Q1 2024 MillerKnoll Inc Earnings Call

Speaker 1: Good evening and welcome to Miller Knowles' Quarterly Earnings Conference call. As a reminder, this call is being recorded.

Good evening and welcome to Miller Knowles quarterly earnings Conference call.

As a reminder, this call is being recorded.

Speaker 1: I would now like to introduce your host for today's conference, Vice President of Investor Relations, Karola Mengeleini.

I would now like to introduce your host for today's conference Vice President of Investor Relations Gorilla Mangled Lini.

Good evening and welcome to <unk> first quarter fiscal 2024 conference call.

Speaker 2: Good evening and welcome to Miller Knowles first quarter fiscal 2024 conference call. I am joined by Andy Owen, Chief Executive Officer and Jeff Stutz Chief Financial Officer.

I'm joined by M. D O N Chief Executive Officer, and Jeff Stutz, Chief Financial Officer.

Speaker 2: Also available during the Q&A session are John Michael, President of America's contract, and Debbie Probs, President of Global Retail.

Also available during the Q&A session I, Jon Michael precedent of Omega contract and Debbie Propst President global retailer.

Speaker 2: Before I turn the call over to Andy, please remember our safe harbor regarding forward-looking information.

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

Speaker 2: 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.

During the call management May discuss information that is forward looking and involve known.

Known and unknown risks uncertainties and other factors, which may cause the actual results to be different than those expressed or implied.

Speaker 2: Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release.

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

Speaker 2: The forward-looking statements are as of today, and we assume no obligation to update or supplement this.

The forward looking statements as of today, and we assume no obligation to update or supplement distinguish.

Speaker 2: We 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 millerknoll.com.

We 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 will turn the call over to Andy.

Speaker 2: With that, I will turn the call over to Andy. Andy? Thanks, Carolla. Good evening, everyone, and thank you for joining our call.

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

Speaker 1: I'm very excited to share that our team delivered a strong first quarter, as evidenced by our top line results and margin expansion. Across our enterprise, we have set ourselves up to see its opportunity as market conditions improve, and we believe we are at an inflection point.

I'm very excited to share that our team delivered a strong first quarter as evidenced by our topline results and margin expansion across our enterprise, we have set ourselves up to seize opportunity as market conditions improve and we believe we're at an inflection point now.

Speaker 1: Now, regarding our continuing strategy, I'd like to highlight some of the efforts we're making to become more resilient and future-proof our business, including diversifying our business both in North America and globally, streamlining our global operations, moving production and capacity efficiently, and investing in e-commerce.

Now regarding our continuing strategy I'd like to highlight some of the efforts, we're making to become more resilient and future proof, our goodness, including diversifying our business both in North America and globally streamlining our global operations, moving production and capacity efficiently and investing in e-commerce.

Speaker 1: We believe that the work we're doing is paying off with much to look forward to on the horizon. At the same time, we remain pragmatic about the next few months. We're still in the early period of recovery and our business segments reflect the varied economic conditions around the globe.

We believe that the work we're doing is paying off with much to look forward to on the horizon at the same time, we remain pragmatic about the next few months, we're still in the early period of recovery in our business segments reflect the varied economic conditions around the globe.

Speaker 1: Right now, we have cause for both enthusiasm and vigilance. We've seen companies begin to take the leap back into physical space and announce return to office policies.

Right now we have costs for both enthusiasm and Angeles, we've seen companies began to take the leap and can do physical space and announced returned to office policies at the same thing in the U S began to rebound in the second quarter of 2023.

Speaker 1: Office leasing in the US began to rebound in the second quarter of 2023. And we're seeing this amongst our clients as companies continue to announce return to office policies.

Seeing this amongst our clients are companies continue to announce returned to office policies. Moreover, The American Institute of architects billing index or Abi has been flat for the last six months, suggesting a slow but stable construction outlook.

Speaker 1: Moreover, the American Institute of Architects billing index, or ABI, has been flat for the last six months, suggesting a slow but stable construction outcome.

Speaker 1: Having said that, we're still seeing mortgage rates at 20-year highs, and uncertainty remains about future rates.

Having said that we're still seeing mortgage rates at 20 year highs and uncertainty remains about future rate hikes, which dampens the housing market and impacts the near term in our retail segment.

Speaker 1: which dampens the housing market and impacts the near term in our retail segment.

Speaker 1: Overall, we remain focused on economic and industry activity worldwide so that we can continue to deliver when our customers and clients value them.

Overall, we remain focused on economic and industry activity worldwide. So that we can continue to deliver what our customers and clients.

Cost.

Speaker 1: Our research and insights team is best in class, bringing the latest data and learning to our clients.

Our research and insights team is best in class, bringing the latest data and learning to our customers.

Speaker 1: This fall, we'll be sharing our latest point of view on the workplace and designing ideal spaces based on quality and actionable data. This fresh, thoughtful perspective emphasizes what we believe are the key factors to designing the best spaces to support thriving and engaged teams.

So well be sharing our latest point of view on the workplace and defining ideal spaces based on quality and actionable data that's fresh thoughtful perspective, emphasizing what we believe are the key factors to defining the best basis to support thriving and engaged teams.

Speaker 1: Internationally, we're seeing some pockets of softness, mainly centered in Europe and China.

Internationally, we're seeing some pockets of softness mainly centered in Europe and China.

Speaker 1: Similar to North America and the rest of the world, we're further pursuing resilient sectors and global economy.

Similar to North America, and the rest of world or further pursuing resilient sectors and global accounts.

Speaker 1: We've seen that our scalability and ability to deliver a wider range of products is a unique market advantage and will continue to seek out these wins.

We've seen that our scalability and ability to deliver a wider range of products is a unique market advantage and we'll continue to seek out these wins.

Speaker 1: In addition, over the next 12 months, we plan to transition 60 more international, hermit-millar dealers into millar-mill dealers, expanding our offering to clients and our share of wallet with our dealers.

In addition over the next 12 months, we plan to transition 60, more international Herman Miller dealers into Miller Knoll dealers, expanding our offering to clients and our share of wallet with our dealers.

Speaker 1: Regarding retail, but a celebration of the North American housing market and the upswing and interest rates across Shura have continued to influence demand in the segment with compared to the previous year. Nevertheless, during the quarter, the order of trajectory in the North American market surpassed that of other regions, primarily attributed to enhancements in our direct to consumer channels.

Regarding retail, but a deceleration in the north American housing market and the upswing in interest rates across Europe have continued to influence demand in the segment when compared to the previous year. Nevertheless, during the quarter. The order trajectory in the North American markets are popped out about the regions primarily attributed to enhancements in our direct to consumer channels.

Speaker 1: Restartigiously advocating resources to improve our digital platforms and technological infrastructure. Aim into enhance the overall customer experience in satisfaction.

We're strategically allocating resources to improve our digital platforms and technological infrastructure aiming to enhance the overall customer experience and satisfaction levels, all while intensifying our efforts to fortify brand awareness. Furthermore, in the first quarter, we opened a new design within reach towards Ardmore, Pennsylvania, which has delivered very promising early.

Speaker 1: All while intensifying their efforts to sport a side brand aware.

Speaker 1: Furthermore, in the first quarter, we opened a new design within REIT Store in Ardmore, Pennsylvania, which has delivered very promising early results, including robust foot traffic and order.

Including robust foot traffic and order placement.

Speaker 1: Now I'd like to talk a little bit about our gross margins that expanded year over year, sequentially, and across all of our business sectors.

Now I'd like to talk a little bit about our gross margin expanded year over year sequentially and across all of our business segments.

Speaker 1: In the past, I've talked about focusing on what we can control, and this performance is proof of that. We're seeing efficiency improvements derived from our synergy capture, we have pricing power, we're laser focused on inventory management and product mix, and we continue to see cost reduction.

In the past you've talked about focusing on what we can control and this performance is proof of that we're seeing efficiency improvements derived from our synergy capture we have pricing power.

Laser focus on inventory management and product mix.

Continue to seek cost reductions.

Speaker 1: all of these key elements that are enabling us to improve the profitability of our core operations.

All of these key elements that are enabling us to improve the profitability of our core operations.

Speaker 1: I'm extremely proud of all the work our teams have done and continue to do every day to seek and seize opportunities.

I'm extremely proud of all the work our teams have done and continue to do every day to seek and seize opportunities.

Speaker 1: Finally, the quarter was not short on activity, so I'll walk you through a few of the highlights. Please...

Finally, this quarter was not sort of activities. So I'll walk you through a few of the highlights.

We started out strong with a success.

Speaker 1: The largest American presentation of Rammel and Elk collective of contract products and services.

As the largest north American presentation of our Miller and old collective a contract products and services throughout.

Speaker 1: Throughout the quarter, we debuted new products and textiles across our collective, including not one's most table system, which was awarded gold by Best of Neacon. Herman Miller's first collaboration with Gabriel Tan, launching the Luba-Longerler Surfall and Soclade tables, as well as the beautiful array of textiles from our textiles group. Many of the sustainable fabrics at the fore.

Throughout the quarter, we debuted new products in textiles across our collective including not one more stable system, which was awarded gold by best of Neocon Herman Miller's first collaboration with Gambrill Tan launching the Louvre modular shortfall into claim tables as well as the beautiful array of textiles from our textiles group many of those sustainable fabrics at the forefront.

Speaker 1: The Hayte Team launched a collection of Lance and other Ancillary items. Holly Hunt celebrated their 40th anniversary with a collection of beautiful people.

The Hain team launched a collection of lamps and other ancillary items Holly Hunt celebrated their 40th anniversary with a collection of beautiful pizza.

