MLHR - Earnings call transcript Q3 2021

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Operator

Good morning, and welcome to the Herman Miller's Third 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.

Joining me today on our third 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; Debbie Propst, President of Herman Miller Retail; and Ben Groom, our Chief Digital Officer.

press our yesterday's at Relations posted hermanmiller.com. have release Investor on website We figures non-GAAP press on reconciled there presented Wherever are a and amounts the non-GAAP basis, within that release. GAAP have we

over to I will quarter, to include Before I statements. like turn Andi a of would this brief that everyone for remind forward-looking the overview call it

and annual to based For and make well or these we forward-looking from a information turn Q&A differ we Andi. to as materially information future as statements events. scheduled Any these filings. factors on session. Today's At to will SEC have call as today release please of obligation quarterly that XX I'll this the refer forward-looking results undertake remarks, that, as to is minutes. the With update we press could prepared date, our the new on a result for cause over actual that of earnings of statements, conclusion call statements assumptions are no our

Andrea Owen

Good and thanks us today. everyone, Kevin. morning, for joining Thanks,

the light marked the do all lead us. of retail that quarter way serve as confident the to are We with to ability are our one-year sense us, capabilities in will contract to we a with shareholders. for in to value the and business want our everywhere grow of our we will they We tunnel. we and are us changes to COVID-XX, for the that brought our continue both third about allow see our a advantage While to and optimism set every our business and believe significant have of a coincided of audiences differentiated today end believe pandemic with beginning renewed at by significant opportunities create

For the diversified we to continue model. benefit the see our business of quarter,

near-term conditions and businesses were contract American to in sales challenging business. down XX% and international our XX%, orders helped our offset in down retail North the consolidated were While growth

expansion our year. strength delivering the of we continued margin pandemic, over last strong of operating retail the also profitability, Throughout business. from We trend of our another quarter benefited

way. and to phase in story. the going through our ramping not And in It's the a of our shared heart is growth with COVID a lost day we our customer-centric more taken of and do, business Herman of communities to everything drove ago and While accelerate very of planet the we haven't made we our that sales series capitalize the a brands of our family retail whole this companies seeing it's series approach weeks. the recent growth two this are up, level strategy well-positioned contract growth XX%, double-digit a that actions With growth for of to margins of the operating of the into moving demand group With third an with we offices to workplace business focus results has last XX% the rise are certainly growth We've on digital-first see us. the we It's brands, year, believe their quickly certainly two the the almost of early in over to that margins the in action turned while office. new and all growth in and have return years, and operating and low front for home for target become rapid investments have in of of last well, XX%, order business sales we as and expect our to spending. And on the building our quarter. skyrocketed summer Retail, year, curveballs, fully unified our many over we've industry-leading fall late years opportunity renewed profitable our urgency customers teens contract vaccines for Miller and our people, Momentum forward. a deliberate in of we

pandemic and we've we to fact, our of been agile working to shifted I of position this pipeline been from resources are the already all are so we've responded has a through Today, through to what COVID and validated initiatives throughout of this new poised emerge in everything have toward, proud way intentionally we faster. we've In organization the more year. am people strength. a crisis the

if effort. where been You be wasn't we hasn't it amazing are for far. today it their wouldn't We we know, easy, but so have come

you So your I'll to for questions. huge I'll team world. turn And the with around a over Miller operator the thank close to Herman the it

Operator

you. [Operator comes Reuben Benchmark. question the Garner of Our from line Thank first with Instructions]

Your line open. go is ahead. Please

Reuben Garner

Thank everybody. you. Good morning,

Jeffrey Stutz

Hey, Reuben.

Andrea Owen

Reuben. Hey,

Debbie Propst

Good morning.

Reuben Garner

I Maybe can up some, I've stock push American think could you recovered The that It's bit. two the but of here. help we a little start down – are back that the with things opened North order clarify XX%. trends off guys pieces gotten the

of same the look what than guys think impact clarification. so you data think your is? maybe that bit BIFMA a office home apples-to-apples I more your I report kind of kind quantify what has during like? secondly, any been numbers then to is and of numbers some period. peers are And little Jeff, way that your And the differently there behind what

like release. coming things the back You some on and commodity mentioned in cost inflation

contribution what year. think I all declining just next XXXX? from estimates we about fiscal you guys a already move that means into talk your standpoint earnings as Can you margin have

Jeffrey Stutz

Sure, Reuben. Good morning.

