MLKN - Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the MillerKnoll First Quarter Fiscal 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Ken Diptee, Vice President of Investor Relations, you may begin your conference.

Ken Diptee

evening. Good MillerKnoll's call. to quarter first welcome conference And I'm Jeff Stutz, Andi Owen, Officer; and Chief Executive Chief joined by Financial Officer. Also President, are and available Debbie Propst, President, Q&A for Global John Americas Michael, Contract. during Retail;

Harbor the call Andi, our Before I regarding over information. turn forward-looking please to remember Safe

context today and of today's may than call, update discuss cause the Please results be factors, different known no the the which forward-looking expressed the in in evaluate uncertainties these or forward-looking to detailed and is these press forward-looking, information actual During statements risks, are that other those information statements. implied. management involves may unknown factors which obligation supplement or are and The release. as of assumes to

non-GAAP described reconciled certain Andi. on over which You With release at posted call refer financial in Investor press I'll may and Relations website that, to our millerknoll.com. to are our the metrics, turn also

Andrea Owen

evening, was through modern Good for Ken. of offering everyone, customers workspaces joining design you lead for channels. and brands deliver collective by and homes and to Thanks, industry their created call. results thank MillerKnoll unique solutions and our our

first the We established our we build year continue as on competitive during MillerKnoll. to and leverage advantages

introduced at MillerKnoll our organization quarter, successfully integration to our we work. and This launched capture the Design continue and new dealer Days sales first network, products company's synergies through

to testament business. global are diversified results our quarter a First

drive multi-brand sustain collective and economic growth. multichannel, Our is to designed conditions shifting

regions see experienced the and benefits performance we the world, globe, strong collaboration we bring we to together want of productivity. for workplace Around of can a quarter, others. matters. from the how hear in and model and the various different customers first performance and the reflect teams culture, of segments to balance hybrid in that the softening results During Companies impact economic in our parts drive the

activity. healthy placing In companies growth their Americas segment, orders pace and and posted sector. workspace we saw the compared year a to the on last based are in location at but enhancing in order which revenue However, varies slowdown

that on operate mostly are We uncertainty about environment. to orders particularly requiring they the as having learn a economic U.S. projects They smaller inflation, in and piloting to are in impact more is concerns feeling revisions customers, hybrid the our the

this are taking increases and management including Given continued actions, macroeconomic discretionary we backdrop, proactively spending. pricing careful of

after International Our fourth grow quarter. segment Specialty orders to a Contract and continue & sales strong

walls a dealers on both East Our and Holly international Hunt, residential leverage. that and their and appeals acoustics advantage to presence to to expand brands three new ability our continue Africa we is pressures pilot is India, customers and levers global the dealer help the We take delivered an this The to enhance continents. plan year. to countries more into the from Spinneybeck|FilzFelt, will that record sales whose XX premium Middle includes XX which to resilient cross-sell markets solutions customized now important the later customer spaces, for inflationary of quarter. it

growth Geiger for and rooms. their conference designs addition, generated offices executive DatesWeiser sales and In from elevated

this year, products and new outdoor and new an Muuto, cafe and both screen Knoll, Miller Knoll, from new we stools. Turning Herman and including naughtone Knoll, and new Maharam to inlet ancillary from chairs more introduced from product, textiles task XX collections than from tables innovative

packaging, and using and we or our areas reflect have new pieces, the more across of design and a footprint of launched our iconic business delivering reducing our plastic. momentum Eames incorporating on collaboration to Whether Sun and seeing we've materials, lower practices reimagination the to advanced available our carbon and These XXXX now are Eames commitment and is including all pieces, functionality goals. it's sustainability and recycled Rolf takes products select Mette Hay in on XXX% chair, which shell on innovation addition, In manufacturing Vibrant design planet-healthy new with outlays.

foundations our MillerKnoll the of communities launched protecting dedicated This our the planet worldwide sustainable with and unites underrepresented art in Foundation. also through platform strength philanthropic We MillerKnoll to programs design. design, equity in engaging and legacy advancing use

continue collective. to deliver our we have equity inclusive programs programs. inclusion new and conscious diversity, are of buying our across education to and across in we ongoing addition, I Action bias fellows In on innovation the and in confidence commitment Diversity and the pioneering sponsorship spaces, our company, Design CEO through new

of economic We and attention our facets close market to are local conditions business with interest. actively managing drivers, market all

will in turn who up We are it detail prepared questions. discuss results for for we the With to financial before it I'll over greater that, Jeff, the ahead. road open