Speaker 1: At NOLE we celebrated a 75th anniversary of the iconic lunch chair, while also introducing the serenade table under modern lounge.

We celebrated the 75th anniversary of the iconic wound share while also introducing the salmon and table at a watering down shake.

Speaker 1: We re-wrapped Termin Miller on chival classics all with fresh interpretation. And we may significant progress towards our sustainability goals, bringing solar power to our UK operations facility. All in all, I'm pleased with-

We relaunched Herman Miller archival classics, all with fresh interpretation, and we made significant progress towards our sustainability goals, bringing solar power to our U K operations facility.

Oh, no I'm pleased with the strong quarter, we delivered.

Speaker 1: Our team is connecting and moving the business forward in exciting creative ways and we're capturing market share and growth opportunities as they are.

Our team is connecting and moving the business forward in exciting creative ways, and recapturing market share and growth opportunities as they arise while I believe the rest of fiscal year 'twenty 'twenty four will remain a transitional year economic indicators trending more positively pockets of weakness are meeting.

Speaker 1: While I believe the rest of the school year 2024 will remain a transitional year, economic indicators training more positively, pockets of weakness remaining. I'm confident in our ability to deliver shareholder value as we are operating efficiently and making decisions to further improve our margins and profitability.

I'm confident in our ability to deliver shareholder value as we are operating efficiently and making decisions to further improve our margins and profitability.

Speaker 1: I'm looking forward to progressing towards our goals, positively impacting our industry, and advancing our strategy to remain resilient, and ready for the future. With that, I want to thank you for your continued partnership with us. I'll now turn the call over to Jess for a deeper look at our finance.

I'm looking forward to progressing towards our gold positively impacting our industry and advancing our strategy to remain resilient.

For the future.

What I want to thank you for your continued partnership with US I'll now turn the call over to Jeff for a deeper look at our financials.

Speaker 3: Thank you, Andy, and good evening, everyone. Does Amy just said, we are proud that our teams delivered first from...

Thank you Annie and good evening everyone.

As Andy just said we are proud that our teams delivered a very strong quarter.

Speaker 3: It results reflect some of the themes that we've been communicating with the past several quarters. First, our focus on diversification, both across geographies, business sectors, and customer customer slang.

Gulf reflects some of the things that we've been communicating over the past several quarters first our focus on diversification both across geographies business sectors and customer segments.

Speaker 3: And second, our focus on margins, taking action across several fronts.

And second our focus on margins taking action across several fronts.

Speaker 3: For the first quarter, we generated adjusted earnings of 37 cents per share, which were 16 cents above the midpoint of our guy.

For the first quarter, we generated adjusted earnings of 37 per share, which were <unk> 16 said above the midpoint of our guidance.

Speaker 3: Overall, strong net sales and gross margin expansion across all of our business segments drove the overperformance.

Overall strong net sales and gross margin expansion across all of our business segments drove the over performance.

Speaker 3: That fails in the first quarter where 918 million above the midpoint of our guidance driven by strong performance in the America's contract.

Net sales in the first quarter were $918 million above.

Above the midpoint of our guidance driven by strong performance in the Americas contract segment.

Speaker 3: Our consolidated gross margin was 39%, which was 450 basis points higher than the same quarter a year ago, and also improved on its sequential period base.

Our consolidated gross margin was 39%, which was 450 basis points higher than the same quarter a year ago and also improved on a sequential period basis.

Speaker 3: Moreover, this marks the third consecutive quarter of consolidated Eurovia adjusted gross margin expansion. Excuse me, as Andy mentioned, several factors contributed to this, including the realization of price increases, ongoing benefits from integration related synergies, and positive shifts in product and channel mix. Our consolidated adjust-

Moreover, this marks the third consecutive quarter of consolidated year over year adjusted gross margin expansion excuse.

Excuse me and Andy mentioned several factors contributed to this including the realization of price increases.

Ongoing benefits from integration related synergies and positive shifts in product and channel mix.

Our consolidated adjusted operating margin was 6% for the period.

Speaker 3: Turning to cash flows in the balance sheet, this quarter we generated approximately 131 million and cash flows from operations.

Turning to cash flows and the balance sheet. This quarter, we generated approximately $131 million in cash flow from operations.

Speaker 3: This represents an increase of nearly $200 million compared to the same quarter last year, mostly driven by working capital improve.

This represents an increase of nearly $200 million compared to the same quarter last year, mostly driven by working capital improvements.

Speaker 3: As a result of this, we were able to retire $66 million of debt and took the opportunity to repurchase approximately 1.7 million shares through a total cash outlay of $31.7 million.

As a result of this we were able to retire $66 million of debt and took the opportunity to repurchase approximately one 7 million shares for a total cash outlay of $31 $7 million.

Speaker 3: We finished the first quarter with a net debt to EBITDA ratio of 2.5 times, which puts us comfortably under the maximum limit defined in our lender agreement.

We finished the first quarter with a net debt to EBITDA ratio of two five times, which puts us comfortably under the maximum limit defined in our lender agreements.

Speaker 3: New orders at the consolidated level total of 914 million in the first quarter, reflecting at our organic decrease of 1.3% from the same quarter last year. While this is lower from last year on an absolute basis, the rate of your over your decrease once again improved.

New orders at the consolidated level totaled $914 million in the first quarter, reflecting an organic decrease of one 3% from the same quarter last year.

Well this is lower from last year on an absolute basis the rate of year over year decrease once again improved this quarter.

Speaker 3: Within our America's contract segment, net sales in the period were $490 million, representing an organic decrease of 1.7% from the same quarter last year.

Within our Americas contract segment net sales in the period were $490 million, representing an organic decrease of one 7% from the same quarter last year.

Speaker 3: New orders in the period totalled 487 million, which was up 2.1% on relash.

New orders in the period totaled $487 million, which was up two 1% over last year.

Speaker 3: This is particularly encouraging, is it's the first time at 4 quarters we've reported an increase in order levels in the America's Seconds.

This is particularly encouraging as it is the first time in four quarters, we've reported an increase in order levels in the Americas segment.

Speaker 3: I'd also like to highlight the fact that our America's contract team delivered another quarter of double digit adjusted operating margin, which totaled 10.6% in the course.

I'd also like to highlight the fact that our Americas contract team delivered another quarter of double digit adjusted operating margin, which totaled 10, 6% in the quarter.

Speaker 3: Turning to our International Contract and Specialty Segment, net sales for the quarter totaled 228 million, down 10.9% organically year-over-year. While new orders came in at 228 million, reflecting a year-over-year organic decrease of 3.6%.

Turning to our international contract and specialty segment net sales for the quarter totaled $228 million down 10, 9% organically year over year.

While new orders came in at $228 million, reflecting a year over year organic decrease of three 6%.

Speaker 3: While we continue to be very optimistic about the medium to long-term growth potential in this segment, near term macroeconomic headwinds, particularly in China and parts of Europe , are impacting demand.

While we continue to be very optimistic about the medium to long term growth potential in this segment near term macroeconomic headwinds, particularly in China and parts of Europe are impacting demand.

Speaker 3: Adjusted operating margin within the segment was 6.5% in the first quarter, down your over your driven by lower sales.

Adjusted operating margin within this segment was six 5% in the first quarter down year over year, driven by lower sales volume.

Speaker 3: This was partially offset by improved gross margin performance, which continues to benefit from previous price increases and our cost synergy.

This was partially offset by improved gross margin performance, which continues to benefit from previous price increases and our cost synergy program.

Speaker 3: Moving to our global retail segment, net sales in the first quarter of $199 million were down 13.6% organically from the same quarter last year.

Moving to our global retail segment net sales in the first quarter of $199 million were down 13, 6% organically from the same quarter last year.

Speaker 3: New orders in this segment of $199 million, were 6.4% lower than a year ago on an organic...

New orders in this segment of $199 million or six 4% lower than a year ago on an organic basis.

Speaker 3: While the slowdown in the North American housing market and the rise in interest rates globally, continue to affect the demand for this segment compared to last year, we are optimistic about the progress our team is making in expanding our market shares through our direct to consumer channels, given the relative order performance of some of our competitors.

While the slowdown in the North American housing market and the rise in interest rates globally continue to affect the demand for this segment compared to last year, we're optimistic about the progress our team is making in expanding our market share through our direct to consumer channels, given the relative order order performance of some of our competitors.

Speaker 3: And as such, we are further positioning our most mature retail brands that prefer choices for authentic design.

And as such we are further positioning our most mature retail brands as preferred choices for authentic design.

Speaker 3: Adjusted operating margin in the retail second, it was 1.6%. Down year over year, mainly due to a combination of lower volume and product.

Adjusted operating margin in the retail segment was one 6% down year over year, mainly due to a combination of lower volume and product mix.

Speaker 3: Now, turning to our near-term guidance and outlook, given the improvements we are seeing in gross margins across each of our business segments, and continued signs of demand stabilization in our North American contract business, we are increasing our adjusted earnings guidance for the full fiscal year, which we now expect to range between $1.85 and $2.15 per year.

Now turning to our near term guidance and outlook given the improvements we're seeing in gross margins across each of our business segments.

And continued signs of demand stabilization in our North American contract business, we are increasing our adjusted earnings guidance for the full fiscal year, which we now expect to range between $1 85, and $2 15 per share.

Speaker 3: As it relates to the second quarter of fiscal 2024, we expect net sales to range between $950,990 million.

As it relates to the second quarter of fiscal 2024, we expect net sales to range between $950 million and $990 million and adjusted diluted earnings to be between 52 says 58 per share.

