MLHR - Earnings call transcript Q1 2021

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Operator

Good morning, and welcome to the Herman Miller's First 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 first quarter earnings call are Andi Owen, our President and Chief Executive Officer; Jeff Stutz, our Chief Financial Officer; John Michael, President of North America Contract; and Debbie Propst, President from Herman Miller Retail.

shareholder noticed have press the the changed release adopt have posted that quarterly conference may replaces to we that yesterday, our a call. you in remarks release our was press our As prepared format on letter approach to allows the We this call. and provides for questions information for more believe time timely and both investors approach more dialog down

non press site are press posted today’s amounts release basis, a at presented Wherever have Investor non-GAAP Web on reconciled We Relations release have figures hermanmiller.com. any on and the GAAP we our as GAAP well. the within

Before that session, this Q&A statements. I everyone include will to forward looking remind we begin call would today's like

these press date, today For to on Any Please factors information cause SEC as and that release, actual we on questions. no this Today's we undertake new for to make operator are could is looking or from the forward back and refer future that to I'll earnings the over materially as update looking statements filings. result your a we'll call XX obligation results Quarterly of scheduled based our well turn and take these call forward With Annual as statements. differ events. as the assumptions to that, information of statements minutes. begin to

Operator

& [Operator comes Greg Company. Sidoti instructions] question with first Our Burns from

Greg Burns

off on temporary different the I they margins business. thanks the sustainable actions segments taken wanted strong taking guess questions. pandemic. the of for you've the some the morning, start get just know of Good the beginning of at a I to across are how cost sense I

this you forward? back P&L. you if to quarter, were that going and wondering, maybe starts should sense avoiding about were the we to unwind margins of items some Can or a Thanks. into come think temporary So give relative we of that of, I how where was just the just some

Jeff Stutz

start maybe I'll is this off Yeah, Greg, here. Jeff.

take aggressive So you're quarter reflected to fairly some pull last as results right. that back cost. quarter for in We our actions certainly did, the matter, and for on

things those are of Some structural. more

earlier some were Some temporary. you return form cost of them the of reductions in did saw intentionally reductions. quarter, in sure the of announced we place we in that in And I'm wage put temporary the are fact,

So those have back. been brought

kind If somewhere that kind annually. taken actions you reduce -- think had about that the we the of million equate that we've the level, between at million took $XX headline costs, actions workforce of to some and $XX to reduction we

like $XX temporarily the employee That's some that were programs exclusive the annually, way, be of And around the by the on wage have benefit feeling order probably back and million reduced. of that's that naturally in would expenses COVID. We of million, is and which some in travel forth, then we're still so of occurring we've pulled $XX because that restraints place, rollbacks. areas

million So $XX reductions. you're expense between current per in year at somewhere looking million $XX and

right the now. As to bring determination to we evaluation That's roll those right some benefit when time back. a we forward, make have of under programs is

some that further this Clearly, yet that on make evaluating. feeling. for we'll So something I'm we've good we're order got not but get the ready quarter that's first But to call. call into the we're results pressures sure but that we're

against. going be to that so there's some we're that pressure expecting still up And we're

not made. those offsetting shareholder revenue with in way, letter There's those, certainly going some to all expenses in more the even say the mentioned back progress and that we've those of in making reductions digital in to do that. or going reductions and is have in -- investments by there's of make cost variable But the would pull We programs. somewhat to to We think business evaluation. do be I on we're under close. lower addition some the time to incremental moving right that the it's area are occur the those, type discretionary we and those forward, levels. So naturally not some some are We not of offsetting investments.

we're up that some there got spending. some retail here, opportunity a place to marketing are of call ramp-up forth to she'll about bit And and representing be of on on Debbie So the the going we're digital to the talk see little in well. sure programs an business. so I'm We've as the some picking in and some going spend that have programs

cost frame I reductions structural as that it are I the made. So we've would those think

quarter look mix at from of factors the by Clearly, business, that retail the segment. favor. If here margin which you our in a were variety the performance was tremendously headline for benefited

of those we expect by at offset some here, we to of quarter, forward durable the Some the least be initiatives into as a move probably bit little I that mentioned. upcoming spend

