Q4 2025 MillerKnoll Inc Earnings Call

Good evening and welcome to Milanov quarterly earnings Conference call.

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

As a reminder, this call is being recorded.

Wendy Watson: I would now like to introduce your host for today's conference, Wendy Watson, Vice President of Investor Relations. Good evening, and welcome to our fourth quarter fiscal 2025 conference call. On with me are Andy Owen, Chief Executive Officer, and Jeff Stutz, Chief Financial Officer.

I would now like to introduce your host for today's conference when do you watch it Vice President of Investor Relations.

Speaker Change: Good evening and welcome to our fourth quarter fiscal 2025 conference call.

And with me are Andy <unk>, Chief Executive Officer, and Jeff <unk>, Chief Financial Officer joining.

Wendy Watson: Joining them for the Q&A session are John Michael, President of North America Contract, and Debbie Propst, President of Global Retail.

Joining them for the Q&A session are John Michael President of North American contract and Debbie probes President of global retail.

Wendy Watson: We issued our earnings press release for the quarter ended May 31st, 2025, after market closed today and it is available on our investor relations website at MillerKnoll.com. A replay of this call will be available on our website within 24 hours.

We issued our earnings press release for the quarter ended may 31st 2025 after market close today and is available on our Investor Relations website at <unk> Dot Com a replay of this call will be available on our website within 24 hours.

Wendy Watson: Before I turn the call over to Andy, please remember our Safe Harbor Disclosure 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 that 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 made as of today's date, and except as may be required by law, we assume no obligation to update or supplement these statements.

Before I turn the call over to Andy Please remember our safe Harbor disclosure 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 that 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 made as of today's date and except as may be required by law, we assume no obligation to update or supplement these statements.

Wendy Watson: We also refer to certain non-GAAP financial metrics, and our press release includes the relevant non-GAAP reconciliations.

We also refer to certain non-GAAP financial metrics and our press release includes the relevant non-GAAP reconciliations with that I'll turn the call over to Andy.

Andrea Owen: With that, I'll turn the call over to Andy. Thanks, Wendy. Good evening, everyone, and thank you so much for joining us tonight. We are very pleased with our strong finish to fiscal 2025, with our Q4 results significantly exceeding our expectations. Jeff will share the details of our financial performance with you, but I want to briefly recap a few highlights from the past year that underscore our design leadership, speak to our opportunities ahead, and then discuss what we are currently seeing in our market.

Speaker Change: Thanks, Wendy good evening, everyone and thank you so much for joining US Tonight. We are very pleased with our strong finish to fiscal 2025, but as our Q4 results significantly exceeding our expectations Jeffs will show the details of our financial performance with you I don't want to briefly recap a few highlights from the past year and underscore.

Speaker Change: Leadership speak to our opportunities ahead, and then discuss what we're currently seeing in our markets first I want to thank our teams across Miller no shower accomplishments over the past year.

Andrea Owen: First, I want to thank our teams across MillerKnoll for our accomplishments over the past year. In our contract businesses, we made incredible progress and we have multiple opportunities to grow our market share both in North America and internationally. We opened new flagship locations in London and New York that include both contract showrooms and retail stores and have meaningfully elevated how we present the collective strength of our brands and products to customers. With these new locations, we've improved the quality of our customer interactions and have seen a significant increase in customer visits, positioning us to capitalize on our product and brand leadership as trends improve in our market.

Speaker Change: And our contract businesses, we made incredible progress and we have multiple opportunities to grow our market share both in North America and internationally, we opened a new flagship locations in London and New York that include both contract showrooms in retail stores and have meaningfully elevated how he presented the collective strength of our brands and products.

Speaker Change: The customers with.

Speaker Change: But these new locations, we've improved the quality of our customer interactions and have seen a significant increase in customer visits positioning us to capitalize on our product and brand leadership as trends improve in our markets.

Andrea Owen: We've spent the past year reimagining what our newest flagship in Chicago's Fulton Market could be. We debuted this new comprehensive design center earlier this month at Design Days 2025, a marquee event for the contract furniture industry. With two buildings at 1100 and 1144 West Fulton, we brought our collectives closer together, making it easier for customers to see what's possible in spaces that reflect the ways people work, gather, heal and create. Our new space highlights the unique strengths of the Herman Miller and Knoll brands while also featuring our Herman Miller floor and Miller-Knoll floor designed to showcase the power of our combined portfolio and real-world solutions through planned and purposeful design.