Speaker 3: and adjusted deluded earnings to be between 52 cents and 58 cents per share.

Speaker 3: And I point out that this guidance takes into consideration the relative seasonal increase in sales that we. Expect to experience in our retail segment from the first quarter to the second quarter of our fiscal year.

I would point out that this guidance takes into consideration the relative seasonal increase in sales that we expect to experience in our retail segment from the first quarter to the second quarter of our fiscal year.

Speaker 3: So with that overview of the numbers, I'll turn the call back over to the operator and we'll take your question.

So with that overview of the numbers I'll now turn the call back over to the operator, and we'll take your questions.

Speaker 4: Thank you. As a reminder, if you would like to ask a question today, press star followed by the number one on your telephone keypad.

Thank you.

As a reminder, if you would like to ask a question today Press Star followed by the number one on your telephone keypad.

Speaker 4: Your first question comes from the line of bud bugach with water tower research.

Your first question comes from the line of Baidu Gotsch with water Tower Research. Your line is open.

Speaker 5: Thank you, and good evening, Andy, Jeff Corolo, John , and Debbie. Congratulations on the margin performance and in the quarter.

Thank you and good evening.

Andy Jets, Corona, John and Debbie and congratulation drove the margin performance and in the quarter.

Speaker 5: I would love to start by just by punching into the order flow during the quarter if you can make some commentary of how that went particularly in America's contract. I think if I caught your drift, you're saying we're seeing some improvement in that. And did that show up late in the quarter and how has the second quarter started?

I would walk to start but just by punching into the order flow during the quarter. If you can make some commentary of how about when particularly in Americas contract I think if I caught your drip Joe Youre, saying, we're seeing some improvement in that and does that show up late in the quarter and Howard how as the second quarter.

Started.

Speaker 3: Yeah, but hey, good evening. This is Jeff. I'll start in the John and Andy and anyone please add as you see fit. So maybe just, I'm the America's segment in particular. Order activity in the first half of the quarter with positive bud and show some signs of slowing in August and the first couple of weeks of September .

Yeah, but hey, good evening. This is Jeff I'll start and then John and Andy and anyone can please please add.

As you see fit so maybe just on the Americas segment in particular is the order activity in the first half of the quarter was positive Bud and showed some signs of slowing in August and the first couple of weeks of September .

Speaker 3: Now with that being said, the timing of last year's price increase, which as a reminder was 8% at the start of October a year ago, would certainly be expected to make September's comparisons much more difficult in the current year.

With that being said the timing of last year's price increase which as a reminder was 8% at the start of October a year ago would certainly be expected to make September comparisons much more difficult in the current year.

Speaker 3: But when we zoom out from that week to week data, the general trends over the past three quarters have shown improved demand activity and that gives us some confidence that more consistent growth is around the corner. So it was a bit choppy in August and early September . I think we're seeing some of that bump up against the tough constant last year due to the sizeable price increase. We put in place at the beginning of October , but how far is there?

But when we zoom out from that week to week data the general trends over the past three quarters have shown improved demand activity and that gives us some confidence that more consistent growth is around the corner. So it was a bit choppy.

And in August and early September I think were seeing some of that bump up against the tough comps from last year due to the sizable price increase we put in place at the beginning of October , but I'll pause there and John add anything you had you have thanks.

Speaker 3: John , anything you have? Thanks, Jeff. I just said, if we looked at additions to the funnel for the quarter, we had, I think, the second largest volume of additions to the funnel that we've had in the last 12 quarters. So from a project activity perspective, we're still seeing a fair amount of activity. And we've seen the day-to-day business maintain a steady pace as well.

Thanks, Jeff I'd, just add if we looked at additions to the funnel for the quarter. We had I think the second largest volume of additions to the funnel that we've had in the last 12 quarters. So from a project activity perspective, we're still seeing a fair amount of activity and we've seen the day to day business maintain a steady.

Eddie pace as well.

Speaker 3: So I think to your point, Jeff, a lot of opportunity. I think we're seeing some regional differences, right, in terms of strength of markets, but overall very positive.

So I think to your point, Jeff a lot of.

A lot of opportunity I think we're seeing some regional differences right in terms of strength of markets, but but overall very positive.

Speaker 5: That's interesting because we had heard and I'm sure you're aware that maybe project activity had lessened in the quarter and day-to-day business had replaced that. Is that not what you're saying? Is that varying with what you're saying?

Uh huh.

It's interesting because we had heard and I and I'm sure you're aware that maybe project activity has lessened in the quarter and and day to day business had had replace that is that not what you are saying is that vary with what youre, saying.

Speaker 3: We're seeing that the day-to-day activity maintain a steady solid pace. And in terms of new project ads to the funnel, it's been very robust for the last 90 days.

We're seeing that the day to day activity maintained a steady solid pace.

And in terms of new project adds to the final its been very robust for the last 90 days.

Speaker 5: Got you. Okay. And in retail, what are you seeing, Debbie? Are you seeing any indication that maybe we're at the bottom and not getting much worse or bouncing along the bottom?

Got you okay.

And in retail what are you seeing Debbie are you seeing any.

Indication that maybe we're at the bottom and not getting much worse or bouncing along the bottom.

Speaker 1: So, just from an order pacing perspective, throughout the quarter,

So, but just from a order pacing perspective sort of a quarter.

Speaker 1: We actually saw a very strong August . We attribute softness that we saw in June and July . Obviously, to the macroeconomic conditions, but also that hankered into travel spend during the summer months.

Actually saw very strong August we attribute softness that we saw in June and July .

Obviously to the macroeconomic conditions, but also the Hainan travel spend during the summer months and on an adjusted basis. Our August R&M performance was actually flat to last year and so we feel like we have momentum. Additionally, we believe as I look at benchmarks externally, we're taking share.

Speaker 1: and on an adjusted basis our August order performance was actually flat till last year. So we feel like we have momentum. Additionally, we believe as we look at benchmarks externally, we're taking a share.

Speaker 1: given the increased performance of our marketing tactics and all the other investments that we're making to improve our efficiencies and how we engage with the customer. I think one of the really important points tied by the Sandy about the retail business is also the relative strength that we're seeing in North America. Retail segment where we are seeing momentum and demand pick up compared to the past few quarters and not encouraging some sort of one of our largest.

Given the increased performance of our marketing tactics and all the other investments that we're making to improve our efficiencies and how we engage with the customer I think whenever they're really important points hi, Ben its Andy about the retail business is also the relative strength that we're seeing in the North America retail segment, where we are seeing momentum in demand.

Pick up compared to the past few quarters and that's encouraging since it is one of our largest segment and the segment that we have a direct to consumer are more mature strategy or our business internationally is largely wholesale where we have you know limitations with open to buy them at wholesale partners that we sell into it.

Speaker 1: and the segment that we have a direct-to-consumer, more mature strategy. Our business internationally is largely wholesale, where we have limitations with open to buy of the wholesale partners that we sell in.

Speaker 5: So you're seeing better DTC than you're seeing in the store? Is that what I understand?

So youre seeing better DTC than you're seeing in the score is that what I understand.

Speaker 1: We think about our direct consumer business as both our store business and our e-commerce business. We also have a wholesale business, which is the selling of our products into third-party retail partners. Our direct consumer business is performing much more resiliently right now, given the more agility we have and the levers we can deploy in that piece of our business, versus in our wholesale business.

We think about our direct to consumer businesses, both our store business and our E. Commerce business. We also have a wholesale business, which is to sell out of our products into third party retail partners. Our direct to consumer business is performing much more resilient Lee right now given just the more agility, we have and the levers we can deploy in that piece of art.

Isn't that far season in our wholesale business.

Speaker 5: And I think you said this and that was my understanding that your wholesale business is primarily offshore, not domestic.

Thank you Sir.

My understanding that your wholesale business is primarily offshore not not domestic.

Speaker 5: primarily international. Yes, that's correct, Doug. Okay, a couple of other things. You've raised the earnings guidance for the year. And I think when you were giving that guidance at the end of the fiscal year, you also mentioned a sales expectation modestly below the year just reported. Any update on that sales expectation for the full year, Jeff?

Primarily international Yeah, that's correct Doug.

Okay. A couple of other things you raised the earnings guidance for the year and I think when when you were giving that.

And that guidance.

At the end of the fiscal year, you also mentioned our sales expectation modestly below the that you just reported.

Any update on that sales expectation for.

The full year Jeff.

Speaker 3: Yeah, but I think we're largely in the same place. I mean, you know, we're several quarters out to end up fiscal. I think what we wanted to make sure we signal here is that the overperformance that we delivered in Q1, we believe we can take that to the bottom line full year. I don't think there's a meaningful change in the outlook from a revenue perspective, but we were intentionally vague, as you remember, at the end of the year when we talked about the revenue guide. So I think we're basically in the same place.

Yes, well I think where we're largely in the same place I mean.

We're several quarters out to end a physical I think what we wanted to make sure. We signal here is that the over performance that we delivered in Q1, we believe we can take that to the bottom line for full year I don't think there's a meaningful change in the outlook from a revenue perspective, but we were intentionally vague as you'll remember at the end of the year when we.

<unk> talked about the revenue guide so I think we're basically in the same place.

Speaker 5: I do. I do remember. Um, and lastly, sorry, that just, it's a fault that I just, I'm trying to, I'm trying to overcome. Um, yeah. Last for me is, is the restructuring. Can you give us a little bit of color of what that is and

I do I do remember and less.

Do you feel bad.

[laughter] sorry, that's just it's a fault that I, just I'm trying to I'm trying to overcome them.

