MLHR - Earnings call transcript Q2 2020

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Operator

Good morning, and welcome to Herman Miller’s Second Quarter Earnings Conference Call.

As a reminder, this call is being recorded.

I would now like to introduce your host for today’s conference, Kevin Veltman, Vice President of Investor Relations and Treasurer.

Kevin Veltman

Good morning, everyone.

Joining me today on our second quarter earnings call are Andi Owen, our President and Chief Executive Officer; Jeff Stutz, our Chief Financial Officer; and Jeremy Hocking, President of our International business.

press our yesterday’s at Relations posted hermanmiller.com. have release Investor on website We

figures today non-GAAP we’ll a of also that Some the the on cover supplemental that We’ve website. the be accessed a non-GAAP reconciled are GAAP in to amounts file can basis. on presented

that begin our everyone I include will will remarks, we call forward-looking Before remind prepared this statements.

last could please night differ materially release forward-looking statements, refer For annual the SEC to we well and information from filings. as results issued on as our cause actual factors press to that earnings quarterly these

we At is the conclusion will of have XX for Q&A our call prepared Today’s remarks, session. minutes. a scheduled

I’ll turn now over call that, to Andi. With the

Andrea Owen

our morning, all over quarter sharing thank and you by update Kevin will Good our Today, our of after for latest Kevin. the international detail. progress I’ll results to Jeff goals. Jeremy and on it results, highlighting the turn quarterly our I’ll in then business, financial towards followed us. Thanks, an of provide strategic to joining begin cover by which

year, the last X% X% expectations performance the from short set by driven the second level. were the our down softer-than-anticipated Retail into by This quarter, higher coming quarter ultimately fell of America than pattern, order revenue which we for businesses. period North Sales and led closed last year’s

project near-term business project-driven. we our a growth the inherently in activity. goals below past and quarter, to remains we industry rates clear, view impact be felt deliver never our of we’re of this To the happy while bullish. pause And set, the is opportunities This

we all-time orders of growth for organic a business, record last representing of of comparison $XXX This year, in the very an by second XX%. difficult was growth year-over-year our high million, quarter posted when aggravated

quarter volume by In $XX our highest history that amount exceeded over million. the in fact,

geopolitical environment of the When anticipate in activity. didn’t project these and we have would impact mixed was comparisons, that the establishing months the guidance considered quarter, on at what macroeconomic our the start tough we recent

the U.S.-China Brexit been Index trade believe and and BIFMA tensions in uncertainty choppy America, demand order these months. factors have lower-than-expected And industry in quarter. recent the We in Architectural Billings North to contributed levels persists. levels

the direct our in for that we business. experienced said, our sure, impact upcoming be we ahead, encouraged order on quarter. a the outlook revenue we the have on QX To as for guide look further remain patterns With

the levels in Our sales optimistic, force the quarter horizon. the business the opportunities nicely number is has sequentially over activity have two new on improved they first weeks quarter. order of overall, And given business this of increased see Customer last. third

are levels business. also remains that factors We strong, spending our unemployment which note job collectively positive consumer growth, and for

our the more progress I’ll next quarter, our priorities position growth. us to strategic on we Beyond profitable share sustainable, And continue for moment. a in well believe

gains. At this we own manage last the our expenses dynamics, of challenges the gross driving on that we the over line, Favorable profitability cost very points efforts, the margin faced continued these we level are time, along Consolidated improvement teams XXX Despite basis top are improved and profitability to with quarter very pleased price our year. well. same with delivered. operating

a of expansion. As quarter margin these another factors, operating delivered of adjusted result we

the quarter. reported $X.XX share GAAP per of We a earnings basis on during

during of In of addition million $XX to special to naughtone gain certain a related shares restructuring the of the earnings non-cash remaining and quarter. charges, acquisition GAAP other included the

earnings reflected year. share of Excluding of quarter these an over per adjusted increase same the items, XX% last $X.XX

long-term are value priorities mentioned, guiding our our four creation strategic plans. I As

can a summarized reminder, As they as follows. be

leverage First, brands amazing our Miller and we’re of being Herman intentional capabilities. of very global about the One power fully unlocking portfolio to

customer-oriented model spaces. Retail and both a building in digitally-enabled business Contract we’re Second, and the

we’re finally, ever each more in initiatives way have in planet range than segments. a to and communities reinforcing integrated people, our our focused of a commitment on accelerating growth we profitable before. our deliberate of and And Third, our business our

highlights like few share I’d to progress of a our this quarter.