Speaker Change: We've spent the past year re imagining what our newest flagship in Chicago's Fulton market could be with you. This new comprehensive design Center earlier. This month at design games 2025, a marquee event for the contract furniture industry with two buildings at a 1100 11 44 West Fulton Libra are collected close.

Speaker Change: Sure together, making it easier for customers to see what's possible and spaces that reflects a ways people work.

Speaker Change: Gather heal and create.

Speaker Change: Our newspaper highlights the unique strengths of the Herman Miller unknown brands, while also featuring our Herman Miller's floor and Miller no floor designed to showcase the power of our combined portfolio and real words real world solutions to planned full design.

Andrea Owen: The space also features an expanded healthcare showroom, Hay's first North American showroom, new Knot One and Moodle spaces, as well as enhanced Herman Miller, Knoll, Geiger, Dates Weiser, and Maharam showrooms. Like our London and New York locations, our Chicago showrooms include DWR and Herman Miller Retail.

Speaker Change: <unk> also features an expanded health care showroom Heath's first north American showroom, new not one end ludo spaces as well as enhanced Herman Miller, No Guy, who do use Pfizer and Muharram showrooms.

Speaker Change: Like every London, and New York locations, our Chicago Showrooms include VW are and Herman Miller retail stores.

Speaker Change: Designed as highlighted the accomplishments of our design creative and product teams over the past year and this year's events, we introduced over 30, new products across our brands. It was an incredibly successful event for melanoma booked appointments up 11% year over year.

Andrea Owen: Design Days highlighted the accomplishments of our design, creative, and product teams over the past year. At this year's events, we introduced over 30 new products across our brands. It was an incredibly successful event for MillerKnoll with booked appointments of 11% year-over-year. As a pioneering tenant of Fulton Market and the founder of Design Days, we are thrilled that more and more customers, dealers, and AMD partners are coming to this event.

Speaker Change: As a pioneering tenant a full market in the foundry up design days, we are thrilled that more and more customers dealers and A&D partners are coming to us for that.

Andrea Owen: In our contract product portfolio, we are investing in targeted R&D and innovation. Four years into the combination of Fuhrman, Miller, and Knoll, we've had time to strategically review our unmatched product portfolio, understand where there is differentiation, and identify where we have opportunities to add innovative new products or enhance product lines. One of our latest innovations is Knoll Dividend Skyline, which we just introduced at Design Days. It offers a refined, flexible and holistically integrated system that reimagines the open plan workplace for today's dynamic and compact office environment. It features a new planning typology and a contemporized material palette, empowering architects and designers to deliver a total interior.

Speaker Change: And our contract product personally out we are investing in targeted R&D innovation.

Speaker Change: Four years into the combination of Herman Miller at all we've had time to strategically review, our unmatched product portfolio understand whether its differentiation and identify where we have opportunities to add innovative new products or enhanced product lines.

Speaker Change: One of our latest innovation is no dividends skyline, which we just introduced it just nine days and almost every find flexible and holistically integrated system that re imagines that opens on workplace for today's dynamic and compact office environments.

Speaker Change: It features a new planning typologies and contemporize material claim pallet empowering architects and designers to deliver a total interior.

Andrea Owen: There are also recession-resilient verticals that we will continue to go after with targeted R&D and product investment. For example, backed by research and real-world insights, Herman Miller's new GEMMA Healthcare Seating Family is thoughtfully designed to support the diverse needs of patients, families, and caregivers. With a range of options, including a recliner, a sleep chair, and a sleep sofa, GEMMA combines intuitive functionality with a warm, modern aesthetic that enhances any care environment. Each piece is easy to use, requiring simple movements to adjust, allowing users to focus on care rather than furniture. Scalable across various room sizes and available in multiple sizes, the GEMMA recliner and its counterparts create a cohesive and comforting visual language throughout health care spaces.

Speaker Change: Theyre also recession resilient vertical so we will continue to go after with targeted R&D and product investment for example, backed by research and real World insights Herman Millers, New Xiaomi healthcare Seatings family is thoughtfully designed to support the diverse needs of patients families and caregivers, but they're.