Let me these try order. take to in

not But we order the North and because particularly, the through the BIFMA that industry. in data does the for separate that us, North hear have period run the the It the our asked way. space orders for you how through COVID retail through segment. report across that the volume is Don't I a component patterns company retail data. this capture certainly, America. the work-from-home companies good And because wrong glad for believe do I'm group we on are differences the contract American So of segment, there runs report question public

the XX% quarter American for So were to QX. your full point, North down in orders

adjust for you X the American about the work-from-home runs retail of kind for in of of contract. piece, volume through the If North component points that decline that accounts the

for down if So adjust a closer you that, pro on to said it's differently, forma basis XX%.

that So let there. me pause helpful? Is

Reuben Garner

Perfect. Thank you.

Jeffrey Stutz

of in gets To much such off and move is P&L ask expect some so we've just and moving Part question. that savings impact a with and are Kevin, back question, because the costs let second and me with your your here. patterns clarification of But I for cost near-term lean parts nature you to the so might had what forth coming many margin of a order comment kind contribution clear start cost be. difficult in in so which to – we with

to Now, gross of the that higher so rise million be pressure certainly, expectation I'm talking in prices, with of $X fourth clear, between our is steel this in level. QX margin just the feel costs tune quarter be to will pressured to the that not but million, going kind from fully and FYXXXX our is $X

pandemic. sure we point going I'm seeing conditions drive the asking are sure, improve speak and just some the that rate begin shoots sense North the the cost I we're should we reductions made about In temporary But expectations contribution addition have we some an pullbacks cost the on employee in back being in bringing that some of I sequentially to will that but And turned seeing. off, of temporary I'm yet fourth $X million have that – benefit because a question? QX. that compared John of point earlier going had are some Reuben, this, cost to during costs run those to can your order can the that about when those bringing understand decision America out that to back green it of to what to in that, to you're want FYXXXX said, I are we we're there doing you quarter for growing implemented confidence or we well, that are margin? we're incremental rates that, all then restate temporarily we seeing our at of make

Reuben Garner

Yes.

I you margin – gave going sustainable you might what color margin look – teens. level think just So on I more like retail some – low business, your – obviously, forward the mean in

business the the levels that a look like like? ink or at for about – XXXX How will think will these year-over-year pressure. But ink impact on And in expand to that might under look the what margins know do these that pieces? are so basis your moving that ability with we business? margins all hold at be How I costs what does levels

Kevin Veltman

Reuben, is Yes. this Kevin.

there, to I as don't know, the so the margins it an would given about of of XX% is tended revenue business we've in this just or answer. in have think an the But is normal over has guide background as FYXXXX the longer to a you be contribution variable consider growth. important margin to that a scenario. run, contribution out way, that And we rate So

we present comparison. that we've our as the those this year typically avoided business, bring Next temporary in that's year costs variable year-over-year not a that's back into

thinking part the revenue should have back And expect We'd about. will so math kind bit margin without those of equation course to those next exact as you you does that a the an into costs come into fairly of assumption in because do of are there, year giving contribution the over that we well. the ratably little costs be feed weave business

Reuben Garner

And to we for made that has know lot those margins you are margins is teens maybe a lot outlook you Obviously, that Debbie. into guys and low grow able I into a what teens going detail of go and helpful. sustain move low moves. unbelievably maybe a are Can – have business folks. retail of Okay, your you surprise confident how strong as to confidence just question going the for to been think business XXXX? double-digits you I

I something to temporary. think else, that can grow you're you you if people confidence looked thought what margins? and sustain and those maybe at see clearly, the guys that to there are on the gives benefits you elaborate continue going just But XXXX

Debbie Propst

Reuben. to. I'd love Thanks,

in want believe to to the market. business longevity data those obviously, estate home. work some is home due and and them triangulating spending build from that we our have based this increased But trends the certainly, I there we also that to real the we're other on So year indicate data in that a are that needs from are seeing indicators the there

know, changes we the of to pleased also have come year, really that we to over some the seeing are at of just and note that course you of we as Additionally, been business this we I'm those the And way those have run changing the fruition. strategically last journeys. beginning are

that of we'll enhancements, momentum QX. the their continue to think retail you'll marketing, and some assortment So drivers, are the off QX the build we strategic some as predominant of of layer then see I us drivers strategies well kicked and with which the web physical in at end and

seasonal and our So marketing into from and to moving management consumer a new organization in brought engagements. marketing much we've our our in the mix seasonally campaign talent perspective, marketing way. are been we've of running a – different And

organic point meanwhile, in of as million So year. $XX $XX we as X.X% orders, a a QX, quarter. million the and And from from reference, X.X% down just $XX.X million that's that in in of was only orders percent drove down came increased of And QX sales from in in obviously, traffic. X.X%, increased marketing last

the So we never that that but had brand, really This in within of in And a geographically. holiday particular, the all marketing specifically, leaned really our campaign. Within from tactics. brands QX, is season our benefit Design Reach of to demand speaks have three a effectiveness