Last for me is the restructuring can you give us a little bit of color of whats that is.

Speaker 5: Where it is in the process, do you still see more restructuring charges in the upcoming quarters? And is it primarily on the up?

Where we're at.

Where it is in the process do you still see more restructuring charges.

The upcoming quarters and is it primarily the the on the on the.

Speaker 5: The salary, the compensation side. Yeah, so, but maybe a point of clear.

The salary the compensation side.

Yes, so, but maybe a point of clarity so.

We have.

Speaker 3: Total charges in the quarter that I'll call, for purposes of discussion, special charges that totaled about $15 million. A subset of those costs were true restructur-

Total charges in the quarter with that I'll, let I'll call for purposes of discussion special charges that totaled about $15 million a subset of those costs were true restructuring related.

Speaker 3: Expenses that tied to workforce reduction action.

<unk> expenses tied to workforce reduction actions.

Speaker 3: that are both here in the US and some international that have already been announced and implemented. I can't say that we have...

That are both here in the U S and some international that have already been announced and implemented.

I can't say that we have other imminent plans for further restructuring obviously, we will react to business conditions like we always view the remainder of the cost so the restructuring component and that was about $5 million. The balance that you see there in the total charges for the quarter continue to relate to cost to achieve and integration related costs are related to two.

Speaker 3: Other imminent plans for further restructuring. Obviously we will react to business conditions like we always do. The remainder of the cost, so the restructuring component that that was about $5 million the balance that you see there in the total charges for the quarter, continue to relate to cost to achieve an integration related costs related to our synergy capture program.

Operator: Good evening and welcome to MillerKnoll's quarterly earnings conference call. As a reminder, this call is being recorded.

Carola Mengolini: I would now like to introduce your host for today's conference, vice president of investor relations, Carola Mengolini. Good evening and welcome to MillerKnoll's first quarter fiscal 2024 conference call. I am joined by Andy Owen, Chief Executive Officer and Jeff Stutz, Chief Financial Officer. Also available during the Q&A session are John Michael, president of America's contract, and Debbie Propst, president of global retail.

Our synergy capture program.

Speaker 3: And those costs, but are just ongoing in-flight integration projects. We're nearing the end of the process.

And those those costs, but are just ongoing inflight integration projects were nearing the end of the process. As we are our full target is a three year goal and that would essentially be at the end of Q1 of next fiscal year would be that three year Mark.

Speaker 3: as we are our full target is a three year goal. And that would essentially be at the end of Q1 of next fiscal year would be that three year mark.

Speaker 3: And we're at a point now where most of the remaining inflate projects

Carola Mengolini: 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 unknown 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 we assume no obligation to update or supplement this statement.

And we're at a point now where most of the remaining in flight projects are either.

Speaker 3: are either consolidation related to showroom or some manufacturing related moves that are planned. So you've got a combination of operating expenses from showroom moves that should be further synergies as well as cost of the sold impact related to some of the factory work that we've got in place.

Consolidation related to showroom or some manufacturing related moves that are planned. So you've got a combination of operating expenses from showroom moves that should be further synergies as well as cost of goods sold impact related to some of the factors at work that we've got in place.

Speaker 5: So you'll see some more of that over the balance of this fiscal year as we complete those projects. So we'll continue to see the integration side. Well, we know the amortization of PI, that's going to continue. The restructuring, you will do that as you find projects and things that you're going to, that may affect an understand, this is quite sensitive compensation and workforce, but those are not yet announced. Is that the way to understand it?

So youll see.

So more of that over the balance of this fiscal year as we as we complete those projects.

So we'll continue to see the integration side, we know the amortization of that is going to continue the restructuring you will do that as you find projects and things that you're going to or that may affect and I understand this is quite sensitive compensation and workforce, but those are not yet those are not yet announced.

Carola Mengolini: We will also refer to certain non-gap and natural metrics which are reconciled and described in our press release posted on our investor relations website at MillerKnoll.com.

Andy Owen: With that, I will turn the call over to Andy. Andy, thanks, Corolla. Good evening, everyone, and thank you for joining our call. I'm very excited to share with our team delivered a strong first quarter as evidenced by our top-line results and margin expansion. Across our enterprise, we have set ourselves up to see as opportunity as market conditions improve, and we believe we are at an inflection point. Now, regarding our continuing strategy, I'd like to highlight some of the efforts we're making to become more resilient and future-proof our business, including diversifying our business both in North America and globally, streamlining our global operations, moving production and capacity efficiently, and investing in e-commerce.

Is that the way to understand it.

Speaker 3: That is correct, nor do we have necessarily plans to announce them. So again, we'll react to business conditions as we move to the balance of year. Understood. Okay, thank you very much. I'll let others proceed. Thank you.

That is correct, nor do we have necessarily plans to announce them. So again, what will will reactive business conditions as we as we move through the balance of year.

Understood. Okay. Thank you very much I'll, let others appreciate it thank you.

Thanks Glenn.

Speaker 4: Your next question comes from the line of Greg Burns with Sidoti. Your line is open.

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

Your line is open.

Speaker 3: got you know in north american now that we're near in the end of the the integration process how how has

Good afternoon.

In North America now that we're nearing the end of the integration process, how how has.

The.

Speaker 3: the consolidation of the dealer networks gone. Are we at the point now where they're fully up to speed and generating the level of productivity that you would expect them to, or is there still a level of...

The consolidation of the dealer networks gone are we at the point now where they're fully up to speed and are generating the level of productivity that you would expect them to or is there still a level of.

Andy Owen: We believe that the work we're doing is paying off. With much to look forward to on the horizon. At the same time, we remain pragmatic about the next few months. We're still on the early, early period of recovery, and our business segments reflect the varied economic conditions around the globe. Right now, we have caused for both enthusiasm and vigilance. We've seen companies begin to take the leap back into physical space and announce return to office policies.

Speaker 6: learning curve that they need to move up to sell the full portfolio products.

Learning curve that they need to move up to sell the full portfolio of products. Thanks.

Speaker 3: Yeah, I would say overall Greg, we're very pleased in North America with the pace at which our dealers and our dealer designers have learned all the product lines from the corresponding legacy companies, but I'll let John ask the color to that. Yeah, I think we are really pleased with the way the network has come together. We had just last week, 22 of our largest dealers in West Michigan, 11 originally from the Miller side, 11 from the Noles side.

Oh, Yeah, I mean, I would say overall, Greg we're very pleased in North America with the pace at which our dealers and our dealer designers have learned all the product lines from the corresponding legacy companies and then I'll, let John add some color to that yes. I think we are really really pleased with the way the network has come together.

Andy Owen: Obviously, seeing in the US began to rebound in a second quarter of 2023, and we're seeing this amongst our clients as companies continue to announce return to office policies. Moreover, the American Institute of Architects Billing Index, or ABI, has been slapped for the last six months, suggesting a slow but stable construction outlook. Having said that, we're still seeing mortgage rates at 20-year highs, and uncertainty remains about future rate hikes, which dampens the housing market and impacts the near-term in our retail segment.

We had just last week 22.

Of our largest dealers in West Michigan 11, originally from the Miller side 11 from the Knoll side.

Speaker 3: Honestly, you couldn't tell who came from from from which camp right they they really have meshed Extremely well together Obviously, there's a learning curve to learn the new products and I would say if I characterize our FY23

Honestly, you couldn't tell who came from from from which camp right. They really have meshed extremes.

Extremely well together.

Obviously, theres a learning curve to learn the new products and I would say if I characterize our FY2023.

Speaker 3: that learning curve, we probably started up a bit more slowly than we expected, but we finished much stronger than we expected. We really picked up a lot of momentum throughout the course of the year, and I think we exceeded our expectations in terms of what we would call cross-tell.

Andy Owen: Overall, we remain focused on economic and industry activity worldwide so that we can continue to deliver with our customers and clients without you know. A research and insights team is best in class, bringing the latest data and learning to our customers. This fall, we'll be sharing our latest point of view on the workplace and designing ideal spaces based on quality and actionable data. This fresh, thoughtful perspective, emphasizes what we believe are the key factors to designing the best spaces to support thriving and engaged teams.

That learning curve, we probably started up but a bit more slowly than we expected, but we finished much stronger than we expected, we really picked up a lot of momentum.

Throughout throughout the course of the year and I think.

See their expectations in terms of what we would call cross sell legacy Miller dealers selling no products and vice versa.

Speaker 3: legacy Miller dealers selling no products and vice versa. So that's, we're really pleased with the way the networks come together.

So that's where we're really pleased with the way the networks come together.

Andy Owen: Internationally, we're seeing some pockets of softness, mainly centered in Europe and China. Similar to North America and the rest of world, we're further pursuing resilient sectors and global accounts. We've seen that our scalability and ability to deliver a wider range of products is a unique market advantage, and we'll continue to seek out these wins. In addition, over the next 12 months, we plan to transition 60 more international, hermit miller dealers into miller-noll dealers, expanding our offering to clients and our share of wallet with our dealers.

Speaker 6: Okay, great. And then I understand the kind of the macro issues impacting some of the international markets. Can you just talk about what the opportunity is there?

Okay, Great and then I understand the kind of the.

Macro issues impacting some of the international markets can you just talk about what the opportunity is there.

Speaker 6: to sell that the broader portfolio I know you're adding dealers, but you know how far along are you in in

To sell that the broader portfolio I know, you're adding dealers, but you know how far along are you in and.

And.

Speaker 6: addressing that opportunity longer term, are we still in there very early endings, are we not really seeing much of that yet? And is there potential for you to offset maybe some of the macro challenges that you're seeing here with some of these organic growth initiatives?

