Q2 2024 MillerKnoll, Inc Earnings Call
Good evening and welcome to the Miller Knowles Quarterly Earnings Conference Call, as a reminder this call is being recorded.
Good evening and welcome to the Miller Knowles quarterly earnings Conference call. As a reminder, this call is being recorded.
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 mingled leaning.
Good evening and welcome to Miller-Norwell's second quarter fiscal 2024 conference call. I am joined by Andy Owen, Chief Executive Officer, and Jeff Stutz, Chief Financial Officer.
Gorilla Mingled: Good evening and welcome to me they've known second quarter fiscal 2024 conference call I am joined by M. D O N Chief Executive Officer, and just Stutz Chief Financial Officer also available during the Q&A session is John Michael, especially I'm talking I guess contract and Debbie Propst.
Also available during the Q&A session is John Michael, President of America's Contract, and Debbie Propst, President of Global Retail.
Speaker Change: President of global retail.
Before I turn the call over to Andy, please remember our safe harbor regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties, and other factors which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release.
Speaker Change: Before I turn the call over 'twenty. Please remember our safe Harbor regarding forward looking information.
During the call management May discuss information that is forward looking and involves known and unknown risks uncertainties and other factors, which may cause the actual results to be different than those expressed or implied.
You say value based 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 these statements.
The forward looking statements are as of today, and we assume no obligation to update or supplement. These statements. 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.
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 MillerNoll.com
With that, I will turn the call over to Andy. Andy. Thanks, Karola. Good evening, everyone, and thank you for joining our call. Miller Null has delivered another quarter of strong financial performance, marked by a 28.3% year-over-year increase in adjusted earnings per share. Our second quarter results speak to the benefits of strategic emphasis we have placed on diversifying our business model, the benefits of our synergy capture, and the resilience of our company as we continue to navigate various global challenges.
Speaker Change: I will turn the call over to Andy Andy Thanks, Karl and good evening, everyone and thank you for joining our call.
There are no has delivered another quarter of strong financial performance marked by a 28, 3% year over year increase in adjusted earnings per share our second quarter results speak to the benefits of strategic emphasis we have placed on diversifying our business model the benefits of our synergy capture and the resilience of our company as we continue to navigate areas.
Speaker Change: Global challenges.
by leveraging the synergies across our collective and focusing on what is within our control. The team drove year-over-year margin improvement in all three areas of our business, again. And while we face relative high interest rates and geopolitical concerns, positive signs are emerging throughout our industry. Metrics such as project funnel activity, order intake, and recent measures of dealer optimism reflect that CEO confidence is improving.
Speaker Change: Leveraging the synergies across our collect it and focusing on what is within our control and trained the team drove year over year margin improvement in all three areas of our business again, I'm always hates relative high interest rates and geopolitical concerns positive signs are emerging throughout our industry metrics such as project funnel activity.
Speaker Change: Order intake and recent measures of dealer optimism reflected CEO confidence improving.
As it pertains to each of our segments, revenues for America's contract declined quarter over quarter, but we delivered another quarter of margin expansion mainly due to positive price dynamics and synergy capture.
Speaker Change: As it pertains to each of our segments revenues for Americas contracted declined quarter over quarter, but we delivered another quarter of margin expansion, mainly due to positive price dynamics and synergy capture.
Since our integration is miller null, we have invested resources into our dealer network and we continue to see the fruits of this labor. Our immersive dealer training session this fall was one of our best attended sessions to date cross selling is up from the same period last year, along with digital tool adoption. The faster and easier we can make our processes, the more we see a direct correlation to a larger share of the wallet and higher sales.
Speaker Change: Since our integration as Miller no we have invested resources into our dealer network and we continue to see the fruits of this labor our immersive dealer training session. This fall with one of our best attended session to date cross selling is up from the same period last year, along with digital tool adoption.
Speaker Change: The faster and easier we can make our processes more or we see a direct correlation to a larger share of the wallet and higher sales.
We're also delighted to see how our dealers are investing in their showrooms to tell the story of all our brands and products.
Speaker Change: We're also delighted to see how our dealers are investing in their showrooms to tell the story of all our brands and products.
Similarly, we opened our first Miller Knoll showroom this past quarter in Dallas. The first of its kind, this showroom showcases Herman Miller and Knoll, as well as an immersive Miller Knoll area designed with settings from a variety of our collective brands. Spaces like this, which integrate our wide portfolio of solutions under one roof, will continue to enhance our leading position within the contract furniture industry.
Speaker Change: Maybe opened our first Miller no sugar in this past quarter in Dallas, but first of its kind that's shriram showcases Herman Miller in dogs as well as an immersive Miller no area assigned with settings from a variety of our collective brands.
Speaker Change: Which integrate our wide portfolio of solutions under one roof, we'll continue to enhance our leading position within the contract furniture industry.
Consistently, our corporate customers express their desire to discover innovative ways to foster team connections and enhance the overall quality of the work experience. This includes the creation of more purposeful, inclusive spaces, even in situations where downsizing may be a factor. Corporate leaders seek guidance and information about available options and our team is actively responding to these requests by offering carefully curated and thoroughly researched solutions.
Speaker Change: Consistently our corporate customers expressed their desire to discover innovative ways to foster team connection's enhanced the overall quality of the work experience. This includes the creation of more purposeful inclusive spaces, even in situations, where downsizing maybe a factor corporate leadership guidance and information about available options our team is out.
Speaker Change: Totally responding to these requests.
Speaker Change: And carefully curated and thoroughly researched solutions.
As an observation, we perceive a stabilization and return to office trends. In the fall, we conducted a survey involving 5,000 people across nine countries relevant to our business.
As an observation, we perceive a stabilization and return to office trends in the fall. We conducted a survey involving 5000 people across nine countries and relevant to our business. The results indicated that 49% are employed by organizations with full and also its policies or <unk> 37 per cent work for organizations with hybrid policies, notably.
The results indicated that 49% are employed by organizations with full and office policies, while 37% work for organizations with hybrid policies.
Notably, only about 13.6% of organizations have adopted a remote first approach shifting our attention to the international contract and specialty segment. We continue to see strength and health care tech and the financial services are required.
Speaker Change: Only about 13, 6% of organizations have adopted a remote first approach.
Speaker Change: Shifting our attention to the international contract and specialty segment.
Speaker Change: We continue to see strength in health care Tech and financial services verticals. We continue to focus on these market resilient sectors, where our products compete strongly due to our scale and agile manufacturing capability and distribution network. We are continuing to help our existing dealers transitioned to selling our full milrinone portfolio, while also attracting.
We continue to focus on these market resilient sectors where our products compete strongly due to our scale, agile manufacturing capabilities, and distribution networks.
We are continuing to help our existing dealers transition to selling our full Millernal portfolio while also attracting strong new dealers to our international network.
Speaker Change: Strong new dealers to our international network. This quarter. We also saw demand increase in our specialty businesses, including a double digit increase within our luxury trade focused business Holly Hunt.
