KNL - Earnings call transcript Q2 2019

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Operator

Good morning, everyone, and welcome to the Knoll Incorporated Second Quarter 2019 Conference Call. This call is being recorded. This call is also being webcast. Presentation slides accompany the webcast.

In addition, this 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 other Actual results of factors Securities filings Report, described with the including Form forward-looking as Exchange as and identified Knoll's a the many risks the factors in may result statements XX-K materially differ Annual and and its The will measures. include to references financial call non-GAAP today also comparable most the GAAP measures of these the Reconciliations slides accompany to in included will presentation webcast. financial the measures are that

Now Andrew Knoll. let and me turn the of the call over CEO Cogan, to Chairman

Andrew Cogan

talking with can and you, Investors everybody, of Frankly, just it's reading numbers. earnings lot It we're quarter Knoll were features call Relations second Market when in to hope release more what Thank our Fulton a you about talk or tour fun about good our concurrently and able you Knoll to welcome a video accessible the to flagship call. the I and on yesterday. Space the than earnings a review to website. see listen morning is our posted Chicago release

Knoll Fulton Market mix NeoCon another successful not that second neighborhood Florence Chicago. working Day in Fulton commented wisely design-driven to the perfect by constellation millennial-friendly can of us environment experience workplace home uniquely of depth were celebration the did, hospitality, create and individual that our boy, not modern as Knoll neighborhood come for them how dealers XXXX when Design resimercial see And workplace overwhelmed That products have to of driving to quarter design the visitors make and and inaugural emerging move that flagship Merchandise architects demonstrate company. is that today, it brands high-performance Knoll living in was and the a our the and crave. Market, made to new The unique, thousands became trip epitomizes just to that they a our breadth Fulton clients continue in Mart blends been the truer designers, Market. was to once and help the furniture the could because of than departed we exhibit we they the of and of

universally to and our The business. inspired experienced architects projects large by dealer feedback major space our headquarter was greater we why to positive planning deserve and their and of new designers from who the want partners share a clients viscerally strategies

and and by are too people in critics our it's I've space. experienced and crowd energized own often the were the they It harshest both see inspiring the Knoll Chicago, space reinvention a and to Our the that buzz spirit heart was the heartening in re-imagination. to we generation, for new sure intend make well business And the ripe is of for conversation. as which industry a Knoll workplace bodes that and remains at youngest

changing a workplace and multi-year product flooded variety a workplace XX,XXX the to designed and groups foot position and design teams. Knoll of together, the tremendous design to Knoll advantage can to organic for take Market journey both holistic which an Fulton where intimate workplace individuals everyone in create. clients Space, Our of furnishings approach large and active Fulton to be to with and can clients total workplace help hospitality-based development culmination settings, the high-performance and Market from light We fresh represents laboratory air, a experience of best living natural bring through to square M&A,

our ubiquitous solutions create individual power allows to using and high-back Rockwell of re-imagined tables, on training perspective new workplace and approach and meeting described up-to-date technology. from total us and and products integrated by to and of that KnollStudio settings to new All teams equipped Spinneybeck colors everything application Florence of range these to its natural It's expanded work. Muuto's the with from fresh to together, include new height-adjustable our a to acoustic space Pixel without tables vision pieces settings that setting. were offers like classics to solutions upholstered setting materials, mobile cafÃ© individuals. Knoll architectural a wouldn't vibrant what power have support envision design possible and meeting high-performance FilzFelt. solutions a our showcases course, And for training and and cost-effective Unscripted textiles, been lounge the solutions, tied residential ancillary high-performing also as furnishings line and focused island subtle and beams DatesWeiser's wood benches and space The from tables conference hospitality

the revenue into at higher-margin lifestyle what second a our that with quarter lot Looking and clear residential and applicability dealers. of it's diversify clients workplace resonating we're Furthermore, to our results, doing is with our combined strategy our of Office sources XX% crossover adjusted margin both continuing is to In growth, increased grew of deliver and and growth. profitability top-line strong the completed, EPS period the was digits. up just double XX%, expansion improve to EBITDA adjusted segment efforts EPS sales with over categories