So there. performance really good margin

the performance And across the to in that business, businesses, discretionary as not Michael, to some it. Perhaps to in job on done is the have on nonetheless, say great level our John pressure. for the in he We're the move those of but margin some exact really same areas operating I I'd ahead, strong. pretty speak -- a again, segment same in and And particularly particularly the I'd feeling and the thing contract and we think real America, board this. international. But offset order reins elevated of result elements segment. performance call as spending, delivered those strong we while a say and can help expect the for of pulling teams North

we good, about to of forward, expectations able to performance. to bit top the is move the line feel least hold in least near-term, be perhaps the as at lower we that on we're albeit performance QX going here certainly at at a benefit, and So some pretty

Andi Owen

to bottom of been months testament add six Greg, think, differently way, we would think is where eye to the the like we've we that, can an a adapt by keep have in do I on lot a strength the things I world, other what places the every this can ways learned to in virtually. team line. I is about changing to last the And and Andi, circumstances company this operate

we a that been through, the to good of have Jeff's an infrastructure been think making along making we have way. carry point, see I with digital So we expect to portion the investments this in continuing and

Jeff Stutz

And Greg, just this might is Jeff add. again, I

lower business believers on the line, that range, you say how think of recent deleverage. deleverage range of maybe but are medium think term, still is pressure I on I a would we based at the kind think the of if in performance, level. in that's XX% we to XX%. that the it that If feel to the at it's probably about about probably end more top high

Greg Burns

we they're And buying that to their that start adjust internationally? might decisions And incentivized the strength do see Or employees back the forced coming America opening in of the relative kind up as making for driving to of seeing North strength offices. the as relative at trying backlog or to there start maybe to Where of then international. open their is is that here? quarter? are kind what's of on back, looking they're something feel that coming through Was we get start I'm they businesses bring the you And a from? up? just

Andi Owen

great It's question, Greg. a

are we But world America gives and I look at think of kind of rest us now. of portion on right in of to COVID. would big there say the as what's hope international the what's of happening is North curve countries that I happening many the sort a the related

ways and People office. So there. People about We very, the if China the very running our look up mask. is without in are back around in at a many we are think APAC normal in walking way. region, businesses

places seen we particularly world Even to new return like parts kind seeing the that to part really So coming Denmark up back around that, we have the of Europe, are life in normal. of of normal. and

optimistic nice HAY, we in uptick the of start see COVID, international happen. things as And and down those also of well. businesses. business both So curve those we That's [Indiscernible] forget, supporting as we're are we'll seeing don't in acquisition to the with a really that continue this

think control you get anything? been we we would indicator add of coming what's if the under Jeff, hopefully, strong that healthy. very has U.S., as business this but So in

Jeff Stutz

No, I that's good. think

you Japan and to add I would China, think this were the alluded quarter. regionally, you Andi, just to Europe. really Middle also I alluded strong East two the parts Continental business of for performers

So that would I bears mentioning. think

Greg Burns

I Okay. just in lastly, then think in trends the about you moderation couple pretty mentioned release, the the declines second And good quarter. quarter? press some of the weeks of the you order And first in throughout talk can

give trends? just maybe to more it So Can order color is is can you give board? little more a specific you bit across on detail, just retail, or little bit the a that us

Jeff Stutz

a and were couple closer couple back the frame chime the itself. closed quarter just kind XX% the would we're of ask Yes, weeks improved. the time about of the the organically order quarter. to June first in headline in just you, say quarter. of the organic of bit, Greg, then quarter, Debbie, Maybe We on so to through the down more this of add down level, an At here. in down are and the little That XX% quarter, say idea. you the half the in organically with still, trending consistently. of total. that color and XX% And kind down numbers, of back were to organically were of and closer And by for is we first These We just that the through level, would I'd the feel the way. and I the consolidated by by I acquisitions, give month to We second of in to Jeff. weeks of free John half XX% down

Andi Owen

-- John to Debbie want contracts? you you in Michael, John Michael, America or North would on weigh

John Michael

I we in a would and Sure, saw Good into definitely strengthening trends Andi. the order morning, half say, Thanks. back QX QX. of in Greg.