This quarter, we also saw demand increase in our specialty businesses, including a double-digit increase within our luxury trade-focused business, Poly Hunt.
Turning to global retail, the team delivered its strongest day in the company's history with a record breaking number of orders followed by a record number of shipments in a single day. We were thrilled to see customers turn to us as a destination for key furniture pieces with November being the largest sales month ever for retail business.
Speaker Change: Turning to global retail team delivered its strongest stay in the company's history with a record breaking number of orders followed by a record number of shipments on a single day, we were thrilled to see customers turn to us as a destination for key furniture pieces with November being the largest sales month ever for our retail business.
Investments in our digital capabilities, expanding customer service, and enhanced marketing capabilities, along with the focus of driving traffic to our largest banners and improved reliability, all played crucial roles in bolstering sales this period. Our team also adopted an agile strategic approach to this critical period that resonated with our customers in a highly promotional environment and significantly contributed to driving demand toward our highest margin brands and collections.
Speaker Change: Investments in our digital capabilities excellent customer service and enhanced marketing capabilities, along with a focus on driving traffic to our largest banners and improved reliability all play crucial roles and bolstering sales. This period. Our team also adopted an agile strategic approach. This critical period that resonated with our customers as highly.
Speaker Change: Shall environment, a significant contributor to driving demand towards our highest margin brands and collections.
Design within Reach remains a key avenue for reaching retail customers. In 2024, we have plans to enhance our DWR spaces through incremental assortment displays and enhance store design services. We will leverage revenue opportunities and also increase our brand awareness, enabling new customers to sit in their very first in-house chair and personally experience some of our most iconic designs, while also getting to know newer designers and third-party brands.
Speaker Change: I find when they reach remains a key avenue for reaching retail customers. In 2024, we have plans to enhance our gws basis through incremental assortment displayed and enhanced store design services.
Speaker Change: He will leverage revenue opportunities and also increase our brand awareness, enabling new customers to sit in their very first England I'm sure and personally experienced some of our most iconic design well.
Speaker Change: Also getting to know newer designers and third party brands.
Furthermore, as we continue to expand our e-commerce business and enhance AI and visualization tools in order to enhance conversion.
Speaker Change: Furthermore, as we continue to expand our e-commerce business and enhanced AI and visualization tools in order to enhance conversion throughout.
Throughout this quarter, we continue to innovate and reimagine our product portfolio. We reintroduced Knowles Classic Model 31 and 33 designs for purchase. Launched a high-profile limited edition gaming chair with G2 Esports and determined that we debuted a new nesting chair and further expanded our essential OV1 workspace collection for our contract clients.
Speaker Change: Throughout this quarter, we continue to innovate and re imagine our product portfolio will you be introduced smells Classic model 31, and 33 designs for purchase once to high profile of limited edition gaming Chairman G. G E sports and at Herman Miller, We debuted a new ducting chair and further expanded our central elite one workspace collection her contract.
Speaker Change: It's not.
Not one introduced a playful new lounge chair, which received many notable accolades, and Meharam celebrated 20 years as continued collaboration with iconic British designer Paul Smith.
Speaker Change: Not one introduced a playful new lounge chair, which received many notable accolades and inherent celebrated 20 years as continued collaboration with iconic British designer Paul Smith.
Shifting gears, this past quarter, we issued our first Better World Report as Miller Knoll. This report is a broad view of our efforts across the environmental, social, and governance areas. Also, during this quarter and for the 15th consecutive year, we received a top score from the Human Rights Campaign's Corporate Equality Index, inclusion in a sense of belonging to our integral elements within our organizational culture and of the experiences we design. And it's an honor to have our commitment to equality recognized in this way.
Speaker Change: Shifting gears this past quarter, we issued our first better World report of Miller No. That's.
Speaker Change: This report is a broad view of our efforts across the environmental social and governance areas.
Speaker Change: Also during this quarter and for the 15th consecutive year, we received the top score from the human rights campaign's corporate equality index inclusion in a sense of belonging our integral elements within our organizational culture and the experiences we defined it's an honor to have her commitment to a quality recognized in this way.
In November , we organized our annual company-wide day of purpose, providing our employees across the globe a day away from the office to contribute to their communities, and ensuring our US team members are able to participate in regional elections. Our associates organized over 150 day of purpose events around the world. This initiative brought greater support to our commitment to improve our local communities and our planet. We reaffirmed once more that when we come together as one millenial family, we can achieve more.
November we organized our annual company idea of purpose, providing our employees across the globe a day away from me I'll have to contribute to their communities and ensuring our U S. Team members are able to participate in Guizhou elections, our associates organized over 150 day of herbicide hands around the World. This initiative brought greater support to our commitment to improve our local communities.
Got it.
Speaker Change: We reaffirmed once more that when we come together as one family we can achieve more.
In summary, while remaining agile and able in this environment, we will continue to focus on meeting our customer's needs, increasing our employee engagement and adding value to our shareholders. This is an exciting time for us, strengthening our business and accelerating us the market rebounds. As always, we appreciate your support. Now, I'll ask Jeff to walk us through the financials. Jeff? Thank you, Andy. Good evening, everyone.
In summary, while remaining agile and nimble in this environment, we will continue to focus on meeting our customers' needs, increasing our employee engagement and adding value to our shareholders.
Speaker Change: It's an exciting time for us strengthening our business and accelerating as the market rebounds as always we appreciate your support now I'll ask Joe to walk us through the financials. Thank.
Joe: Thank you Annie good evening everyone.
As Andy just said, we're happy to deliver another quarter of strong earnings and a further increase to our full-year EPS guide to a midpoint of $2.08, despite what remains a rather challenging macroeconomic backdrop for our industry.
Joe: As Andy just said, we're happy to deliver another quarter of strong earnings and a further increase to our full year EPS guidance midpoint of $2.08. Despite what remains a rather challenging macroeconomic backdrop for our industry.
Our Consolidated Adjusted Operating Margin for the second quarter was 7.9%, an all-time high since we became Miller Knoll. And our Adjusted EPS was $0.59, up 28.3% year-over-year.
Consolidated adjusted operating margin for the second quarter was seven 9%.
Joe: An all time high since we became Miller Knoll and our adjusted EPS was 59 says up 28, 3% year over year.
Moreover, we continue to improve our gross margins. This quarter, we delivered a consolidated gross margin of 39.2% up year over year in all three of our business segments.
Joe: Moreover, we continue to improve our gross margins. This quarter, we delivered consolidated gross margin of 39, 2% up year over year in all three of our business segments.
As we mentioned in the press release, this marks the fourth consecutive quarter of Consolidated Urobeer Adjusted Growth Margin Expansion.
As we mentioned in the press release this marks the fourth consecutive quarter of consolidated year over year adjusted gross margin expansion, notably these results were achieved in an environment largely affected by high interest rates and geopolitical concerns both of which influenced the housing market as well as sentiment measures.
Notably, these results were achieved in an environment largely affected by high interest rates and geopolitical concerns, both of which influenced the housing market as well as sentiment measures.