and a we driven On in North XX% over Workplace record with reported quarter the with Holly penetration by DatesWeiser growth XX% increased FilzFelt by ancillary side, XX% Combined grew you height-adjustable by to systems, in growth get products Hunt. storage in plus in our clients. This just Spinneybeck, was segment the Lifestyle led XX% growth of led Rockwell strength Office America Unscripted, under result. for XX% the Workplace sale tables, growth by and KnollStudio, Muuto continue

minimal integrate in most new recent dealer our XD XXXX top in of specification benefit dealers progress. Workplace pleased share total over in that so to that particularly ongoing sales. received our share our a And also remember, Muuto of from share in ancillary our of data proof accelerating of almost XX% dealers acquisition and showed The for is this traction belief accelerated. our XX% XXXX. our This the tools had from will total representing have rollout XXXX in further validated gains uptick gains of share points make our of spaces. it time as the The durability trend data the our and be real to for was XX% we Workplace also should products they of breadth Lifestyle percent in last XXX year share and gains increased a a QX; easier in basis with client and visualize We're meaningful of our and further Workplace work the designer supportive dealers ancillary as with full offerings too. simultaneously of

we by of Spinneybeck brands FilzFelt, grew On XX% and from strongly our was the KnollStudio all to of North break represented were the the sales see apart the of the Lifestyle here residential by million Europe resimercialization of some America. approximately continue workplace. higher-end business. similar and Growth Muuto, just When headwinds growth benefitting sales and in under three others in X.X% you as Lifestyle have to that both down front, rate QX led a channels, $XXX reported record XX% residentially-focused total

Lifestyle is only our in whom margins important are expected, It's one while over margin. dilutive back quarter. to really others we their overall that EBITDA this enterprise the for XX% to accretive our talking are not the note rebounded lifestyle expanding As businesses, about

saw XX%. attributable ago. to America About was Muuto growth to North in and X-fold by continued as to months brand another of traction was QX the just quarter where acquired dealers it total grew half this the record we shipments XX%. Muuto increased worldwide XX on promise over when increased in we sales for deliver sales grew Knoll over

the X-fold particularly Indicative orders of have target North million. were half to a required consolidated quarter, America segment accretive Space. In are of and both to EBITDA fifth the build in major Fulton we launch will position $XX we with well brand Knoll space record floor capabilities opened we over with of our margin XXXX. north consumer and contribution expand sometime momentum wave And additional for in growth. the that the in North EBITDA continued in margins of the remember, to our as continue North a now the America, we to from that and We rolled tracking Lifestyle IT above product the out inventory of back the Market see consumer out on $XXX samples yet America, opportunity meaningful the Muuto incremental million that flagship for dedicated be forward a increased

the the not number Looking both on growth the the we and of side, year ahead Workplace that balance of and are those we in dollar well opportunities the been double-digit as to values yet booked. awarded as by remain encouraged tracking have

of will Index budgets positive improving our year its we feel posted expanded to our ABI in month ancillary continued in consecutive of is leverage and industry dealer of of in and to are infrastructure good if back coordinated somewhat third territory. continue drive about amount but demand we year. Workplace half June, space We by you've environment This, we deliver has clients' the seen date, solutions solidly Additionally, as with at inflation Residentially, results, our coupled solid to of flatter improvement both to demonstrated and we peaked fact force, ability and the positive profits efforts believe, the XX.X showrooms, that continue to our our and expanded to speaks the win in rates our furnishing improved Commercial the growth our the share and Industrial expansion relevance share, too. being we of reported can select with Lifestyle can we expect to position growth. continue sales invest particular we serve, IT visualization increasing and, our capabilities, while expanding feel the sales white increased the offerings, the