efficient acquisition year. it our last of we've seen much big a really tactic see will continue the more and really marketing what down under now coming It's to what in time way. the QX. you down fruition was tactics cost execute But cost. than And half to effective So this way $XX. of in our benefits It's our campaign acquisition we a is drives less in

five modern be our and only build perspective, proud costs. driving of QX so to of the really that need some the million also in will destination effective more with trends well continuing In layer us as into and their $XX have and source art accessories trends whole think of also QX, a us you we retail people cash and to a effort QX, in goal seeing were years, performance. growth, stores a driven by see as of some a using of our seeing from And of retail. the been to at physical that. brand rugs, around retail journey. your store, therefore you assortment any a and those and you format cognitive into assortment workout as are end beginning couple a pre-COVID, in in you the of testing very QX we've emerging of across we're see room, last particular, just SKUs, I those assortment were non-comp begin been for places – wellness products start From in there opened into an a the already increased on category, and things. being an do small were bigger in probably for really PC. that Miller so units is I to to dive those style. where all assortment our expansion then assortment improve offering QX, not a just very units on we of would more acquisition our range physical sales our perspective products to Herman carry build excited decorating over new furnishings we're broader role the we layering and came based start and grow our a my things. physical an the concepts And perspective, help furniture testing for and spaces know, health, homes The about distributed or do which desire as workplace From a and At And

in So several small of we're that Within that version model and they one assortment Fulton stores, And localized our additional a fleet. is more in a stores York, of focused proposition small Design typically our generic in that Miller similar offering ramp versus Herman was to opened and and to That across like on offered format the the showcases our value we past our New exceeding in a Hamptons location. Hampton, continue also new both are ergonomic really Market just a seating, we've that. format and showcasing Reach, model than Reach entire Within Design which offering launched additionally, expectations, a South done offering going

capital And assess type what And a is we're store very so and in and accessories costs of inventory includes carry opening. also terms for previous cost this positive And the the that initial seeing investments offering curated cash localized performance locations. referenced. about this some I of DWR and of but from those

e-com we've quarter and channels. [indiscernible]. just And we're a and most especially, made the how the enhancements to in where physical for of we've journey as thus looking within an we office Certainly, huge where our the to of the enhancements And in XXX% at important in specialist journey. corporate time. coming continued we've I'm themselves it of personal So our seating over of brands the really that product successful And seen web of pass specialist across customers more beginning are engagement our the we're has already type brands how a or Ben DWR then are until of category the talk with that first the procurement our proved in – over of now, decision going purchasing that ergonomics in very about our is, year component those that for over the customer retail to with products last with growth key retail portfolio that far launched enhancements what optimize learned customer. ergonomics at

there? So, some Ben, add color to you want do just

Benjamin Groom

by Thanks, transformation everyone e-commerce I in into commenced which Group just we want end-to-end September reminding the entire heading for our Reuben. And timely will. an question, the I period. that thanks Yes, start very XXXX, is for to Debbie. obviously, COVID

this the in really out pre-launch. our last increase a the on onto increases significant site transformation on our DWR.com. the ahead to pre-launch, is ability additional customer our roll key with I see sites relative mentioned our we which gives as metrics across look we're mentioned performance as seeing on significant of decrease believe you in well and performing this a of at speed, we expectations. seeing that improvement of when as that last part significant to in we're sessions of site, product rate. our us that we extremely platform. We're and also continue really really which all improvement Now DWR.com, the including balance step-change call, confidence relative to with add first for a conversion step-change to seeing COVID quarter It a even seeing a cut relaunched period to strategy our And but lot views, rates, important really site we is we're

for So part let just are relaunch, the of And the more ecosystem, and reiterate create our journey, really this going to experience with a new kind way QX. and relaunches launches comment, of our that store and to are under Herman in know platforms really customers. to forward. we on strategy and you and richer getting providers at beginning currently we certainly, site the frictionless ready evolving are critical technology that are is excited for Miller I'm of track well continually we particularly, Debbie's and a that for the we work

the check because back for just e-commerce flywheel find is come I site then more important about their assortment are excited people this during where So And key business just growth on quarter, Debbie reason finally, really a and newness that the on we really personalization success are that. our great creating early component And metrics, highlight another we and to that and very so often. touched seeing is relaunched we want it's that. to

a these ahead. confidence of we in of quarters things the all have and are So lot contributing