Jeffrey Stutz

Thanks, everyone. evening, Andi. Good

MillerKnoll Our the current macroeconomic the the environment. position results for to pressures business leverage of results model, the has mitigate These the helped for taken steps also reflect some to from we've benefits which our growth. of first diverse quarter

although remain. We still times also with chain, near some saw levels, signs lead lead of our stabilization to longer times normal in and pockets returned supply

ahead, what our As to focus we to and solutions control we providing look can on we continue customers.

and you align September our filed reporting changes in As with our changed issued X, X-K in release quarter. organizational which of structure, we first the press effective our the saw at the today was on start to segments

of consist a Retail. As our and reminder, Contract, quick Specialty segments International Americas Global & now Contract

by factors. to ago year, XX% reflecting and same the Retail same organically and in dealers quarter compared the segment, being exceed period last decrease $X a an several Consolidated first Order quarter year the XX% on primarily results. to orders the understaffed, reported challenging the an reported an sales organic XX% On driven due with increase increase macroeconomic to The of basis, million year-over-year. In levels taking the were a a the pent-up our X% Americas a continued XX% basis the uncertainty reported in Consolidated Contract comparison to XX% a Contract a prior XX% to last due year. down net segments. billion on orders Americas XX% and increased year basis pandemic declined first same to on were were same projects $XXX $XXX of to the orders These year current first of to of organically. due year, compared last compared $X.X compared levels the caused sales was Turning billion, and to basis demand environment. general million, increase last period longer surrounding an and the up quarter to by in include basis quarter reported on quarter organically.

on segment. Retail Now down in to XX% segment Global $XXX this to X% period the organically. turn reported basis million, compared I'll the were and ago for quarter a year the up Sales

such the to a reported in performance continued overall spending time, a down basis X% impacted year The last New as at macroeconomic by channels, orders shift X% totaled in up making business. carefully and quarter, travel retail $XXX on our towards and the targeted uncertainty. million organically. segment's this consumer to new mainly first scale in experiences investments managing the while both business and same post-pandemic cost We're to our customers drive structure was

closed opened of to Japan. Miller in Portland Costa we stores the Copenhagen, And locations Denmark Denver, and new New given ongoing stores six plan quarter, rationalization the our additional across location Japan. quarter, an York, Angeles, Los and we Mesa. also in Herman two West second quarter. In open Ginza, the fleet, During we Nagoya, the These were store Palm Beach, in

sentiment to several international Specialty Turning & International segment. and continued business markets to growth. impressive healthy demand across key Favorable our drive Contract

For million, the an reflecting XX% reported basis quarter, up increase a and sales totaled on of organically. $XXX XX%

and reported of orders basis an year-over-year were million, also the increase first New XX% on in quarter organically. X% robust, up a $XXX totaling approximately

the and in We strong South are partially East, China order by was and very with pleased in Korea offset Middle Central Eastern the Europe. India, which and growth softness

XX.X%, driven other October inflationary primarily margin gross costs increases. inflationary And Contract ago. in down same Americas take basis pressures, comparable to last Adjusted period list offset a and consolidated was in margin price partially the XXX points segment, first implemented which by which XX compared compared Last the quarter points increase quarter Our headwinds. for announced year. effect gross decreased X% the the to recently price by is mitigate variance to the help further we basis was commodity average will an month, higher year

price additional in net periods reduction we gross expansion the Looking that drive environment cost margin ahead, initiatives from believe will stabilizes, if the ahead. inflationary and increases traction

Given are the additional a steps outlook. include These in retirement macroeconomic improve program capital flow cash proactively and we taking further backdrop, offering profit current optimizing spending rationalizing to expenditures. window, structure, our voluntary reductions near-term and organizational our

reductions during the the As to annualized fourth of third between gaining realized begin actions, we a more quarter. fully realize savings traction quarter million. and expense should and $XX million These be $XX in these result of planned expect