Our second quarter results reinforce themes that we've communicated over the past several quarters, namely the impact of strategic pricing initiatives, ongoing benefits of acquisition related synergies are focused on improved working capital management and product and regional mix optimization.
Joe: Our second quarter results reinforced themes that we've communicated over the past several quarters.
Joe: The impact of strategic pricing initiatives.
Ongoing benefits of acquisition related synergies, our focus on improved working capital management and product and regional mix optimization.
Our strong profitability in the quarter despite softness on the top line demonstrates the resilience that we are building around our operating
Joe: Our strong profitability in the quarter despite softness on the top line demonstrates the resilience that we are building around our operating margin.
With respect to cash flows in the balance sheet, we generated $82.4 million of cash flow from operations.
Joe: With respect to cash flows and the balance sheet, we generated $82 $4 million of cash flow from operations this quarter.
Joe: US to pay down $19 million of outstanding debt and provided an opportunity to repurchase approximately one 4 million shares amounting to a total cash expenditure of $28 million.
As the quarter concluded, our net debt-to-EBITDA ratio stood at just under 2.5 turns.
Joe: Orders included our net debt to EBITDA ratio stood at just under two five turns.
New orders at the consolidated level totaled $944 million in the second quarter, reflecting an organic decrease of 6% from the same quarter last year.
Joe: New orders at the consolidated level totaled 944 million in the second quarter, reflecting an organic decrease of 6% from the same quarter last year.
While new orders in total were lower than last year's level, we were heartened to see the sequential trend improve steadily as we progressed through the quarter.
Speaker Change: Well new orders in total were lower than last year's level, we were heartened to see the sequential trend improved steadily as we progressed through the quarter.
Within our America's Contract segment net sales for the quarter were $476 million, representing an organic decrease of 10.3% from the same quarter a year ago.
Speaker Change: Within our Americas contract segment net sales for the quarter were $476 million, representing an organic decrease of 10, 3% from the same quarter a year ago.
New orders in the period totaled $437 million, down 8.1% from last year on an organic basis.
Speaker Change: Orders in the period totaled $437 million.
Eight 1% from last year on an organic basis.
Within the quarter, order comparisons to last year were somewhat volatile between September and October . This is largely due to the timing of a price increase that became effective in October of last year.
Speaker Change: Within the quarter order comparisons to last year were somewhat volatile between September and October. This is largely due to the timing of our price increase that became effective in October of last year.
Setting this aside, order growth in the month of November stabilized, with segment orders coming in 8% higher than last year.
Speaker Change: Setting this aside order growth in the month of November stabilized with segment orders coming in 8% higher than last year.
Additionally, for this segment, orders in the first two weeks of Q3 were up 15% year-over-year.
Speaker Change: Additionally for this segment orders in the first two weeks of Q3 were up 15% year over year.
Our confidence is further bolstered by other forward-looking demand indicators, including project funnel activity and a notable increase in requests for project pricing and mock-up bills.
Speaker Change: Our confidence is further bolstered by other forward looking demand indicators, including project funnel activity and a notable increase in request for project pricing and backup builds.
Customer showroom visits were also higher this quarter, with West Michigan visits up 28 percent year over year.
Speaker Change: Customer showroom visits were also higher this quarter with west, Michigan visits up 28% year over year.
We remain committed to providing our dealers with compelling content and dynamic tools to aid them in their projects, and our investment in technology is playing a key role in accelerating these efforts.
Speaker Change: We remain committed to providing our dealers with compelling content and dynamic tools to aid them in their projects and our investment in technology is playing a key role in accelerating these efforts.
In November , we launched a significant upgrade to our proprietary B2B e-commerce platform.
Speaker Change: In November we launched a significant upgrade to our proprietary b to B E Commerce platform.
This platform will substantially improve our ability to onboard new clients at a much faster pace.
Speaker Change: This platform will substantially improve our ability to onboard new clients at a much faster pace.
The onboarding process is already underway and the backlog of new opportunities is growing.
Speaker Change: Onboarding process is already underway and the backlog of new opportunities is growing.
I'd also like to highlight the fact that our America's Contract team delivered another strong quarter of earnings with its adjusted operating margin totaling 9.4%.
Speaker Change: I'd also like to highlight the fact that our Americas contract team delivered another strong quarter of earnings with its adjusted operating margin totaling nine 4%.
This was the sixth straight quarter of year-over-year margin improvement for this segment, despite lower revenue.
Speaker Change: This was the sixth straight quarter of year over year margin improvement for this segment despite lower revenue.
This year-over-year expansion reflects the positive price-cost dynamics and benefits from Synergy Capture, which are contributing to the overall resilience and operational success of the SEC.
Speaker Change: This year over year expansion reflects the positive price cost dynamics and benefits from synergy capture which are contributing to the overall resilience and operational success of the segment.
Turning to our international contract and specialty segment, net sales for the quarter total 241.2 million, down 10.4 percent organically year-over-year, while new orders came to 234 million, reflecting a year-over-year organic decrease of 5 percent.
Turning to our international contract in the specialty segment net sales for the quarter totaled $241 2 million down 10, 4% organically year over year, while new orders came to $234 million, reflecting a year over year organic decrease of 5%.
Similar to the America segment, border trends improved as we moved through the quarter and ended in positive territory for the month of November and through the first two weeks of Q3.
Speaker Change: Similar to the Americas segment order trends improved as we moved through the quarter and ended in positive territory for the month of November and through the first two weeks of Q3.
Nonetheless, macroeconomic challenges, particularly in China and parts of Europe , have impacted the demand dynamics of this sector.
Speaker Change: Nonetheless, macroeconomic challenges, particularly in China and parts of Europe have impacted the demand dynamics of this segment and.
In addressing these challenges and aligning with our commitment to agility and continuous improvement, we implemented targeted restructuring actions this quarter aimed at bolstering manufacturing efficiency and adjusting the operating expense run rate of the business.
Speaker Change: In addressing these challenges and aligning with our commitment to agility and continuous improvement we implemented targeted restructuring actions. This quarter aimed at bolstering manufacturing efficiency and adjusting the operating expense run rate of the business.
With all that said, our optimism for the medium to long-term growth prospect of this segment remains high, especially in markets like India, South Korea, and in the Middle East.
Speaker Change: With all that said our optimism for the medium to long term growth prospect at this segment remains high, especially in markets like India, South Korea and in the Middle East.
To this end, we're continuing to focus on transitioning legacy Herman Miller dealers to full-line Miller & Ohl dealers.
Speaker Change: And we're continuing to focus on transitioning legacy Herman Miller dealers to full line Miller and all dealers today.
To date, we have transitioned just over 30% of the global network, and we have more planned in the second half of this fiscal year.
To date, we are transitioning just over 30% of the global network and we have more planned in the second half of this fiscal year.
Adjusted operating margin within this segment was 11.3% in the second quarter, down year-over-year, driven by lower sales volume. This was partially offset by improved growth margin performance, which continues to benefit from previous pricing.
