Q1 2023 MillerKnoll Inc Earnings Call

September 28, 2022

Ladies and gentlemen, thank you for standing by and welcome to the Miller Noel 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.

I would like to ask a question. During this time. Please press star followed by the number one on your telephone keypad if.

If you would like to withdraw your question again press Star one.

We ask that you please limit yourself to one question and one follow up thank you.

Ken Giftee Vice President of Investor Relations you May begin your conference.

Good evening and welcome to Millennial first quarter conference call.

Andi Owen Chief Executive Officer, and Jeff <unk>.

<unk> financial officer.

Also available during Q&A for Debbie approach, President Global retail and John Michael President Americas contract.

Before I turn the call over to Andy Please remember our safe Harbor regarding forward looking information.

During the call management May discuss information that is forward looking and involves known and unknown risks uncertainties and other factors, which may cause the actual results to be different than those expressed or implied.

Please evaluate the forward looking information in the context of these factors, which are detailed in today's press release.

Forward looking statements are as of today and assumes no obligation to update from health and that these statements.

We also refer to certain non-GAAP financial metrics, which are reconciled and described in our press release posted on our Investor Relations website at <unk> Dot com.

With that I'll turn the call over to Andy.

Thanks, Ken Good evening, everyone and thank you for joining our call.

No no no it's created to lead our industry and deliver results by offering customers modern design tuition for their workspaces in home or unique collective brands and channels, we continue to leverage and build on our competitive advantages to be established during our first year as Miller at all this quarter, we successfully launched our millennial sales organization and dealer network.

<unk> introduced new products with the company's first sign days and continue to capture synergies through our integration work.

First quarter results are a testament to our diversified global business, our multichannel multi brand and collectively designed to sustain shifting economic conditions and drive growth during the first quarter, we experienced the impact of the economic softening in various parts of the world and our results reflect how we can drive strong performance in different segments and regions.

Balance of our Assortments and others.

Around the globe, we hear from customers at the workplace matters companies see the benefit of a hybrid model and want to bring teams together for culture collaboration and productivity. However, the pace at which companies are placing orders and enhancing their workspaces vary based on location and sector.

In the Americas segment, we posted healthy growth in revenue compared to last year, but saw a slowdown in order activity. We are feeling the impact of the economic uncertainty is having on your customers, particularly in the U S.

Their hearts and concerns about inflation piloting smaller orders and requiring more revisions to projects that they learned to operate in a mostly hybrid environment.

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

Our international contract with specialty segment sales and orders continue to grow after a strong fourth quarter.

Global presence and the ability to take brands into new markets is an important advantage that we will continue to leverage.

The international dealer Cross sell pilot now includes 41 dealer from 17 countries on three continents.

Plan to extend it to India, the Middle East and Africa later this year.

Holly Hunt, which appeals to a premium residential customer that is more resilient to inflationary pressures and anybody who's customized solutions help our customers enhance the acoustics and walls of their spaces. Both delivered record sales numbers for the quarter. In addition, guy here in days twice, our generated sales person, they're elevated geoscience for executive.

Offices and conference room.

Turning to product, we introduced more than 15, new products this year, including new task chairs from both Herman Miller or no.

An innovative enlist screening from no new textiles from Muharram adult new outdoor and ancillary questions from near term and not one cafe tables and stool.

In addition, we've launched new takes on iconic pieces, including a son and vibrant collaboration with Rolf and Mette Hay on select in pieces and the re imagination of the in shell Chair, which is now available in 100% recycled plastic.

These new products innovation, and design and functionality and our commitment to delivering on our 2030 sustainability goals.

It's incorporating more upon it healthy materials using advanced manufacturing processes by reducing our packaging, we are seeing momentum across all areas of our business to lower our carbon footprint and to find at least.

We also launched the Miller No foundation, the philanthropic platform unites the strength of our legacy foundation with programs dedicated to engaging underrepresent abuse and art and design.

Equity in melanoma communities worldwide and protecting our planet for sustainable design. In addition, we continued to deliver on our commitment to diversity equity and inclusion through ongoing education across our company got unconscious bias and inclusive basis.

Our sponsorship with new CEO action Fellows, and new diversity and design programs.

Confidence in the programs and innovation, we are pioneering a cross our collective we are actively managing all facets of our business with close attention to market drivers economic condition.

Market interest we are preparing for the road ahead with that I'll turn it over to Jeff who will discuss our financial results in greater detail before we open it up for questions.