We basis XX The X.X%. operating basis, was quarter operating $X.XX the margin, gross per points year and share ago Our on prior operating earnings which the pressures expenses. the the adjusted per period share in were reported operating to diluted reflected margin period. On in an $X.XX well-managed decline a was near-term margin the to quarter partially compared down for adjusted first of basis in in the diluted were compared inflationary in offset margin the $X.XX year. by earnings reported

during our we've continue our adjusted our facility maintain to totaling of proactive hand uncertainty. billion I net to we're for balance we'll reflected financial the expect elements pressures. flexibility revolving of prudently $X.XX between between steps periods the the provided sales second earnings first were share cash with and our environment At as be guidance liquidity the credit in approximately Turning And these to regarding mention second that considers well of position This supplemental $X.XX $XXX per the guidance to might quarter, $X.XX. as guidance included And sheet. and manage $X.XX economic inflationary also billion other on the on quarter, offset earnings we these cost end near-term availability the that and our our release. materials our million. to quarter to and that range taking

diversified turn those business resiliency we'll your an close, global the on We a call that collective unique with to and And take strong of we back customers a we'll brands have our for MillerKnoll of unparalleled needs believe and have forward. with exceed operator, provides advantage remarks, competitive to we that business and now a the opening to our scale. provides model the meet So going questions.

Operator

Tower [Operator Instructions] line Your of Budd Research. Water comes question Bugatch first the with from

Budd Bugatch

are terms just seeing you quarter I sales bit and know little that can afternoon, would customers what I guess in what of color book maybe terms and I love you monitor? terms you and Andi, expected of in Debbie. Ken in and you're in visits a activity orders of order what your what you more Jeff, get on versus telling to the Good see the

Andrea Owen

hear Andi. to It's you. nice Budd, Hey,

I sign. that's really visits, think customer as a far encouraging As

Our also up last and the customer visits year are up quarter. XX% to on

the be demand Americas what would par competitors we orders on from were the I slightly be, in in standpoint been, standpoint. think us I than but would orders? has I you for the was lower add was it think, in think it Retail would quarter. I order varied from thought trend and it say on hoping contract John, with we that an than a International, the throughout our would stronger

John Michael

I activity. think I agree, add there's would that robust and Andi,

If busy. talk dealer the you to network, all incredibly they're

pre-pandemic the work hesitation projects a we're more probably forward realize on environment most new companies what's of things environment. order the they the size takes part they're to the some hybrid-focused process to trigger lot get said, the of of some required. we just an in that the going think I longer bit terms going to terms -- terms close in hesitation have iterative to it's kind It's also on of of That than and of in is a seeing a do it of talk pulling and little to and customers process. of a something in that in be and

Budd Bugatch

inventory would -- Okay. my expected in than much higher came I pretty guess question, as the And I follow-up for I like debt. to

like inventory ratio to So the color million maybe for going debt, the were me can and inventory to higher on the I for would banks Jeff, holders. like thought and we comment you But you maybe in same for It debt. and and to in, inventory some I debt? get get and were you on than if $XX come debt if looked could maybe

Jeffrey Stutz

you the Yes. question. call. you're to given talk of you. hope the are, I to clear Good you're Budd, that assume I on staying store. great

Budd Bugatch

it's and notable, we here are… It's but

Jeffrey Stutz

you only build can see I did clearly, in cash have flow. we Well, a the inventory imagine. and Yes, so in that

inventory, working I areas the operating where International, seeing a related million]. point. negative, that flow capital activities chunk certainly a that relative was see strength in of make think Budd. to up so I to tied one That from couple will the say, that And our is want It's I we're business continued it. inventory some would cash of [$XX a in in buildup big Contract do hut, We take. to related

simply ordering inventory contending with I that, in I demand the in -- the inventory it, in in was expecting that think can to they were And ring-fence would if business fact, that weighed demand even that to of Retail was such in the see build on a back -- levels, business. organically to And right? warehousing we in early demand were were such an with that X% you in transportation a say of costs quarter, for the that we the that a a inventory up. related more my Debbie part we we times of did in just falloff unpack I margins and and that a this did prepared bit lead But buildup area some levels spring mentioned saw or the in surprise, that incur in summer color. weren't piled of bit that we of And period. orders trying We front get and down had front were in have the and in that little business. remarks, storage We as it. were related the

had Debbie, that's know So area. any don't the primary if really I color. you

Debbie Propst

seasonal, that X% much Debbie. inventory as quarter-on-quarter largely cost result that not The months. trend; in year-out however, clearance lower in outdoor. is inventory. to, dedicated a and and our largely over we as shift about call we've is, warehousing retail business than moving that outlets outdoor in total what few increased locations. this impacts longer-term our X% storing is discontinued, for and is of our We've meaning that the last news Only now the our of by been X% locations We stored add, buildup inventory inventory did, demand just are that a liable section. Jeff alluded had in increase great is I'd in we've our Budd, was that Retail at short-term always We is X% we're have secured through would

Jeffrey Stutz

the the question our lending then Budd, kind just the to leverage and net EBITDA Yes, turns. out debt your to on of X.X adjusted it at close for ratio, ended quarter on agreements

Operator

from line Sidoti the Greg of with next comes Company. & Your question Burns

Greg Burns

XX% I is volume? When much just order wanted to in decline start how off with the organically Americas, trends. price versus we look that at the the

Jeffrey Stutz

is Greg, this Jeff.