Speaker Change: [noise] of options, including a recliner asleep chair I, just sleep sofa, Gemma combined intruder functionality with a warm modern aesthetic that enhances any care environment.

Speaker Change: Each piece is easy to use requiring simple movements to adjust allowing users to focus on care rather than furniture.

Speaker Change: Scalable across various room size isn't available in multiple sizes of German recliner and its counterparts create a cohesive and comforting visual language throughout health care spaces, ultimately, Jim It helps patients families and caregivers feel supported and it.

Andrea Owen: Ultimately, GEMMA helps patients, families and caregivers feel supported and at ease, making it a smart, human-centered choice for today's health care environment.

Speaker Change: Making it a smart humans and her choice for today's health care environment.

Andrea Owen: In higher education, Muto and Hayes' extensive assortment of ancillary and hospitality solutions can assist colleges and universities as they build out lounge areas, meeting spaces, and cafeterias for their growing population. We also see exciting opportunities with Herman Miller Gaming in the higher education space. For example, we recently collaborated with the university on a state-of-the-art esports arena.

Speaker Change: And higher education, new telling his extensive assortment of ancillary and hospitality solutions can assist colleges and universities as they build out lounge areas meeting spaces and cafeterias for their growing populations.

Speaker Change: We also see exciting opportunities with Herman Miller gaming in the higher education space. For example, we recently collaborated with the University honesty dump yard esports arena.

Andrea Owen: Turning now to our accomplishments and growth opportunities in our global retail business. In fiscal 2025, we opened four beautiful new stores, including a DWR studio in Palm Springs that opened in concert with Modernism Week, a DWR in Paramus, New Jersey, and a Herman Miller store in Fairfax, Virginia, and one also in Coral Gables, Florida. In fiscal 2026, we expect to open an additional 10 to 15 new stores in the US as we continue our journey to more than double our DWR and Herman Miller store footprint over the next several years. Earlier this month, as I mentioned, we opened an expanded DWR store and a new Herman Miller store in our Chicago Fulton Markets flagship.

Speaker Change: Turning now to our accomplishments and growth opportunities in our global retail business in fiscal 2025, we opened four beautiful new stores, including the GW our studio in Palm Springs that opened in concert with one of them is a peak ITW are in Paramus, New Jersey, and a Herman Miller store in Fairfax, Virginia, and one also in Coral Gables, Florida.

Speaker Change: In fiscal 'twenty 'twenty six we expect to open an additional 10 to 15 new stores in the U S. As.

Speaker Change: We continue our journey to more than double our GW, our affirmative on their store footprint over the next several years.

Speaker Change: Earlier this month as I mentioned, we opened an expanded tw our store.

Speaker Change: New Herman Miller store, and our Chicago Fulton market flagship.

Andrea Owen: In the next few months, we plan to open DWR stores in Sarasota, Florida and Las Vegas and a Herman Miller store in Philadelphia. We will follow this in the second quarter with a DWR store opening in Salt Lake City and Herman Miller store openings in Nashville and El Segundo, California. In addition to growing our store footprint, we have several growth levers we can pull in the business over the next several years, including continuing to invest in product assortment expansion, increasing our e-commerce penetration, and expanding our brand awareness. These levers will allow us to drive revenue growth, and also expand our brand awareness through targeted marketing and investments for new product launches, and activities and events designed to introduce our brand to new customers.

Speaker Change: In the next few months, we plan to open new Dolby our stores in Sarasota, Florida.

Speaker Change: In Las Vegas, and our Herman Miller store in Philadelphia, We will follow this in the second quarter with GW, our store opening in Salt Lake City, and Herman Miller store openings in Nashville announced until California.

Speaker Change: In addition to growing our store footprint, we have several growth levers you can pull them over the next several years.

Speaker Change: <unk> continuing to invest in product assortment expansion, increasing our e-commerce penetration and expanding our brand awareness.

Speaker Change: These farmers will allow us to drive revenue growth and also expand our brand awareness through targeted marketing and investments for new product launches and activities and events designed to introduce our brand to new customers.

Andrea Owen: Additionally, each time we open a new store, we see a compelling halo effect of e-commerce growth and increased brand awareness in these new geographies. During fiscal 2025, we meaningfully expanded our retail product assortment, with new product launches increasing over 50% compared to the prior year.

