MLHR - Earnings call transcript Q1 2018

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Operator

Good morning everyone, and welcome to this Herman Miller Incorporated First Quarter Fiscal Year 2018 Earnings Results Conference Call. This call is being recorded. This presentation will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include those risk factors discussed in the company's reports on Form 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. Today's presentation will be hosted by Mr. CEO; and President Walker, Mr. Brian Vice Jeff CFO; Mr. and Stutz, Executive and President Relations Vice Veltman, President, and Kevin Investor Treasurer. Mr. financials open remarks, more the followed will by Mr. Walker the a detailed call presentation with brief by of Stutz and Mr. Veltman.

open then your call We will the questions. to

ahead. the minutes Walker. like We callers ask presentation to time all begin limit will this Please At turning allow that to to the and participate. to call questions time, limit Mr. call for today's go over XX to their I by would

Brian Walker

everyone, our for brief current like of for results the we over demand X% share the turning met by thanks the morning organic against to prior year. week strategic quarter I’ll this last start structure. we and our more Jeff followed our information to on I'd Good us today. X% over quarter and a priorities. progress close to and change joining results year during expected backlog organic with backdrop per than the reporting over Adjusted better the the our was with short, of announced overview clear we including expectations patterns financial the highlights Kevin the with economic before growth the for quarter. key of made the earnings a reflected of quarterly of highlight segment In finished $X.XX order earlier up as quarter view

delivered and all the consumer strong ELA, America segments growth North order Our quarter. for

near efforts quarter large laminate our constrained adjustable delivered by our traction. our gain capacity low accelerate transform square more straight of the in across strong of consumer quarter. product sales our the business Gross of selling storage. consumer was work height fifth addition tables footage, categories, as brand This growth In a part and demand channels growth some driven revenue was in to also business by ongoing our our comparable real for end footprint to to estate the margin expectation for consumer increasing the its namely

keep outsourcing with we to work and demand, we additional overtime incurred As pace costs.

terrific quickly challenge of has Our moving the to we a key term, areas add are likely operations. in these operations near capacity continue done responding while team to and in to pressures some of job are the

We size. the incurred normal quarter. on way higher our These which a this, across disproportionately Despite impacted expenses, segments, segments I the this had the each than very and overall warranty profitability expenses period pressures experienced of the we also of our expenses operating warranty consumer their with helped pleased specialty gross but offset relative effect teams given in large and which the have margin managed am organization . in our

one the goal. our progress Our key savings cost making savings of initiatives ultimate strategic areas we’re towards good and focus is of

profitable Now with we like customer are at the that progress the as for work changing for update our of our key distribution and overview in positioning sustainable on to would the quarter, our These on nature growth five the priorities aimed I we of focus technology, see driving trends channels, base, us priorities. long-term.

I are generation next priorities delivering our realizing progress highlights to second, proposition; would commitment third, improvement of reminder, the our fourth, a consumer office our specific quarter and these focused priorities. of that to leveraging the the five and product ecosystem; our continued on on last, and scaling during focus Herman business; goals; cost on like innovation. service we strategic first, are; the across As living Miller on dealer

our as business. As we drive consumer we fresh have in brought to mentioned quarter, growth we about to outside perspectives challenge thinking ways last our scale profitable

in result implementation plans, work business work, as have create forward confidence work will first we to view profit for can the specific detailed toward short-term as coming driving growth that meet pricing, our in areas and will XX% next and steps. this do the said, is this of That growing improvement a this work effort of As namely sourcing, costs more to of we contribute profitable that our is consumer these logistics, operating have in and we we meaningfully objectives, There a goals achieving the e-commerce. stated are confidence result we path to develop margins this phase growing level. strategy, targeting and

quarters progress. upcoming further We more as we to will have share on make

square space to real XX,XXX within retail ongoing the expand end progressing to total, of an transformation studio estate reach add expect the footprint selling by design Our of In we May. foot incremental is well. of

expenses new the to mature long-term their product as results warranty as potential one margin Despite did mentioned over part they costs bankruptcy expanded operating, past ramp I XX as profitability was growing operating months of our from of first our and sales studios months confidence well This of past operating increase expansion. drive this quarter the the will consumer help profit in due the business, up arising of our of not As our expectations. the suppliers. to in and XX meet

the transitory Aside we is out maturing also it to important currently point have new phase plus Coast seven . that are studios, that outlet issues, from West early a in new these

for years. we the a opportunity operating to that over the three year earnings a double in the consumer near from increase segment remain has drag can next this digit XX% segment X% believe revenue this margins at While last growth or near-term, in

contract channels estate our to this the growth the support and real opportunity. improvement growth transformation designs increase also margin and addition of continuing In mix to higher initiative will through product driving digital exclusive profitability catalog and