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

Charles Rayfield

you, Andrew. Thank

commodities. some in currently in continuous decelerated from the have basis to the I'll quarter facilities in products our due leverage higher was in and gross quarter cost expenditures and manufacturing additional during favorable expanded and relating moderately through of in financial of compared product first positive our metrics. Adjusted inflation volume strategic we points quarter effect. continued Sequentially, The second due primarily expand the walk peak drivers tariffs to this transportation inflation mix. offset by were impact inflation the year. improvement through the sourcing planning growth XXX and absorption, from quarter partially to activities tariffs our by impacted minimal key by to These fixed constellation discussed, Andrew sales strategy. margin operating details to margins, As

the live have positive received management end feedback significant with the customer functions adjusted including order incremental showroom selling expenses Total we quarter, our initiatives. driven the technology implementation, spending million the in deployed volume-related second increased disruptions of operating experience that service. business our successfully Early not entry from going We of by the information and and any front expenditures, phase did primarily increased and support second and our order ERP business $XX.X to dealers.

we addition, several our notably as In various in outlined, as well business, most of in new investments the expansion. made previously flagship showroom-related as Chicago showroom areas Andrew Muuto-related

to headcount We ancillary level XXXX, also worthwhile help Adjusted in Muuto, million. operating not exclude $X.X the intangible increased fuel expanded and key $X.X in assets and expenses the markets Hunt expenses businesses force nearly we sales integration sales investment across amortization and, our our to of of it's million Edelman North of of Holly acquisitions America. while the a related Muuto-related our growth

offset from Adjusted segment to XXXX. expenses that due The infrastructure XXXX new adjusted our XXXX From XX.X% XX.X% offset increased margin initiatives primarily sales from decrease investment XXXX. margin segment and was EBITDA for incremental increased QX to Office in segment increase in our in in and QX continuous Adjusted gross increased spending partially basis in growth improvement in quarter points the XX the by by adjusted increased future The Lifestyle spending QX was to QX from X.X% to IT The and was investments sequentially mix footprint. of XXX selling of for and decreased in in of the margins basis product and volume shift growth. strategic points mainly EBITDA improvements XXXX. in of primarily perspective, due volume-related Lifestyle EBITDA increased to a volume-related by by XX% were EBITDA initiatives XX XXXX various of expenses. margin driven amongst investment additional EBITDA basis points businesses, adjusted X.X% XX.X% for second increase

by million expense partially effective ago rate income affects from interest tax up and higher debt offset XXXX. XX% tax in was of pre-tax XX.X%, states QX countries rates the of effective and The outstanding mix tax year Interest quarter The in was decreased our down we effective rate. the which varying $X.X rates for operate the consolidated a to primarily levels. due the from in directly

of that net quarter the second the earnings net is for exclusive amortization the of XXXX tax-affected earnings share was million $X.X and adjustments a XXXX and the same were for previously charge. diluted net respectively. XXXX $XX.X expenses in earnings $XX.X Adjusted Adjusted Adjusted from of quarter of acquisition-related for earnings million period per million, second discussed XXXX. pension from related to up acquisitions, the $X.XX settlement $X.XX and was

Regarding by the activities ending $X.X Consistent investments in strategic activities was largely of in balance quarter as payment the cash million cash at end cash in reduction from Leverage our our outstanding our quarterly just in reduce QX effectiveness of our equivalents quarter operating our as financing during our focus flow, infrastructure $X.X reduced was adjusted quarter continue debt of leverage primarily to balance dividends approximately based and second capital was with quarter, provided $XX.X our sheet our business reduce driven in our and million. the by debt of well related debt. and during cash expenditures dividend the by $XXX the growth. approximately outstanding cash months use X.Xx. reducing offset our million showroom of significantly information to to on increase XX% QX, leverage we and a primarily primarily was and our debt $XX.X activities confidence the and strategy Capital announced quarter the over In to XX technology position further financial strong at Cash million. of the EBITDA during investment free million to of were on of within acquisitions, we outstanding XXXX, and the of cashed QX on million. payments in to used expenditures used and $XX.X financing related quarter

the to we pay to top of enter grow as year, grow down we use improve the debt. free our adjusted EBITDA our expect ratio half to bottom we lines flow and As back leverage and continue and cash

focus to as on well drive We our tariffs. increased actions as continue lean improvement activities to to offset continuous initiatives