At quarter additional of end naughtone. remaining early end majority of we of the we As you HAY, shares the October, interest two we the transactions know, announced us ownership Subsequent during in on purchase to acquired second of the important closed the in quarter. the stake. December, the XX% an giving

Herman these like will would that transactions, the brands fronts addition Jeremy While growing several to share We more a also these recognition design on honored were this fact to highlight our I to Miller valuable Group. are receive about quarter.

by Our acknowledged three influential total efforts groups. were societal around impacts

recognized Council for Supplier Corporation named the our for XX XXXX and also Development diversity. were leadership to We of Investor’s for values. sales of the first-ever $XX Daily’s The supplier million National top Herman companies the in Miller Year list Business as governance social environmental, Minority under companies and

Miller. our across Companies XXXX. It’s chair industry-leading finally, Cosm Responsible focus drive of the continuing its Most to list Innovations unlocking products. of us our key And Newsweek is innovation named Best XXXX. TIME brands portfolio and of Confirming of our task the power high-performance their one to here, Similarly, Herman named element of One of magazine a XXX

honored we’re While we this innovation. by also recognition, leaning were on forward

delivers launched recently combined with line capabilities. technology conference an important a tables global sleek, of seamless Our market addresses customizable and headway opportunity style,

on to out we’ve dealers continue and this rolling gain goal America through enablement, digital North our processes. been digital network dealer and to Scout. new end them new their branded improve we to tools for better our our We’ve our platform On the help selling quarter traction design serve customers that

XXX% America, year. Building expect to during dealers tool quarter, We’ve same who fiscal also the an launched increase we the international quarter capability last by of an end a created over of year. on the X,XXX version platform over of certified the of with success, North a the launch the this XXX% our at projects in

architecture. work completed will customer-centric work This to digital at as platform. ensure do unique the business e-commerce working with design our to are we’ve through of define are operations just ways updates Retail, our number are for to couple an easy of to foundational we we a that each that is that On e-commerce as front important the meaningful These possible. forefront, ensure as journeys across customer of our aspect begin extensive we

focus growth, bottom With profitable benefits to profitability our our line. deliver initiatives on America to North accelerating improvement continues our

low-end the targeted of at to million the of benefits FY are gross quarter. XXXX, rate of run second savings the We of our by in end $XX million approximately $XX million with $XX

brands excited our of Design as portfolio we’re Herman Finally, HAY. Reach will Retail, of a business a we industry Herman have lead track profitable announce Within Herman digital Propst including transformation. proven across veteran named Miller, that Debbie Debbie building brands, true Retail President record through Miller’s for and Miller with to

John the but President McPhee ensure of Herman few an play will role leadership over be Miller smooth Retail, a transition. stepping to months important next will down as he

While behavior we for consumer look thank also within all we to industry, many knowledge best future. forward his in John him of interiors perspective, the and the Debbie’s want wish contributions furniture fresh well as the as her to and

we all we creating inspiring on remained of priorities, our do ultimate help things. across work focused designs great people As our to goal of

more Hocking, it over let about And international who share will Jeremy turn me with our businesses. to that,

Jeremy Hocking

growth has year, over where the XX% everyone. It’s per including an of a the for delivered you organic We’ve growth been five grew morning, last for profitable sales annual organically, Good operating pleasure business of past years, our International Andy. year of accelerating we you, a today. business. join of margin sales key driver with Thank to X% XX.X%. adjusted

the in reflected year, in demand global uncertain growth the also our more creates the growth in levels While comparisons international last second difficult volatile inherently quarter business. more sales year this international fiscal picture

has seen tensions, margins Mexico China to this our economic basis manufacturing in Helping to XX continued over of quarter, geopolitical impacting the been in consolidation that In facilities. Europe our Mainland we’ve to addition year. mitigate picture a with those an gross global contributor important last of points to we’ve softer An pressures, demand regions. expand these increase and expansion