Living benefits to the to new adding addition focused work and solutions framework, technology the of concepts. in applying realize we on product Office research next generation have new highlighting we these As been of

a in saw reflect bringing points categories of in our particular broader Herman and a pipeline volume price create number chair that launched quality sales Miller desking of As recently we to Versus task growth. a products part business. opportunity new drive innovation opportunities this product and of range effort, will new to for The the

time as robust momentum While program initial utilization data early The June space the with days, several platform technology spaces meeting and of estate as the better and year. platform has new scheduled their X by used. half in smart strong seek user chair smart how makes platform room install their live for for in comfort live The version developed second being pipeline, that to These wellness insight over the installations professionals customers a further particularly personalized provide an The grow well providing remastered will and enhanced still understand during sites Aeron benefits experiences. being OS experiences our OS sensors enhanced with and with customer in the has large sales along the of active coming more to months. since beta with workday. data people will corporate for furnitures launch real are

solid our are making on of annual to we cost target initiative, by Moving gross fiscal $XX $XX of XXXX. progress savings our to million million

we actions, run today gross estimate quarter, annualized is our additional the approximately we rate savings and During implemented million. XX

this goal years. effort plays XX% a and above the margins not fund ahead, inflation a but key three for of this or initiatives, the of over wage and key material initiative potential Looking offset our number role, next help consolidated ultimately growth increasing will operating only

To Finally, of goal wallet. increase we our ecosystem. toward are simply our put, share of our advancing fully leveraging dealer

have we enabling our sets few current within business. in dealers products the fulfillment digital area months, work With this brands, in the made last Over ahead some order for and more our to including our that we tools further entire Miller specification enhanced easily across have for dealers. the our The products me Group months provide progress stage capability key picture contract reach. our design order update for priorities, the Herman focused on specify at of the macroeconomic about additional points improving strategic planned specific aimed let from

saw contract American this patterns for industry consistency clear improvement overall, employment, business. levels order the and both measures, a activity. architectural we pace our economic While of the what much for by of appears and with month-to-month, choppy construction in positive billings, and fairly data order non-residential quarter remains across remains consistent This positive a confidence encouraging sector service is North around picture supported

in regions for are of to the safe, reform have events on the as relative they these have sustained a and potential potential investment for around from the higher levels increased the approach, persists America spaces, resumed disruption our quarter. through timetable uncertainty regions That tailwind significant employment people None the said our those has little recent While for devastation focus business their administration's recovery. dealers their The recent hurricanes tax in North the and spending. US a damage operations. be physical impact on dealers in hurricanes the has no near-term earthquakes and impacted to to first to and us

Beach On and that studios the in Within the front, Design Houston, Palm were by has impacted Hurricanes. Miami consumer Reach West

Here none businesses as is the significant and concern Like impact retail rehabilitation course are studios the the comes there this impact operations see for rebuilding and damage and of while in of phase. The many our have areas already the of surrounding is, space reopened. the disruption clean-up and safe people undergo all begin their settlements boost process. process. the and demand consumers our may businesses a be Both begin dealers could customers out rebuilding in some there demand we potential retail that of is that and as as insurance receive sustained near-term

rates, inventory revenue issue, we EPS provide unemployment, markets, have tightness America a uncertainty space, than low on provide. range unsold strong to equity we combine of a consumer historically level to environment. QX guidance positive Consumer Relative interest future spending, the home the this provided Given Consumer typically for improved to limited North for macroeconomic low and broader

consumer potential. Korea. release globally, While the We pockets oil executing is and quarter, in navigating will with for improvement potential will demand some Middle East, softness segment will the the our regions, agenda disruption geopolitical the stable the consolidated Miller. including identified have focused we continue Brexit, climate various levels see strategic uncertainty to including areas in profitability on have areas, this ELA business the the Herman surrounding continuing producing of our and that North that picture of deal Encouraged fairly by strong on

for that detail as results five quarter. Stutz call to will guide our financial efforts over business and world. the to the more innovations corporate turn new Jeff With multi continues the virtually our channel leading I’ll overview, Our provide deliver designs key in on to everywhere to the audiences priorities

Jeff Stutz

thanks Alright, everyone. morning Good Brian.

moved segment's begin the this leadership the unique areas the our also each of out teams, I So, first in into quarter, on of business we specialty I capabilities architect craft in American to results and business under was the segment our of community. want of Effective way a better particularly segment the strong and cover subsidiary fit segments. provide some North our to we Steve before to for report Nemschoff across business the manufacturing, sets skill and our the of wood change focus and made Gane. leverage This upholstery the design and specialty changes