Thanks, Andy Good evening everyone.

Our results for the first quarter reflect the steps we've taken to position milanov growth.

These results also leverage the benefits of our diverse business model, which has helped to mitigate some of the pressures from the current macroeconomic environment.

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

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

As you saw on our press release issued today and the 8-K filed on September eight we changed our reporting segments to align with changes in our organizational structure.

Which was effective at the start of the first quarter as a quick reminder, our segment now consists of America's contract.

International contract in specialty and global retail.

Turning to our results consolidated net sales in the first quarter were $1 1 billion, an increase of 37% on a reported basis and 12% organically compared to the same quarter last year.

Consolidated orders continue to exceed prior year levels on a reported basis with orders of $1 billion, reflecting an increase of 11% year over year.

On the organic basis orders were down 11% compared to the same period last year, primarily driven by the Americas contract and retail segments.

In the Americas contract segment sales in the first quarter were $537 million, an increase of 41% on a reported basis compared to the same period last year and up 15% organically.

Order levels in the first quarter increased 3% to $511 million compared to the same quarter a year ago.

On a reported basis and declined 17% organically.

The decrease was due to several factors. These include a challenging comparison due to pent up demand caused by the pandemic last year.

<unk> is taking longer due to dealers being understaffed and general uncertainty surrounding the current macroeconomic environment.

Now I'll turn to the global retail segment.

It was in the quarter for this segment were $269 million up 11% compared to the year ago period on a reported basis and down 4% organically.

New orders totaled $249 million in the first quarter up 9% to last year on a reported basis and down 8% organically.

Segment's performance was mainly impacted by a shift in consumer spending towards experiences such as post pandemic travel and continued macroeconomic uncertainty.

We're making targeted investments to both scale, the retail business and drive new customers to our channels while at the same time carefully managing our overall cost structure in this business.

During the quarter, we opened six new stores across Los Angeles, New York, Denver, West Palm Beach, Copenhagen, Denmark in Nagoya, Japan.

In the second quarter, we plan to open an additional Herman Miller location in Ginza, Japan.

And given the ongoing rationalization of our store fleet. We also closed two locations in the quarter. These stores were in Portland in Costa Mesa.

Turning to our international contract and specialty segment favorable business sentiment and healthy demand across several key international markets continued to drive impressive growth for the quarter sales totaled $273 million, reflecting an increase of 63% on a reported basis and up 30% organically.

New orders in the first quarter were also robust totaling $252 million, an increase of 31% year over year on a reported basis and up approximately 1% organically.

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

Our consolidated gross margin for the first quarter was 34, 5%, which is down 70 basis points compared to the same period a year ago.

Adjusted gross margin decreased 150 basis points compared to the comparable quarter last year and the variance was primarily driven by higher commodity costs and other inflationary pressures, partially offset by recently implemented price increases.

Last month, we announced an 8% average list price increase in the Americas contract segment, which will take effect in October to help further mitigate inflationary headwinds.

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

Given the current macroeconomic backdrop, we are proactively taking additional steps to improve our near term profit and cash flow outlook.

These include offering a voluntary retirement window further optimizing our organizational structure reductions and program spending and rationalizing capital expenditures.

As a result of these planned actions, we expect to realize annualized expense reductions of between $30 million and $35 million.

These savings should begin gaining traction during the third quarter would be more fully realized in the fourth quarter.

Our operating margin for the first quarter on a reported basis was four 7%.

On an adjusted basis, the operating margin was down 40 basis points compared to the prior year. The decline in operating margin reflected the near term inflationary pressures and gross margin, which were partially offset by well managed operating expenses.

We reported diluted earnings per share in the quarter of 34.

And adjusted diluted earnings per share were <unk> 44 in the period compared to <unk> 50 in the year ago period.

Turning to the balance sheet at the end of the first quarter, our liquidity position reflected cash on hand, and availability on our revolving credit facility totaling $402 million.

And regarding our guidance for the second quarter, we expect second quarter net sales to range between approximately $1 3 billion and $1 7 billion.

And adjusted earnings per share to be between 39% to 45.

I might also mention that we've provided other elements of our guidance and our supplemental materials that were included with the earnings release.

This guidance considers the near term inflationary environment as well as the proactive steps that we're taking to offset these pressures and will continue to prudently manage our cost to maintain our financial flexibility. During these periods of economic uncertainty.