next the order that if figure on much that's the is as right workplace. what's conversation our indicative a Another down nearly to think moves out opportunity to not with next bit in clients trying we are what that. But terms still We're trend the And of the is. figure as is are forward, to the the at there a data point relevant the obviously I going it future fact out funnel relative trying of office. of them people look are as of in pause

Andi Owen

Yes.

think that's I I great cancellations, seeing what point, you many road of seeing kind of is down guys but a mentioned are not we're a we're because think we which things the we've people seeing, John, push bit. all before little to

QX. in turn any Debbie, would things to funnel operational, some we'll to around, we're retail? we to as start more start that on see become view think see add which of you So point starting of

Debbie Propst

Absolutely.

in or within at June of then July retail were and segment, [OI]. [OI] X and to saw to X the plus point XX So we orders plus both XX% August

So we've order definitely A pick seen of consider. dynamics there trends to couple up.

The then mix contribution significant first still month. new that site, of e-com is in of sitting conversion at conversion majority brick-and-mortar the Web double improvement launched July, locations that in Coast had that [OI], improvement. dwr.com we been has closed And our our were significant which East us. June, for our for has of And secondly, with

Web customer indicate previous experience. are metrics So throughout that whole dwr.com increase conversion there journey is our versus site our exciting advanced of the And XX% that performance a really new online. some site Web rate

Operator

from comes with Steven question next Thompson Our Ramsey Research.

Steven Ramsey

I'll figure? it everyone. into traffic that And is brick-and-mortar up any color? kind that of demand on deeper side, purchases, continuing what's mean maybe start ticket morning, sales customers X%? can driving you buying guess smaller up then the with down. was you it with I said items? I or you is higher but Maybe levels retail. Does X% more Good bigger On can items, go start Just mean,

Debbie Propst

This question. Debbie. is that Absolutely. can I take

last locations. the So year. we seeing down performance in rates seeing those year X% we XX% plus are obviously to about sales of at traffic in XX% But are brick-and-mortar to locations at our to last

intent we're typically in customer point Actually a the at customer. see. seeing a is different physical location what coming So higher versus what to journey their we

customer phase end touched consideration the So customer usually, journey, ready flexing sort seeing is transact or store at the is studio the the coming the the and of during the to still And what their felt -- browsing we're store studio the interaction ideas. once of to interaction now when and and is product.

home. are that's as higher on ever seeing upgrading customers have And that we're higher intent higher obviously, the had spending more in we're through as well than conversion driving before. also and the order is our value, So pressure on traffic more their coming seeing them they've door, homes

tactics. work for harder to multi-use make home. looking People are have decorating within the spaces We

And with larger value help so we're store as a channels drive a result. really through that able to and our

Steven Ramsey

the that on ship maybe able second, I not that I normal to a to then similar QX, to guess. of strong reflects basis on just at strong guess, guess, Two questions, up timely order ship well I as retail, patterns orders web year-over-year being and demand being deliver manner? growth much order in how the as buildup up a the levels times? trending Are does a as And strong and quarter. XX% growth then indicate in sales products of able in you QX? And with so for timely the

Debbie Propst

that June of volumes orders each ship, collect course orders are close data totality. the and May coming backlog the levels So sales into QX ship in we're bit QX. April and A didn't going sales our throughout normal but to with other of obviously little of pretty we were QX and very out in

really I about So feel the we're seeing. trends that order good

Steven Ramsey

Great.

So QX what take necessarily would much, would that sales lower and orders QX takes sales, there's indicate. reason there's no that no puts than much

Debbie Propst

slight May, forward seeing rates a in QX. that into order coming we're and carry orders into from we’re similar August we April, in expecting bump June got We July took that but

Steven Ramsey

office for Great. others the of as ideas discussed, of world they America to that have discussions office orders And well of one companies are any theories kind now kind contract. then what brokers switching of and last about some what as clients, of that to and the offices? have on the the North future discussed looks future companies with furniture the saying like? office Do In the me, of have reflect new and you compared

John McPhee

Steven, this is...