So I have pricing your it's amount that's right, a you've question But split got last mean, over one numbers a the fair months. of fair that XX up, don't is, those precisely. I out built

were whereas me demand surprise So in volume dollar in see in the Americas, levels XX% unit wouldn't it terms hunt, declining that XX%, to XX%, down entry order XX%.

directional. think I that's

Greg Burns

shift of any similar a Okay. trajectory early the the has And part in of been this in quarter, part quarter? of type kind then just early this there the or trajectory

Jeffrey Stutz

yes. Yes,

weeks orders improved quarter, bit, down to first little Americas were the three year. of last Greg, organically a XX% The

Greg Burns

office then corporate we I And you pre Okay. how now business to are pandemic? look overall, when the the guess, Like business, size has the -- at like is able big enterprise education, that or how to to health has you business? maybe need of adjacent do feel on kind some it maybe care areas like you verticals much other focus shrunk? And like grow versus some

Jeffrey Stutz

simply this. is is the anxious probably that say I much find don't of -- and Jeff. on return don't to of I resulted we're free questions can't of to dislocation size is would on. big question types tag tag We answer all you this office. John, really industry think to how this Greg, think if -- in out lags now. right that know of I will I has -- John macroeconomic want to to But feel

John Michael

very healthcare active think sector. the as in I business. public Well, education we've about as We're verticals, and of healthy active an terms got in well higher question

firms verticals say manufacturing But times as segment verticals of that. quite pockets banking, business not and service doing active is the there of still has the investment we in more -- sort as pockets activity companies, types a it lean of there as And and business, the professional they in we've very would softer, across few compared those been are are core active where of I lot as a are providing we resilient. definitely office of All certainly, So Tech to still opportunity. that into And are life where the down years. in firms, office is in in when office legal, well. last But there lot strength been. sciences, probably obviously, even activity, are is those pharma. were

Operator

Your next the Alex question of Craig-Hallum. comes line Fuhrman with from

Alex Fuhrman

navigating in think opportunities done more Just general, particularly to to able good cost going and maybe prices product Wondering elsewhere lot import Are continue in a and you're increase and the manufacturing and your that surge do in the crisis about prices You European next be in of how you all with Europe supply have there? curious increases job increase manufacturing you're in world to guys you cost step on at everything thinking those to of costs through very of as to your pass perhaps electricity of to there Europe? for the a the spike just businesses? chain happening, producer the look that's passing customers. in on

Andrea Owen

it's a Alex, great question. Yes,

from is market. say as by I market are you as in markets when And I a price it manufacturing where the all much we possibly be look the we also world, localized can around think sell. would at increase, how we we're

But I able far, the Like we we've in But else agile of an seen a at commodities, very branch everything we very been we look increase discounting there. how in think closely. or flexible And And haven't these approach raise and that. watching prices. days, difference we we a forward. because minute. have so where it's necessarily I changing coming minute like feel anything are think that localized what's make most will to to So we're Europe of we felt

Alex Fuhrman

ask you quarter. if But order other the since it's And additional seeing have dollars the difference mean, between mean, or perhaps a I decline couple regionally in just that I any call-outs volumes. looks like talked like it slowed -- here. Okay, last another are the could just months been helpful. pretty just the last quarter. really -- unit last you're in I that's things decline then seems meaningful of I from the there know it about and like the anything that? it about orders

Just one those screwed like comparisons last maybe wondering just year shed that that? orders that massive any noise, could light there's if up on more two or

