much Morrison?

Andrew Cogan

coming in room that, both is products Morrison and new up clearing do in on. We're whole Rubin we have seating was building we seating. where There which the

up. ramping [indiscernible] the have We

We performance hope really to we market innovative high to have tier a bring that around NeoCon.

quarter. of are that and fourth all we kind part of So there's a in completed on the roadmap lot these multi-year rearranging of moves going that

Budd Bugatch

in the to need that any system the as of come fact they in to And Is your much journey? that space of you out. that come on like CI looks point, most gained it's journey. lean lean when gain have go some gains the the to How you the space you there node by

Charles Rayfield

you think the talked the No, here up pick the The past. about they're when Q necessarily they're feet square challenge contiguous lean and or over year we right in the but with there, feet not again of XXXX as and square last stuff, XXXX I network.

And where step change 'XX you so, point you 'XX point make level to a at of can a that and we critical point. be some at and will now get we math believe in right

So, of bunch that will a a more and and smaller a 'XX cube of reduction. like in in still I probably the 'XX Rubic's interim significant work again kind fixed would there's lead ultimately of to cost moves

Budd Bugatch

in my 'XX, And understand. what you depreciation? expectation CapEx is last I question and to do expect

Charles Rayfield

Sure.

in market do showroom XX% going his in CapEx. CapEx we CapEx $XX talked activities, in a by ERP. that investment We to million XX% the broken product about as comments. during primarily with our about down $XX CI flagship Andrew to management million phase showroom the an would onetime in up spends but increase including have has developments, XX% So, which to Chicago We had expect XX% maintenance, little bit XXXX. related That mentioned, order cash of IT 'XX in go a that perspective, related activities projects. driven $XX port in from distribution is to so next outweigh Andrew of

there depreciation year otherwise. you a bit next more have but So, maybe consistent relatively little

Budd Bugatch

you year consistent think? depreciation this So, with

Charles Rayfield

Correct.

Budd Bugatch

luck the year. Thank good Okay. on you much, very

Charles Rayfield

Thanks, Budd.

Andrew Cogan

Budd. Thanks,

Operator

Thank you.

Our line of comes Sidoti. Burns with from question next Greg the

open. now is line Your

Greg Burns

taken your morning. prior adding areas you any or maybe strengthened good and leveraging of infrastructure. be can you're not prior feel to your into? subscale your and that kind you're areas Is your platform get potentially that and Hi, portfolio portfolio brands When that of maybe you to approach look you've need in there platform this

Andrew Cogan

the Well thanks, Greg question. for

us a constellation I approach selling to continue lot there -- for of though. this is think is no there leverage to whitespace whole

core strengthening We portfolio. payable just $XXX four built with organically years in business. a starts the it million three adjustable First

be done this they mean out. like higher look very we in our see a organic of in some in areas we'll real market Phoenix. have area individual we had where workplace, start and a innovations I and at workplace the in what Then think to coming So, the the storage should of strong we major that roll year. year products. and are the area later We've that We very performing

another more the rapidly areas doing roll very individual there. as and we're I area organic organic expand continues out we're towards growing hike areas line capability. both we received. ancillary doing strong meeting the of then, product acquisition an gives math and we distribution mean can us that doing Then on significant those we're well us which in network sharp and Muuto and and Muuto have development, critical lot Knoll's significant studios is is with and sales tables we is And to our focus gives really first which a been our conference have what that that leverage a where of through So, R&D we a then areas with commercial opportunity, work and it like

increase and a So, this the environment. ancillary it in scope particularly year significant the contract to relates Muuto as you middle see will of relevant products

that. So, we can into There's layer comments. more lighting

environment. in have open an and more our with areas we a So, creating deal of Filzfelt privacy acoustic a and products Spinneybeck planned space visual lot architectural they with coming providing in

lot looking a at in we acquisitions we've always think add other I to can on. or do bolt we're that and So, then

record relations we the we've HOLLY very very our knowing that strong HUNT; client I think in is with that track those that much we've scale it Kagan, that and Vladimir very ROI, strong strong with rapidly. And strategy. are done did Filzfelt; done track our accretion leg install with of with we've dealer that's an another exceptionally one strong our record that of have acquisition relations things leverage and base. We unique of integrating distribution about Muuto; done DatesWeiser;

we So, white go space that I more all away after Greg. on happy ancillary do space multiple we're and going this call, a it lot but not in to to see give ways in think and