Looking ahead, naughtone and a the for remaining offering of future. dealer ancillary acquisition there our of we fast-growing across position Herman of network. products, Miller’s number area the well can shares expand in we The helps collaborative initiatives of the us global which believe that are leverage global

profitable HAY, with to we partnership the directly Hay, and designed, Similarly, make world. creative products accessible around Rolf directors, ownership well aligned retail accelerate Mette continued will our with and HAY’s Through position increasing Co-Founders high-quality in audiences to growth. in our HAY’s our priority contract

to to look time, by expand dealer same We accelerating forward our exploring between leveraging we’re that the one products of key regions help our Herman this to will cross-distribution of of our At wallet. channels. to global our opportunities share new initiatives our partnership respective bring brands the Miller Group with the distribution

unlocking of a globally. the recent Within the of addition Herman as seating One well Reach, a of chair Crosshatch family lean as from Design examples great The Geiger, the power Miller from of

At expand further offerings. in to great as orientation of Miller build our dealers we driver the remain we international We for our Herman in our only who we Herman regions, Miller. to growth gain growth same the believe are will Not our can add global existing leveraging have our believe will teams to with meaningful time, product we share each the mindset business we One dealers network, important our an continue business.

to With that results the overview of now of Jeff our I’ll more for call over quarter. for international, turn the discussion financial

Jeff Stutz

Good everyone. Jeremy. morning, you, Thank Okay.

X% above last quarter million quarter in Consolidated were second sales net the of $XXX the year. same

level. million the of period in the prior-year below were New orders $XXX X%

levels order record quarter were this period, and difficult levels our believe the quarter by persisting levels this had mentioned, a uncertainties. macroeconomic demand but to in Andy reported impacted we As year-ago the comparison geopolitical also

representing of an X% of Contract segment, X%. quarter, year increase Within North GAAP-basis American were our increase a $XXX in from an organic million the last sales and on

across million year New fairly and X% last quarter in project reflected than the sizes. $XXX orders broad-based lower were declines of

standpoint, From information partially a and services, by government and business sectors, offset in lower the demand U.S. levels sector in healthcare we technology. federal communications growth saw

with segment Contract last International the $XXX the of roughly million second Our year. quarter, in quarter flat of reported sales

below X% New reported orders same basis were on million organically. lower of a X% last quarter the and $XXX year

To challenging for that perspective, second quarter posted pointed in last note important order the growth organic faced It’s quarter, the business this order year, growth international the in international of the to of Jeremy as business comparisons particularly XX%. out. put

contributor comparison and Now in our the tough been recent heavily to our growth a growth this profitable future. continued years this has key strategy driving for in decide factors quarter, into business

in the Southeast Middle the experienced were levels UK demand this partially were Mexico, year-over-year project lower growth Asia, and background, declines by East new and China quarter. mitigated that These India. With in

$XXX business from sales reported of quarter an Retail in X% of segment quarter last increase Our same the year. million, the

New were on $XXX up a the basis. of million X% orders period in year-over-year

International, from growth and Design primarily by growth prior Within Sales this growth stores. with driven contract, Similar outlet also comparisons new was Retail year. year faced Reach XX% studios last order tough to e-commerce, quarter

dollar $X U.S. consolidated quarter. impact a to the sales a of an unfavorable sales We growth the rates year-ago estimate levels to relative in in was currency million net From changes of on perspective, approximately year-over-year impact the the translation currency in period. the strengthening headwind had translation from

Consolidated along consolidated efforts. gross the at margin XX.X% costs, The gross same which tariffs the helped These lower profit with XX.X%, reflected in and our pressures within expansion price benefits was improvement by ongoing mitigate progress in net second business freight quarter and was in favorable quarter continued level realization from an our the expenses. increased increase from retail gross driven margin steel year. from last margin primarily

imported for to U.S. continue that components qualified benefit from of $X million granted the results this Representative. expenses, tariff While year-over-year reflected a to quarter of applied we China exclusion was by that the Office retroactively related also our Trade approximately our bear certain higher

estimate $X.X range quarter. between and imports tariffs we Chinese $X.X million per gross impact on all with forward, the Going will associated million

have negotiations of calls, we in believe noted a pricing, through range and previous leveraging profit we’ve these including improvement as fully supplier Importantly, our we pressures offset actions, initiatives.