Speaker Change: Adjusted operating margin within this segment was 11, 3% in the second 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.
cost synergies, favorable regional and product mix, and the restructuring actions that I just mentioned.
Speaker Change: Synergies favorable regional and product mix and the restructuring actions that I just mentioned.
Moving to our global retail segment, net sales in the second quarter of $232 million were down 9.4% organically from the same quarter last year, and new orders for this segment of $273 million were 3% lower from a year ago on an organic basis.
Speaker Change: Moving to our global retail segment net sales in the second quarter of $232 million were down nine 4% organically from the same quarter last year.
Speaker Change: New orders for this segment of $273 million were 3% lower.
Speaker Change: From a year ago on an organic basis.
This relative decline in organic orders is, however, an improvement compared to the 6.4 percent decrease posted in the previous quarter.
Speaker Change: This relative decline in organic orders is however, an improvement compared to the six 4% decrease posted in the previous quarter.
The retail team's agile and strategic approach to promotions enabled us to drive year-over-year organic demand growth in November .
The retail teams agile and strategic approach to promotions enabled us to drive year over year organic demand growth in November.
And as Andy highlighted, demand in this critical month of the retail calendar reached an all-time record level for the sector.
Speaker Change: And as Andy highlighted demand in this critical month of the retail calendar reached an all time record level for the segment.
Despite challenges posed by the slowdown in the housing market and elevated interest rates, we remain optimistic about the retail team's efforts to gain market share through direct consumer channels.
Speaker Change: Despite challenges posed by the slowdown in the housing market and elevated interest rates, we remain optimistic about the retail teams efforts to gain market share through direct to consumer channels.
We believe the longer-term demand fundamentals for this business are robust, with the U.S. housing market facing undersupply and demographic trends pointing towards substantial future construction growth. Accordingly, our retail team remains focused on investments and initiatives geared toward market expansion, including assortment expansion and innovation, and enhanced digital capability.
Speaker Change: We believe the longer term demand fundamentals for this business are robust with the U S housing market facing under supply and demographic trends pointing towards substantial future construction growth occurs.
Speaker Change: Accordingly, our retail team remains focused on investments in initiatives geared toward margin expansion, including assortment expansion and innovation and enhanced digital capabilities.
It's just an operating margin in the retail segment with 7.1%. This is 570 basis points higher than Q2 of last year due to a host of operational improvements, including inventory management and enhanced shipping revenues. Now, I'm going to turn my attention to some of the things that I want to talk about.
Speaker Change: Adjusted operating margin in the retail segment was seven 1%. This is 570 basis points higher than Q2 of last year due to a host of operational improvements, including inventory management and enhanced shipping revenues.
Speaker Change: Now I'm going to turn my attention 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 the business, we're increasing our adjusted earnings guidance for the full fiscal year, which we now expect to range between $2.00 and $2.16 per share.
Speaker Change: Given the improvements we're seeing in gross margins across each of our business segments and continued signs of demand stabilization in the business. We are increasing our adjusted earnings guidance for the full fiscal year, which we now expect to range between $2 and $2 16 per share.
As it relates to the third quarter of fiscal 2024, we expect net sales to range between $890 million and $930 million and adjusted diluted earnings per share to be between $0.40 and $0.48 per share.
Speaker Change: As it relates to the third quarter of fiscal 2024, we expect net sales to range between $890 million.
Speaker Change: $930 million and adjusted diluted earnings per share to be between 40 and 48 per share.
Consolidated orders for the first two weeks of the third quarter of fiscal 2024 grew 4% organically compared to last year, our revenue guidance considers this as well as the size and scheduling of the beginning backlog. And it also considers the relative seasonal decrease that we normally experienced from the second to the third quarter, which is characterized by lower demand and shipping activity in the contract segments driven by the holidays.
Speaker Change: Consolidated orders through the first two weeks of the third quarter of fiscal 2024 grew 4% organically compared to last year. Our revenue guidance considers this as well as the size and scheduling at the beginning backlog and it also considers the relative seasonal decrease that we normally experience from the second to the third quarter, which is characterized by lower demand.
Speaker Change: And shipping activity and the contract segments driven by the holiday season.
So with those overview comments, and I'll turn the call back over to the operator and we'll take your questions.
So with those overview comments and I'll turn the call back over to the operator, and we'll take your questions.
Thank you. If you have any questions, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, simply press star 1 again.
Speaker Change: Thank you if you have any questions. Please press star one on your telephone keypad, if you wish to remove yourself from the queue simply press star one again.
Speaker Change: Just one moment for your first question.
Speaker Change: Yeah.
Your first question comes from the line of Greg Burns of Sidotian Company. Your line is open.
Speaker Change: Your first question comes from the line of Greg Burns of Sidoti and company. Your line is open.
Speaker Change: Yeah.
Greg Burns: Greg are you there.
Greg Burns: Yeah.
Greg Burns: You may be on mute.
Greg Burns: Yeah.
We'll get back to him at a later time. Check again. Your next question then comes from the line of Reuben Garner of the Benchmark Company. Your line is open.
We'll get back to him at a later time trick again. Your next question then comes from the line of Reuben Garner of the benchmark Company. Your line is open.
Reuben Garner: Thank you good evening everybody.
Maybe we could start big picture in the Americas, last couple of quarters, you've talked a lot about seeing kind of signs of a turning point and discussed an increase.
Reuben Garner: Hmm.
Reuben Garner: Maybe we could start big picture in the Americas, a last couple of quarters, you've talked a lot about seeing kind of some.
Reuben Garner: Ons of a turning point and discussed and increased project funnel in order intake and our visits to the to the showrooms in and that sort of thing orders still seem a little bit choppy I think is that fair to say or what what do you think it's going to take for for kind of the order.
project funnel and order intake and visits to the showrooms and that sort of thing. Orders still seem a little bit choppy, I think. Is that fair to say? Or what do you think it's going to take for kind of the order level to turn the quarter and maybe return to growth on a consistent basis?
Reuben Garner: Level to turned the quarter and maybe return to growth on a consistent.
Reuben Garner: <unk> basis.
It's a great question, Reuben. Actually, we're pretty optimistic about order growth in the Americas. As Jeff mentioned in his opening comments, our comparisons to last year in September and October were pretty volatile and probably out of sync based on a price increase that we did last year. So if you normalize for that and you look at our trend coming out of October when we took the price increase last year, we're confident in the increases that we've seen from that point on, Jeff or John , what would you add to that? I would just add, I think the work patterns that have really been
Speaker Change: It's a great question right, but actually we're pretty optimistic about order growth in the Americas as Jeff mentioned in his opening comments are comparisons to last year in September and October were pretty volatile and probably out of St. Based on a price increase that we did last year. So if you normalize for that and you look at our trend coming out of October when we took the price increase last year.
Speaker Change: We're confident in the increases that we've seen from that point on Jeff or John would you add to that.