Andrea Owen

I a Debbie. thing. get a were are fact you guys We've our that and hope want and we is made better is amount distributed with, not taken hearing lumps pretty from changes we this change. this business These dramatic in are add for saw work things the to to two last just to and of Ben response begin investments. we thanks long-term for This half COVID. these coming What significant and that we business. one years have had this to a the in Hey, while. I some and had that But are things

have We run off these as long that are the this, for well. been working things pay in will and

hope I a little understand just hearing pan. is long-term change business. about a are the of So is this not This you bit the trajectory but this, flash this a in in

Reuben Garner

to alluded Great. Thank going think North to, things I'm that of or one contract, here. or guys kind some shoots that. all optimism more you, you that's for green in, mentioned right. if The are sneak all American inflecting I

business substantially, You or and more give pipeline just any are you up that more Can mentioned sequentially. sign think for a turning, think guys? when probably actually I this this you on what but most that things into color up color for you orders I little new inflect are And be you great. the orders maybe the is concrete might seen we've us give turn would could seeing?

John Michael

are Thanks Yes, we've shoots a for This Reuben. so seen the days. John of to is over or last – there number XX green that the Sure, emerge Michael. question.

points. few data you to Just a give

of comps. when positive project were of up sample in and and of year-over-year fiscal it to January opportunities opportunities, activations, QX, the usually, Our of obviously are doubled against against volume. the contracts, product And competitive process let orders QX sales changed clients then is direction in year-over-year course improvement. the before headed both February direction. are QX sort in of which a want number or as new pre-COVID activity, Contract year to part when is in and see to which we for buy and in those of a over a start Markup demonstration is those of in terms significantly over up terms they pricing pipeline this evaluation XX% where significantly come in in

are I with conversations and that fiscal the last been see the an And anecdotally, now that they've the in bit see Andi action. They mentioned feel I but to road as take we'll – really clients, little Does it the – been our a in in think the now that her XXXX. the from to build see the think your need through impact down the part opening they here half know perspective, what they concrete. your are they've emerges, can order we'll think understand from first answer to that begin but clients QX, comments waiting, I question? of question kicking of

Reuben Garner

It Appreciate much. does. on Thank and congrats you the guys, very quarter. it

Andrea Owen

Reuben. Thanks,

Debbie Propst

you. Thank

Operator

our And from Burns line next you. Greg question the of Thank Sidoti. comes with

line open. Please Your is go ahead.

Gregory Burns

couple to feeling, measures how inflationary are taking what any next price timing you. the Relative have raised – should you to gap the you the of quarters? cost some – are actions and the closing morning. the the you're Good you or with cutting of over other cost Thank close the about narrowing pressures that of price think we

Andrea Owen

breaking just think price your little Greg, you're actions bit, up question and but about we're taking. cost I is Hey, a

over but are it a that. price Jeff you to hand taking I'm to on details We give to going increase,

Jeffrey Stutz

past, price inflationary we've to we're actions, pressures We've as increase. like in had offset we fact, we're doing. With increases That Yes. major respect implementing look when the that. Greg. to had a success see help Good. what with price is, in we steel, Thanks, near-term seeing announced

We've when increase sizing of important account that remember to the immediately and you to and as kind in switch fiscal phase realize increase. to it – price taken it's pressure in we're of I year the you that hit of accordingly a I put nonetheless, not that a price in the obviously, has Now of you though to increase beginning over effective benefit in price the size will the a it's start know time. business remind that fiscal realize place, period but into light contract until But we've not the others just the listening, it's year. this, for tried upcoming seeing. always to

are say And a it would the we I the that So in have they will our as effective. to – look, broadly, and a this toward past with and the we I our very credit we we much they're reacting supply company, folks, then like be do had more confidence of work goal change have always tremendously reductions won’t for us. operations working cost and and that chain teams always that

are continuing for press We forth. improvements to efficiency so and improvements and

So as and that's kind and we and do next move expected into business we how with is of part year. parcel through quarter the fourth

Now these to next I to that's costs those efficiency be continue think we leaning wouldn't have cost the focused out as reductions with back Kevin expectation. we coming far, pointed But to business, on want out, the been, too a like offset and bridge are temporary and that set I always that we have into completely improvement, probably and year the operation.