$XXX the investments. quarter to primarily ago. quarter HAY expenses million million million, in $XXX related second same and the of expenses a included current The of special associated naughtone charges, transaction quarter year to $X compared Operating the in with

as in increase $XX expenses in recorded selling occupancy second the year. totaling well last studios higher expenses, in last expenses since variable million as we opened million, initiatives comparison, of these fiscal year. special items, of for the $X.X Exclusive our operating and staffing quarter from related business year-over-year in retail retail marketing, of digital mainly resulted By investment to charges and

operations. manufacturing the and Herman in both Restructuring $X associated operations of improvement with within Nemschoff manufacturing facilities. quarter Miller targeted also the recognized North workforce million across plan American our a to during associated to footprint our profit second charges quarter its charges Sheboygan including Restructuring other initiated our initiatives, our optimize reflect this of actions reductions facility made related recorded with expenses quarter

of GAAP-basis, year-ago compared to $XX period. earnings reported in $XX in On of quarter, the operating we a operating million earnings the million

we adjusted operating operating sales other Excluding last adjusted XX.X% restructuring the sales. this or of income of $XX million, special quarter X.X% were and of million, charges, second earnings quarter comparison, or reported year. in By $XX of

XX.X%. was The the by accounting effective quarter second XX.X%. in tax excluding non-taxable tax gain recorded The $XX for of the gain, this was naughtone. million the impact of rate within And gain rate This effective a acquisition this impact was the was in reduced the rate with quarter quarter the other connection income. recognized adjusted for

per to this Finally, compared earnings of compared same totaled diluted to $X.XX in share last last million, $X.XX On $XX per adjusted second quarter totaled earnings $XX per share the $X.XX quarter year. in second a the adjusted in basis, net of the $X.XX, share or quarter share earnings year. million, basis, or an per on quarter

brief that cash update call sheet. and over give balance us the turn our to overview, on who will With Kevin, I’ll flow an

Kevin Veltman

working Cash ended from Thanks, over of $XX second reflecting were cash than lower higher earnings Increased last quarter. the on million We quarter cash same to capital, higher which quarter. operations XX% year. last hand accounts flows cash operating with increase Jeff. the to the the million, total in were of quarter contributors the million, key primarily $XX was $XXX lower quarter cash an in equivalents flows receivable due and and

cash repurchase in to required was were the investment our funding, funds third Capital the for the of modest on expenditures quarter. capital transaction deployment the the were activity the in start quarter during Share and million in paid but close million. as million $XX focused was million HAY of quarter, not quarter $XX at one dividends the reserving $XX $XX

as $XXX debt-to-EBITDA million X. debt of capacity in to at and was our approximately the our The of end at facility gross ratio We quarter. compliance available bank credit remain on covenants, with all the X.X quarter-end, stood

the Given flow we our ongoing cash forward. meet from capacity, needs the remain operations of financing cash total current balances, borrowing to moving and business well-positioned

With that, fiscal to quarter the earnings for I’ll Jeff to cover sales call the back third and XXXX. guidance turn of our over

Jeff Stutz

Kevin. Okay. Thanks,

to a approximately contribute in in and expected range This sales quarter full expect We the the basis, $XXX third of both are million HAY $XXX for naughtone, XXXX million. which of for between includes outlook a and revenue on combined quarter million fiscal quarter. to sales $XX

fiscal the perspective, From midpoint range an of this to a the revenue increase implies compared of organic X% same year. quarter last

range This net realization, consolidated expect initiatives. third is gross benefits between quarter basis margin ongoing gross third fiscal We to XX.X% prices XXX our XXXX, the and and net higher improvement lower of than XX.X%. quarter midpoint margin reflecting price points in profit forecast the from a steel

between to $XX seasonal million consolidation of $XXX the full are slowdown The third that from the includes month relative forecast estimated experience also in around the contemplates million normally million. This range of quarter HAY an the both expenses in naughtone. expected and range production the quarter $XXX in period January. factory we and Operating holiday and

adjusted be to the period is anticipate assumed for and between XX% and $X.XX our and per tax We effective earnings between share $X.XX XX%. rate

I’ll now call turn take to operator, that, over and With your questions. the the we’ll

Operator

Thompson [Operator comes question line Instructions] Research of first from Steven with Ramsey Group. Our the

Your line open. now is

Brian Biros

steel pieces then just taking for want profit my the some you gross start lower profitability than is slightly maybe of guys This I point lapping pricing, a out Steven. those the could, when in give you additional to the the on – with consolidated guide, favorable Brian questions. steel morning. the Biros lower XXX start guess, to to for and where called will Thanks you good higher on And Hey, basis one, I arrived costs? the that initiatives. gain? the color sense if I wondering was quantify came

Jeff Stutz

second and Hey, part. take answer here Brian, steel Kevin, start this Jeff. that data pull Yes, can a on I’ll the is you and maybe