Speaker Change: Additionally, each time, we open a new store, we see a compelling the halo effect of ecommerce growth and increased brand awareness in these new geographies.

Speaker Change: During fiscal 2025, we meaningfully expanded our retail product assortment with new product launches, increasing over 50% compared to the prior year.

Andrea Owen: Going forward, we have opportunities to grow the breadth and depth of our product assortment in several key areas of the home.

Speaker Change: Going forward, we have opportunities to grow the breadth and depth of our product assortment in several key areas of the home.

Andrea Owen: And finally, an accomplishment in the past year that is very personal to me is our new MillerKnoll Archive space at our Michigan headquarters, showcasing over 100 years of design history. The new space has been well received by dealers, customers, and design It's grounded in the belief that we must celebrate our iconic design heritage and learn from our legacy as we continue to innovate for the future. We were excited to have the archives opening featured in the CBS Saturday Morning segment on June 7th.

Speaker Change: And finally, an accomplishment in the pasture that is very personal to me is our new melano archived space, our Michigan headquarters showcasing over 100 years of design history.

Speaker Change: The new space is about has been well received by dealers and customers and to find partners is grounded in the belief that we must celebrate our iconic design heritage and learned from our legacy as we continue to innovate for the future.

Speaker Change: We were excited to have the archives opening featured in a C. B S. Saturday morning segment on June seven.

Speaker Change: Now I'll turn to what we're seeing in our markets in both our North America and international contract markets. We are cautiously optimistic well navigating what continues to be a very dynamic macroeconomic environment.

Andrea Owen: Now I'll turn to what we're seeing in our markets. In both our North America and international contract markets, we are cautiously optimistic while navigating what continues to be a very dynamic macroeconomic environment. Prior to tariffs being reimposed in January, we had seen three consecutive quarters of order growth in the North American contract segment. While the onset of tariffs interrupted this trend in the third quarter, we were pleased to see a return to order growth in the fourth quarter, which Jeff will detail shortly. In our international markets, we were especially pleased to see strength and increased activity in Europe and the UK.

Speaker Change: Tariffs being being posted in January we had seen three consecutive quarters of growth in the North American contract segment.

Speaker Change: While the onset of tariffs interrupted this trend in the third quarter. We were pleased to see a return to order growth in the fourth quarter, which Jeff will detail shortly.

Speaker Change: In our international markets, we were especially pleased to see strength and increased activity in Europe and the U K, we are well positioned with our flagship showroom in the heart of London, Coca Clerkenwell design District.

Andrea Owen: We are well-positioned with our flagship showrooms in the heart of London's Clerkenwell Design District. Thousands of customers, A&E partners, dealers, commercial real estate professionals, and project influencers came to our showroom over the three days of Clover Mall Design Weekend May. There was also a tremendous opportunity to grow Knoll internationally through their private office and elevated conference room solution.

Speaker Change: Thousands of customers A&D partners dealers commercial real estate professionals and project Influencers came to our showroom over the three days all defined making me.

Speaker Change: There's also a tremendous opportunity to grow knoll internationally through their private office in L. A in a conference room solutions.

Andrea Owen: Beyond our internal growth opportunities, we are also encouraged by several external factors that we expect to work in our favor in our contract business. More companies are now working in the office and focused on how to attract associates through upgraded spaces and elevated experiences that support being together. A recent study among Fortune 100 companies showed that days in the office have increased 68% since 2022. Office leasing activity is rising and rent has fully recovered for Class A. Since December 2024, BISMA industry orders have consistently trended up on a year-over-year basis. Our internal indicators also give us reason to be optimistic.

Speaker Change: Our internal growth opportunities. We are also encouraged by several external factors that we expect to work in our favor and our contract businesses.

Speaker Change: More companies are now working in the office and focused on how do I tried to associates to create spaces and elevated experiences that support beaten together are.

Speaker Change: A recent study among fortune 100 companies showed that days on the outlets have increased 68% since 2022.

Speaker Change: Office leasing activity is driving and rent has fully recovered for class a space.

Speaker Change: Since December 2024. This is my industry orders have consistently trended up on a year over year basis.

Speaker Change: Our internal indicators also give us reason to be optimistic.

Andrea Owen: We are seeing the ingredients for a return to growth in contract, and we are well-tuned to take advantage as the industry recovers. We have compelling competitive advantages, including an unmatched suite of products and a formidable distribution channel with world-class dealers who are well-versed in the entire MillerKnoll product collective.