Gregory Burns

It little about Okay, Herman like for the of was projects, your and more that, prepared how end Can this thanks. Professional. of one about that your strategy? Miller addressable talks sounds And some a in with remarks, cost the bit initiative. you us I you about total smaller you base? might are guess, tell increase just the after market what Can that And go-to-market market is and just incubator that? the the your, mentioned you talk going

Andrea Owen

Greg. I'm Ben Yes. to to I second, to innovation off Groom hand incubator, but touch in the a just going it on want

a set model really business up. important that we've it's think I

business, flourish of them new doesn't the when thrive. our it And a necessarily big from As separate a traction. in and you it and by business, sort middle get new you it, ideas into rest of a up bit of know, great seen we've the seen we've needs flat little effectively setting running this and idea to team put putting our what

peripherals. one that business we're innovative G, did incredibly about with And successful. really gaming design we partnership the gaming haven't is So the that of comes to the business gaming. our when and amazing, touched with companies it excited gaming thinking most we And on Logitech

that runway lot And a ideas out So one there. we Miller think of of Herman there then that of the is is came Professional other group.

pretty been I you So instrumental color. some Ben you've so give turn to to can over that in

Benjamin Groom

and Andi, question, Yes. Thanks, thanks for Greg. the

is Miller the right. business, So essence business Herman Professional e-commerce in our for contract

just to clear the I to creating And for contract the really very on are I'm can So whatever e-commerce that. we committed best experience market. be we

So design professional grade tailored cetera. what provides a BXB focus pricing, tools we specifications, files are et working contract on and will catalog,

to general trying generating create but really medium as trying initiative showroom experience we business in historically. you And e-commerce been for by what business a mentioned our on buys segment, we're custom, has we're So underserved which BXB very particularly here our more focused revenue small most targeting on that of and we Greg through as this really segment turn know essence is focused in all do our we're to contract is a which assets. hermanmiller.com, into visited believe

platform. for of the We're of we're best experience because standpoint customer companies now, take launch traditional Miller really want when in customer feel there and and dealer launch how over there of trying at going really as doing beginning to are with well of that, of of like track agile e-commerce our out business, a MVP from and our business, one a approach bring to believe customers we to our point, an build that from we are and do we in this QX. to customer be time So emphasize functionality is we very for more more more to our the quarter right to are and for and of are to service learn starting to price companies service innovation unique what here technical this the terms Herman service marketplace a the best really great an this we But on look both. future customers service want that the component huge aspects Herman behave are to customer I we at Miller is on e-commerce

now. information by much So we initiative. create would on really part offline, of site served we've great buy be customers purchasing closely dealer with process customers focus generation But the for as that partnered particularly leads allow to dealer and this this a result we our here, very our gather of that to as big expect dealer very better great this They will that during this that and a be is community Obviously, these will community really this. if designed a well. be data will

this internationally but what going about excited where start in North really as mean we're which for is not business, contract well. we're our So just America, could to

Gregory Burns

you. thank Good,

Operator

with next Research. Steven Our Instructions] question from [Operator you. Thank Ramsey Thompson comes line the of

Please ahead. open. is go line Your

Steven Ramsey

good some morning. – to maybe going Maybe on. the color three digital clearly, internal long-term, contributing retail then is, the market growth? platforms growth much growth Hey, outlook, much new is get that thinking sales about well? improvements the with backdrop factors and I How the I'd long-term of guess, on maybe long-term to like many store same-store start growth of is openings? as is how of to And how is that on that much strong

Debbie Propst

morning. Hi, Steven. Debbie. is, This Good

So in the a physical our quarter. maybe performance start retail around with reference just same-store

is XX% XX% grew in being XX%. down stores despite in-store comp in and orders sales Our traffic

we're are growth to And by the our store very comps the drives of good – perspective, and thinking we managing in the we we've current from of retail And perspective, done said, with drive course initial been new lot long-term DWR projecting through and relaunch our a fleet. of format here of performance Herman expanded see over like broader seen the the associates, year. portfolio traction across certainly we improved the in our of selling all, sales stores, current way certainly site assortment a of the testing growth offering a ecosystem starting results Ben to driven next as have stores we're as first those those we're of I well recent happy So the our element we've we're smaller compensating and in of with indicated From that of then we're of a from brands, come, that our that comp tactics, and new Herman we've how stores. changes in our openings. really pleased digital DWR fleet about a Miller, those the Miller, doing as results the

but infrastructure. these – planning provide that additional say our the investment order we in in to being to in year, investment channels. key channels, go-to-market some the retail We digital additional some double-digit continue build obviously need stores, we're growth, I'd in the I do color physical openings that in need being those upcoming are We strategic. is obviously, and

very strategies to those and the push we're continue deployed and to about so the traction in looking areas. gotten, excited so far forward we've And

Steven Ramsey

those full-on costs maybe not, for where call costs? to solely. and rate? may costs – factors what what back Okay, would thinking great. maybe run If full segment the Is retail bringing back are the full at that And costs coming determine running not then about retail are rate you run