Addressing that that opportunity longer term are we still in their very early innings or we're not really seeing much of that yet and is there potential for you to offset maybe some of the macro challenges that youre seeing here with with some of these organic growth initiatives.

Speaker 1: You took the words out of my mouth. I would say that we focus.

Yeah. So you took the words out of my now I would say that we focused our attention on North America to begin this process that we could learn its also our largest business and we're now focusing on international So where we are just beginning this process, we've converted dealer instead as far as rationalizing product I'm learning products backup continuing to take them.

Andy Owen: Regarding retail, but a celebration of the North American housing market and the upswing and interest rates across your earth have continued to influence demand in this segment, compared to the previous year. Nevertheless, during the quarter, the order of trajectory in the North American markets surpassed that of other regions, primarily attributed to enhancements in our direct to consumer channels. We're strategically advocating resources to improve our digital platforms and technological infrastructure, aiming to enhance the overall customer experience in satisfaction levels, all while intensifying our efforts to sport aside brand awareness.

Speaker 1: our attention on North America to begin this process so that we could learn. It's also our largest business and we're now focusing on international. So we are just beginning this process. We've converted dealers but as far as rationalizing products, learning product specs, continuing to convert dealers, we see a lot of runway and opportunity particularly in selling the norm.

Bert dealers, we see a lot of runway and opportunity, particularly in selling the no studio no ancillary products throughout the world and we have a long way to go there and we're actually pretty excited about what it cannot set to more at the beef market beginning of the process internationally.

Speaker 1: Studio, NOL, and flurry products throughout the world. We have a long way to go there, and we're actually pretty excited about what it can offset. So more to be more into the beginning of the process, internationally.

Andy Owen: Furthermore, in the first quarter, we opened a new design within reach toward an art more Pennsylvania, which has delivered very promising early results, including robust foot traffic and ordered placement. Now I'd like to talk a little bit about our growth margins to expanded year over year, sequentially, and across all of our business segments. In the past, I've talked about focusing on what we can control, and this performance is proof of that.

Okay, Great and then.

Speaker 1: Oh, go ahead. We all had very limited contract dealers in the past. They really focused primarily on the interior design and retail wholesale customers. So opening up that product line to contract dealers is a new effort, and we're excited about that.

Oh go ahead, you'll have Jerry.

Very limited contract dealers in the past they really focus primarily on the interior designer and retail wholesale customers. So opening up that product line to contract dealers. This is a new effort and were excited about that.

Anything you would add Jeff.

Speaker 7: Yeah, I think I think Greg, we may have mentioned this at the end of year, but just

Yeah.

Thank Greg we May have mentioned this at the end of year, but just recall that we've got this kind of builds on your comment about the dealer network that no. It really didn't have an extensive international dealer network and we're phasing into that to that Miller Noel.

Andy Owen: We're seeing efficiency improvements derived from our energy capture, we have pricing power, we're laser focused on inventory management and product mix, and we continue to save cost reductions. All of these key elements that are enabling us to improve the profitability of our core operations. I'm extremely proud of all the work our teams have done, and continue to do every day to seek and see the opportunities.

Speaker 7: Recall that we've got, I mean, this kind of builds on your comment about the dealer network that no one really didn't have an extensive international dealer network.

Speaker 7: And we're phasing into that to that Millernol viewer format and

Dealer format and.

Speaker 7: You know, we've got about 80 of those dealers of 335 international permanent Miller dealers, 80 of them are.

We've got about 80 of those dealers of 335 international.

Herman Miller dealers 80 of them R. R.

Speaker 7: Are transitioned at this point and we expect another 60 yet this year so we're moving forward with that at a pretty.

Andy Owen: Finally, this quarter was not short on activity, so I'll walk you through a few of the highlights. We started out strong with a successful phase. The largest North American presentation of our Mill or No Collective of Contract Products and Services. Throughout the quarter, we debuted new products and textiles across our collective, including not one more stable system, which was awarded gold by best of Miyakon. Herman Miller's first collaboration with Gabriel Tan, launching the Louisville-Vonterler Surfall into Clyde tables, as well as a beautiful array of textiles from our textiles group, many with sustainable fabrics at the forefront.

Transitioned at this point and we expect another 60, yet this year. So we're moving forward with that.

Is it pretty.

Disciplined clip I would say.

Speaker 6: All right, great. And then, lastly, I appreciate the kind of balanced approach you're taking to capital allocation.

Okay, Great and then lastly, I appreciate the kind of a balanced approach you're taking the capital allocation.

Speaker 6: relative to your leverage. Is there a target you're trying to get to? Are you comfortable with 2.5 times? Are you trying to reduce that any further going forward?

Relative to your leverage is there a target you're you're trying to get to or are you comfortable at two five times or you're trying to reduce that any further going forward.

Yeah, Greg Jeff.

Speaker 7: Greg, Jeff, you know, we're certainly comfortable.

We're certainly comfortable with with the two and a half where we are now we have said from the beginning we intend to kind of follow up migration path or a glide path that would see that that level come down over time nothing has changed on that front from our perspective, I think I think longer term.

Andy Owen: The Hayte team launched a collection of Lance and other ancillary items. Holly Hunt celebrated their 40th anniversary with a collection of beautiful pieces. At NOEL, we celebrated a 75th anniversary of the iconic Loan Chair while also introducing the serenin table under modern lounge height. We relaunched Herman Miller on chival classics all with fresh interpretation, and we made significant progress towards our sustainability goals, bringing solar power to our UK operations facility.

Speaker 7: with the two and a half where we are now. We have sets from the beginning, we intend to kind of follow up migration path or a glide path.

Speaker 7: that would see that debt level come down over time. Nothing has changed on that front from our perspective. I think longer.

Speaker 7: somewhere around two turns of leverage, which seem reasonable, but you know, some that that also is highly influenced by the level of demand and earnings power that we see in the business. So

Somewhere around two turns of leverage which seem reasonable but.

That also is highly influenced by the level of demand and earnings power that we see in the business. So.

Andy Owen: All in all, I'm pleased with the strong quarter we delivered. Our team is connecting and moving the business forward in exciting, creative ways and recapturing market share and growth opportunities as they arise. While I believe the rest of the school year 2024 will remain a transitional year, economic indicators training more positively, pockets of weakness remaining, I'm confident in our ability to deliver shareholder value as we are operating efficiently and making decisions to further improve our margins and profitability. I'm looking forward to progressing towards our goals, positively impacting our industry and advancing our strategy to remain resilient and ready for the future.

Speaker 7: I would just simply say we intend to continue to pay that down as we move forward, but we're in no way fussed with the leverage ratio that we have today.

I would just simply say, we intend to continue to pay that down as we move forward, but were in no way fast with the with the leverage ratio that we have today.

Alright, great. Thank you.

Speaker 4: Your next question comes from the line of Reuben Garner with benchmark. Your line is open.

Your next question comes from the line of Reuben Garner with benchmark. Your line is open.

Speaker 8: Thank you, good evening everybody. We're back to you. Let's see. So Andy, you mentioned an inflection point. I was curious if you could elaborate on that. Is that an inflection in Mill or Nol, specifically? Was that a profitability comment? Was that a macro perspective? Anything that you can kind of give on that comment would be up.

Thank you good evening or good evening everybody.

Hum.

So Andy you mentioned and inflection point I was curious if you could elaborate on that is that.

Andy Owen: With that, I want to thank you for your continued partnership with us.

Now an inflection and Miller know specifically is that a profitability comment was that a macro perspective anything that you can kind.

Jeffrey Stutz: I'll now turn the call over to Jeff to a deeper look at our financials. Thank you, Annie.

Jeffrey Stutz: Good evening, everyone. As Annie just said, we are proud that our teams delivered very strong quarter. The results reflect some of the themes that we've been communicating with the past several quarters. First, our focus on diversification, both across geographies, business sectors and customer segments, and second, our focus on margins, taking action across several fronts. For the first quarter, we generated adjusted earnings of 37 cents per share, which were 16 cents above the midpoint of our guidance.

Kind of give on that comment would be helpful.

Speaker 1: Yeah, it's really a macro perspective and also sentiment that we're hearing from our customers, from CEOs and from research that we've done around returning to office, around spending time together. I think that we are seeing a lot more of our clients finding ways to bring people back together, finding ways to utilize their space. I think the world has...

Yeah, It's it's really a macro perspective analysis sentiment that we're hearing from our customers from Ceos and from our research that we've done around returning to office around spending time together.

I think that we are seeing a lot more of our clients finding ways to bring people back together.

Finding ways to utilize their space I think the world has moved through a cycle as remote to hybrid cube flexibility and I think as John talked about new projects and new demand in our funnel that return and I think CEO sentiment around the return has turned to be a majority.

Speaker 1: moved through a cycle of remote to hybrid to flexibility. And I think as John talked about new projects and new demand in the funnel.

Jeffrey Stutz: Overall, strong net sales and gross margin expansion across all of our business segments drove the overperformance. Net sales in the first quarter were 918 million above the midpoint of our guidance driven by strong performance in the America's contract segment. Our consolidated gross margin was 39%, which was 450 basis points higher than the same quarter a year ago, and also improved on a sequential period basis. Moreover, this marks the third consecutive quarter of consolidated eurovere adjusted gross margin expansion.

Speaker 1: that return and I think CEO sentiment around the return has turned.

Speaker 1: be a majority in favor of being together more often. And that works well for us. And we're excited about that.

D in favor of being together more often and that works well for us and we're excited about that that's that's what I meant.