In to refreshed addition for to our we’ve segment. business move, the functional SG&A methodology expenses allocating this

investors going practice Our include expenses. We’ve segment profile Group information of allocated be finally, better unallocated to our our Rather services results past has closely this more the pool expanded disclosure significantly we’ve understand utilization segments. to change to across corporate reportable no be business and Herman help of our will business manage business change Miller these each And identified cost reflection measure gross the reflects changed aligns that our for we few of and across years to margin and corporate segments. the longer support how provides financial tracked as industry the and to costs reported over better supplemental will of these better a businesses. This forward. also a will business

I’ll out results that way, XXXX housekeeping cover quarter first comparable now by X-K sales the week filed $XXX this of bit new last below X% million were the we net for segment fiscal approach. that quarter. our With year. this quarter results of and an Consolidated XXXX of in the order changes, restatement with same the for the to these provided years Given in earlier of a quarter be

an included extra the As of of operations. first a week quarter XXXX reminder, fiscal

consolidated we at This resulted impacts to the shipment this being otherwise purely been than under DWR. made recognized is customer to that compared year on $XXX in of quarter, recognized point flat, into week orders the Orders the have foreign moving And approximately as terms excludes basis higher sales effect level. net but of the it quarter X% On previous the the organic dealer standard were revenue point The an delivery. would product year's shipping the sales terms. extra revenue than this an terms, of in the currency this which one the timing, change during a of in than addition, same million organic In our last rather first were $X higher quarter and basis, were on change impact divestitures, ago. at a change quarter last year's general to of movement QX deferred of year. period as last in of well X% change is million which

million included have Our $XX been dealers approximately in backlog last that year subsequently divested. related orders to

tailwind the decrease $XXX the gives first Excluding sales ending backlog million higher was year's impact Within as enter which a we American from us Brian in the from of QX. X% North that divestitures, than quarter for year representing a dealer last were highlighted nice the X% a our level, quarter, segment, ago. the

increase a reflecting million, from New last orders year. $XXX were slight

wholesale, year-over-year were X%, revenue particular were higher the than of marked pharmaceuticals, and and we manufacturing, projects results same lower quarter that levels in However, medium growth a we broad X% Higher by growth showed large in during posted equipment. saw on projects fairly quarters. services, led communications, order quarter partially led and based the had from by computer recent large organic size last orders an in offset while noting seeing been business Sector in by basis, demand increase year. we what

up start a in organically had first X% year segment $XX perspective relatively a the of a were X% but to sales slow to a quarter, decrease quarter. million in fiscal year ELA compared from basis, reporting Our of on sales last GAAP the revenue the

and orders New Latin Australia, UK, from The Europe, in basis, order and which a demand but activity $XXX the up offset last on partially reported X% basis was an on year-over-year is totaled East, X% by down patterns year in strong America, by organically. Middle million, growth organic lower China. driven

of subsidiary. our $XX same first the year. million, mentioned now Nemschoff of quarter last includes specialty our earlier, X% in segment Sales a our within As the the quarter results decrease were segment specialty from

period. due in X% orders was ago to a decreased million X% bore New compared basis, that year a the during sales On to The to issue operational orders year, growth factors also lower of while in year, quality primarily segment tied of strong share increase quarter warranty referred large approximately the year catalogue, This sales of business their last in an that XX%, of last period. decrease were orders were X%. sales organic quarter compared e-commerce, contract $XX the experienced transitory higher, than relatively the the the a a and Collection. consumer than million, lower and the declines and in productivity segment year-over-year Nemschoff large an year-over-year in our reported the negatively offset to number The Brian quarter. Geiger last in by across of XX within impacted at channels. studio, partially driven cost in supplier quarter Nemschoff, the year's to earlier. Maharam, in of the reflected the Herman by for project and patterns, growth face Miller Profitability order last was orders net

the ahead the sales to Related the revenue for quarter quarter. in for basis, than of up shipping were additional a in comparable of the and XX%. of On last approximately million year. orders On impact organic improved from which basis revenues estimate XX%. the million higher consumer excludes by extra terms quarter QX an sales $X terms earnings the were the year, we X% XX% quarter, increased for earnings change brand shipping DWR in New year, operating orders while were operating resulting week last of change net on the the last $XX

rollout support studio to necessary other of and earnings new continue for operating are term be growth we believe this longer limited that to locations our investments by the While segment potential.

the As path mentioned, operating double-digits over Brian long-term. where we for near see margins a this business