Andi Owen

when add John. I'll Go ahead, ahead. And go done. Actually, you're

John McPhee

work and we're and in I model employees said seeing see was is June thinking XX%. that of done mean distributed. customers the our new conversations client of definitely I survey that of this could is future Similar the year, more employers going the what to transition think of point that remotely. workplace. would view much be XX% I say the pre-COVID, make work effectively about And in we number their

shines think definitely going So to mode we different a office, seen in the design where building of would to pandemic be more the distributed is enhancing work types add And that. starting more that on really the community we've and primary the I of and areas resource collaboration. and shift and work including those of adds be workplace, migration but to the accelerated focus the And more model, has and a intensive demand, teamwork -- What terms I going of And culture you layout to offices an to think we're on-demand supporting in we're value. that, functions. supports and Andi? the see supports in individual that

Andi Owen

and more now we from that as home, to schooling revamp have set people they office we're has workforce for workers this COVID. oriented, one been us because multichannel very been of have, are the model about, and future long the are do has prior the and we the we have that But our furnishing the home we're excited a than distributed here of given for ever a well distribution think Steven, that time real say, would support the residential before. help as a working I are spaces of given represented we given strength fact from the workforce even to sort for happening in And opportunity distribution up

our we working can as journey. the to in just way of we're think we're to on that Everywhere to with every are continuum. So from be to, a are used the to the back office, all along we that coming home. we're to as like portion different talking a going But customers way -- larger normal folks working supporting the soon customer from I we're companies definitely the back

for really of it’s it's a So the model. been company business our time full for interesting and opportunity

Operator

with comes Benchmark. Our from next Garner Reuben question

Reuben Garner

of technical had difficulties So tail missed end. and questions. some caught I I most Greg's the

I So I backlog, start the like that want any flat sorry to year-over-year doesn't retail. was by what's in with said sound release. anything. I in it if is going driven But repeat on of you the It think

So decline that's been number in prior two, simultaneous I guess, a been And prior one, order mean, big in time that that they mean talking this of come America? number the I kind and that maybe is does drops. -- is, correct? there's mean, with I than if in specifically give that it increased crisis might backlog quicker have about recessions guys around North does you back things confidence obviously,

Jeff Stutz

this Reuben, for not was a the repeat is that Jeff. record… question And

Reuben Garner

One for one…

Jeff Stutz

So let color you me little backlog. a on the give

for the it's said, contract as rough don't said, North normal quarter. down that out okay, first So if a -- segment comment, fairly about to you business, specific you I but is that American backlog it's as the heard coming backlog XX%, said know or she numbers. Debbie of Retail,

a want given would the pressure we're pressure, business with order of it’s tell it lot the episodic. down, I uncertainty. driving related, So I virus to of the I feels In still don't a organic, speaking, backlog, pretty up while in of the no give that's color actually international good of up. okay? just actually, about little say, by a surprises kind being some shape. paint backlog with there's there, XX% to still otherwise. just would lot generally you and mean, seeing picture and But I segment. MAC big what's you obviously, So circumstances it's and the uncertainty, It's there's

get a little quicker. if from around science a help on can our we I feet some can we more get do that bit confidence think we this, some back think have I

that's think I here. working our So assumption

to I Now by no That that's well. we're woods of not question. business thing right? any we is really were the would other very, say say the pleased, stretch, out very performed international about And has

Andi international to thing the in out, this of recovery business. As one a said, point segment in the our the I on further a just would nature backlog, longer-dated business, curve. The with little perhaps be bit though, is tends of ahead, that

You've more distances. a to longer have be shipping that bit got It project-driven general. in tends projects

be of general tends North in So a caution the into shipments. in longer-dated than translating that some would just to we little assumptions I see backlog America. around It terms

Reuben Garner

just a follow-up that. to And then

of progression? kind kind business. the think gave trends know down you Debbie then can throughout of breakdown same order or I you it that do you kind in gave retail And -- in the saw the North a for what You us? like for organically you of what in quarter. what mentioned you of the Can half. modestly second better looked was Can Like international America I the was break thing