Jeffrey Stutz

centered largely business retail That degree yet Debbie Hey, jump around of lesser maybe travel yet do but touch entertainment, enterprise a pro and of to can area size been in quick. that probably an including large me across course business, what – is you general significantly retail has would component Yes, let real own North in is The come components that Steve, think the to COVID, Jeff. little are right. into travel whole I that would the and are return retail That's this characterization, in I touches some reduced, the we through that calculus almost are contract our this of here, is not cases that the costs back the they rata by international. as for for is a to nil. it and the a in say American certainly, business.

way pushing organization think travel future. that are differently tell I in the about that the will that forever, you to also and stay Andi I can but Now

we've do learned think some I to new ways work. all

And so run expect a up. with around global – people that, that return pick and moving pre-COVID expect we that's levels expect to without necessarily don't you some can't anytime that’s business to But that we going going we soon. to

contributions team retail other some Debbie and will affect then retail. there So will join And benefits like you is I've things the retirement cut that that impact. off, we're area, paid see is employee some but in. retirement, employer one And please, certainly

Debbie Propst

planning sales. variable cost is forward add cost we're going the I'd associated incremental thing just of is only that The with most

sales. percent of sales grow our the increase, as So costs marketing not but and will

an cost as our spend, variable-selling absolute Just and then obviously increases.

Steven Ramsey

increases maybe sentiment sentiment, is relates to benefiting it retail America focus this Contract some demand improving there Got where overall less softens from how be contract. Helpful North color pipeline but is may effect, people some at do and the a that is to reverse or and DWR shift America is going home back Contract, you. offices incremental from there to shifting spending, North may DWR all you a on expect, be

Debbie Propst

obviously DWR spoke slightly DWR fee. from obviously ancillary North segment of trending retail contract ancillary is of it's weeks, will is DWR activity so I more that plate the North and down format includes Contract what that ahead similar America captured a companies What large trending. like, work floor recent to as one to the That's different DWR in about an of well fee XX% America about say improvement seen and return looks thinking and it's improvement America where from And flurry I an products much And is been penetration And community in in and where quarter. Steven, they're in of because our we John and space. seeing Contract North think improved are rest a are that of rethinking the we've category.

business we around a see leading what fee longer-term. DWR So to the I in think indicator continue seeing might we're

and to last last have we And also this that the segments touch over XX% to consumer our on residential DTC then call in quarter. growing so retail business, the what the of end-user, quarter, other us audience really Just actually grew XXX% our the rebounded trade consumers, year. a version selling we that's

So I momentum really in category. are we're their trade, DWR and the we're seeing and that people and fee lifestyle think way what between and ancillary engaging with seeing build,

Andrea Owen

brands of to sure look our every urgency a at every get and back and back And will to getting realizing conversation the is planner, think Yes. that But future. well, us need which all is a how competitors actually going with important of the especially touching excited you ancillary about really opportunity everyone is working forward spectrum hearing and that the need CEO a of is those businesses are that dawning our like to And Debbie their I'm contract all with they of some the in different of but business. as also that, environments taking there for DWR how we opportunity the in office be now. point be some and there one that on engaging with own from for I to this in on certainly huge and is a we're and office the not we reality facility's our

Steven Ramsey

I cushion to talking to kind discussions Excellent. expenses projects? How help you the better looking And that which may and you on coming America would characterize because add leading And on bigger any just now, office how mix products right Andi that floor being ancillary there there, much pressured margins thoughts of plan product to and large of as much changes? more something with North smaller what in? contribution the were is which ask maybe planning changes of is, was at about

Andrea Owen

take to John, one? do you want that

John Michael

Sure.

Andrea Owen

Okay.

John Michael

look deep are and The – going or for think as workspace like figuring concentration, collaboration, community. to as certainly, I is opportunities as connection the out spaces forward. in well needs their what around companies focus connection

big about types ancillary product spaces. you a think in And those areas, part of outfitting when those key so plays

question are those your momentum we lines, of the offices that's certainly think, size and in types clients. been conversation things I of with an seeing ancillary to the about interesting So product

a I but think nearly all board, over need the the to little are be early conversation honest bit to you, not going we space. it's with the was, as much

begin out may process, the you more collaborative because space need are the that accommodate into that and different get you but space creating. actually you type you spaces find more similar-sized office, a you people into we bring less the of to planning As actually of

significant And So play tag C-suite. real conversation. in space our is as definitely Andi's well think this CEOs, on urgency it's issue of as industry companies this right, going moving things And as we think can mind it's contract And the the a right not to I is, fluid in is real ancillary an if I to of think part that could general, I one it's and and in as it's top that critical always the But for seeing are top comment leadership or the evolving, company that. about just role that of plus play C-suite. mind will a I but get of very in possibly in to time. is important a a of understands the it's the they the first think, forward, knowing I think, sense I

Andrea Owen

and Steven. thinking I small large say is Yes. really projects the would we're And it's across board, from companies, seeing coming about company, it. everyone

area the segmented So in one across board. or it's not just another, really it

Debbie Propst

around longer-term floor also that's more and where And is they are we starting from been indicator this long-term their momentum policies consider look really just plate, an their employees trend also starting believe companies at home that are from, seeing. to to we've as are what communicate there a community I'd and and add, driven work work

start assigned. as wave get So we around purchasing second actually expect to of the to see policies category

Steven Ramsey

helpful, Very thank you.