During million. with drag approximately full impact that unfavorable to maturity we have this earnings $X the the new to related quarter, reached estimate from operating yet not studios

a segment basis in than our the XXX $X.X was near the impacted by period. and Additionally, warranty coming profitability margin last claim low range cost XX.X%, lower negatively write-off the the end which the points approximately quarter million. was first year, and quarter quarter of into gross the first Consolidated the of against supplier in expected

outlined resulted demand QX in capacity quarter, strong the some that saved basis our categories. points. approximately we commitments, we and our challenges in delivery gross customer XX the by additional As expenses in This margin reduced outsourcing for we product release, given earnings estimate certain factor labor meet to necessary a

to addition, feel continue were experienced compared the same variety in million primary for impact operating since the $X year factor expenses due to In we included quarter the in year. million The $X related quarter $XXX reflected adjusting week million was expenses prior below in of were to After time. leverage extra ELA expenses the production segments. of higher last The of dealers first $XXX items, approximately in lower specialty and year prices operations. an Operating those divested and that year last million, prior the a steel factors. to

we this noted, cost progress quarter, contributed which made operating savings Brian on our initiatives As to expenses. also lower good

We for favorability to and incentive compensation warranty by had related claims staffing year. higher DWR healthcare costs also benefits growth initiatives. studios, cost, levels, and increased from was compared partially benefited and favorable investments occupancy, to This and offset new last experience lower

it not operating required ultimate not difference. our even with will toward have a teams for cost plans. our been focused To making organization the profitability walk expenses be growth Next, reduction are and across as linear our very investments for an necessarily the be on is managing sure, goals one,

we feel actions reduction involving and reductions track in However, the in quarter. in we’ve first previously we quarter resulted workforce we cost teams feel a announced severance progress were certain plans expenses recognition the very our of Restructuring the that outplacement and are good the with making outlined. are on about

improvement We also million business. consulting consumer $X a On million other combined basis, reported associated operating the related we basis, of initiatives earnings the in for charges a fees in our profitability first $XX On our recognized quarter. to GAAP total the with amounts quarter. these

Excluding restructuring to rate of XX.X% this $XX operating the and tax Effective last compares X.X% of first reported adjusted effective in income of in X.X% quarter sales of XX% rate sales. charges, quarter other By or million QX $XX we was this quarter year. were year. comparison, the operating an million last in earnings and or of

totaled million diluted $X.XX on or Finally, share the net quarter first $XX in per earnings a basis.

of as adjusted to and charges, and extra in first first the quarter impact compared $X.XX week the operations on over $X.XX, included first Excluding to quarter the of week share in last in other And we restructuring give the a Kevin reminder, to that to estimate the earnings expenses of last With balance quarter sheet. share and extra approximately year. I’ll us flow the per share contributed earnings of an diluted that the per $X.XX were turn quarter per that period. our cash update call year

Kevin Veltman

$XX during the which Capital million compared million, Cash from in equivalents dividends cash million. $XX due We expenditures reflected primarily pension the a plan. million operations year, the quarter $XX the and million quarter were a last paid to of everyone. one-time first last to $XX in morning year. increase $XX Good of were the $XX quarter funded our cash in were from the million, UK in $XX flow with the quarter. total of quarter status ended decrease same to million Cash period of of contribution

in approximately our paid brings our will a last annual October. we be reminder, million. $XX increase level increase in quarterly payout X% to expected a As that beginning announced rate dividend quarter This

the in repay X.XXX. notes on are quarter, bank $XXX shares aside the end capacity with approximately of credit available placement and We our during due of $XXX $XX at remain million which We the that facility as the The to private also million approximately all worth our stood million covenants debt ratio January at quarter includes set in end XXXX. debt-to-EBITDA of gross repurchased compliance quarter. was

for flows believe positioned meet well forward. Jeff ongoing to of balance, we over our Given continue the cash and be of back that the call capacity, sales needs we our turn fiscal cash now second XXXX. to total earnings to and operations, from moving cover I’ll the financing to guidance quarter our the current business borrowing With

Jeff Stutz

in quarter $XXX All and Kevin. range $XXX million the to second right, thanks sales We anticipate million. between

for earnings range and of range storms the this we resulting our for reflect to favorable We impact adjusted the of midpoint forecast to the basis, foreign quarter be $X and Texas recent foreign implies year-over-year uncertainty of from the in compared midpoint period, the for to the for normal estimate the translation While currency of X%, exchange revenue last this divestitures On a the on are of impact estimate and than organic Southeast. the million. sales approximately reflects wider a providing range. dealer best an increased year quarter sales increase at this

and operator period. this to be assumes that I’ll and effective gross in expenses now and earnings of quarter consolidated we questions. second $X.XX the expect to overview, And With we’ll the tax XX.X%. million and between your XX.X% operating million. per quarter turn $XXX between over We to finally, $XXX between share call expected take to anticipate the back to an for XX%, XX.X% margin $X.XX in And are be range the the rate