Charles Rayfield

SAY.com shareholders our initiative managing continuing the new engage of by growing the partnered with and capital see a It's the increased a an to quarterly As provide May. call. questions questions, We'll think invest is dividend question answering enough to this X the we as earnings answer in begin directly We'll Q&A the first How call we've in received SAY.com. dividend year, the platform portion to Knoll and follows: increase great to do you into about business? on

First, see we're noticed glad you to that the increased dividend.

down ample business cash been to investments our and the continue lean easier debt. Today, about leaves free cash organically Knoll drive to out to Our pay in new chain. improve with and the priority which make the remains to million includes has investments IT simultaneously to tools business well supply business street invest to our as flow infrastructure we well do as spend and showrooms, of in dividend $XX on invest payments, selling on This feet and in in as as products, profitability. growth to investments our

in we our our XXXX. And feel successful the million access facility Given strategic such under of the and the excess shareholders revolving a we to return continued of reminder, credit our capital for appropriate dividend acquisition generation, M&A cash to of to available as it's Muuto have form as still free payment. in $XXX-plus opportunities a cash

face The furniture more purchasing-rental of pushing companies next to Andrew. question in attract Feather and is: competition How alternative millennial like does direct-to-consumer furniture Knoll customers plan models? the with

Andrew Cogan

workplaces by employees. to we with employ attract are for like and clients the of and other reasons ancillary and greatest retain Thanks, in designs Market it we help spaces competing acquired Fulton on It's talk of one focus and that residential hospitality-based and driving more core our find demand question. these millennials, channels, Charles. about that number create It's our Rockwell clients millennial Muuto just-opened Chicago. flagship our increased the to today who Unscripted Space new exactly Thanks but with the interesting corporate

of as our market appeal it's we've to reasons We millennials. to one attract been also gaining clients the share believe trying offerings

the models, business goes. interesting of see in will go-to-market the commencing, Feather support it a process actually, test to question be we're that with their to and around to Specifically alternative how

and in we've development played more in. BXC not capabilities, much with and of are Holly the the also and to markets but Hunt. an with effort notably time the early devoting These serve designer both XXXX capabilities area being We XXXX also consumer, Muuto, most small business will historically latter individual with

well. as there opportunity considerable a So

Charles Rayfield

The is: showcasing Great. SAY.com affected the question reality future Knoll's plans? augmented How interior from rise has last design of for

Andrew Cogan

in potential so. this, space. designs design to for With their on and shop most the these Very a testing, of and by where you those augmented our direct-to-consumer we're of AR reality, we're knoll.com functionality AR popular who in go regard iPhones, products excited selection our home want using classic at can much to see see in

client. the huge XD rollout On designer simultaneously business, our breadth the makes we side and a visualize Workplace time of and The as in potential tool for our of software. just-in-time configure work this for with visualization specification dealers to integrate easier see it and and full real of Workplace see ongoing to offerings designer ancillary they through our

As well. and virtual out have reality potential as leverage we continue the to this capability, functioning AR build to we

live questions. Now over turn the for to we'll call the operator some

Operator

Instructions]. [Operator

Our from Company. of first question comes Burns Sidoti Greg &

Gregory Burns

XXXX? talked XX points have about little to year. the margin making So like in the XXXX XXX business less about margin growth the and way good you've sales expected historically, bit a the to a Is leverage given still think that investments basis sound EBITDA looking to about and for expand does than growth, the you're I But strong business. was would a it some