So to close we have a strong collective of brands that provides millard all with an unparalleled competitive advantage to meet and exceed the needs of our customers on a global scale.

We believe we have a unique and diversified business model that provides resiliency for our business going forward.

And with those opening remarks, we will now turn the call back to the operator will take your questions.

As a reminder, if you would like to ask a question at this time. Please press star followed by the number one on your telephone keypad. Please.

Please limit yourself to one question and one follow up.

First question comes from the line of Budd <unk> with water Tower Research. Your line is open.

Oh good afternoon Andy.

Jeff.

Got it and Debbie.

I guess I guess I, just would love to get a little bit more color on the order book or maybe versus what you are what you expected in the quarter in terms of orders and.

Oh, what youre seeing in terms of what your customers are telling you and what you could see in terms of a visit so and.

Sales activity that I know you monitor.

Hey, nice to hear you, it's Andy as far as customer visits I think that's a really encouraging sign our customer visits are up 10% to last year and also up on the quarter I think the order trend for us in the Americas was slightly lower than we were hoping that it would be but I think it was varied throughout the quarter.

<unk> I would say stronger than we thought it would be in international and the demand in retail has been I think on par with our competitors from an orders standpoint, John what would you add from a contract can't put out orders.

I think I would.

I would agree Andy and add that.

There is robust activity, if you talk to the dealer network.

All incredibly busy I think some of the things that we're seeing is a lot of hesitation on the part of customers in terms of.

Pulling the trigger on a new and more hybrid focused work environment.

And also probably.

Some hesitation in terms of the size of projects going forward in terms of what's going to be required that said.

Most companies that we talk to realize they have to do something.

And they are in the process. It's just it's an iterative process and it takes a little bit longer to get the order to close.

And then in our pre pandemic kind of environment.

Okay.

My follow up question, I guess I'd like to inventory came in pretty much higher than I expected is that sure we'd like to get maybe some color on our inventory and Jack and maybe if we can get the ratio.

For the banks for the debt holders, which after a few.

How much inventory.

It looks to me like you were maybe $60 million higher in inventory.

We're going to come in.

Yes.

But great question good to good to talk to you all of you staying clear of the storm I assume you are.

That you are on the call.

What I'd.

It's here and it's.

No.

We are I can only imagine.

So clearly we did have a build in inventory and you see that in the cash bar I think our cash flow from operating activities was was a negative 60, I want to say $7 million of Jeanette in that hunt Bud and.

A big chunk of that is working capital tied up with related to inventory a couple of areas, where we're seeing it we do see some inventory buildup in the contract business related to the continued relative strength in international So I would make that point.

That one will.

We will certainly take I think the <unk> rating.

Ring fence the area that was a bit of a surprise we did have an inventory build in the retail business and Debbie can unpack this a bit in it in a little more color, but I would just simply say that.

The lead times that that business was contending with back in the spring and even the early part of summer, where such and demand levels were such that we were ordering in front of it right. We were trying to get in front of it and with the falloff in demand that we saw in the quarter as I mentioned in my prepared remarks orders organically were down.

8% for that business, we did see a buildup in demand or inventory levels. They piled up and in fact, we had to incur.

Some some costs related that we weren't expecting related to warehousing and storage and transportation of that inventory that weighed on margins in the period. So that's really the primary area.

Okay.

And I'd just add this is Doug.

We and our dedicated retail and inventory increased increased quarter on quarter by 7%.

As a result of the shift and demand trend.

And as Jeff alluded to that 7% increase was largely started short term.

Warehousing locations, we've now secured.

Longer term locations that are.

At a much lower cost impacts and we're always been storing that buildup that we've had over the last few months. The great news is that our inventory as largely not liable inventory only 3% of our total inventory for retail as seasonal meaning outdoor we did however, having youre right IPR business.

And about 3% is what we would call discontinued and we're moving through that.

And our clearance section.

And then just to kind of close it out on your question on the leverage ratio the net debt to adjusted EBITDA for our lending agreement ended the quarter at two nine turns.

Okay Alright.

Alright, well good luck.

I'll, let others have the peppercorn. Thank you very much and thanks Bob.

David.

Thank you.

Your next question comes from the line of Greg Burns with Sidoti <unk> Company. Your line is open.

Good afternoon.

Just wanted to start off with the order.

Order trends.

We look at the 17% decline.

Organically in the Americas, how much does that price versus volume.

Greg This is Jeff so.