So and, buckets I’ll Brian. you in look, frame big up big for this

going point basis. the gross really the basis this XXX price the on of a the by pricing, way So to actions impact improvement break I’m

of break to going out the I’m from pricing. So impact tariffs

Obviously, actions larger were normal tariff a situation. took the of as result pricing a little than the we

and about year-over-year. So the of in that prices course, Commodity Tariffs benefit offset to year-over-year of flow to pricing basis in points, XXX total, in about year-over-year. through. the somewhere gross of XX between question, points down okay, total, with contributor, being XXX pricing tune being steel your basis largest being,

of about there. get points benefit You XX basis

revenue of retail point one including benefit, gross the higher we would the combination a some of being margins by but the of mixed than mix, some business. rest remainder freight has then business, larger our write I channel And growth structurally drag to offset in just retail segments the

a higher of should across XXX to much the as that’s that out So production production basis nets and leverage numbers, that as improvement you in business factor So year-over-year. the volumes well to some get point close

Kevin Veltman

And this then, is Brian, Kevin.

On steel next about this little lap been in It’ll to running and full a we’ll it’s down rolled quarter, a favorable more steel QX front, way has ton. start start our per that of that year for quarter next $XXX bit its guide cold really in implied the to QX $XXX ton. QX, work

Brian Biros

QX. or the low-end appreciate some of it. I right to of I the the could more guess, the us gross color. still just on get guess, but guide me gross the Got that would profit, the you One early the from for now talk now. assumptions I for margin guide all drivers for about high-end QX? from

Jeff Stutz

starting point movement again. factory would lower walked say, in the our through have of and production tend year-over-year, basis, imply you well plants guide puts just mainly in here margin kind similar as fairly terms gross QX I as seasonally basis our Obviously, – levels, to year-over-year U.S., a as Jeff we’re a Brian, on would be QX. lower is a – both Yes, quarter, takes because of internationally. always you for in I

starting I if and That’s than we already would it terms within our a swing similar certainly single gross our outside guide – business margins any from probably and environment, as lower changes in see similar of production aren’t trends you’re So don’t business which by on the the quarter volumes But pricing less the our get leverage depending in international factory perspective. the U.S. kind to. the predicated down that factored biggest and or is But in saw leverage biggest production of better That’s factor into guide. pricing, this we point leverage fairly factor on up large, and you anticipate. the commodity of you probably price flow-through. can in

Brian Biros

Thank it pass I’ll you. on.

Jeff Stutz

Yes.

Operator

[Operator next of Instructions] comes question Greg Sidoti. Our with line from Burns the

is line Your now open.

Greg Burns

color Good you you quarter it can the of point saw throughout or the you. a you the any business, sort quarter? at order quarter, discuss or softness saw materialize something us And the was in of during almost pattern later there? just morning. this particular Thank give trends additional you localized reach the Could broad-based did the

Andrea Owen

is about saw the of this was this to And volume QX the really timing as quarter, the first orders. part price a first we had into was we believe as rebalance few softness million nice which we seeing into look pickup see of prior in $XX And we the quarter, to then this we’re started in October. into perspective, million orders we start QX. flat. November to Andy. and turned from September a of we in of and weeks Greg, in Hey, pulled then November, From $X really quarter Part increase the the

a September of think, of we in the pocket it and little part air and do the October quarter. really bit So was first an

add you to would Jeff, that? anything

Jeff Stutz

right that’s think I up. No,

Greg Burns

of orders? more mean, the are you orders? the the in growth are few us any or I are And in you give kind they what you Okay. improvement can on you the up improvement – are seeing year-over-year, – of the seeing in first granularity terms in weeks,

Jeff Stutz

of of but those this data, Yes, level the Greg, we obviously, at year-on-year up couple weeks. Jeff. two through is about first X.X% weeks We we’re – consolidated have

total So the improvement trends certainly a in over QX. over we nice saw

Greg Burns

industry that’s Is you the very gives could Okay. demand outlook and an this And was air positive positive trend. remains to so pocket a anything – then for maybe else that and…? confidence – point a as okay, the obviously, there you whole that demand

Andrea Owen

as the seeing internationally strong our at businesses we America, and four-month Greg, across in in we’re Yes, of look in funnel funnel North month the really funnel. all

So that gives reason be to optimistic. of us lot a

Greg Burns

Okay, great. Thanks.

Jeff Stutz

if And anything you terms Greg, I add your just want in might – Jeremy, on I qualitative business…. know to don’t

Andrea Owen

Yes.