Jeff Stutz

quarter. the X%. Jeff as Reuben. in them. far, improved with ended, as XX% of a is moved down mentioned the This start about And That XX%, about of I'll little quarter down saw, kind in taking decrease couple happy about organic International XX% the through We business, just new reported that quarter, Yes, of with we in you thus rates order weeks markedly to. again, the down organic order, north the we year-over-year. first number you number the we as reported started -- of or total.

first side, Hope to to not XX% then bit hold we close obviously. that, as quarter, levels. of new below I North we down in great. of month That a the in We American off August improvement the And closed closer order June down meaningfully improved hole year-over-year. an the there. the to think of XX%. started were in seen contract couple entry a XX% declines And around weeks was the was we've -- of on just to quarter, So in

down meaningfully still trend. like the but So we year-over-year

Reuben Garner

Yes. Thanks Jeff. That sounds for like I'm two. two

in into Greg. progressed. of might I to the than profile in want are at I versus sustainability responses caught mentioned product us on decremental picture. come to margin kind XX% I because And everything the Help think the mix a a do ago, today. where to the with question [XX.X%] is the rather quarter margin quarters. and next on first year not guess we sequentially has take and given a hit decremental tail my I go looking at of where the did the I margin channel Is And fair how to of I to I everything your a think decremental. Here's be couple replicating, apply clearly, it mix mix the lot maybe and the the ink of you from level has year-over-year release margins. few mean, to end -- XX% it QX that basis?

Jeff Stutz

you're with Ruben, a question. follow was that I'd -- say, last on here. three that Yes, three somewhat that for tip Maybe

So minute. maybe stepping a back for

I You bonus we long got our one this so And is in right? always got to know. everything point from drive can that from never performance periods that changes, you've in to followed factors the where overperforming, up next like you've us margin straight overall make enough changes. a ramp we're the period-to-period expenses mean, business walk, period that try to

wise. believers where you you But so is in necessarily what That's is you going a guess said if have the expectation think that Clearly, cost that certainly structural pursued, not because into be that seem get myself business to of coming math bucked on I I kind I'd little We times. had I areas number bit, -- a operating that We you'd end of you would of I as a reasonable. think back a it on expectation factors. saw higher deleverage. is out that that but I probably Certainly, And profit. and forward, unreasonable of could we QX, revenue into of lower don't typical quarter the that for sounds we lower significant that pullback like. further we're little pulled of sequential we that basis. a favorable dig this very missed unreasonable. continue because range mix the to we tell would and We've back say, cost first in normal not step saw doesn't we maybe I the at it. look can

Some those initiatives. temporary of are

so have of few reductions. benefit under back, those bring a for is right things the time we to things evaluation And temporary is when those some of like

decision us. in We the we earlier but and cost bit T&E, front fully that yet, little moving in of start Travel it's up that. made going haven't we're a a entertainment, to elevate quarter the get as around loosen to that wages and pullback announced. people the related temporary see world bit, to back We we've brought in

And say some this. back. things to costs the so front one we've But I been and opposed into say can thing investments the leaning then that those of passionate about There's us. I already those in forward pulled is and has the pulling think, protecting these perspective in is I you has of some that of my business those would Andi speak more of from really -- in can other Andy And as we really, to ring-fencing been digital initiatives back. have

want So of that those for there's to the front be and foot, definitely our are the investments coming some quarters. areas of in slated we business

recent that sense digital give kind lower toward that performance the going reasonable. I is to a see business based probably ramp-up to of on that XX% a spending some a range. us in all of areas XX% told But of few deleverage I would end we're so in the And say that think

Reuben Garner

do behind have be I one more there but here. want the to I queue in is anybody me, don't selfish And

Andi Owen

Go ahead.