I don't have those numbers split out precisely, but I mean your question. It's a fair one that you've got you've got a fair amount of pricing that's built up right over the last 12 months so in the Americas.

It wouldn't surprise me to see unit volume demand.

Declining in 2025% in that <unk>, 25%, whereas order entry levels in dollar terms were down 17% I think that's directional.

Okay, and then just the early part of this quarter or has there been any.

Kind of.

Shifting the trajectory or similar type of trajectory in the early part of this.

This quarter, yes, yes first the first three weeks of the quarter, Greg Americas orders were improved a little bit down 12% organically to last year.

Okay.

And then when.

When we look at the the.

The overall.

I guess corporate enterprise.

All of this business.

Are you able to size like.

How big the business is now versus pre pandemic like because of how much has it shrunk.

And do you feel like you need to focus on maybe some.

Adjacent areas like health care or.

Or education, maybe some other verticals to kind of grow that business.

Greg This is Jeff John will probably want to tag onto this but I would I would say I don't think I think the big question that we're all.

Anxious to find out is how much of this is macroeconomic dislocation and that has resulted in lags have returned to office, we really simply can't answer.

Size of industry types of types of questions right now John I don't know if you feel free to Doug well I think in terms of the question about the verticals.

We've got an active and healthy healthcare business, we're very active in higher education as well as public sector. So we in times when the office business is softer we leaned into those verticals that are more resilient.

And certainly we've been doing that but I would say even in the.

And sort of the core core office business. There are there are pockets.

Where there is still a lot of strength in activity professional service firms investment banking legal and life Sciences pharma. All those types of firms are still very active in providing a lot of opportunity tech companies, obviously are down.

As compared to where they were in last last few years and manufacturing is probably not quite as active as it has been but there are definitely pockets of activity across the verticals and in the office segment as well.

Okay. Thank you.

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

Great. Thanks, very much for taking my question.

You guys have done a very good job of navigating through all of the supply chain crisis and.

Passing on cost increases to your customers wondering as you look at maybe the next step of of that with everything that's happening, particularly in Europe , and just a surge in electricity prices and producer prices in general.

Do you think youre going to be able to continue to pass on a lot of those cost increase.

In Europe or are there, perhaps opportunities to increase manufacturing elsewhere in the world in an import more product there.

Curious to how youre thinking about.

The spike in manufacturing costs for your European businesses.

Yeah. It's a great question I think when you look at how air manufacturing around the world. We are localized as much as we possibly can be and all of the markets, where we sell them and I would say from a price increase it is also a market by market. So where we felt most of the brands have commodities, we've been able to raise prices and I.

So far we haven't necessarily seen an increase in discounting or anything like that but we're watching Europe very closely everything else. These days, it's changing minute to minute, but we feel we have a very flexible and agile approach because we are localized there and I think that will make a difference in how we look at what's coming forward.

Okay.

That's really helpful.

And then just if I could if I could ask another about the.

The decline Youre seeing in.

Order volumes I mean, it looks like it's been just the last couple of months that things have slowed since the last quarter.

I know you talked about the perhaps the difference between unit and dollars here, but are there are there any other additional callouts regionally or or anything like that I mean, it just it seems like a pretty meaningful decline in orders from the last quarter just wonder.

If there is any nor.

Noise like one or two just massive orders last year that maybe screwed up those comparisons.

That could shed more light on that.

I think from a comparison standpoint, if you look at last year this quarter in the Americas specifically.

Much bigger flurry of activity around kind of that first if you remember sort of post COVID-19 return to office. They didn't comparatively there that in the numbers I also think regionally when you're looking at north.

North America, United States in particular, we have a lot more indecision, we have a lot of Ceos that are still kind of iterating and iterating on what they want they returned to office to look like in other parts of the world. We have a lot more decisiveness and we haven't seen this questioning for the projects are taking longer I think if you were to ask John Michael What is your funnel look like.

In the Americas Super healthy, it's just taking a lot longer so I look at it sort of declined and I say not incredibly worried I think we're certainly facing uncertainty and I think we will see some decline, but I also think there is a matter of people being indecisive and understanding how to work in a hybrid environment. So I would say activity is strong projects.

Were taking longer and there is definitely a regional variance in how we're approaching the return to office post COVID-19.

The only other thing.

Real quick this is Jeff the only other thing I would add to that as a data point, which I find encouraging.

And by the way.

It's a uncertainty right so no doubt about that but the encouraging thing for me is when you look across the book of business in the Americas segment day to day business activity has been relatively healthy.