Speaker 8: And so, you know, that project funnel that John referenced, what about the willingness, and maybe this goes into your reflection point comment, are you seeing a change in the willingness to kind of pull the trigger on those projects or is it still kind of that planning and, you know, thinking about the new way of work phase?

And so the project funnel that John referenced.

What about the willingness and maybe this goes when do your inflection point comment are you seeing a change in the willingness to kind of pull the trigger on those projects or is that still kind of that.

Jeffrey Stutz: As Annie mentioned, several factors contributed to this, including the realization of price increases, ongoing benefits from integration related synergies, and positive shifts in product and channel mix. Our consolidated adjusted operating margin was 6% for the period. Turning to cash flows in the balance sheet, this quarter we generate approximately 131 million in cash flows from operations. This represents an increase of nearly $200 million compared to the same quarter last year, mostly driven by working capital improvements.

That planning and you know I'm.

Thinking about the new way of work phase.

Speaker 1: Yeah, we're seeing more confidence in decision making. So less CEOs and decision makers waiting to see what everyone else is doing and sort of boldly going into what's right for their organization, obviously with some help and guidance from us. And the decision points, I don't think they're as short and John , please add to this, as short as they used to be pre-COVID, but they've certainly shortened substantially from where they were six months to a year ago.

Yeah, we're seeing more confidence and decision, making so less Ceos and decision makers are waiting to see what everyone else is doing and sort of boldly going into what's right for their organization, obviously with some help and guidance from us and the.

The decision points I don't think there is short and John Please add to this as short as they used to be pre COVID-19, but they certainly certain substantially from where they were six months to a year ago.

Jeffrey Stutz: As a result of this, we were able to retire $66 million of debt and took the opportunity to repurchase approximately 1.7 million shares through a total cash outlay of $31.7 million. We finished the first quarter with a net debt to EBITDA ratio of 2.5 times, which puts us comfortably under the maximum limit defined in our lender agreements. New orders at the consolidated level total of 914 million in the first quarter, reflecting in our organic decrease of 1.3% from the same quarter last year.

Speaker 3: I would agree, Andy, in that the

John I would agree Andy and that the.

Speaker 3: there is still a lot of iterating that goes on before the plan is finally complete. So people really want to make sure that they get it right.

There is still a lot of Iterating that goes on before our plan is finally complete so people are really wanted to make sure that they get it right.

But I would add to that there is.

Speaker 3: a growing sense of urgency among CEOs and leaders, maybe even a sense of frustration on this topic, which to Andy's point is a sort of a catalyst for activity and to kind of get off the fence on some of these projects and make decisions. So obviously that's positive for us and for our industry.

A growing sense of urgency among Ceos and leaders, maybe even a sense of frustration on this topic, which to Andy's point is sort of a catalyst for activity and to kind of get off the fence on some of these projects and make decisions. So obviously that's <unk>.

Jeffrey Stutz: While this is lower from last year on an absolute basis, the rate of eurovere decrease once again and prove this quarter. Within our America's contract segment, net sales in the period were 490 million dollars, representing an organic decrease of 1.7% from the same quarter last year. New orders in the period totaled $487 million, which was up 2.1% over last year. This is particularly encouraging as it's the first time in four quarters we've reported an increase in order levels in the America's second quarter.

<unk> four for us and for our industry.

Speaker 8: Great. And Jeff, sorry if I missed this, but can we get an update on where we are in the price cost? Jeremy, I know you guys had an increase out as recently as the summer, I believe, are the current kind of double digit margin run rates that you're seeing in the Americas, fully reflecting your price cost. Have you gotten your margin back? Or is there still kind of room to run there?

Great and Jeff I'm sorry.

Sorry, if I missed this but can we get an update on where we are in the price cost Jeremy I know you guys had an increase out.

As recently as the summer I believe.

Are the current kind of double digit margin run rates that you're seeing in the Americas, you know fully reflecting.

Jeffrey Stutz: I'd also like to highlight the fact that our America's contract team delivered another quarter of double digit adjusted operating margin which total 10.6% in the quarter. Turning to our international contract and specialty segment net sales for the quarter total 228 million down 10.9% organically year over year, while new orders came in at 228 million reflecting a year over year organic decrease of 3.6%. While we continue to be very optimistic about the immediate long-term growth potential in this segment, near term macroeconomic headwinds, particularly in China and parts of Europe, are impacting demand.

<unk> cost that we got in your margin back or is there still kind of room to run there.

Speaker 7: Yeah, Ruben, I would say it this way. So, yeah, you are correct. First of all, I'll confirm we did it. We did have an increase that was effective. John , keep me honest here was July , beginning of July . So, we've and it was, it was certainly not the 8 and 10 percenters that we had been seeing, you know, in years, recent years past, it was closer to 3 percent on average. So, more akin to typical history of price increases. And that'll take some time to layer in. And so, we think there's some further upside there. You know, I want to

Yeah, Ruben I would say it this way. So yes, you are correct first of all I'll confirm we did it we did have an increase that was effective John keep me honest here with July at the beginning of July So we and it was it was certainly not the 8% to 10 Percenters that we had been seeing you know in year's pay of recent years past it was up close.

The 3% on average so more akin to typical history of price increases and that will take some time to layer in and so we think there's some further upside there yeah I went up.

Jeffrey Stutz: Adjusted operating margin within the segment was 6.5% in the first quarter, down year over year driven by lower sales volume. This was partially offset by improved gross margin performance which continues to benefit from previous price increases and our cost energy program. Moving to our global retail segment, net sales in the first quarter of $199 million were down 13.6% organically from the same quarter last year. New orders in this segment of $199 million were 6.4% lower than a year ago on an organic basis.

Speaker 7: maybe take this as an opportunity to highlight the fact that you get this synergy plan that we have been spending so much time and effort on over the past two plus years. You know we have been

Maybe take this as an opportunity to highlight the fact that you got the synergy plan that we have been spending so much time and effort on over the past two plus years, we have been.

Speaker 7: working hard in the background and market conditions have been such that it is largely masked all that so much of that work And I think what you're seeing now and you see in the America's business we were 800 plus basis points of gross margin expansion year on year this quarter That's a big deal and I and I attribute that it's pricing it's it's price cost factors as you highlight for sure those have come back in our favor a bit

Working hard in the background and market conditions have been such that it is largely masked all that so much of that work and I think what you're seeing now and you see it in the Americas business, we were 800 plus basis points of gross margin expansion year on year this quarter.

Jeffrey Stutz: While the slowdown in the North American housing market and the rise in interest rates globally, continued to affect the demand for this segment compared to last year, we are optimistic about the progress our team is making in expanding our market share through our direct to consumer channels. Given the relative order performance of some of our competitors, and as such, we are further positioning our most mature retail brands as preferred choices for authentic designs.

That's a big deal and I and I attribute that that's pricing. It's it's price cost factors as you highlight for sure those have come back in our favor a bit.

Speaker 7: And we still have a little little room to run there, I believe, but the synergy plan is layering in and you heard my comments a few minutes ago on the remaining projects. We think there's still some.

And we started a little little room to run there I believe but the synergy plan is layering in and you heard my comments a few minutes ago on the remaining projects, we think theres still some room.

Speaker 7: room for further margin expansion there. Now the precondition for that is always been in this business. Do you have to have some level of demand support?

For further margin expansion there now the precondition for that it's always been in this business did you have to have some level of demand support and so that's.

Jeffrey Stutz: Adjusted operating margin in the retail segment was 1.6% down year over year mainly due to a combination of lower volume and product mix. Now, turning to our near-term guidance and outlook, given the improvements we are seeing in gross margins across each of our business segments, and continued signs of demand stabilization in our North American contract business, we are increasing our adjusted earnings guidance for the full fiscal year, which we now expect to range between $1.85 and $2.15 per share.

Speaker 7: And so, you know, that's why we will continue to watch the macro picture very closely, as you can imagine.

That's why we will continue to watch the macro picture very closely as you can imagine, but if we get some support there we think the table set for.

Speaker 7: But if we get some support there, we think the table set for even some further margin expansion has been moved forward.

Even some further further margin expansion as we move forward.

Speaker 8: You stole my thunder. That was my follow-up question. So I think I'll end with.

You stole my Thunder that was my follow up question. So.

I think I'll add.

With.

Speaker 8: I believe that was the largest repurchase we've seen in some time for the quarter. Maybe just update us on what you're thinking is there. If that's something we'll continue to see if the stock remains at these levels. It seems to speak to your confidence that maybe we're turning the corner here and the stock's not reflective of that, but I don't want to put words in here.

Stock repurchase that I believe that was the largest <unk>.

Jeffrey Stutz: As it relates to the second quarter of fiscal 2024, we expect net sales to range between $950 million and $990 million, and adjusted deluded earnings to be between $0.52 and $0.58 per share. And I point out that this guidance takes into consideration the relative seasonal increase in sales that we expect to experience in our retail segment from the first quarter to the second quarter of our fiscal year. So with that overview of the numbers, I'll turn the call back over to the operator and we'll take your questions. Thank you.

The repurchase we've seen in some time lines for the quarter.

Maybe just update us on what your thinking.

Is there if that's something we will continue to see if the stock remains at these levels. It seems to speak to your confidence that neighborhood, we're turning a corner here and stuff not reflected in that but I don't want to put words in your mouth.

Speaker 1: I would say we believe we're oversold, but I think we have a very balanced perspective on capital allocation. We'll continue to pay down debt, but if we continue to see opportunistic times to purchase our stock, we'll do that too. We believe that's a great return for our shareholders, and we believe in the future.