Operator

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

Kathryn Thompson

you thank taking for my questions today. Hi,

cost Just little driver the clarity to a following decline more wanted on and up in order primary that bit warranty the get specialty, segment? margin for was on higher decline the the

Brian Walker

for we warranty will Nemschoff Brian. then related I Geiger was, is I to quarter some the caused the the that. bounce quarter. the discussion thing little say, late be Nemschoff, little and a about more both bit to We line last foam Those had this particularly had, side. little talk bit big on that challenges a largely some supply was Geiger I’ll also project first last revenue shipments. largely a of for Jeff year with bit quarter bit projects a quarter would the that this a let them impact. by businesses by and Kathryn in chain the supplier tend on the same big start around with Nemschoff impacted revenue

when too those down I side year-over-year. was textile little things that you say the So would a together, was add two majority. the bit

progress collection overall of We really had So, quarter the good we in really good cover, look really orders, which just ramping the have That’s softness order in we as the leather side. did reviews. good products getting just happens and collection. on second of of expand business, of it as was business in supply are well. challenges are feel say that on particularly have Maharam, side breadth on there really And number some rug these get some points can in also us that good a doing price what in really see of new textile across a Geiger that true I number we the a the we the front, behind would The great business ideas well quarter. Nemschoff the is activity to pretty to we side. the at see we are in to going

the feel at a at light balance good little and collection. Geiger year Frank, I was bit momentum although we to the say, good the to really the and start about So, year both then like of Maharam, a of be there

first the but ramped their we’ve will were needed. We got made pipeline things number We’ve some to be do do of Nemschoff up retooling in done in quarter there. We’ve work a in for business we’re one. getting leadership that that that have think be leadership got combined, So, we those Frank. product sales important work changes to that business, in of to

Jeff Stutz

issue group, the got on about, two your think then The I The Nemschoff segment remarks, quarter. there was of but And prepared however, those, then arms warranty, larger around of To for is the my to fundamental fairly issue definitely the issues million profitability actually Jeff. the significant we there impacted was was it but alluded really but in this there supplier a period. was which supplier it that subsidiary the - our we’ve on at Kathryn point, quantify two. $X.X about this were we you talked combination specialty in our question if

if income. kind So, operating a you for more of normalize to X.X% that, get you

and we Now but drove, a higher volume pointed and less lower last channel mix think as our a ago. a those had of little I still businesses result we favorable year, then than out, moves period-to-period. particularly quarter couple within that, had as comps that’s That businesses a Brian year than in tough across much that around this

the So that will be driver. big

Kathryn Thompson

you. you little outside competitive, pricing pressures a more seeing US company-wide? on Okay great, are to maybe discounting industry, overall focus or see other regions you. the then theme becoming it as type a on bit what within be just Thank greater in pricing, just more ancillary pressure and seems thank products the of And you and you’re seeing pricing in a general preponderance

Brian Walker

price this competitive would often side by I on pricing, contract way on bidding say, project-to-project. I say Yes. the I always because the Kathryn, very especially are is industry don't would a think areas, you play less overall argue ancillary bulk to in because tend areas often. in don't some by it’s more a queue I in driven of much or newer you those as fact would

it to be, what is the side. may used typically don't significantly it past. wouldn't where than think the significant different in you on more got been is be but So see I period say pricing this workstation than price that I the pressure it’s

breadth are continuing they that and/or which floor we through it’s to or I more their to stable in broaden us alliances offers portfolios is to the that of customers product how not the their what wallet internal of a figure dealers. new think competitive In is settings cover fact types be of points from see to lot would are or we there, trying trying of but broaden of are of more out the as additions cover I get be it folks, that than make been. including call It competitive, their acquisitions, to do you it view. our whatever out price through the in development to to plate across to share figure, going continue or fairly to

one play bell we in price at going sure more got those I number almost pretty at at think years and of of the ahead about of I not important we feel aiming those think continue years is try coming needs. the DWR sure to about to and of collection to own towards a level, of actually that do, That those of settings fulfill to areas we ago, and a won’t four the addition be about say began places shaped work we kind is office. our that of into the There have our rolled be when the we even always we and the that making I are points that we M&A the a bit as could office and saw the types would both that to we think the with new were to we And or going of of of ago. thinking years wider isn’t having with addition five done we’ve we so have that can made living we made work folks there. been are one, of talk made areas, play a frank reasons rotate all things to engine moves; is full those done number we at where and good playing one engine to curve themes Nemschoff we then people acquisition is for I curve go, a variety forward. out that our development it certainly but be The making we

Kathryn Thompson

you could you. consumer areas thank And you or any strong color bit color or have on just either give really a it that Okay on product the a with more then growth and benefits changes little in is great, ongoing reaping be DWR? it the been the geographic