John Michael: I would just add I think the the work patterns that have really been sort of bouncing around sort of post COVID-19.
sort of bouncing around sort of post COVID have really begun to stabilize. And I think clients are now more in a position to take action than they have been previously. And I think the reference to funnel activity and share room visits and those types of leading indicators really, really demonstrates that fact that they're getting closer to pulling the trigger on a lot of these projects. And there's a fair amount of them in the funnel.
John Michael: Began to stabilize and I think clients are now more in a position to take action than they had been previously and I think the reference to funnel activity and showroom visits and those types of leading indicators.
John Michael: Really really demonstrates the fact that they're getting closer to pulling the trigger on a lot of these projects and and there's a fair amount of them in the funnel.
Yeah, Ruben, this is Jeff. I guess I agree with all of that. The only other color I would add, and I think you know this, but I think it warrants saying out loud, you know that in.
John Michael: Yes, Reuben this is Jeff I guess I agree with all of that the only other color I would add and I think you know this but I think it warrants, saying out loud you you know that.
John Michael: Just moments.
of the beginning of a recovery in this business, I think your word was right, choppy demand patterns are very typical, and so as Andy said, we had a fairly volatile start to the quarter, I think in large part due to that timing of the price increase, but really feels like things began to stabilize in November , and as I said in the opening remarks, up 8% in November , up 15% in the first two weeks.
Jeff: And at the beginning of a recovery in this business. You you you I think your word was right choppy demand patterns are very typical.
Speaker Change: So as Andy said, we had a we had a fairly volatile start to the quarter I think in large part due to that timing of the price increase but really feels like things began to stabilize in November and as I said in the opening remarks up 8% November up 15% in the first two weeks.
of the new quarter and a reminder, last quarter we were up 2% for the segment in total for the full quarter.
Speaker Change: Of the new quarter, and a reminder, last quarter, we were up 2% for.
Speaker Change: For the segment in total for the full quarter.
Speaker Change: Yeah.
Got it. And any areas of particular strength or weakness within your
Speaker Change: Got it and any areas of particular strength or weakness within your.
contract business that you would call out? Or are you starting to see some of the bigger cities, bigger customers return in a bigger way? Is that what's driving kind of the recent stabilization?
Speaker Change: Contract business that you would call out or are you starting to see some of the bigger cities are bigger customers return in a bigger way is that what's driving kind of the recent stabilization.
I definitely think some of that, I think if you looked at the sectors.
Speaker Change: Definitely seeing some of that I think if you looked at the sectors.
Um, energy, uh, public sector, pharma, healthcare are all pretty vibrant now, um, sort of across the board. I think there are still some geographic soft spots, um, certain large cities that were maybe tech heavier, um, than others are still a little bit slower to recover, but in general, um, they're all, they all seem to be, um, coming back and then of course there are those that have been been pretty robust throughout all of this, be that.
Speaker Change: G. A public sector pharma health care are all pretty vibrant now sort of across the board.
Speaker Change: There are still some geographic soft spots.
Speaker Change: Certain large cities that were maybe tech heavier.
And then others are still a little bit slower to recover but in general they're all they all seem to be coming back and then of course there are those that have been.
Speaker Change: Robust throughout all of this should be that.
areas like Texas, Midwest, etc. that have been relatively stable.
Speaker Change: Areas like Texas, Midwest et cetera that have been relatively stable.
And Ruben, I would say globally, we continue to see strength in the Middle East, we continue to see strength in India, we're seeing China sort of slowly come back, which is encouraging. And then I think Europe is starting to feel a little bit better than it had usually. So internationally, we have markets that are definitely seeing.
Speaker Change: And we've been I would say globally, we continue to see strength in the middle East we continue to see strength in India, we're seeing China's sort of slowly come back which is encouraging and and then I think Europe is starting to feel a little bit better than it had usually so internationally. We have markets that are definitely seeing strength.
Speaker Change: Yeah.
And you made reference to, I think, in the same vein as synergies and cross-selling and some other initiatives you have ongoing product and regional mix optimization. Can you refresh me on what you've got going on there and what kind of benefits you're seeing?
Speaker Change: And you made reference to I think are in the same vein as synergies and cross selling and some other initiatives you have ongoing product and regional mix optimization can you refresh me on what you've got going on there and what kind of benefits you're seeing.
Reuben, this is Jeff. I'll start and Debbie you might want to jump in because I think some of this certainly relates to you. So part of the mix...
Speaker Change: Reuben This is Jeff I'll start and Debbie you might want to jump in because I think some of this certainly relates to years, so part of the mix.
that I'm referring to it becomes segment channel mix Ruben and when we index
Jeff: Is that I'm, referring to it becomes segment and channel mix Reuben when we index into retail we get the benefit of the retail margin profile. The gross margin level and of course November as soon as we highlighted in the opening remarks.
into retail, we get the benefit of the retail margin profile at the gross margin level. Of course, November is as we highlighted in the opening remarks.
kind of be critical month of the year for that. Within the international business in particular, there are certain regions of the world where we tend to index a little higher into seeding, for example, and we've had some strength in those parts of the world in particular. So that's kind of the regional mix comment. Debbie, I don't know if you want to add any comment on the retail side. I think that's where we get to retail too. You know, Ruben, as you've heard us talk about in the past, as we see our contract customers.
Jeff: The critical months of the year for.
Jeff: For that within the international business in particular, there are certain regions of the world, where we tend to index a little higher into seating for example, and we've had some strength.
Jeff: And in those parts of the world in particular, so that's kind of a regional mix comment Debbie I don't know if you want to add any comments on the retail side before we get to reach out to you know Reuben is you've heard us talk about in the past as we see our contract customers are wanting to look more at ancillary options. Those are obviously, a little bit at the margin for us than kind of workstation. So that's another piece of it.
Uh, wanting to look more at ancillary options. Those are obviously a little bit at margin for us then kind of workstation. So that's another piece of the contract business from a product mix standpoint and then retail. And from a retail perspective with a promotional posture, we took this holiday season, we really focused on driving demand through our own brands.
Debbie Propst: Contract with us from a product mix standpoint, and then when he tells me and from a retail perspective with a promotional posture. We took this holiday season, we are really focused on driving demand through our owned brands as specifically the Herman Miller brand. However, we saw really nice increases in performance in our gaming category.
specifically the Herman Miller brand, where we saw really nice increases in performance in our gaming category and nice resilience out of our upholstery category. We were able to sell our large ticket items with rich margins and drive margin growth both year over year and sequentially from Q1.
Debbie Propst: And nice resilience that of our upholstery category, we were able to sell our large ticket items with switch margins and drive margin growth both year over year and sequentially from Q1.
Got it. Thanks guys. That's it for me. Happy holidays and happy new year.
Speaker Change: Got it thanks, guys. That's it for me happy holidays, and happy new year.
Speaker Change: Thank you Robert.
Your next question comes from the line of Alex Furman of Craig Hadlam Capital Group. Your line is open.
Speaker Change: Your next question comes from the line of Alex Sherman of Craig Hallum Capital Group. Your line is open.