Charles Rayfield

do we we first had we the ahead activity pull think We So go-live. into first that pretty half some discussed, year of our half had a looking of the shipment as XXXX. of ERP strong forward,

the QX. than we seeing we're the pipeline, And that on to heavily As indicators industry at is faster to going line top our positive of more Nonetheless, look a are probably expect grow basis, weighted opportunities we the overall. full-year remaining shipments pipeline average.

from asked specifically offset full-year The the top-line You to improvement a depended strength to We're prior continued improvements and upon year. basis margins. in about for EBITDA margins EBITDA compared expansion well investments factors adjusted improvement margin be XXXX These absorption. as of strategic gross also in adjusted gross by realization our expecting on half activities and the improvement tariffs the and will 'XX. transportation commodity dissipation see back inflation volume and margin anticipate We price continuous offset what of we'll as is.

we So growth. still expect EBITDA

Andrew Cogan

And Greg, half first improvement. this we XX a points add is basis, margin Actually, profit I Andrew. of on things. the couple operating an just in over got operating would basis

to you putting the Space, a we working, be which expect of launch Market had the investments heavier continued improvement. at it what operating one. growth. So bit it profit place investment. diminished Fulton in to EBITDA investing profit second was where in and XX made drive with are that a XX number exposed. of EBITDA phase harder, little a to imagine, Number and would the much look in significant got on I more to It additional are broadly at but the drive was range the bit also may the see cost, significant a as level, something we're in you very getting can quarter, from decisions we now In And to at more we've level, done this Muuto basis operating we've that to get muted we've little when more lean point side two,

some decided in in point in share that's leaning share more evidence a share, total in dealer tests And particularly working, person you when performance and coverage our We moving high-opportunity way. differentiated we're look additional dealers. basis dealer we that's put reported, I Knoll we've up real some into number you investment our to that When saw but people. we last and Knoll at high-opportunity think a we the in the XXX of those saw year do sales ramping also did our improvement

drive think little market, accelerate right I in our when resonating; than pedal now So kind of and the industry I a time should X we're think trying is in where this our to or on a X better healthy that have growth. terms investments even a products are over the designs think we next bit years we it's of exactly foot will

means what our see just XX to we're again until least In the terms target it's operating how really the going this of XXXX, early I margin, as planning of that too basis won't we both to margin out EBITDA summer. end play at points will and and exactly for of start improvement, think

Gregory Burns

percentage pull Are you Okay, of your seeing for terms about pull able great. more Muuto? have portfolio, you on products? sales And maybe business? because nice portfolio growth get are then the Or you that you Muuto? have having the to that now in project Muuto that just opportunities of seeing seeing, Are your really rest in dynamic, front. you Muuto, are a rest that of larger of -- having Can now you a that talk you broader

Andrew Cogan

firstly. Well

I were the when and we acquired thought or said and price think obviously with could we thought everyone in years. paid. And X the earnings we business we double everybody X double we the to Muuto we crazy

much very on are that today. path We

X north XX% with in EBITDA margin. of excess confident feel X well to in we will that So $XXX years be Muuto of million

and story we theory a we office these more the kind win impactful. corporate bigger the actually theory leveraging here capturing our really ancillary core that playing clients much becoming as of our so of very dealers it as a is project, even in and in expected, layer we part, spending North when can out relationships workstation So ancillary our whole that on pieces. and Well primarily and America is a is what are or based more that was

of on and our system, drop captured York very the focused bunch elsewhere, just much clients being our And and their I've where saying, clients And we dealers got yes, now of that New Muuto let's relationships a we but drop in that. do driving with as -- we're more just they're to I've examples here stuff complete win we're by have are So your seeing looking let's really in in. involved been space.