Yeah, I would say, we believe were ever sold but I think we have a very balanced perspective on capital allocation. We will continue to pay down debt, but if we continue to see an opportunistic time to purchase our stock will do that too that's a great return for our shareholders and we believe in the future.

Operator: As a reminder, if you would like to ask a question today, press star followed by the number one on your telephone keypad.

Budd Bugatch: Your first question comes from the line of Bud Bugac with water tower research. Your line is open. Thank you.

Great. Thanks, guys. Congrats on the strong results and good luck.

Thanks Robyn.

Speaker 4: Your next question comes from the line of Alex Furman with Craig Hallam.

Jeffrey Stutz: Good evening, Andy, Jeff, Corolla, John and Debbie. And congratulations on the larger performance and in the quarter. I would love to start by just by punching into the order flow during the quarter if you can make some commentary of how that went particularly in America's contract. I think if I caught your drift, you're saying we're seeing some some improvement in that and did that show up late in the quarter and how has the second quarter started?

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

Your line is open.

Speaker 9: Hey guys, thanks very much for taking my question. Most of my questions were asked here earlier, but I guess just to take a look at the full year guidance, I mean definitely much better than expected results in Q1 and guided to for Q2 on the bottom line. Certainly don't mean this to sound nitpicky or anything, but it looks like the degree to which you beat Q1 estimates in Q2 wasn't maybe fully flowed through to the full year. Is that just being a little bit conservative or you may be expecting that some of the headwinds you mentioned on a macro basis related to things like housing in China and Europe , is that expected to offset some of the gains that you've seen with gross margin and your North America business maybe in the back half of the year?

Hey, guys. Thanks, very much for taking my question. Most of my questions were asked here earlier, but I guess just.

Take a look at the full year guidance, I mean definitely much better than expected results in Q1 and guided to.

For Q2 on the bottom I, certainly don't mean, this to sound nitpicky or anything, but it looks like the degree to which you.

You beat Q1 estimates in Q2 wasn't maybe fully flowed through to the full year is that just being a little bit conservative or you may be expecting that some of the headwinds you mentioned on a macro basis related to you know things like housing in China, and Europe is that expected to offset some of.

Jeffrey Stutz: Yeah, but hey, a good evening. This is Jeff. I'll start in the John and Andy and anyone please, please add as you see fit. So maybe just I'm the America segment in particular so order activity in the first half of the quarter with positive Bud and showed some signs of slowing in August and the first couple of weeks of September. Now with that being said, the timing of last year's price increase, which is a reminder was 8% at the start of October a year ago, would certainly be expected to make September's comparisons much more difficult in the current year.

The gains that you've seen with gross margin and your North America business, maybe in the back half of the year.

Speaker 1: As I said earlier on, Alex, I think we're super enthusiastic, but we are also pragmatic and vigilant. I think we live in a very dynamic world right now. And while we have enthusiasm and optimism, we do have China that hasn't come back as quickly as we like. We have a European consumer who has mortgages where interest rates are not fixed.

Yeah as I said earlier on Alex I think where we're super enthusiastic, but we're also pragmatic and vigilant I think we live in a very dynamic world right now and while we have enthusiasm and optimism we do have China that hasn't come back as quickly as we'd like we have a European consumer who has mortgages where interest rates.

Jeffrey Stutz: But when we zoom out from that week to week data, the general trends over the past three quarters have shown improved demand activity. And that gives us some confidence that more consistent growth is around the corner. So it was a bit choppy and in August and early September, I think we're seeing some of that bump up against the tough constant last year due to the sizable price increase. We put in place at the beginning of October, but how far is there and John had anything you had you have.

Or not fixed is not necessarily backing that wholesale market. So we're watching these things very closely and while we feel very strongly about our diversified business model and our ability to offset these things, but want to make sure. We have the right mix of enthusiasm and pragmatism.

Speaker 1: who's not necessarily back in the wholesale market. So we're watching these things very closely. And while we feel very strongly about our diversified business model and our ability to offset these things, we wanna make sure we have the right mix of enthusiasm and pragmatism. Please, that's...

Jeffrey Stutz: Thanks. Jeff, I'd just add if we looked at additions to the funnel for the quarter we had, I think the second largest volume of additions to the funnel that we've had in the last 12 quarters. So from a project activity perspective, we're still seeing a fair amount of activity. And we've seen the day-to-day business maintain a steady pace as well. So I think to your point, Jeff, a lot of opportunity. I think we're seeing some regional differences, right in terms of strength of markets, but overall very positive.

Great that makes a lot of sense, thanks very much Andy.

Yeah.

Speaker 4: There are no further questions. We turn the floor back to President NCEO, Andy Owen, for any closing remarks.

There are no further questions, we turn the floor back to president and CEO Andi Owen for any closing remarks.

Speaker 1: Thank you so much you guys for joining us on the call. We really appreciate your continued support of Miller Knoll and we look forward to updating you on our next quarterly call. Have a great night. This concludes today's conference.

Thank you so much you guys for joining us on the call. We really appreciate your continued support of Miller Knoll, and we look forward to updating you on our next quarterly call have a great night.

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

[music].

Jeffrey Stutz: That's interesting because we had heard and I'm sure you're aware that maybe project activity had lessened in the quarter and day-to-day business had replaced that. Is that not what you're seeing? Is that very with what you're seeing? We're seeing the day-to-day activity maintain a steady solid pace. And in terms of new project ads to the funnel, it's been very robust for the last 90 days. Gotcha. Okay.

Debbie Propst: And in retail, what are you seeing Debbie?

Debbie Propst: Are you seeing any indication that maybe we're at the bottom and not getting much worse or bouncing along the bottom? So budgets from an order pacing perspective throughout the quarter. We actually saw a very strong August. We attribute softness that we saw in June and July. Obviously, it's a bit of macroeconomic conditions, but also that heightened into travel spend during the summer months. And on an adjusted basis, our August order performance was actually flat to last year.

Debbie Propst: So we feel like we have momentum. Additionally, we believe as we look at benchmarks externally, we're taking share. Given the increased performance of our marketing tactics and all the other investments that we're making to improve our efficiencies and how we engage with the customer.

Debbie Propst: I think one of the really important points tied by the Sandy about the retail business is also the relative strength that we're seeing in North America. Retail segment where we are seeing momentum and demand pickup compared to the past few quarters and that's encouraging some sort of one of our largest segments. And the segment that we have a direct to conceive our more mature strategy. Our business internationally is largely wholesale where we have limitations with open to buy of the wholesale partners that we sell in.

Debbie Propst: So you're seeing better DTC than you're seeing in stores? Is that what I understand? We think about our direct consumer business as both our store business and our e-commerce business. We also have a wholesale business, which is the selling of our products into third-party retail partners. Our direct consumer business is performing much more resiliently right now given the more agility we have and the levers we can deploy in that piece of our business, as far as these in our wholesale business. And I think we heard this and that was my understanding that your wholesale business is primarily offshore, not domestic. It's primarily international. Yes, that's correct.

Budd Bugatch: Okay, a couple of other things. You've raised the earnings guidance for the year. And I think when you were giving that that guidance at the end of the fiscal year, you also mentioned a sales expectation, modestly below the year just reported any update on that sales expectation for the full year, Jeff. Yeah, well, I think we're largely in the same place. I mean, you know, we're several quarters out to end of fiscal.

Budd Bugatch: I think what we wanted to make sure we signaled here is that the overperformance that we delivered in Q1, we believe we can take that to the bottom line full year. I don't think there's a meaningful change in the outlook from a revenue perspective, but we were intentionally vague as you remember at the end of the year when we talked about the revenue guide. So I think we're basically in the same place. I do, I do remember. And last, sorry, that's just it's a fault that I just I'm trying to I'm trying to overcome.

Jeffrey Stutz: Yeah, last for me is the restructuring. Can you give us a little bit of color of what that is and where it, where it, where it is in the process. Do you still see more restructuring charges in the upcoming quarters and is it primarily the on the on the, the salary, the compensation side. Yeah, so, but maybe a point of clarity. So we have total charges in the quarter without, but I'll call for purposes of the discussion.

Jeffrey Stutz: Special charges that total about $15 million a subset of those costs were troops restructuring related expenses that tied to workforce reduction actions that are both here in the US and some international that have already been announced. And implemented. I can't say that we have other imminent plans for further restructuring. Obviously we will react to business conditions like we always do the remainder of the cost. So the restructuring component that that was about $5 million the balance that you see there in the total charges for the quarter continue to relate to cost to achieve an integration related costs related to to our, our synergy capture program.

Jeffrey Stutz: And those, those costs, but are just ongoing in flight integration projects. We're nearing the end of the process as we are, our full target is a, is a three year goal. And that would essentially be at the end of Q1 of next fiscal year would be that three year mark. And we're at a point now where most of the remaining in flight projects are either consolidation related to showroom or some manufacturing related moves that are planned.

Jeffrey Stutz: So you've got a combination of operating expenses from showroom moves that should be further synergies as well as cost of the sold impact related to some of the factory work that we've got in place. So, you'll see some more of that over the balance of this fiscal year as we complete those projects. So, we'll continue to see the integration side. We know the amortization of PI that's going to continue the restructuring.

Jeffrey Stutz: You will do that as you find projects and things that you're going to that may affect. And I understand this is quite sensitive compensation and workforce, but those are not yet, those are not yet announced. Is that the way to understand that? That is correct, nor do we have necessarily plans to announce them. So, again, we'll react to business conditions as we as we move through the balance of here. Understood.

Budd Bugatch: Okay, thank you very much. I'll let others proceed. Thank you. Thanks, Ben.