Greg Burns

Muuto to that then, at segment America? investments And there opportunity look thanks. with of look need to residential on kind the after that you you're what pivoting timeframe incremental the expanding domestically. What's go North investments you and the in or great, that direction Okay, at and market Muuto of and make

Andrew Cogan

contract that don’t millennial or with But durability. a others quality products and on we've for quality changing So, residence products perspective was unique similar strategy; to of brand the do their our have new things. clearly contract their don’t was with this the what design. The just about Muuto we seen try the

with So, Muuto. we saw

training; multichannel, 'XX, the of do in and starting year the basically some there contract We're IT on sometime office and terms investment in related localizing maximizing is that training, year. focus I are imagine we that hiring timing the time, more and of can mandates Muuto investments. mid-XX. so by this and in really through we're we've really where of investing will really the would omnichannel of that's that's launch and of 'XX say let's Such same consumer And again Let's of some the be the been / to Because opportunities investment and terms in where first products terms work middle that's work of millions end both At the to dedicated. to starting foundational, this that that's do the IT warehouse; the tens focus work; the of on manufacturing; of were where and capability that in to store in mid-XX the residential. major residential dollars. some online

Greg Burns

Thank great. Okay, you.

Andrew Cogan

of thinking sort on Muuto. That's

Greg Burns

Thanks.

Operator

Our next the with Seaport comes Instructions] Matt line of Securities. [Operator from McCall question Global

Your line is open. now

Matt McCall

Thank morning, everybody. you. Good

Andrew Cogan

Hi, Matt.

Matt McCall

-- you. start with Charles, So,

some detail of components the gave of good margins. office You some around

savings the talked or expectations, about I mix price impact CI then or savings leverage inflation the about expectation growth. you volume What C&I think from increases. of and

a from on Just in full trying XXXX? expect to what margins get bigger to on picture picture office the

Charles Rayfield

that's expectations of of -- probably have. part price part Let it's me that we just the

down. us we more combined be consider there'll to be of leverage, boost price extent I get up So, and together that. the to mix a kind give But obviously to

Andrew Cogan

as than basis products help a margins exceed few XXX bit that other the higher little our Matt, and points continue Yes legacy thing legacy. on new us new will to

will the the think as Charles we I of so I we too think But So, get mix move guidance again, helpful lot don’t year. There to want granular I we here. through be a are in give think moving pieces, right. is

Matt McCall

fair. that's Okay,

over So, maybe to move lifestyle. I'll

high thought the variable consistently So, the of had pretty about segment of was always that it I've structures. cost the way and consistent nature margins cost because

pricing more and more through you more of from change and their is you the things see model As any like has traditional channels, workplace seen see into discounting, the to pressure through more you do that sold I've there that sold lifestyle? workplace see risk as products your products

Charles Rayfield

how disciplined a you're bundling. price We don’t. occasionally little give very you'll I bit we're of those. client we in mean, Maybe, something the where with

them margin extra whole few give tremendous a of a but in bundle You'll package not together bit general hit. that's little a

Matt McCall

Okay.