That's maintained.

Nicely and if you just consider past cycles that has been one of the things that has been a kind of a leading indicator of significant decline. So I'm not saying that it's not down but it's hung in there better than in past down cycles, and I think that.

Certainly a positive and probably a testament to the activity that Jon talks about when you were when we talked to deal with when we talk to customers.

Okay. That's really helpful. Thank you both very much.

Yeah.

Your next question comes from the line of Budd <unk> with water Tower Research. Your line is open.

Alright, Thank you for taking the follow up I guess, Jeff maybe.

Well good question would've been asked about price versus cost in the quarter or do you have any way to characterize that.

In terms of what your realized pricing versus the.

The commodity inflation and labor inflation, and what youre seeing future on that.

Sure Budd.

So I'll just make sure we're level set I'll talk year over year.

From up from a gross margin standpoint, we saw a nice nice benefit from pricing at the consolidated level about 330 basis points of net price realization to last year, which is encouraging commodities remain at elevated levels Theres, some signs and you probably see this.

And some of the categories that they are beginning to stabilize and begin the rollover, but they still remain at elevated levels across most categories to prior year. So that accounted for about a 240 basis point erosion in gross margin.

The freight and transportation costs as well remain elevated we estimated that to be 90 basis points of <unk>.

Margin pressure bear in mind some of that that includes some of that retail inventory related costs debt. While meaningful are are temporary as we work that those balances down and then labor and overhead.

Collectively about 70 basis points of pressure.

And then so that's kind of the cost price and then if you could kind of walk the rest of that gross margin you've got product and channel mix changes that accounted for 60 to 80 basis points of pressure year over year as well so that should get you the walk.

So we've got 330 positive.

Looking at about $460 to 480 negative.

Right, yes, inclusive inclusive of product and channel mix shifts.

Which is not.

I would factor that out of the price cost equation.

Prior to your question, yes, yes.

Okay alright. Thanks, Thank you very much and good luck on the on the balance sheet.

For the year.

Thanks Budd.

Your next question comes from the line of Greg Burns with Sidoti <unk> Company. Your line is open.

Alright, thanks for taking one more year so.

I just wanted to dig into the price increases and the impact that that's had on demand is there any element of pull forward thats happened over the last couple of quarters, where now were.

Yeah.

That's like exacerbating or why we're seeing such a significant decline this quarter, maybe instead of maybe more moderate slowdown like how do you think pricing is affected.

Demand in previous quarters, and then going forward.

If things are slowing down do you still feel comfortable being able to pass along as much prices you've been passing along especially with the new proposed.

Proposed increase.

Sure Hi, Greg This is Jon Michael.

Yes, I think that.

I think from a from a price perspective.

Conversations with customers.

Ever been a better time to have a conversation with a customer about price increase because they all understand it because inflation is pretty much across the board and I think as we look at our competitive set and how prices have gone up we see that we are in line.

With others.

So I don't think we see any significant impact.

From the price from the price increases and I think the conversations we've had we've had with customers in the projects we've been pricing.

Late would indicate that the market's accepting the pricing that we have and we should be able to continue to realize that going forward.

Okay. Thank you.

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

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

Thank you.

This concludes today's conference call you may now disconnect.

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[music].

Ladies and gentlemen, thank you for standing by and welcome to the Miller <unk> 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.

He would like to ask a question. During this time. Please press star followed by the number one on your telephone keypad if.

If you would like to withdraw your question again press Star one.

We ask that you please limit yourself to one question and one follow up thank you.

Ken <unk> Vice President of Investor Relations you May begin your conference.

Good evening and welcome to Millennials first quarter Conference call I'm joined by Andy Owen Chief Executive Officer, and Jeff <unk>, Chief Financial Officer.

Also available during Q&A for Debbie probes.

<unk> global retail and John Michael President Americas contract.

Before I turn the call over to Andy. Please remember our safe Harbor regarding forward looking information during the call management may discuss information that is forward looking and involves known and unknown risks uncertainties and other factors, which may cause the actual results to be different than those expressed or implied.

Please evaluate the forward looking information in the context of these factors, which are detailed in today's press release.

The forward looking statements are as of today and assumes no obligation to update or on top of that these statements.

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

Thanks, Ken Good evening, everyone and thank you for joining our call.