Gregory Burns: Your next question comes from the line of Greg Burns with Sedotti. Your line is open. Katzun, in North America now that we're near in the end of the integration process, how has the consolidation of the dealer networks gone? Are we at the point now where they're fully up to speed and generating the level of productivity that you would expect them to or is there still a level of learning curve that they need to move up to sell the full portfolio product? Thanks. Yeah, I would say overall, Greg, we're very pleased in North America with the pace at which are dealers and our dealer designers have learned all the product lines from the corresponding legacy companies.

John Michael: But I'll let John ask color to that. Yeah, I think we are really pleased with the way the network has come together. We had just last week, 22 of our largest dealers in West Michigan, 11 originally from the Miller side, 11 from the Noel side. Honestly, you couldn't tell who came from from from which camp, right? They really have meshed extremely well together. Obviously, there's a learning curve to learn the new products.

John Michael: And I would say if I characterize our FY 23, that learning curve, we probably started up a bit more slowly than we expected, but we finished much stronger than we expected. We really picked up a lot of momentum throughout throughout the course of the year. And I think we exceeded our expectations in terms of what we would call cross health, like a similar dealer selling no products and vice versa. So that we're really pleased with the way the networks come together.

Gregory Burns: Okay, great. And then I understand the kind of macro issues impacting some of the international markets. If you just talk about what the opportunity is there to sell that the broader portfolio, I know you're adding dealers, but you know how far along are you in and addressing that opportunity longer term? Are we still in there very early innings? Are we not really seeing much of that yet? And is there potential for you to offset maybe some of the macro challenges that you're seeing here with some of these organic growth initiatives?

Gregory Burns: Yeah, I think you took the words out of my mouth. I would say that we focused our attention on North America to begin this process so that we could learn a software largest business. And we're now focusing on international. So we are just beginning this process. We've converted dealers, but as far as rationalizing products, learning products, backs, continuing to convert dealers, we see a lot of runway. And opportunity particularly in selling the no studio, no answer products throughout the world. We have we have a long way to go there, and we're actually pretty excited about what it can offset. So more to be more into the beginning of the process internationally.

John Michael: Okay, great. And then, Bob. Oh, go ahead. Very limited contract dealers in the past. They really focus primarily on the interior design and retail wholesale customers. So opening up that product line to contract dealers is a new effort and we're excited about that.

John Michael: Anything you may add to us? Yeah, I think Greg, we may have mentioned this at end of year, but just recall that we've got, I mean, this kind of builds on your comment about the dealer network that Noel really didn't have an extensive international dealer network. And we're phasing into that MillerKnoll dealer format. And, you know, we've got about 80 of those dealers of 335 international permanent Miller dealers, 80 of them are transitioned at this point. And we expect another 60 yet this year. So we're moving forward with that at a pretty disciplined clip, I would say.

Jeffrey Stutz: All right, great. And then lastly, I appreciate the kind of balance approach you're taking to capital allocation relative to your leverage. Is there a target you're trying to get to? Are you comfortable with 2.5 times? Are you trying to reduce that any further going forward? Yeah, Greg, Jeff, you know, we're certainly comfortable with the 2.5 where we are now. We have sets from the beginning. We intend to kind of follow up migration path or a glide path that would see that debt level come down over time.

Jeffrey Stutz: Nothing has changed on that front from our perspective. I think, you know, I think longer term somewhere around two turns of leverage, which seemed reasonable, but you know, that that that also is highly influenced by the level of demand and earnings power that we see in the business. So I would just simply say we intend to continue to pay debt down as we move forward, but we're in no way fussed with the leverage ratio that we have today.

Gregory Burns: All right, great. Thank you.

Reuben Garner: Your next question comes from the line of Ruben Garner with Benchmark. Your line is open. Thanks.

Andy Owen: You could even good evening, everybody. So Andy, you mentioned an inflection point. I was curious if you could elaborate on that. Is that you know, an inflection in Mill or Nol specifically? Was that a profitability comment? Was that a macro perspective? Anything that you can kind of give on that comment would be helpful? It's really a macro perspective and also a sentiment that we're hearing from our customers from CEOs and from research that we've done around returning to office around spending time together.

Andy Owen: I think that we are seeing a lot more of our clients finding ways to bring people back together, finding ways to utilize their space. I think the world has moved through a cycle of remote to hybrid to flexibility. And I think as John talked about new projects and new demand in the funnel, that return and I think CEO sentiment around the return has turned to be a majority in favor of being together more often and that works well for us and we're excited about that.

Andy Owen: That's what it's all about, and so, you know, that project funnel that John referenced, what about the willingness and maybe this goes into your inflection point comment? Are you seeing a change in the willingness to kind of hold the trigger on those projects or is it still kind of that planning and, you know, thinking about the new way of work phase? Yeah, we're seeing more confidence in decision making. The last CEO is in decision makers, waiting to see what everyone else is doing and sort of boldly going into what's right for their organization obviously with some help and guidance from us and the decision points.

Andy Owen: I don't think there is short and John, please add to this as short as they used to be pre-COVID, but they certainly shorten substantially from where they were six months to a year ago. I would do that, John. I would agree, Andy, in that the there is still a lot of iterating that goes on before the plan is finally complete, so people are really want to make sure that that they get it right, but I would add to that there is a growing sense of urgency among CEOs and leaders, maybe even a sense of frustration on this topic, which to Andy's point is a sort of a catalyst for activity and to kind of get off the fence on some of these projects and make decisions. So obviously that's positive for us and for our industry.

Jeffrey Stutz: Great, and Jeff, sorry if I missed this, but can we get an update on where we are in the price cost journey? I know you guys have an increased out as recently as the summer, I believe, you know, are the current kind of double digit margin run rights that you're seeing in the Americas, you know, fully reflecting, you know, your price cost. We've gotten your margin back. Or is there still kind of room to run there?

Jeffrey Stutz: Yeah, Ruben, I would say it this way. So yet, you are correct. First of all, I'll confirm we did that we did have an increase that was effective. John, keep me honest, here was July, beginning of July. So we've, and it was, it was certainly not the eight and ten percenters that we had been seeing, you know, in years, a recent years past, it was closer to three percent on average, the more akin to typical history of price increases.

Jeffrey Stutz: And that will take some time to layer in. And so we think there's some further upside there. You know, I want to maybe take this as an opportunity to highlight the fact that you get the synergy plan that we have been spending so much time and effort on over the past two plus years. You know, we have been working hard in the background and market conditions have been such that it is largely masked all that so much of that work.

Jeffrey Stutz: And I think what you're seeing now and you see in the Americas business, we were 800 plus basis points of gross margin expansion year on year this quarter. That's a big deal and I attribute that it's pricing. It's price cost factors as you highlight, for sure. Those have come back in our favor a bit. And we saw a little room to run there, I believe, but the synergy plan is layering in.

Jeffrey Stutz: And you heard my comments a few minutes ago on the remaining projects. We think there's still some room for further margin expansion there. Now, the precondition for that is always been in this business. You have to have some level of demand support. And so, you know, that's why we will continue to watch the macro picture very closely, as you can imagine. But if we get some support there, we think the table set for even some further further margin expansion as we move forward.

Reuben Garner: You stole my thunder. That was my follow-up question.

Jeffrey Stutz: So I think I'll end with stock repurchase. I believe that was the largest repurchase we've seen in some time, you know, for the quarter. Maybe just update us on what you're thinking is there. If that's something we'll continue to see if the stock kind remains at these levels, it seems to speak to your confidence that maybe we're turning the corner here and the stock's not reflective of that, but I don't want to put words in your mouth.

Jeffrey Stutz: Yeah, I would say we believe we're oversold, but I think we have a very balanced perspective on capital allocation. We'll continue to pay down debt, but if we continue to see opportunistic times to purchase our stock, we'll do that to you. We believe that's a great return for our shareholders and we believe in the future.

Reuben Garner: Great, thanks guys, congrats on the strong results and good luck.

Alex Fuhrman: Your next question comes from the line of Alex Ferman with Craig Hallum. Your line is open. Hey guys, thanks very much for taking my question. Most of my questions were asked here earlier, but I guess just to take a look at the full year guidance, I mean, definitely much better than expected results in Q1 and guided to for Q2 on the bottom line. Certainly, don't mean this to sound nitpicking or anything, but it looks like the degree to which you beat Q1 estimates in Q2 wasn't maybe fully flowed through to the full year.

Alex Fuhrman: Is that just being a little bit conservative or you may be expecting that some of the headwinds you mentioned on a macro basis related to things like housing in China and Europe is that expected to offset some of the gains that you've seen with gross margin and you're north America business maybe in the back half of the year. As I said earlier on, Alex, I think we're super enthusiastic, but we are also pragmatic and vigilant.

Alex Fuhrman: I think we live in a very dynamic world right now, and while we have enthusiasm and optimism, we do have China that hasn't come back as quickly as we like. We have a European consumer who has mortgages where interest rates are not fixed, who's not necessarily back in the wholesale market. So we're watching these things very closely, and while we feel very strongly about our diversified business model and our ability to offset these things, we want to make sure we have the right mix of enthusiasm and pragmatism.

Andy Owen: That makes a lot of sense. Thanks very much, Andy.

Operator: There are no further questions.

Andy Owen: We turn the floor back to President and CEO Andy Owen for any closing remarks. Thank you so much, you guys. We're joining us on a call. We really appreciate your continued support of Miller Nol, and we look forward to updating you on our next quarterly call. Have a great night.

Operator: This concludes today's conference call.

Operator: You may now disconnect.