Andrea Owen

year, from specifically, quarter think comparison if that a look this we of post-COVID if around the last I much had sort to at you return flurry office. of bigger remember, first, in a standpoint, activity of Americas you kind

is it, when at indecision. regionally, So I Alex, North you also we lot more particular, have the look there States, I in think a think comparatively, that numbers. America, in United

seen their of a look are We the have we kind office to so of lot we iterating a parts what they want this iterating lot and still return have of on other decisiveness haven't questioning. more In like. world, CEOs to that

taking are the projects longer. So

does say would to in longer. ask super what were just you look taking if it's Michael, He It's funnel healthy. a the think lot Americas? John your I like

and So not this decline worried. say order I incredibly look at I

decline. how matter environment. understanding will and we're think being hybrid work facing think a I and a certainly people uncertainty in some to there's think we I of But see also I indecisive

projects So office in there's we're regional I longer, is variant approaching to taking return definitely the and are post COVID. say would how strong, activity a

Jeffrey Stutz

me real healthy. consider you business The add has that. maintained for past significant one of So the activity -- encouraging, a Americas right? that look quite But cycles, Jeff. I this I that nicely. that other other data across encouraging of by kind of if been thing is, That's the way, been doubt uncertainty, of thing in which is point day-to-day about no And book been decline. things you thing and the has to is quick, the just when The only would of lots a leading relatively has the segment, indicator business find

it's a think talk in certainly better when saying than I'm that And past testament down hung and So I about down there talks not probably activity not that a dealers, it's customers. cycles. we talk positive but John that's to we the when to to in

Operator

Your comes Tower from of line Water the with next Bugatch Research. Budd question

Budd Bugatch

Thank have in any been Jeff, follow-up. I and guess, quarter. inflation cost you're realized characterize Do commodity the on future the taking that? and about maybe what the versus the thought of you have asked to what's that for you question price I way versus labor would inflation in seeing your pricing terms

Jeffrey Stutz

Budd. Sure,

a remain standpoint. in There's levels this, we're points of categories I'll saw We elevated probably year. and roll basis margin to they prior level, beginning at encouraging. from most So Commodities remain set. you to some still elevated stabilize that at the talk to but to year, begin gross consolidated categories I'll sure see is signs, pricing across over, they're some just levels. about which from XXX of make level net year-over-year last realization the at price nice benefit a

if pressure then basis XX basis mix for accounted margin, of and changes points gross the that's kind -- labor for well, to includes about and points elevated. of cost costs, that temporary margin. of estimated We freight work points The accounted price. meaningful, that rest that be as that, XXX points then XX as And -- in of of pressure. some basis in mind, that while you've got some overhead collectively we So pressure. walk XX And about gross down. of that product basis you kind of and inventory-related XX as erosion the to that margin costs those retail that of point basis so Bear year-over-year And remain balances transportation then channel are well.

get the walk. should that you So

Budd Bugatch

looking XXX XXX So to that XXX at about I'm right? positive Is we negative. and got

Jeffrey Stutz

mix factor your of in channel equation which and product of out inclusive shifts, yes. price/cost is not a -- Yes, that the question. Yes, I'd answer to

Operator

next question the from of Company. comes Greg Your with Sidoti Burns line &

Greg Burns

for one here. more taking Thanks

So a impact quarters, had how affected Is over you happened more the I or being the as into of there seeing new Like why dig element maybe on instead last able as a that moderate previous slowing proposed the think now passing pricing just significant along to wanted are and has of in things where the much we're you've that's And this quarters? price do that's comfortable demand couple down, slowdown? still demand. like to then going increase? feel has quarter any decline increases if such pull-forward with forward, exacerbating you price along, maybe of pass we're do especially been

John Michael

This from because in pretty look inflation all a Sure. price the conversation customers, customer better our understand gone much a there's John set think we perspective, it, think Hi, time I with increase up, that conversations is prices about and board. price never we they have a Greg. others. with Yes, are across we Michael. competitive I with is at have as because to line a And see how been

and we should pricing any projects it going to and I we indicate had price So the to see be the forward. customers we able have, realize that late accepting significant pricing that I been we've think is market impact increases. continue don't would conversations the the from think we've And of the with

Operator

call questions. back to Andi the Owen There I'll remarks. further turn for no are closing

Andrea Owen

that thank everybody, you the for integration work. resiliency forward again Thank joining us we and MillerKnoll. And lies call. making with your you. proud team Thank demonstrated quarter. the really I for closing, feel through of next In this The strongly speaking progress we're our and you. Thank on opportunity leadership evening's collective the by for of brands look about today, you, time our and we're ahead to you

Operator

This call. conference today's concludes

You may now disconnect.

MillerKnoll (MLKN) 29 Sep 222023 Q1 Earnings call transcript