Operator

the Bugatch Research. comes from next And Tower question you. Thank with our of Water line Budd

Your open. is go line ahead. Please

Budd Bugatch

hope Good morning, me. hear I you Congratulations quarter. can on the

Jeffrey Stutz

Budd. Hi,

Andrea Owen

How a been are It's long Budd. Hi, you? time.

Budd Bugatch

I'm is want several difficult and saw was navigating of for of about remember I decade, I people it was office the makes all that with the talked decades, Andi. least you much amount fine. well. well, little which back living on really challenging you you, a the history estate about office, Jeff, last is hope of talked about I collaboration Miller talking in – Herman all is And which think think COVID is I talked more to mind Thank because go last Hope obviously, about and John I Congratulations which at issue. of space, period. you the bit was the that. as real most space corporations. And contract community whole over I top a a

do we I which architecture the to C-suite, private for the will to have have see how go those be? that? do of interested important then think conversations, and look I'm more future? with the to be particularly does you on financials kinds in than those it's other future? because upon as mix to is more I quarters? So little based going what What you looking And going benching I'm office Or that Are back questions some a really go office how and color get the other And close your into at.

John Michael

Sure, Budd. Michael. This is John

in planned. of emerging there is think clearly I the going principles how couple be of workplace terms a to is new

them point, from term trend hearing a that become down community estate How is de-densification, cetera? for called historically well. a people that got we're to commercial in more real space? do And of and get per it's some this the has of we were the been drive as to that is both the space think lot to what is, as degree. purpose that we your do as reverse we health that One square the of for and safety that the clear I focus how footage everyone well et person, reasons, to we

as I about spaces, a that place a five is attractive office go that go employees that have week, to work need to has is I amenity-rich do, thing not to be of go. place it becomes and I but want are the to, has hearing for to type to to destination want we other a be to days The place a lot a and that to support the it to an

themes like. I new into workplace key look think So and will are that two translates those we obviously hear what that the

but I be, in that hearing. think might are prevalent that think interpretation every what different all things got two has we're those themes the company on slightly a I

Budd Bugatch

do does identified. had I actually, products you into I think that have think of they new those, you principles accommodate Michael, kind What translate Sure. how very are to John product? as

John Michael

Yes.

– figure Miller Group, to of really there portfolio and of want we the where may coffee part HAY is are space place ancillary types And and take there. applications, the Geiger as the brands leverage well and out air, are fresh we companies of over products spaces many helpful significantly bars, how years by the of Contract certainly a products Herman thing designing the have of through And trying to in made and offering and as like is added fit be are designed types to the in into in of we've seeing So naughtone other Miller nicely news the breath lounge investments we're of is, rounding DWR to the independent work, get Obviously, go those very seeing out The space. not prevalent, but that and last is into of just outdoor right. when types designers. type things. collaborative significant have that that more go good the as spaces, want the several space we Herman brands in Group, actually amenity becomes people just terms perfectly brands the advantage areas where they that the weather the so fit

Andrea Owen

Budd, difficult it's social through we've the and interesting, And probably Yes. experiment of of most one our been tragic time.

seating there ergonomic is things when of has work seeing because is really focusing things you health Debbie and and real and how really, are like sitting, are a that we're wellness important. One you way focus mentioned the also it down on when as on and

it's some many people people have can include work to on do settings look the we are almost at workspaces a rich get things because that. and an it's heads-down And focused as hard how need way. many, environments, that from the really like in for you for many healthy these suffered And been we work, is working can especially so and headcount work with that been folks like people amenity some for easy collaborative and really spaces what people, for money out that home, also library

think categories with last we've it's and innovate I around of years. I think of said, the over So happy several as done really product to these all John we're what ranges, a spectrum

Budd Bugatch

DWR. from you changes Herman a it And if mean retail exciting very contract, Miller to am evidenced with now I separated potentially all you decision correct structure think seems organization. the made that? changing think of bold bit can go has heavily emerging, always to is organization, about curious I into I this that because, but to there to you forward. way this, of be the all you the to have little me of I'm And in the and talk the when that But it nature is

Andrea Owen

that Not Budd. anticipate I

Budd Bugatch

Not there or Okay. that no talk won't change? is you about

Andrea Owen

anticipate I changes. don't

Budd Bugatch

Okay.