Speaker Change: We are seeing the ingredients for a return to growth in contract and we are well tuned to take advantage as the industry recovers, we have compelling competitive advantages, including an unmatched suite of products and a formidable distribution channel with world class dealers, who are well versed in the entire melano product collective.

Andrea Owen: In a retail business, while we are similarly cautiously optimistic about the macroeconomic environment, as I have described, we have several levers we are willing to pull growth now and that will put us in a position of strength when the housing market begins to recover. At the same time, we're investing for growth across our businesses. We will continue to balance our approach for the long term. We are well positioned with cash flow and balance sheet strength to capitalize on opportunities. We will focus on our customers, we will prudently manage our costs, and we will consistently deliver innovation, and we will invest for profitable growth.

Speaker Change: Our retail business, while we while we are similarly cautiously optimistic about the macroeconomic environment as I have described we have several levers we are going to pull gross now and that will put us in a position of strength in the housing market begins to recover.

Speaker Change: At the same time, we're investing for growth across our businesses. We will continue to balance our approach for the long term, we are well positioned with cash flow and balance sheet strength to capitalize on opportunities we.

Speaker Change: We will focus on our customers, we will prudently manage our costs and we will consistently deliver innovation.

Speaker Change: We will invest for profitable growth.

Andrea Owen: To close, I'm so proud of our entire team for all their hard work and dedication in fiscal year 2025 and for the strong finish to the year. We are excited to see what we can accomplish together in fiscal 2025.

Speaker Change: To close I'm, so proud of our entire team for all their hard work and dedication in fiscal year 2025.

Speaker Change: Strong finish to the year.

Speaker Change: We are excited to see what we can accomplish together in fiscal 2026, I'll now hand, it over to Jack to discuss our results in more detail and share our perspective on fiscal 2026.

Jeffrey Stutz: I'll now hand it over to Jeff to discuss our results in more detail and share our perspective on Fiscal 2020. Thanks Andy, and good evening everyone. I'll start with an overview of our performance in the fourth quarter and some full year highlights, followed by our outlook and targets for the first quarter, including our most up-to-date view on tariffs. In the fourth quarter, we generated adjusted earnings of $0.60 per share, significantly outperforming the midpoint of our guidance, driven by better-than-expected sales and strong gross margin performance that benefited from leverage on our sales. Consolidated net sales in the fourth quarter were $962 million, well above the midpoint of our guidance.

Jack: Thanks, Andy and good evening everyone.

Jack: I'll start with an overview of our performance in the fourth quarter and some full year highlights followed by our outlook and targets for the first quarter, including our most up to date view on tariffs.

Speaker Change: In the fourth quarter, we generated adjusted earnings of <unk> 60 per share significantly outperforming the midpoint of our guidance driven by better than expected sales and strong gross margin performance that benefited from leverage on our sales growth.

Speaker Change: Consolidated net sales in the fourth quarter with $962 million well above the midpoint of our guidance.

Jeffrey Stutz: Relative to the same quarter last year, net sales were up 8.2% on a reported basis and up 7.8% organically, driven by relative strength in all segments of the business. In North America contract, we saw both strong orders and sales, which was partially enhanced by full forward activity ahead of our recently announced tariff surcharge and list pricing. New orders at the consolidated level in the fourth quarter were $1.04 billion, up 11.1% as reported and 10.7% higher on an organic. Our Consolidated Backlog increased by $78 million to $761 million from improved demand in the quarter. We were very pleased with our consolidated gross margin of 39.2% in the...

Speaker Change: Relative to the same quarter last year net sales were up eight 2% on a reported basis and up seven 8% organically driven by relative strength in all segments of the business.

Speaker Change: In North American contract, we saw bold strokes orders in sales, which was partially enhanced by all forward activity ahead of our recently announced tariff surcharge a list price increase.

Speaker Change: New orders at the consolidated level in the fourth quarter 1.04 billion up 11, 1% as reported and 10, 7% higher on an organic basis.

Speaker Change: Our consolidated backlog increased by $78 million to $761 million from improved demand in the quarter.

Speaker Change: We were very pleased with our consolidated gross margin of 39, 2% in the fourth quarter, while down slightly to last year gross margin was up 130 basis points sequentially.