So think well. really working I that's

The many so Muuto our that's is that clients really plays areas touch other thing didn't are happening we in that even that within before. there

our putting areas. mean came They're from we wonderful stacking project just chairs. with meeting -- forte, So I a that's hotel filled not cafes, Muuto

we hospitality. client of but could lot of We're played those doing and the more a Again, in have restaurants ours, never a parts opportunity.

clients we their work So restaurants, for we corporate may do done where have them, we didn't didn't do their cafeterias.

So focused and the not have. greater. leadership. of extraordinary an us The be people It's America corporate noted, to noted it's infrastructure And to But great field consumer it's do. great Muuto Muuto as again, we really out we've has playing now. products. work is team, work been And between phenomenal. on side. and broadening even the They're then got They're We've team great high-quality North really we're the a going you've opportunity to partnership and lot the we've right touching contract in with.

Operator

And comes Bugatch question our from of Bud James. Raymond next

Beryl Bugatch

more think, If second million, and a those made increased as expense in I And the the adjusted could line. the get flavor what to little $XX detail operating maybe expense increases. could, quarter I some we expenses operating on operating into bit

Charles Rayfield

Bud. sure, Yes,

this million It up over right. you're $XX last year. was So quarter

QX they of additional go-live some on earlier hypercare, where costs in discussed, as the I our we capitalizing have strategic some think spending and now July then go continue thoughts and notably for an investments to is to to are some to the we of down and of once out increased full while had the Andrew talked incentives live completed of that ERP headcount as mentality. we early that for come sales elevated and We terms in of year. level so of burn it's As we showrooms North That of got our XX-ish% and in cetera, quarter Chicago, we the you've invest P&L. maybe volume-related this level, you primarily dealer part straight American revenue, and increases But hypercare. bit in through a most stop think early sort the investments. for compensation, little probably those the well about, we're related outlined commissions, et you percentage

Beryl Bugatch

me telling or XX.X% XX non-recurring basis in the-- is was you're of be points of what that kind would So not

Andrew Cogan

XX% mentioned XX in that would this to between probably ERP. be we're say range the that. to for I full launch I'd going points frankly, the XX.X But there things particular we're fourth we XX going the things XX-XX.X% the was year, more Charles basis were for and say of think be had third the and quarter, of somewhere year. balance We for the showroom for the like I the, in to think and quarters. one-timeish.

strategy. just think still When into lean to we first that a them. have things working I that's very think tell So are quarter the it a was can But lower. well, an I want conscious you'll the little we I see at bit of elevated you And level.

our that ability adjust And that. is XXX think as not XX the appropriate. this But so And could do we down I SG&A the scale we've and basis I to think shown points? to knock to Absolutely. moment

we think advantage us. take time opportunities good now do of is I great keep And shareholders time well. for is them. want to see And that's see as to think we a want us a this This investing. to right what frankly, and I our

Beryl Bugatch

I'm no understand have the I much increase that. non-investing was how of and disagreement just non-recurring. with No, stuff might be that to trying

Andrew Cogan

Maybe XX% XX%. to

Beryl Bugatch

it, and inventory would of more I strategy your know I as Okay. your current solution. what initial strategy, Muuto, And call an is in

some there? that are You offshore bring domestically? some product or strategy domestically. from still and in production additional available strategy Or that you that the is strategy considering product is Is the now make

Andrew Cogan

That's great Yes. a Bud. question,

initial kind been has strategy So yes inventory. of the

that And clients COM. is to you products would it those what -- textiles lot North lead what the non-standard. want when Muuto opens It do on it a to to our application Now And something goal the America. does taking our do is we're and products. starting more reduces highest-volume we're time we're to of Muuto and make doing allows leathers in be

was expand significantly. add out definitely, now starting So potential with operational, year balance the to more But the into that pretty We'll be in capabilities quarter. is pipeline think of products. put the material also the and is place market operational in second we getting and finish it Muuto the broadens out and broadening

So strategy. a it's dual

Beryl Bugatch

And complete are that? has Are capabilities building capabilities? those thought that so not you that, Knoll those insourcing on I'm Or to and outsourcing are sure for you the internally.