Hey, guys, thanks very much for taking my question. Andy, it sounds like you're pretty optimistic about your customers return to the office plans. There continue to be a lot of really negative headlines out there about office occupancy in North America and expectations, you know, for for next year. Can you help us?
Alex Sherman: Hey, guys. Thanks, very much for taking my question you know Andy it sounds like you're pretty optimistic about Europe customers return to the office plans, they're continued to be a lot of really negative headlines out there about office occupancy in North America in and expectations for next year can you help us.
bridge that gap a little bit you're obviously on on the front lines here at the return to the office do you think some of the headlines out there may be getting it wrong or or are too pessimistic for next year or or is it possible that maybe your large multinational customers uh... are returning to the office perhaps faster than small and medium-sized businesses uh... just just just trying to get better understand that what you're seeing and how that squares with with uh... some of the headlines that are out there
Alex Sherman: Bridge that gap, a little bit you're obviously on the front lines here if the return to the office do you think some of the headlines out there are maybe getting it wrong or are too pessimistic for next year or is it possible that maybe you were large multinational customers are returning to the office, perhaps faster than small and medium size businesses.
Alex Sherman: Just trying to better understand what you're seeing and how that squares with with some of the headlines that are out there.
Yes, funny Alex. I actually think there's a little bit less headlines than there were about six or eight months ago. But I think every market is a little bit different. But what we're hearing and seeing is we sit and speak with our customers in the contract market.
Speaker Change: Yeah, Alex I actually think there's a little bit less headlines and there were about six or eight months ago, but I think every market is a little bit different but what we are hearing and seeing as we used to speak with our customers in the contract market. So theres a lot more momentum around getting people back together for all the reasons that you see in the press as well so we're seeing people come to.
So there's a lot more momentum around getting people back together for all the reasons that you see in the press as well. So we're seeing people come to us with, instead of, Hey, we're thinking about, they have ideas about what they want to do. They have plans to bring people back to the office. So I think the key here is flexibility. I think return to office is absolutely picking up. I think as John said, there are markets where we see much more momentum than others in the U S you would agree with that, John , but certainly momentum is building.
Speaker Change: As with instead of Hey, we're thinking about it they have ideas about what they want and do you have plans to bring people back to the office. So I think the key here is flexibility I think returned to office is absolutely picking up I think as John said, there are markets, where we see much more momentum momentum that others in the U S. You would agree with that John.
Speaker Change: Momentum is building.
we can add. I would add that a lot of companies are downsizing their real estate portfolio.
Speaker Change: What would you add I would add that a lot of companies are downsizing their real estate portfolio.
But going to smaller spaces really triggers project activity for us. So even though from a overall commercial real estate perspective, there's, there's a lot of.
Speaker Change: But going to a smaller space is really triggers project activity for us so even though from a overall commercial real estate perspective, there's a lot of headwinds the movement within the commercial real estate creates activity for for what we do and what our dealers do so whether that's moves adds and changes or new workplace.
The movement within the commercial real estate creates activity for what we do and what our dealers do. So whether that's moves, ads, and changes, or new workplaces to reflect new ways of working, it creates demand. And I think our clients realize that the real estate has to work harder than ever in order to attract people back into the office to make the social connections that they can't get working remotely or hybrid. And that's really our focus is helping them figure that out.
Speaker Change: As to reflect new ways of working.
Speaker Change: It creates demand and I think I think our clients realize that they are the real estate has to work harder than ever in order to attract people back into the office to make the social connections that they can't get working remotely or hybrid and that's really our focus is helping them to figure that out.
Okay, that's really helpful. Thanks guys. You guys have done a really good job of growing EBITDA so far this year, in a year when revenue has been down pretty significantly. How should we think about your margin profile heading into next year? Is it possible that you could continue to see further gross margin increases here, even if revenue remains at current levels, or at a certain point are you going to need revenue growth to resume in order to start getting earnings, you know, continuing to move higher?
Okay. That's really helpful. Thanks, guys and then and then you guys have done a really good job of growing EBITDA. So far this year in a year when revenue has been down pretty significantly how should we think about kind of your your margin profile heading into next year is it possible that you could.
Speaker Change: To see further gross margin increases here you know, even if revenue remains kind of at current levels or you know at a certain point are you going to need revenue growth to resume in order to start getting our earnings you know continuing to move higher.
Yeah, this is Jeff. I think we still have a little bit of room. I believe in some of the more recent pricing actions, but I think you hit on a key point. That is, at some point, and I don't think we're too far off from it. We do need to see some top line growth to drive leverage in our manufacturing operation.
Jeff: Yeah. This is Jeff.
Jeff: We still have a little bit of room I believe in some of the more recent pricing actions, but I think you hit on a key point and that is it.
Jeff: Some point and I don't think we're too far off from it we do need to see some top line growth to drive leverage in our manufacturing operations.
I think that the retail team is doing a really nice job. We talked on the preparatory marks about assortment expansion and some of the newness. I think we've got some real opportunity there to drive.
Jeff: I think that the retail team is doing a really nice job, we talked on the prepared remarks about assortment expansion and some of the newness I think we've got some real opportunity there to drive.
some margin-rich products into that business and growth.
Some margin rich products into that business and growth.
Jeff: But within the contract business in particular I think.
Jeff: Our our margin profile is at some point going to be reliant on top line growth for meaningful further expansion I mean, our teams are constantly working on V type initiatives to drive efficiencies. They are really good at it we expect that we plan for those every year and so I think theres, a theres a window here, where without topline growth we still.
margin profile is at some point going to be reliant on top-line growth for meaningful further expansion. I mean, our teams are constantly working on VAVE-type initiatives to drive efficiencies. They're really good at it. We expect that we plan for those every year. And so I think there's a window here where, without top-line growth, we still can show some improvement with that plus some of the pricing that we still have in place. But at some point, history would say you've got to have that top-line moving. The good news is, as we've said, we've got growing optimism that that's coming. That's terrific. Thanks, all of you, very much.
Jeff: Showed some improvement with that plus some of the pricing that we.
Jeff: We still have in place, but at some point history would say you've got to have that top line moving the good news is as we've said we've got growing optimism that thats comment.
That's terrific. Thanks all of you very much.
Speaker Change: That's terrific. Thanks, all of you very much.
Your next question comes from Greg Byrnes of Sidodean Company. Your line is open.
Speaker Change: Your next question.
Speaker Change: Your next question comes from the line of Greg Burns of Sidoti <unk> Company. Your line is open.
Greg Burns: Good afternoon can you hear me this time.
Yeah, I agree. Okay, great. Um, so I just want to, I guess, touch on the, the, the kind of the relative strength in the retail segment or the better than expected. It was definitely stronger than, you know, I was expecting given.
Greg Burns: Hi, Greg.
Greg Burns: Okay, great. So.
Greg Burns: So I just wanted to touch on the the kind of the relative strength of the retail segment for the better than expected. It was definitely stronger than I was expecting given.
Some of the macro headwinds, you know, facing the, the, the, the, uh, the housing market. So can you just talk about, you know, specifically what, what do you think you're doing right to.