Jeffrey Stutz: While down slightly to last year, gross margin was up 130 basis points sequentially. Gross margin included a drag of approximately $7 million from tariff-related impacts to cost of goods sold, an amount right in line with the estimate we provided in our fourth quarter earnings guidance back in March.

Speaker Change: Gross margin included a drag of approximately $7 million from tariff related impacts to cost of goods sold and am I right in line with the estimate we provided in our fourth quarter earnings guidance back in March.

Jeffrey Stutz: Given the volume of orders pulled forward ahead of our price surcharge and the normal time it takes to begin benefiting from list price changes in our contract business, We expect margins to be negatively impacted in the near term by tariffs currently in place, but remain confident our pricing actions will offset these later in the fiscal 2026.

Speaker Change: Given the volume of orders pulled forward ahead of our price surcharge and the normal time. It takes to begin benefiting from list price changes and our contract businesses.

Speaker Change: We expect margins to be negatively impacted in the near term by tariffs currently in place, but remain confident our pricing actions will offset these later.

Speaker Change: 2026.

Speaker Change: Turning to cash flow and the balance sheet, we generated $71 million in cash flow from operations in the fourth quarter, driven by our strong sales and earnings performance.

Jeffrey Stutz: Turning to cash flow in the balance sheet, we generated $71 million in cash flow from operations in the fourth quarter, driven by our strong sales and earnings performance And we reduced our long-term debt by $5 million. We ended the quarter with $576 million of liquidity, and in April we amended our revolving credit facility and Term Loan A to extend their maturities to 2030. We finished the quarter with a net debt to EBITDA ratio of 2.88 turns and amount comfortably under the maximum limit defined in our lending agreement.

Speaker Change: And we reduced our long term debt by $5 million.

Speaker Change: We ended the quarter with $576 million of liquidity and in April we amended our revolving credit facility and term loan a to extend their maturities to 2030.

Speaker Change: We finished the quarter with a net debt to EBITDA ratio of 288 turns and a mountain comfortably under the maximum limit defined in our lending agreements.

Speaker Change: With that I'll now move to our performance by segment in the fourth quarter.

Jeffrey Stutz: With that, I'll now move to our performance by segment in the fourth. Within our North America contract segment, net sales for the quarter were $496 million, up just under 13% from the same quarter a year ago. New orders in the period were 568 million, reflecting growth of almost 16 percent over last year. We estimate new orders in the fourth quarter benefited from between $55 million and $60 million in demand pull forward in advance of implementing our tariff-related surcharge on April 21st and our price increase on June 2nd. Importantly, we believe these price actions have created a sense of urgency in the customers of our North America contract business, and our internal demand indicators in the quarter reflected this customer activity.

Speaker Change: Within our North America contract segment net sales for the quarter were $496 million.

Speaker Change: Just under 13% from the same quarter a year ago.

Speaker Change: New orders in the period were $568 million, reflecting growth of almost 16% over last year.

Speaker Change: We estimate new orders in the fourth quarter benefited from between $55 million and $60 million and demand pull forward in advance of implementing our tariff related surcharge on April 21st and our price increase on June 2nd.

Speaker Change: Importantly, we believe these price actions have created a sense of urgency and the customers of our North American contract business and our internal demand indicators in the quarter reflected this customer activity.

Speaker Change: Fourth quarter operating margin in the North American contract segment was seven 7% compared to breakeven performance in the prior year.

Jeffrey Stutz: Fourth quarter operating margin in the North America contract segment was 7.7% compared to break-even performance in the prior year. Adjusted operating margin improved 90 basis points in the quarter to 10 percent, primarily due to benefit of fixed expense leverage from higher net sales and favorable product mix, partially offset by the tariff-related costs. In the international contract segment, net sales for the quarter improved to $186 million, up 6.9% on a reported basis, and up 5.5% on an organic basis year over year. New orders during the quarter were $190 million, an increase of 3.6% on a reported basis, and a 2.1% organic increase compared to the prior year.

Speaker Change: Adjusted operating margin improved 90 basis points in the quarter to 10%, primarily due to benefit of fixed expense leverage from higher net sales.

Speaker Change: And favorable product mix, partially offset by the tariff related cost increases.