Charles Rayfield

Outsourcing. Outsourcing.

Andrew Cogan

whole approach And with Muuto. to that light the goes

the I about ancillary. think with and I doing everyone high-quality brand. what ancillary, just it's way. that Muuto consistent else mean of not areas. true that's So those is high-quality contract-quality it's very the is ancillary; doing a not And very other that's And it's it in thing in it's

Beryl Bugatch

can for from And give wallet a of your the base? of in Okay. kind feel share share dealer your of What's Knoll lastly wallet us me, where you products?

Andrew Cogan

Yes.

I that's and XX% -- of to another of the XXs% we to the our gain point roughly low points think think within up million. mid-XXs%. gain to each is share Remember, we're now share XX pushing dealers. from see I And our up $XX certainly X

workplace stuff probably say, by will So XX% an products our all within XX%. opportunity insignificant be ancillary it's of not I'd of dealers. this share our it the or because core driven kind And is,

Beryl Bugatch

Is that Is variance among that in base your pretty that? wide standard deviation? is much there dealer tight? Or a

Andrew Cogan

probably below the Well I is then our the more dealers, XX at XX it broaden share. as out dealers, share you XX less. top probably slightly top XX when And or have look or we you think

dollars though say or slightly works the network. where that's strategy share But have than is what XX there, we top a XX the across there, we're dealer it's that taking and would I dealers, are. even average XX, those may So

about deploying think dealerships are to brand there Knoll sure managers them what we're our into really dealer we into we're products highest-opportunity deploying those those when markets, so sit make and And calling specified.

-- we data that initial so And our of with ahead wasn't doing this test investments one going the again, we're it. worked we and That's it last keep incremental the year. decided and to that go year thinking. says well. to in did It works that But

Operator

Instructions]. [Operator

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

Matthew McCall

I XXX good to would like the half. looks EBITDA comps to, you But basis a done the SG&A margin outlook get outlook points definitely the for first that talk for of or gross in tougher margin? So half. be little gross pretty I contraction year. tougher. You've XX contribution for year. did get never outlook XX% The think gross a the deleveraging what's to get this this margin? a about net job about EBIT comps It expansion you and hear back Can XX.X% the in margin

Andrew Cogan

XX, Listen, I things for a a in the point let full given terms little little and EBITDA be Matt. Andrew, that basis investments XX like to dive in go improvement margins. we're It's we're to then bit incremental more think the that. Charles XX I'll the probably the year, of in deeply stuff I'll doing, going in

yes, at mean operating I probably think level -- the the I operating pretty similar.

think we've So can that to that make. investments of attribute and I incremental you to decided directly some the

additional little tariffs. muted bit think I probably the It's by more million been for $X the in is us or a half, So XX back tariffs, are The $X XX million. realistic number. to a

a So the getting that's and think where points number, to maybe the XX, it's XX to I difference but XX, XX not between be. basis probably to we'll huge

kind there. of that's the So outlook

decelerating. badly we so kind again, others now see again, had some we're think But we inflation And more we fourth year I steel. weren't as of in we think margin quarter as from hit -- The neutral. get some the steel. pop third said, I quarter we'll as collars Steel as last

fourth in sense. margin biggest improvement make put at level they our So but make they do gross level we because tariff the I XX% didn't Also at think hold of the XX% sense, kind you'll efforts see quarter. on mitigation the the

quarter reacting a on behind to that. about we're So

fourth help quarter. will that So

we've gross would see that second to margin been. sequentially I some see the third But the you'll think I gross margin where some of the I you'll improvement expect from from the improvement. improvement then the gross fourth fourth you'll is margin third to the from where So kind year-over-year and more see greatest think