Greg Burns: Some of the macro headwinds facing the the the the.
Greg Burns: The housing market. So can you just talk about specifically, what what do you think youre doing right too.
drive market share gains there and then also on the profitability of that that segment is that sustainable what you put up this quarter or is you know there's some kind of one-off type of items that are we're driving the the operating margin
Greg Burns: To drive market share gains there and then also on the profitability of that segment is that sustainable what you put up this quarter or is there just some kind of one off type of items that are driving the operating margin.
Greg Burns: This quarter.
Yeah. Hey, Greg, I'm going to start very briefly and then I'll turn it over to Andy and Debbie, but I would just, I wanted to say no, no one off items in the quarter. I mean, this was, uh, what was great about this quarter is that it was just really awesome to see the team deliver a real clean kind of high quality, uh, quarter of profitability. So there's nothing notable in, in, in terms of one off and I don't know Debbie, if you want to unpack that any further.
Speaker Change: Yeah, Hey, Greg I'm going to start very briefly and then I'll turn it over to Andy and Debbie, but I would just I wanted to say no no one off items in the quarter. I mean this was a what was great about this quarter is that it was just really awesome to see the team deliver a real clean kind of high quality.
Speaker Change: Quarter of profitability. So there's nothing notable in terms of one off and I don't think that would be to unpack that any further.
Yeah, I would give kudos to the team this quarter and for the last year, Greg, and really, um, knuckling down and delivering strategic execution and they really did that this quarter, but again, no one time.
Speaker Change: Yeah, I I I would give kudos to the team this quarter and for the last year, Greg and really knuckling down and delivering strategic execution and they really did that this quarter, but again no one time emphasis.
Well done. Why don't you add, Debbie? Hi, Greg, it's Debbie. So a few things that I would just highlight. The first is we've been extremely focused on our foundational execution over the last 24 months. And we're really starting to see some of the operational investments and improvements we've made paying off. That's driving up customer lifetime value. We're improving across all of our operational metrics. We had our fastest lead times ever within the quarter.
Speaker Change: Well done unless you're accessing high grandkids, Debbie so a few things that I would just highlight the first is we've been extremely focused on her and foundational execution and over the last 24 months and we're really starting to see some of the operational investments and improvements we've made pay off that's driving up customer lifetime value.
Speaker Change: We're improving across all of our operational metrics, we had our fastest check like lead times ever within the quarter.
And that is, in fact, freeing up more time and capacity in our stores to focus on selling activity instead of post-purchase activity.
Speaker Change: And that is in fact, freeing up more time and capacity in our stores to focus on selling activity. Instead of post purchase activity second thing is our marketing effectiveness, we actually spent 11% less in marketing expenses year over year and our organic sales are down 3%. So we got really nice leverage out of our market.
Second thing is our marketing effectiveness. We actually spent 11% less in marketing expenses year over year, and our organic sales are down 3%. So we got really nice leverage out of our marketing capabilities. That's driven by the beginnings of optimizing the customer data platform we stood up in the last year.
Speaker Change: And capabilities, that's driven by the beginnings of optimizing the customer data platform. We stood up in the last year and then in terms of our promotional posture and that obviously drove a really nice progress we had our best month ever in November November out, 5% until last year and organic orders and that was really driven by.
And then in terms of our promotional posture, that obviously drove really nice progress. We had our best month ever in November .
November up 5% to last year in organic orders. That was really driven by the position we took to capture as much demand late in the quarter as possible. We've seen a shift over the last three years of customers waiting until later and later in the month to purchase.
Speaker Change: By that position, we took to capture as much demand late in the quarter. It's possible we've seen a shift over the last three years of customers waiting till later and later in the month to purchase and so we wanted to be agile and have a promotional strategy that we could stairstep, depending on the customer behavior, we saw and we manage that business real.
And so we wanted to be agile and have a promotional strategy that we could stair step depending on the customer behavior we saw and we managed that business real time to make sure that we were driving demand in term was profitable category.
Speaker Change: To make sure that we were driving demand and term was profitable categories.
So, we're really proud of the demand trends versus the industry in the quarter. We're really also proud of the margin trends, and we expect to see forward-looking trends from a margin perspective in line.
Speaker Change: So we're really proud of the demand trends versus the industry and in the quarter, but really also proud of the margin trends and we expect to see forward looking trends from a margin perspective in line.
Great. And then, Jeff, the interest in other expenses, line item, I think you were guidance around 19 or 20 million to come in. It came in at 16 million in your guidance to that for the next quarter. What's driving the decrease there? Yeah.
Okay great.
Speaker Change: And then Jeff the the interest and other expense line item.
Speaker Change: Your guidance around 19, or 20 million to come in and it came in at $16 million in your guidance to that for.
Speaker Change: For the next quarter, what's what's driving the decrease there.
Speaker Change: Yeah the.
Speaker Change: The Biggie is we generated some good amounts of cash I think in prepared remarks, we've been pleased with working capital efficiency and has helped generate cash not just in the U S. But in a variety of jurisdictions around the world and what we benefited from was higher interest rates, particularly outside the U S. Driving interest income so that was a biggie below the line that was a positive.
We've been pleased with working capital efficiency, and that's helped generate cash not just in the U.S., but in a variety of jurisdictions around the world. And what we benefited from was higher interest rates, particularly outside the U.S., driving interest income. So that was a biggie below the line that was a positive. We also had a slight currency – good news on the currency line, which we tend to – currency transaction gains and losses, we tend to guide those as flat. We had a slight gain, and some good news related to an international pension plan. So it was really those three things. Okay, great.
Speaker Change: We also had a slight currency <unk>.
News on the currency language, we tend to currency transaction gains and losses, we tend to guide those as flat, we had a slight gain and some good news.
Speaker Change: Related to an international pension plan. So it was really those three things.
Okay, great. All right. Thank you.
Speaker Change: Okay, Great alright, thank you.
Your next question is from the line of Bud Bugat of Water Tower Research. Your line is open.
Speaker Change: Your next question is from the line of Budd, who got of water Tower Research. Your line is open.
Oh, good evening. Yes. Hi. Happy New Year and Happy Holidays and Happy New Year to everybody there.
Budd: Oh, good evening, Andy or yes.
Budd: Hi, happy new year, and happy holidays, and happy new year to everybody there.
Yep, I guess the and congratulations on the margin performance. So it's very nice
Speaker Change: I guess with the <unk> and congratulations on the margin performance. So it's very nice and I guess, Jeff. My first question is so the 30 on nearly 34% gross margin in America is.
I guess Jeff, my first question is the 30 on nearly 34% growth margin in America is
Can you hang on to that if the backlog continues to be, looks depressed to me, and that your comment about leverage is one that I worry about.
Speaker Change: Can you hang on to that.
Speaker Change: If the backlog is.
Speaker Change: Continues to be looked at the press to me that you are.
Speaker Change: Your comment about leverage is one that I worry about.
Yeah, but I think over the
Speaker Change: Yeah, but I think over over the.