Charles Rayfield

to are totality dealer Knoll of fixed our incentives like a share the I think of total Those additional of have where them don’t our expect businesses I lot spend driving and in cost ability and their some asset don’t primarily spend. client for exposure. a margin capture dealer There's we volatility. the But outsourced of general, lot

Matt McCall

Okay.

the when is opportunity minus there's it So, and right I the the Muuto year, we of is bigger as assume likely higher the piece you right margin here. layered relative mix from of forward EBITDA, XX plus is a gave minus minus biggest or or number? improvement I through maybe the it of inch plus a move is not is an and what's that’s lot bit if in Is as pie little a volatility, say XX, level, mean or XX. it plus an

Charles Rayfield

I there, think biggest is opportunity mix you're right. absolutely the

XX% with as than everything EBITDA of the the better But happy to they each super in did past our in we're year. has in margin do think like targets I businesses this year category. coming

continuous of improvement cost efforts, all All of have has focus. areas of them them

Muuto. and driving to only think is investment is as rapid say thing incremental we're I this level of the kind of I everything relates lifestyle There growth. would in

in of growth terms next say three So, expect or EBITDA we're funding of years the a for in two they're really the initiatives. Because today. from don’t strong ton would margin I I improvement level at back that

Matt McCall

QX? reported that From you level in the did

Charles Rayfield

ride Yes, level you're QX. I mindset they just backing not harder. should going we from but in we certainly think growth of want a we're riding can to to lot we get reported I investments leverage we the a worse kind away think we're in know if the But it don’t off be it's making. get with the were you Muuto, of

Matt McCall

some some expectations annual cost should basis you outlook for those perspective in the talked about next us And from 'XX or 'XX, significant 'XX I and probably the update think what give reductions function alright. I discussed question Can an few on step ask Okay, we you with guess the in but I dollars cost a 'XX? an is over on years. reduction this the and 'XX, office Charles

Andrew Cogan

tonight. but Well,

Charles a improvement continuous points -- talking I think were opportunities. of as we're basis that about XXX

level. look that we level change, we annual in of dollarize I -- double probably do 'XX 'XX, step at I you And I in those an think a we pursue can of larger opportunity. of CI. make that think you think recurring that's a So, terms some then of 'XX, terms 'XX, large, some on And number kind into basis of as could those as as

is So, rate. XX continuous the of -- XX CI kind it's XX, million $XX to

think the You equal That's how step road. the more have down I that about move in of of amount level may a it. kind

Matt McCall

down, Okay. year of new can to to by And intermediate go hope talk what's then maybe the the you targets you the final this about coming and can question the get I and in? leverage had, you end about your where talked that ultimate

Andrew Cogan

two, leverage to its generate in dividend. Matt, the We free mean, we allows lot all I Listen. half business mean, It organically. for super in we're us. I CapEx super robust range, to a need cash, comfortable us pay a of have comfortable. the we the and two invest a

We have transformational uncover the acquisitions those. do to to we ample liquidity extent

of cash. So, low. off rates with interest we feel throw it We where still amount tremendous a is relatively free pretty leverage all and unconstraint are

then than think don’t of you what free there's at to the that are point that I lower at we use will and cash go most efficient much So, our when look much need is.

Matt McCall

thank you Okay, Andrew.

Operator

Thank you.

Group. Ramsey next Research from Thompson line the Our Steven of comes with question

is Your line now open.

Unidentified Analyst

between uncertainty for Is on there all? for Thanks Hi, for connection taking good organic growth those? business, to at the quarter. volatility maybe how for any my impact may market play in equities This But any Steven. XXXX QX Want strong that lifestyle from Barris questions. in morning. or Brian outlook with the there was in is housing up shaped start

Andrew Cogan

some I that my the mean, some I I some of lot. like or evidence around in any did the of to HOLLY a has as we had say But seen not really probably at probably of mean negative impact there. I exposure psyche residential probably have mean market businesses some at much stock Well, haven't this and terms had spending consumer top take point. HUNT in higher-end our market comments, impact of something the I say

Unidentified Analyst

no XXXX, you, what at negative moment that now? Got real into we the will know anything continue impact given

Andrew Cogan

don't obviously out. a plays but what crystal see we'll have I know we now, it Given ball so how