No it's created to lead our industry and deliver results by offering customers modern design tuition for their workspaces and home so unique collective with brands and channels, we continue to leverage and build on our competitive advantages to be established during our first year as Miller at all this quarter, we successfully launched our Mila Mila sales organization and dealer network.

<unk> introduced new products. The Companys first design days and continue to capture synergies through our integration work.

First quarter results are a testament to our diversified global business, our multichannel multi brand collective gets assigned to sustain shifting economic conditions and drive growth during the first quarter, we experienced the impact of economic softening in various parts of the world and our results reflect how we can drive strong performance in different segments and regions.

Balance the performance in others.

Around the globe, we hear from customers at the workplace matters companies see the benefit of our hybrid model and want to bring teams together for culture collaboration and productivity. However, the pace at which companies are placing orders and enhancing their workspaces varies based on location and sector.

In the Americas segment, we posted healthy growth in revenue compared to last year, but saw a slowdown in order activity.

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

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

Our international contract with specialty segment sales and orders continue to grow after a strong fourth quarter, our global presence and the ability to take brands into new markets is an important advantage that we will continue to leverage.

The international dealer Cross sell pilot now includes 41 dealer from 17 countries on three continents, we plan to extend it to India, the Middle East and Africa later this year.

Hollywood, which appeals to a premium residential customer that is more resilient to inflationary pressures and any backfill felt whose customized solutions help our customers enhance the acoustics and walls of their spaces. Both delivered record sales levers for the quarter. In addition, geiger and days twice or generate a salesperson or elevated designs for executive.

Officers and conference room.

Turning to product, we introduce more than 15, new products this year, including new task chairs from both Herman Miller Noel.

An innovative enlist screening from no new textiles from inherent adult new outdoor and ancillary questions from their toe and not one cafe tables and stool.

In addition, we've launched new takes on iconic pieces, including a fun and vibrant collaboration with Rolf and Mette Hay on select Inc. Pieces and the re imagination of the Ames shall chair, which is now available in 100% recycled plastic.

These new products reflect innovation and design and functionality and our commitment to delivering on our 2030 sustainability goals.

It's incorporating more of a set of healthy materials using advanced manufacturing processes are reducing our packaging, we are seeing momentum across all areas of our business to lower our carbon footprint and define at least.

We also launched the millennial foundation, the philanthropic platform unites the strength of our legacy Foundation with program dedicated to engaging underrepresent abuse and art and design.

<unk> equity in Melano communities worldwide and protecting our planet for sustainable design. In addition, we continued to deliver on our commitment to diversity equity and inclusion through ongoing education across our company unconscious bias and inclusive basis.

Our sponsorship of new CEO action, pillows, and new diversity and design programs.

Confidence in the programs and innovation, we are pioneering a cross our collective we are actively managing all facets of our business with close attention to market drivers economic condition.

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

Thanks, Andy Good evening everyone.

Our results for the first quarter reflect the steps we've taken to position <unk> for growth.

These results also leveraged the benefits of our diverse business model, which has helped to mitigate some of the pressures from the current macroeconomic environment.

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

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

As you saw in our press release issued today and the 8-K filed on September eight we changed our reporting segments to align with changes in our organizational structure.

It was effective at the start of the first quarter as a quick reminder, our segments now consist of Americas contract international contract in specialty and global retail.

Turning to our results consolidated net sales in the first quarter were $1 1 billion, an increase of 37% on a reported basis and 12% organically compared to the same quarter last year.

Consolidated orders continue to exceed prior year levels on a reported basis with orders of $1 billion, reflecting.

Reflecting an increase of 11% year over year.

And organic basis orders were down 11% compared to the same period last year, primarily driven by the American contract and retail segments.

And the American contract segment sales in the first quarter were $537 million, an increase of 41% on a reported basis compared to the same period last year and up 15% organically.

Order levels in the first quarter increased 3% to $511 million compared to the same quarter a year ago.

On a reported basis and declined 17% organically.

The decrease was due to several factors. These include a challenging comparison due to pent up demand caused by the pandemic last year.

<unk> is taking longer due to dealers being understaffed and general uncertainty surrounding the current macroeconomic environment.

Now I'll turn to the global retail segment.

Sales in the quarter for this segment were $269 million up 11% compared to the year ago period on a reported basis and down 4% organically.

New orders totaled $249 million in the first quarter up 9% to last year on a reported basis and down 8% organically.

Segment's performance was mainly impacted by a shift in consumer spending toward experiences such as post pandemic travel and continued macroeconomic uncertainty.