Reuben Garner

in I'll one right. then. All sneak more

the I drove if the growth e-commerce boost? is you So I it channel But kind guess of and more look the much -- is it's the shift, specifically. don't permanent think the of have much and sounds margins maybe the retail e-commerce to company. quarter through term? -- in how we on the guess, going your pickup could business the And from the note, mean, that selling lot that e-commerce what much how where how a it Is changed that how so that margin probably e-commerce I that about home Jeff, did for like know mean, brick-and-mortar of through shift in channel, longer get selling targets I of does a a positive long-term you've now. does do I that likely permanent continue. office of got right the margin the or like? for And possible retail you're more

Debbie Propst

are So three is right in performance at now. play are There Debbie. really Ruben, this that margin retail dynamics impacting

of mix. We our manufacture did is is category, those vertically. that One products big shift a of we curation predominantly workspace into category which a see

shift. We also saw audience mix

shift we from contract business So the saw a our our retail consumer. and residential businesses into retail trade

consumer were of penetration trade this sort for residential XX-XX. So to this to we're And last year residential in year, versus XX% time about consumers directly XX% to trade.

than has despite last discounting because so we were channel a trade year, rate. the promotional more our an note, slightly that important that's And fact higher

save as And to last residential comping then able the is element were the mix. we channel we this directly. drove So on channel

fill. staff web margin studio with volume studios but incent sales without of also because in with web associated the We help we structure through saw such this quarter we do obviously, commission web, higher. in have in shifting seeing mix our web don't more high a the the of category drive, of is and So we're sales, as that's improvement really commission but they that driven obviously, because structure significant

see normalize things a but little these course go through to actively the expect year, the year. of we bit margins of of that dynamics the do as some we rest we the maintain So through can are

Reuben Garner

Got it. Great. Thank you guys and congrats…

Andi Owen

gone of There's a of really had spent strength. time retail strong building leadership I think would been I just and business in where it's we we we've one building in been calls and add leader of with a team I then And And all that, laggard said retail opportunity. your for the not think a that. strength to you lot that a from notes, us. agree past in has the to ton

because retail to see Debbie think ahead margins I of normalizing, the see in us. said is when of margins So the we what normal opportunity that's normalizing we new

benefited there the have there's going we we've categories lot other forward. retail that be think But Certainly, mix seating. that So extremely of business to a into bright spot a from been task performed going have in well.

Given workforce. the focus on the distributed

So we're the and future business in the this very optimistic about team.

Debbie Propst

underway. for some opportunity. HAY I’d a in was assortment digital us. physical we the Herman of assortment studio little moving that would growth and opportunity, have get we're in we and and Difficulty] we previously But We talked Web Web new about what potential. have call, gives are amount It to new omni-channel This catalog. seeing new a, a analog [Technical digital what levers huge in curation performance of Miller site showcased dwr.com the us of We investment of the the our growth front and bit through beyond site, we're a tremendous business approach, a business. about tremendous as being more of as And have was run just an

is multi-touch Our And attribution and also have audience moving huge. we our to we're opportunity using our model model. management been attribution last touch

our way seeing ad on channels understand in performing. marketing that customer in journey. in been meantime, the marketing making role shifts we've, channel the we think and are plays we that record each across return about the really spend spend the So But some

of This inventory have a performance life. breadth home on shareholder really inventory really their the And stores the and spoke working throughout about [Indiscernible] We briefly how of new drive reducing night. to improve personal concept, opportunity on of category last liquidation, we're launch that which also we planning understand those our did and enhancing our will course wellness the focused offer our in performance customers of retail assortments. letter retail and terms in work really in performance opportunities their our category explore performance and turns the can that and from the

We segment. and our fulfillment this strive as opportunities we approach how business we in warehousing have grow to Herman our channels retail a with then ongoing cost and as savings Miller continue to lastly, we one run the towards

Reuben Garner

the Congrats guys of impressive getting on luck And Thanks Great. safe. detail. quarter stays again, for all the now through good rest an year. hopefully, everybody the and

Operator

call the I'd questions further back Andi. over time. to I'm like at turn not this And any to showing

Andi Owen

much. Thank you so

of think So We other we in you, just disruption believe will our on emerge to weather And remind the side. from human COVID of the strategy. good we reinforces not but kind. will it purpose stronger only for really that big we're design near-term the our believers

us joining care we call look stay for interest forward and your on next you the you updating Miller. continued Take in and appreciate quarter. today, again Herman thank So And safe. we’ll to

Operator

Ladies does gentlemen, presentation. today's and conclude this

disconnect, have wonderful now may You day. and a

MillerKnoll (MLKN) 17 Sep 202021 Q1 Earnings call transcript