Unidentified Analyst

on guess, know the right now, But market. the also? describe maybe competing do in we're really space a in that competitive and we side, environment discounting given then just it's the how about environment with I if think Office I you Office And the discounts inflation tariff

Andrew Cogan

the problems Well, everyone good those against as well. I news think all competing has is are we

In probably bit from fact, both a little the standpoint. less exposed commodity we're and tariff metal

on more from and see a of are mixed So, lot that. social is And us. accretive margin hospitality a for standpoint frankly ancillary don't then areas we from I those impact focus all these

those where So sell client can we products. of engagement more have we them that every profitability of the improves with

there. see changes don't major any I So

Unidentified Analyst

one price one on Got last you. increases. And

it’s Looking anything the with might delivered XXXX? and way back with could think hindsight of might that about the differently benefit that have anything you there done have increases either is magnitude different you done in just in or the price in implementing XXXX, or timing or

Andrew Cogan

that in the we I they of retrospect we saw sooner. there that known kind Well, mean, would done it more protectionism have that be if Sure. was carved had be we would would

known tariffs the know they after tomorrow. that I today, of but this they So anticipating in what year could X.X have but that. how that guess, I be are we would And don't are terms

be little XXXX. hope would we'll doing aggressive to to bit in two what do increase we in as and gone of terms more We a one just March have in opposed

shaped our influence we did the increase. March thinking that as So

Unidentified Analyst

appreciate Got you, thank it, you.

Operator

have Bugatch you. Budd Raymond a Thank We of question the do from line with follow-up James.

Your line open. is now

Budd Bugatch

Yes.

year have Just of January acquire me in Muuto, fourth-quarter XXXX. pro-forma quick the it couple very mid I XXXX? was what know Muuto think last might of I a didn't been Remind for we questions.

Andrew Cogan

Budd, I don't can right We that that look us. of in know front that we have up.

Budd Bugatch

and the to model in think or and inventory the the domestic inventory to that did made an for you model I is with product inventories changes market? be for continued any to. you Andrew that were And primarily going offshore to that, if model had the say you be states going U.S. I it the made wonder was the

Andrew Cogan

going inventory upholstery things, of now we've accelerate to here just increased to the significantly actually do Two make in one America. North our two, more of we beginning because we're carry ability the Budd, recently And and demand. we're a the to decision

customers So we times own do can to ability our increase significantly and reduce the and fabrics lead materials.

Budd Bugatch

going is done to by be that to is that? thinking And Knoll you're going outsource or How that? the on

Andrew Cogan

It light done will by partner. asset an be

Budd Bugatch

is that? You mean outsource,

Andrew Cogan

Correct.

Budd Bugatch

year. luck Thank you. you, good the Thank on

Andrew Cogan

Budd. Thanks

Operator

Thank you.

Cogan time. Andrew to the further for have like call I remarks. this turn over any back to further We questions at no would

Andrew Cogan

on was met by entire problem-solving workplace intensely today of pioneer a good architecture First, that you a the integrating Florence workplace. frankly the a take interior a the participation style, I was Florence needs. was of call to Knoll. the the Knoll. Knoll Florence at environment taste textiles to and questions. furniture, she moment design of Not woman She client our as invented just an And and closing notion In thank planning holistic and our crux acknowledge of but co-founder go-to-market design only want which and delivering modern on recent strategy is and everyone impeccable passing of their for was the activity viewed your focused

Knoll that set, remains in and to few in she will Knoll, and she the Design the you were to a person, years is you good an be months. with excellence designs. modern many the design professions. the invest measure everybody. and trailblazer a Director we as motto invented work all against. She Executive, been design a us in mentor a and is business of always Knoll was our and since rationale for ourselves of for it's Thank talk good we something at to inspiration Florence both business interior design clients both women for well as As last standards in that Florence in Well, We'll

Operator

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

You disconnect. day. all great may Everyone have a

Knoll (KNL) 7 Feb 192018 Q4 Earnings call transcript