Jeff Stutz

to your I business bit, QX a …because comps had, improved difficult know start so. particularly

Jeremy Hocking

Sure.

in And huge really the is one in real that that of this that through a up been I can I it tell a and got positive things, estate the we held market election market. that my general have that it’s you accent, sense of think UK, And particular relief a the speak from release. just could straightaway. bounced I some in think transactions FTSE X.XX% get amount

we’re some good about think that. as feeling I Clearly, helps always progress U.S.-China So in well. negotiations

catching think up right now to I was the optimistic were and I team just weeks six they eight than are feeling ago. somewhat more yesterday So

that’s pretty So good.

Greg Burns

margins. just on some to at what’s then those that operating switching on I back transitory the was improve there facilities, And this retail profitability? items? business business. And that going What’s of steel know a there view distribution the the year, some getting maybe your loss to were status still would through then things initiatives Okay.

Andrea Owen

Yes.

our I they prior to charges you large not and I look had think were as if were we’ve the move, at last DC quarters. in they think, warehouse that that the as in

won’t forward, that we Going see again.

growth for as to biggest here, invest in think, I us the digital. investments around we are really continue

brands geographies. our really So sites all we and have upgrading around a across our of strategy multi-year

that going investing from growth, a for been our as business forward allows then that We architecture. And DWR that. will store doing digital. HAY, particularly flexible in single believe we’ve come as So have will well

will We do continue to that.

continue territory and say, in improvements is leadership single have I next with optimistic. So But majority the in to would still that positive forward in single-digits HAY, we’ll that the as we to get margin we look we’ll quarters. the growing I few margin but say, to would now view operating in to ownership, our very invest, confident we’re change still operating

Greg Burns

great. Is else anyone there Thanks. Okay, up? queued

Kevin Veltman

if Go ahead Greg. another you No. question, have

Greg Burns

the press you did you in the give the – talk an Could it there on call, commentary release. I that about in business? but just Nemschoff, think some us Okay. was update on I’m is just trying to is just structurally challenging, something market want or that there is lag? – understand, there to the specific causing that business to healthcare better Nemschoff is more something

Jeff Stutz

Yes, Greg, good question.

So, Nemschoff look, the business is product I want the Nemschoff, – we it’s out – this we that our business. really – are get to clear. Nemschoff important to be healthcare of really

is And upfront with so a that as overall an change. be impressive important point this that healthcare Miller of a doesn’t offer starting very Herman I want component for that to

we not the and profitably that What news. can business been that for that a on we’ve been the – is sometime new operate this focused it over have business. work and so not has consistently that years has We this been leaner, getting is that progress case in owned

And so big aimed This a been there at was has that. announcements of just latest round push.

because upon tell the way to the and, so the of But improve actions to have I be goal to we’ve the we’re today careful business do be too at this continued much a going taking is a is, sharing the where And you little obviously, prior QX ongoing that quarter taken on little going have can negotiations. some that. I’m a obviously, I’m – including we what detail. it’s this reporting profitable in and point actions second to – in we’re

I we pretty where right the has about in a feeling It we’re direction. heading journey we’re us. So stand. think been good But for

Andrea Owen

Yes.

Greg Burns

North the then margin in America. is strong And operating very Okay.

gross in too. there, You’ve margins improvement gotten a nice the

the I out further wanted should And leverage maybe we a Thanks. be operating? what your are you your to confident of So maybe kind a consolidated margin on America, to drive expect kind view basis, business? on North business of where then view would sense specifically that of of just on get improvements, margin in

Jeff Stutz

Yes, Greg, again, Jeff to well. been With business so again. – American this the is very respect North performing has

have As profit couple been say, focused you business. contract the well the North we years. specific optimization to last, very for in last within XX I’d And over of months, on the American XX heavily terms know,

we that margin much that also partners been equation. pricing strategy the supplier the we’re working of have we’re suppliers general, – fair very we that focused have And have arrangement work but partners stress just has that And on long-term both line and gross of in on sure making and want value. making with our a that and that sure I important we right then sides we to that

conversation. And so that’s been an ongoing

versus really through. does on I good so the that time the get – And in kind The short if think volume made progress leverage the flowing to over you get business. performance on top much it in this as you always margin improvements of of line depend that can get