Matthew McCall

helpful. Okay, that's

the is the I guess really next together question of So putting top-line commentary. kind all

and dealer opportunity. of I share you've to the got outperform think wallet you're you said industry going the

easier the You've expectations and about your comps growth margin grow put appear What's your for to while get expectations with Because actually together. expectations, beyond the industry the got industry it half. beyond in all lot. Muuto then top-line the back growth continuing get comps that. your to a growth guess I that? talk Start tougher,

mean overall So perspective? from what does rate that an growth

Andrew Cogan

half Tech tougher -- that the like to the ways. and have over in But top-line the at activity positive are indicative break the I macros in XX the markets back drivers, The think couple year-to-date to think but of well. top of you rents absorption increase, some kind actually for equivalent a 'XX. to XX government 'XX, space. little and absorption pretty the X say, has a looks bit showing the I 'XX continue which very macros comps been I quarters. full Matt. But stuff Leasing fact, solid. as strong. what and on it remains I in demand published anyway, strong that. co-working biggest I happened get been are front half, than is know the probably of absorption last listen, commentary And has look year And good. as And

You can residential, by solid but look is commercial everything. in ABI, the which ABI really skewed lower is the at headline

you the Then secular we about feel attracting millennials good safe like workplace, so have And of about resimercialization competition the trends got nice the retaining. that. question for you've and the

that's So good background a for all I think pretty us.

opportunities both and at look they're of funnel digits. our our and And then double pipeline up I

think of we're background. I torrid I kind a keep it's think at don't going XX% to XX%. a to good So growing

into upper-mid kind think is the for mid- our if head margin. XXX think to get I going a single-digit think mix the we I into I quarter-over-quarter of thing get to year. the supportive evolving, mid- the to rate think Because points contribution that spend balance single-digit upper margin. you kind more as in down settle on SG&A higher of of and of other XXXX to we it's the I we'll I And also and is XXXX moderate you'll of to XX basis XXXX, continue going like back what way think is we then with growth to mid- do beyond as into is the like rate,

see kind into out would of So quarters over the of and helpful. it playing next I that's how that's XXXX. couple If

Matthew McCall

helpful. very it's No,

numbers So the around -- easier. The total organic looks look sales right. comp, organic well comp comp XX% I falling that not an I perspective? the The confusion. Maybe match I at back like -- growth does I of in from first actually there's If in growth, guess, last to half. need half X% or you're still the the X% to getting growth your year see

Andrew Cogan

off settle you full last my to us don't I single-digit mid- of the a half of have in think I into to out the like broken can't going it year just going to give top upper-mid I that the growth the back we're so low-double give year. like upper-single for year. head. That's

As think year, next be to upper we'll about down business. we growth. we're And thinking mid- turning planning single-digit for not

Let that way. me put it

Matthew McCall

recent or analysis Is we've in Okay. quarters update The doing around of any was had last there? there. we and facility had conversations I you've the really that of some the that some been facilities there had question conversation

Andrew Cogan

in where making, should making lean very say even doing the some are kind the down think That operations. their at discontinuation operations. I No. up a taking we're be we the things job announced frees we're will Marson big what nice get last system look to midst I crystalize We're think doing into our out imagine continue I of of further. I I And much road. what we doing leaning our picture would our like We're we that a of sites But of XXXX out have space. to mean and we as quarter.

and in to doing space to to are efficient there So a become our operations. manufacturing continue lot of create more leverage we're things

Operator

I questions the in like time, call back have other no this Cogan the remarks. to over I for to Andrew would at closing Mr. queue. turn And

Andrew Cogan

at in you Great. Well experience X,XXX of want And in shareholders of today's stop the questions on SAY you for we yourself call. And thank if Market all Fulton you, please to continued find by space everybody, appreciate behalf for interest. person. associates participating. thank the and really, On your I the really, super the Chicago, Knoll,

great summer and So to have talk you all a the we'll fall. in

Operator

your you today's Ladies for and participation in gentlemen, thank conference.

Everyone, a may wonderful You disconnect. day. have

Knoll (KNL) 26 Jul 192019 Q2 Earnings call transcript