on better of give and where could color a international a so results not flavor If us you good? were the bit the of little

Jeffrey Stutz

they Jeff. certainly to start out take America. Well, seen this quite is team a what in one. just we've Budd, with relation this to to maybe I perform Hey Yes. North the in want shout international, well. continue in to I'll And

luck a I of products, through of past, on just not there particularly think job, and team mix don't focusing they nice focus a good a that a margin in Western strong has would but seating touchpoints, done from in made in their in Europe XX know particular only really their penetration a say, investment to the deeper new or own I so trying places like find we and lot perspective, maybe much months some ways Europe, of where the is Continental thing which I dealer of do – tend market. really also to sell

past several Western to the us been area actually but come may has strength of quarters. to So for surprise for Europe this folks, some an

big parts be seeing kind places but where to that much quarter, America, some weakness. past was down. certainly, as very or a seen last parts be and of talk flavor of and as the strength India, laggards you tends globe kind other of of strong seeing seen and part flip I quarter the China, of whole Latin would But for is other gives growth Pacific about Japan, around Mexico, that have We this The Latin a where have so world, been some the we're project-driven certainly like well. walk Pacific, geography, it that America, where the thing you not those and should would haven't markets Asia as strength obviously, Greater that's and say, Budd, us. Asia I Maybe Australia, we script the a of we're

Budd Bugatch

couple a of questions. Okay. And just specific

You typically that? a the in lower I spend than you're remember to in is R&D, Is where about million $XX come that spending this to right. going $XX in Or somewhere year? million year if it

Jeffrey Stutz

Yes.

that. lower I than a thought think number here, it CapEx don't with but with your I you were doing question, Budd, a little like any have to give high. you that's way. I little the by feels

Budd Bugatch

we where ask. next, Jeff. to The I'm right going have exactly don't now. what's differential investing don't flow cash happened have That's was that's Well, CapEx a so cash that. flow I to because think detailed we eye-popping,

Jeffrey Stutz

Yes. add here? go if kind to any a standpoint, to pure Certainly, CapEx Kevin, want full-year know just expectation. I the a million million would from Kevin. you of comments – $XX $XX But don't ahead, be

Kevin Veltman

our all well exciting space half three Fulton that's little and a a had both we've related area. back an opened Budd, as And of brands – We particularly, in a commercial showroom as opening. Yes. activity, up market in the retail new to Chicago

the saw so related that part investments as the quarter this And well. numbers that you of to were

Budd Bugatch

you. owe got you got I I about And million. of debt a think $XX short-term Jeff, least at you or

off of on or? already $XX debt you kind or $XX that of this lot or in sheet was but paid due? million some that a the down the was the paid that You fourth paid I $XXX was the quarter, million not voluntary to million Is year. million of year, necessarily have balance might be end going at take the

Jeffrey Stutz

paid, in that and due the fiscal line or comfort, some Yes. month at said, COVID a we bills then the early paydown March We like were were heavy we came result sometime part so that had about that as drawing saw degree of year And that as paid as once notes companies were of on concerned beginning And in many big did us that down. the of got of earlier our the we Budd. a was March, you of we liquidity.

seeing. So you are that's what

Budd Bugatch

think don't of And for bought you – bought quarter of any third quarter, have hadn't What's still as But least the the the as on cash, at stock. rest second the you I – you plan authorization. year? that a any of you have Okay. the repurchase

Kevin Veltman

Yes. is Budd, this Kevin.

to to So we'll end build gaining to navigate of confidence definitely, through have to that deploy those a the dividend it returns continue share cash to and the to opportunities, team that of either cash. for a we or not America, in pandemic toward as trove we continues is cash, screen types But whether for goal opportunities of repurchases. the M&A look be look or investors things North

Budd Bugatch

challenging you very Thank and luck much. Good pretty environment. on congratulations a Okay. navigating

I understatement. think that's an

Jeffrey Stutz

you, Budd. Thank

Andrea Owen

Thanks, hear from Budd. you. Nice to

Debbie Propst

Thank you.

Operator

I'm Thank to over no you. time. And And questions any Owen back Andi showing further to would the this further at turn I conference like remarks. for

Andrea Owen

everyone you, all continued I'm forward next We quarter. again Herman well, care. joining thank call today. for in interest the take looking on and Well, your to you. Thank updating you and questions Hope appreciate us your stays Miller.

Operator

have This participating Ladies today's conference. the disconnect. Everyone does day. all and may a in conclude and thank program gentlemen, you you for great

MillerKnoll (MLKN) 18 Mar 212021 Q3 Earnings call transcript