So this year pretty quarter order the We’ve a a – had notwithstanding run good so. over patterns. – we’ve or last had that’s And important. second the

to factories we optimistic show running And we to kind in continue able that I generate we leverage we’ve the of profit think, as past. can those be forward, the been look keep that and

front, North the on working things well. quite So are American

– team always and management HMPS. a folks never the And – done. Performance we what we’re a great System Miller have supply We’re they Herman that we call on lean are or in

And so ongoing. that’s

that And line continued from will so benefit ultimately top but dictate. performance that, we expect

At the look, continue have the to consolidated business. level, opportunity, we

and factors. wage-based there’s it the inflation commodities, that’s often inflation, is While about we’re equation. but pricing getting good only healthcare pressures other be that We important not the business the talk inflationary always facing flow-through, of part

to help in increases place kind look cadence reasonable put to we to price so opportunities of for those. And continue will of a offset

price that those already – – Some the in on a expect of if place those for in it has points to now. we from lot typical you the And obviously, help happens flow-through those get our we and get depends – will for. the actions. sometime of talking which of kind pricing And are commodities been plans what with

the freight improve over or from retail, we’ve within past Andy has profitability effort year which secret then reduced pressures facing said, to overall net retail got business, been the And as revenue big of no that a so.

that. leadership new with I in I’m us working ideas. coming Debbie We’re going she you’d on come is add sure don’t to anything if that. And some Andy, know onboard, with the new you to and give

Andrea Owen

would Greg. add to that, I Yes.

and we the believe retail as of lot improvement Just launching the we a optimists side our from years our business, is the in same there. that learned work last for business, effort contract of couple we’re room the because side of project obviously in there

a help, too. be will big that So

Greg Burns

Okay, right great. some you. terms up was interest investments Thank And that can HAY, more controlling highlight maybe creation in investments And the kind immediate do you then the to time Why of in value a increased each, step there? opportunities in you now have of investments naughtone. of HAY and in then the now your for the lastly, those?

Andrea Owen

Yes.

just let the start So beginning. at me

I think the time. is now right

If number incredibly globe. you majority like with brand start now We successful an to ownership it’s contracts the been having things. naughtone, around of the feel

out, areas enter helped of but the is naughtone for also really America. growth international one markets, Jeremy us it pointed As highest North

perspective, the then tremendous we’ve as some let bricks-and-mortar retail to globe unable compelling we retail of also solution growth its brand, quite HAY, and been accelerate naughtone. for Jeff online. incredibly sometime, I’ll also minority potential from HAY believe contract And and North creation both but opportunity America. in in is about And ownership the more we’ve a an really talk around around value So

us put have Rolf and Mette, ownership partnership can get we America we’re like the in to what brand and do with started. feel and gas we that we fire that this on the can excited really North for Now

Jeff Stutz

market that businesses would this spot sweet where furnishing, is Herman the are market impressive both in this the right and moment these to I part ancillary have and for is it’s And of this add going. in for of that a of us only is both is, of HAY naughtone. address growth. – now they where of much Both Miller time, track right at a in thing true the – the attention Greg, area Yes. family record their

us makes impressive already pretty think, anything competitive. is what much to don’t to overall adds to And that get more and that. add just I it so Jeremy, a I portfolio And

Jeremy Hocking

to I our channels still, North only America. we’re that of penetration see add in think, into HAY really the would I beginning contract

go of community. architecture there. darling think of kind further a So integration a and to opportunity explore very this of established upside HAY, in is Europe, design where still distribution And great of strongly the lot channels. We a sharing of and kind

some that wholesalers as opportunity to as products distribute interested companies, and be dealers going in across markets are some that are wonderful Herman dealers Miller the channel, So Europe. HAY. Many very not I to to in well those got each in maybe Miller market think, discuss today of Herman they selling

Europe. So of brand, for there’s think plenty North this both in upside America and in we

Greg Burns

for the color. Okay, great. Thanks

Andrea Owen

Thank you.

Operator

call Owen further not I’d showing I’m any queue the like for to And questions in remarks. turn back this time. to at Andi closing

Andrea Owen

from all again Great. quarter. next Herman to Well, We families Herman continued joining holiday I us the season. look and you very, Thank us in thank your wish your you. happy you a want forward all appreciate you at really And and Miller, of very updating today. to for interest on here call Miller, we

Operator

this gentlemen, today’s call. conference participating. and Thank concludes for Ladies you

now may You disconnect.

MillerKnoll (MLKN) 19 Dec 192020 Q2 Earnings call transcript