Brian Walker

and we the open today the year. We really two all number the year. we around business, of ago if done standout I about had. seeing aside you if now started Probably last where time the the that think you products. day the disruption in drive and where Jeff line helping. has set if getting take studios biggest guess terms think of hitting we That’s which strong were new this hiccups mark been of look we actually which we’ve in new the years a since out launched, a two happened I web in are really new I the revenue it look studios course have are at we’re certainly the of The growth with ago that opened the ERP fact our was the moving quite two fiscal and first that right ago. the up team one level this that good is when am us again greater getting in job. I years We think good the growing seeing consumer productivity hit of underneath and how number XXX volume, of online is into really system products we’re really because segment also catalogue growth I feeding is faster in of is getting years online, new business, business the significant you now.

and and room would also to been and unit thing growing significant last If growth you The we’ve it’s because is in quickly are to than we’re to to the point what’s coming I omni-channel level side. really you through has there - say accelerate know into think help studio tell, we contract that. at that online on continue order, come the they an the especially model, addition focus I of look hard but the is would contract channel seen a studio that and the we’re the DWR is

hospitality of in that’s of early innings that places contract that, own we also Miller those also they say are whether focus, of through dealers, the would DWR's I being Some that’s and that play. Herman kind

to or done we think So it’s combination four like things think work inside of top I we five said, we done work worked line have well be the more on really and a have DWR. of quite e-commerce there that around is the

we and in things. those the drop quarter and we and platform. I - works We better of new are new platform hermanmiller.com, sure better, a kind implementing also eliminate It’s amount the which well in from that benefits because consumers target for seeing connect DWR cards platform it’s significant would the that just of next make this much much be believe e-commerce mobile,

have that certainly going days to it’s time from cut excited Miller we’re XX over now, and think we're I in So that online up platform will running, about Herman we really the for sales.

not that positioning think So, we price do a revenue segment we we those additional expanding total work with we we in the things around really we are of we’re good doing drive one a can things work better levers high of call them, the pull, our in the by can talk earners and additional additional price lot assortment is actually supply outside both confidence of terms of the firm a of cover, think those we I us but the can the levers the harder giving profitability. We and about think and team yet working points HENRY, get rich to is do base. things how that

can wouldn't we call declare and set we're confidence the is XX we certainly increasing not folks, our see ago we of where things on I done it the yet, but we're we right were the got right victory, months So - have steps. next a from level working that wouldn't

Kathryn Thompson

I appreciate Great. Thank you very it. much.

Operator

next Sidoti. at comes Burns question Our Greg from

Greg Burns

Good morning.

is large from? handful Just you growth, in just more of sense it in demand a - is coming it of terms of is North broad-based, order from could the where us particularly that give America, a projects, coming

Brian Walker

as project as and nearly year an down, large ago. area we the broad-based now there in generally I call much years would area two fact certainly it’s that super was say that that saw, ago was have of we a saw with we or would didn't we even I didn’t see an any,

it is it. call mid-size are would I So, more small seeing where in projects as the to we

from actually Kevin this activity quarter, project of think last to project remember year compared up that’s percentage I if the was business actually data correct. it I

they million. would up, X we that, above not into typically but I did So say range were about projects kind which as of projects talk large, very

think Kevin? a I overall actually down remember was if that is data, the I bit, that category correct

Kevin Veltman

million to think I X strong. million X was right. that’s The

Greg Burns

it’s for investments was be the looking And or up like, for factors on your thanks. it going increased Okay seasonal to OpEx sequentially, is this at quarter next just part? that guidance is

Jeff Stutz

variable for Jeff. top and volume I’d we million I increases. bit say account have really cost and that it you’ve things. the say obviously in this one, seasonally our million of investment - initiatives level remaining the got the total investments. some the somewhat And total, I Hi volume-related would got, Greg Number point higher for we’ve and increments beyond that of at and related period two growth incentive That quite increase. line seasonal, then is which volume increase, are increases, and is saving for $X.X would consumer $X about our that really related got is cost a selling business. to guy high calls that the got net with for about some we’ve are above of

candidly timing - another into that is over I the have call time spill million, of planned it I think that that of the increase. accounts for of QX Some for you of bulk been some QX, from would this is might that X.X that initiatives but year,

not our doing range and a I job remiss three I past range done those tell on for are going Now we a clearly quarters I and that that did focus, lower we’ve operating that the job account if we’ve for reason towards the end not you cost I of give would good will be increase. been to a the a stop we’re categories and nice but managing the say, given. expenses goal think really with That’s

Greg Burns

and based studio terms And incremental the then maturity initiatives of to So go of understand time? some drive of of segment in studio versus versus in the the what naturally accrue place you I’m you. in the potential incrementally that kind of to to can have implement? with where what plan segments, like, existing just on that of outside will line footprint thank firm margin Okay, can based over trying consulting bottom the lastly you footprint what your of consumer the maturity just the you kind getting the the on