More than just one quarter. We're rolling into our, as you know this very well, we're rolling into what is historically a seasonal low quarter from a manufacturing
Speaker Change: More than just one quarter thing, where we're rolling into our as you know this very well we're rolling into what is historically a seasonal.
Speaker Change: Low quarter from a manufacturing.
of manufacturing volume perspective and that tends to
Manufacturing volume perspective, and that tends to drive some reduction in gross margin, but that's in the best of times, we see that in this business. So I think it would be fair to say that in the Americas segment, we see a slight sequential step down in margin performance I think that's reasonable to expect in SMB, that's implied in our guide.
drive some reduction in gross margin, but that's in the best of times we see that in this business. So I think it would be fair to say that in the America's segment, will we see a slight sequential step down in margin performance? I think that's reasonable to expect and that's implied in our guidance for the quarter.
Speaker Change: For the quarter, but what like for like.
But like for like Q2 going forward, we don't see anything in this performance that we don't think we can hold on to. I mean, obviously, we're keeping an eye on discounting pressure in the business.
Speaker Change: So Q2 going forward, we don't see anything in this performance that that we don't think we can hold on to I mean, obviously, we're keeping an eye on discounting pressure in the business and I think we've seen some signs of it on the edges, but nothing nothing significant that's of great concern.
Um, and I think we've seen some signs of it on the edges, but nothing, nothing significant that's a great concern and as we see larger project opportunities, those are going to be priced more aggressively. That always happens. But with that comes more manufacturing production and an opportunity to leverage. So, uh, nothing that that causes us any great concern there.
Speaker Change: And as we see larger project opportunities those are going to be priced more aggressively that always happens, but with that comes more manufacturing production.
Speaker Change: And an opportunity to leverage so.
Speaker Change: Nothing that causes us any great concern there.
So in contract, the normal, at least as I recall, in normal times, the discounting impact used to be about 50 basis points, or that's.
Speaker Change: So in contract that's the normal at least as I recall in normal times, the discounting impacts used to be about 50 basis points.
discussed. Is that what is normal and what you're expecting?
Speaker Change: Discussed is that what is normal and what youre expecting.
You know, it's funny, I don't know that I think of it in terms of basis points. I mean, that doesn't strike me as crazy, but I'm kind of going from memory. I don't have any data from history in front of me. Typically, you do see some contraction in margins and it can happen. It can happen in short bursts until the volume picks up and you start to be able to offset that with.
You know, it's funny I don't know that I think of it in terms of basis points I mean that doesn't strike me as crazy.
Speaker Change: But I'm kind of going from memory I don't mean data from history in front of me typically you do see some contraction in margins in.
Speaker Change: And it can happen it can happen in short burst until the volume picks up and you start to be able to offset that with with opportunity growth and that's why these forward indicators that we've been following so closely are are so important and have us fairly optimistic.
opportunity growth, and that's why these forward indicators that we've been following so closely are, are so important and have us fairly optimistic.
And the difference between orders and shipments in the Americas implies about a $40 million drawdown of the ending backlog.
Speaker Change: And the difference between orders and shipments in the Americas implies about a $40 million drawdown of the <unk> and the backlog.
from the beginning backlog in the quarter, and I'll ask you, is that correct, and that strikes me as a number that I haven't seen that low and I don't remember.
Speaker Change: From the beginning backlog in the quarter Ryan I'll ask you is that correct and it strikes me as a number that I havent seen that low and I don't remember when.
So help me understand, when do you start building that back? And it was nice to see it come back in retail. And I know international is down a little bit, but America's was significant from what I can see from the numbers.
Ryan: So help me understand when do you start building that back in.
Ryan: It was nice to see it come back in retail and I know international was down a little bit, but Americas was significant from what I can see from the numbers.
I think your numbers are right, but that's correct. And I think that puts us down about 15% or 16% year on year in the America's Segment Backlog. The number sounds right.
Speaker Change: I think your numbers are right, but that's correct.
Speaker Change: And I.
Speaker Change: I think that puts us down about 15 or 16% year on year in the Americas segment backlogs now that nobody selling price.
I think 19 is the number I look at it. It's like around the 380 level versus 470. I think it was at the end of Q2 of last year. It's under 384. Okay, yeah, 383.
Speaker Change: I think 19 inside that number I look at it like around the $3 80 level versus 470, I think it was at the end of.
Speaker Change: Q2 of last year under three just under three four.
Speaker Change: Okay, Yeah, 383, three yeah okay.
Speaker Change: Yeah.
And that's about that. Yeah, that's so that's a big number. That's so that worries me. I mean,
Speaker Change: And that's about that's yeah, that's a that's a big number and that's so that worries me.
Speaker Change: So when do we start seeing that build I was hoping that maybe that.
When do we start seeing that build? I was hoping that maybe that's the real thing, because I think that's the key here.
That's the real thing because I think that's the key here.
Yeah, I mean, clearly we're watching that closely too. I think the best indicators that we have are what we've already highlighted and the fact that we've seen a nice improvement in the year-on-year order comparisons in the month of November and thus far through two weeks of Q3. So at the end of the day, order growth is what it's going to take to drive that. And so far, we like what we see as we close the quarter and move into Q3.
Speaker Change: Yeah, I mean, clearly we were watching that closely too I think the best the best indicators, we have or what we've already highlighted and the fact that we've seen some.
Speaker Change: Nice improvement in the in the order a year on year order comparisons in the month of November and thus far through two weeks up off of Q3. So that's I mean, you know at the end of the day orders. The order growth is what's going to take is what it's going to take to drive that and so far we like what we see as we close the quarter and move into Q3.
Okay. I'm rooting for you. So, yep, that's what I would like to see. Okay. Well, Happy New Year to everybody there. And stay warm if you can.
Speaker Change: Okay.
Speaker Change: I'm rooting for you so yep that's so.
Speaker Change: That's what drives that's what I would like to see okay, well happy new year to everybody there and Hum stay warm if you can.
Speaker Change: [laughter] same to you, but thank you.
There are no further questions at this time. We now turn the floor over back to President and CEO , Andy Owen, for any closing remarks.
Speaker Change: There are no further questions at this time, we now turn the floor over back to President and CEO Andi Owen for any closing remarks.
Thank you. I'd like to thank everyone again for joining us on today's call. In closing, we're very proud of the resilience demonstrated by our collective of brands and the continued progress we're making through our integration work and product innovation. We appreciate your continued interest in Miller Knoll, and we look forward to updating you again next quarter. On behalf of all of us here at Miller Knoll, I want to wish you and your families a wonderful holiday season. Thank you.
Andi Owen: Thank you and I. Thank everyone again for joining us on today's call in closing, we're very proud of the resilience demonstrated by our collective brands and the continued progress we're making through our integration work and product innovation. We appreciate your continued interest in there now and we look forward to updating you again next quarter.
Speaker Change: Half of all of US here at Miller, and I only want to wish you and your families a wonderful holiday season. Thank you.
Speaker Change: This concludes today's conference call you may now disconnect.
Speaker Change: [music].