Jeff Stutz

it to is obviously again. would is channels, other say answer we’ve Jeff elements So a business just difficult Brian of little got I studios mentioned this across because that the from Greg, X% think contracting e-commerce, channels, footprint is with standpoint growing X% within that existing to see could I time say I now. you but studio over our up income those in other range combination growing would that

being studios, how higher, leverage given us that’s investments we I additional level, incremental that can view additional footage XX% that’s our we approaching current square now our ultimate talk of the why but would footprint. right that in goal about help obviously that making, We’re think business

Greg Burns

Okay, thank you.

Operator

question from comes with Global. Matt Seaport next Our McCall

Matt McCall

morning Thanks, good guys.

Brian Walker

Hi Matt.

Matt McCall

initiatives expand further? trying of still that you across North had So, operating have margins, I a for the the first but you forgive line industry few is gross to me your Brian margins or use technical North but business? understand operating the so to margin, level goal contrast is I in of the those about I with maybe compare expenses, like to to XX%, start difficulties, the There differences, hit and the to wanted XX% to think that top the what’s of some trying maybe talked of new number profitability America, right and right American detail margin ongoing, what’s the the potential level drive and

Brian Walker

as price that we income will Matt income pressure. do on goals the Part specialty I place operating Those The to of to us every is to there the improvement places margin work think continue over largely that we be the everybody. we’ve to as probably lots to by don't our competitive is at be well I more probably lot find he we that efficiencies. able grow The do continue from So work savings give of time, operating for way, a up of is think in the if do. same the focused, to to just objective consumer to continue line, are think Greg for business, know really looking plays, are across that line going wage operating is, going to top is, not like Certainly not lot be going place to We we expansion; businesses. a but can in margins? to from including margin the at it’s that of come time. at we expansion come competitive to be find the line. Greg. going business be how is ways how continue ways cost more got He’s got

largely you that it able years maintenance, right also but are to specialty every in chunk business greater I a how the we equipment, and see on be are can, so will will retiring same run So, time call direct frank, able where a we of drive some over it of trying efficiency of front can now, side replace big fewer we would the at folks be be investments because three manufacturing of people that volume. that that new day to do to be grow next in labor to not with we of the that in get making it the are number

two could we think get you if them of of can be three business up I it segments, I at and in So, growth the kind that be will our or don't XX% it that really helps range margin each goal expansion, if get other in us that look will revenue obviously. and think to

Matt McCall

Okay.

unchanged range, right will keep of be little to efficiencies drive remain in offset is is number, the spend so help going expense, that and you drive that operating be, clarify the just think that I factories, to the a sales percentage about the may XX, bit percent it? math, the XX% expense, or maybe so Just efficiencies is did Greg’s that, percent that more to I operating that the going that some of XX will in but will there, steady

Jeff Stutz

Jeff. is Hey Matt, this

to try take Let that one. me

in talked operating was So very expenses, from we benefited managed. of North timing this around business quarter, the but for some we particularly one clearly some total element. that are that of the a well noise had American causes the we about, that of the things We warranty notwithstanding

is that very So, strong quarter. segment overall past in this profitability

going the timing leverage to in in our of segment to you just as that reflected expect to profit QX continue turnaround our it’s see business because it expenses. for play, operating leading be big We particularly some that is the guidance, ongoing, are but

I So, rate, operating not QX expense you normalized. our if but that burn will has view business been would

operating the expectation. probably you of i.e. the near in profitability a over is fiscal reasonable if overall range XX.X% look balance that term at more to more XX% it the think I of year is

Matt McCall

it. Got

Okay. the couple I expenses, sorry am years to back of last operating [indiscernible]. okay, looking XX close it’s been XX.X,

Jeff Stutz

on hard just point me Obviously, cost working the let Matt right. we’re out. side,

So our goal is to some and focus that drive on improvement.

that run I as want for just last wouldn't to don't QX our take year, repeat that rate to as same So balance nonetheless but year point of the you comment over necessarily expect the out that segment.

Matt McCall

Okay. inflationary I'm if didn’t I discounting? the And any did, you the pressure? Did quantify pressure, Kathryn don't the you did quantify numbers but you know pricing if sorry. hear I about cost, price asked

Jeff Stutz

but we steel to commodity $X million particular, drag prices. would that from didn’t, component. metal and I felt steel I as other the We mainly say am happy about side year-on-year on in

Matt McCall

and Okay, and then on the pricing discounting?

Kevin Veltman

XXX,XXX slight a loss above was That year-over-year.

Matt McCall

Okay.

head top from acceleration the the of mid-XX was X%? up X.X% ex to of don't backlog order but said is an divestitures good be to reported outlook say that timing X.X%, you know the backlog don’t the Jeff, think that X.X%, that backlog was I I deceleration I it and trends. up about number dealer the if the be the you from was the or so about the of Brian provide when had up some meant the So, X.X% remember the or X%, revenue that anniversary, to divestitures backlog, looks up dealer the things my

Brian Walker

get one always with because with ships have to to you the that all assume Matt, do backlog don't start next the out. be projects by careful way, quarter to thing date you

bit at with we some pointed those which you that to the that I going out Jeff out almost So you think look what of also be some is the of impact is that a when we gave, storms. drop too don't two. you between range at this range remember high concern point of unknowable correlation from expanded probably careful a the be the

down the that the we sure taking, pulls quarter. and ongoing as room Texas to we little account making enough what that bit in some a for, in give at So midpoint what Southeast disruption the looked in that’s be could

now have down are slow effects. markets. ready as to building So It are A, they that as it being could implemented could some trying those order in projects right. actually see delay from to patterns accept furniture, two also could folks

The of deceleration to So, consumer in heavier signal that. acceleration I do you don't is, promotional we’re quarter, don't happens of periods second thing it is think any one or see forget our the in business. that one trying the with

of quarter fourth two the a to sale that and those three where second business have to in because running we the typically on be quarter periods other. quarters both largest are the So in tend we

So, I fourth think bit the third get and difference year by impacted little you get you larger in be quarter then holiday tend of a do a second the the course to that the little bit and season. of

rates. give into think I and much would too I read So, I order don't you, the between backlog did differences

Matt McCall

it. Got

we last this to year, Okay, mind other items that and making - forward, price that occurred through the just go and either expense then cost like back should progress keep I’m the the year? or any occur line, cost that what’s looking takes sure will as finally expectation puts on the we going in year warranty to and

Brian Walker

bit. the So are comps things do Matt in is terms steel of have easing of one pricing we commodity, our a for

between guide $X.X million worth $X million and pressure of implies year-on-year. Our

on the commodity front. that’s So

discounting, terms I get on you what have asking? assumption where enough agreed have In we I in is don't Make a else ball so experience to our think of all QX. and of sure that Matt, what something crystal price of we necessarily, question kind that your year-on-year

Matt McCall

think would warranty anything either expense I about else expected thinking high, is should don't that or was just else in that the about be think of today anybody was year? in modeled, rest had know guidance that you Well we the I the that the

Jeff Stutz

things that you point trouble can't a So is these I ever from we can not issues consumer supplier We have to. on that matter, I number. of the in would terms am of potential is there some that impact these no, that’s you predict some at shipping terms with and sure in nothing the in is do that but Brian I them, don't clearly potential quantify to the change the see because a I warranty that know nothing and for business near-term here give you want

Brian Walker

shipping, did That folks of making a to for side gone lot changes of down the bill to delivery. you we same some out, on is that we the a we’re shipments. how how drive helps of on customers time, what bill shipping. the cost At there us as pressure know out one We are at we Matt have free as lot got things other did some changed we’re model two we’ve doing group - Yes, we’ve were once, it going we logistics looking - further of done our is, things consolidate those deep with a dive to outside of we ahead this at time. although

One the a white up that done had of do percentage model we’ve things order the is a as driven was to of we and plus more charge glove.

of today be, to know - what number you’ll on will believe flat of is with increase in in two shipping; that customer more close the We white problems team and when to have rate, hold There glove; to much need returns, to match we will can it A, will will people with We flat flat rate actually the are a customer run, changes on a really reduce be things we without and intention on be more long a white number think more Our they and and that of to make percentage. allow work is towards how glove often shipments it can the default. become rate it how the question occur you’ll that they the we will going drive charge move the gains will sales because will consolidation the it. of satisfaction. the more and there the customer.

one of we that margin consumer could bit the so I will how in that the changes a don't say, So that you quarter. know by out but we next the that will movement as of even other re-coop, a have implement much the see side. are we see a think all in quantify really margins, not it’s if there, because is deal, is certainly moving around would on to will turn we be in big gross parts time that’s the I it question a are We could we one watching, but there there to we team one. many I how some movement little tell

Matt McCall

Okay, you guys. thank

Operator

And to Brian not showing questions over I’m this the Walker. I back any time. like further at would call turn to

Brian Walker

for next today. for day. Miller a your Thanks We and look forward quarter. Have Herman call everyone interest continued joining the to updating you appreciate in great

Operator

this Ladies today's presentation. gentlemen, concludes and

wonderful have You may a now day. and disconnect

MillerKnoll (MLKN) 21 Sep 172018 Q1 Earnings call transcript