Speaker Change: And the international contract segment net sales for the quarter that prudent to $186 million.

Speaker Change: Six 9% on a reported basis and up five 5% on an organic basis year over year.

Speaker Change: New orders during the quarter were $190 million, an increase of three 6% on a reported basis and a two 1% organic increase compared to the prior year.

Speaker Change: We were very pleased with the widespread sales and order growth in the quarter with particular strength in our European markets.

Jeffrey Stutz: We were very pleased with the widespread sales and order growth in the quarter, with particular strength in our European markets. Our Latin America region also delivered strong sales growth in the quarter.

Speaker Change: Erika Regional also delivered strong sales growth in the quarter.

Jeffrey Stutz: In contrast to the North American segment, we do not believe our international contract business experienced any meaningful order pull ahead activity related to our previously announced list prices. reported operating margin for the international segment in the fourth quarter was 11.7% compared to 10.9% in the prior year. On an adjusted basis, segment operating margin was 12.9%, down 230 basis points, primarily from regional and product mix of sales and higher variable incentive compensation in the quarter versus last year.

Speaker Change: In contrast to the North American segment, we do not believe our international contract business experienced any meaningful order pull ahead activity related to our previously announced list price increase.

Speaker Change: Reported operating margin for the international segment in the fourth quarter was 11, 7% compared to 10, 9% in the prior year.

Speaker Change: On an adjusted basis segment operating margin was 12, 9% down 230 basis points, primarily from regional and product mix of sales and higher variable incentive compensation in the quarter versus last year.

Speaker Change: Turning to our global retail segment net sales in the fourth quarter were $280 million up two 2% on a reported basis and up one 4% organically.

Jeffrey Stutz: Turning to our global retail segment, net sales in the fourth quarter were $280 million, up 2.2% on a reported basis, and up 1.4% organically. New orders in the quarter improved to $280 million, up 7.5% to last year on a reported basis, and up 6.7% on an organic basis compared to the prior year.

Speaker Change: New orders in the quarter improved to $280 million up seven 5% to last year on a reported basis and up six 7% on an organic basis compared to the prior year.

Jeffrey Stutz: Operating margin in the retail segment was 5.3% in the quarter compared to 6% last year. On an adjusted basis, the operating margin was 6.5%. 210 basis points lower than in the prior year, primarily from new store opening costs, lower sales in the international region. unfavorable product mix, and higher variable incentive comp.

Speaker Change: Operating margin in the retail segment was five 3% in the quarter compared to 6% last year.

Speaker Change: On adjusted basis, the operating margin was six 5% this quarter's 210 basis points lower than in the prior year, primarily from new store opening costs lower sales in the international regions unfavorable product mix and higher variable incentive compensation.

Speaker Change: We opened two new stores in the fourth quarter of DW are in Paramus, New Jersey, and the new Herman Miller store in Coral Gables, Florida.

Jeffrey Stutz: We opened two new stores in the fourth quarter, a DWR in Pramus, New Jersey and a new Herman Miller store in Coral Gables, Florida. And as Andy highlighted in her prepared comments, we have exciting plans to grow this segment further in the coming quarters through additional new store openings and expansion of our product to sort.

Speaker Change: And as Andy highlighted in her prepared comments, we have exciting plans to grow this segment further in the coming quarters through additional new store openings and expansion of our product assortment.

Speaker Change: For the full fiscal year on a consolidated basis net sales were $3 67 billion and adjusted earnings per share were $1 95.

Jeffrey Stutz: For the full fiscal year, on a consolidated basis, net sales were $3.67 billion and adjusted earnings per share were $1.95. During fiscal 2025, we paid approximately $52 million in dividends, returned approximately $85 million to our shareholders in the form of share repurchases. and reduced our total outstanding debt by $10.8 million. Capital expenditures for the full year were $107.6 million. In fiscal 2026, we expect capital expenditures to range between $120 and $130 million.

Speaker Change: During fiscal 2025, we paid approximately $52 million in dividend returned approximately $85 million to our shareholders in the form of share repurchases and reduced our total outstanding debt by $10 $8 million.

Speaker Change: Capital expenditures for the full year were $107 $6 million.

Speaker Change: In fiscal 2026, we expect capital expenditures to range between 120 and $130 million.

Jeffrey Stutz: And as I mentioned, we closed fiscal 2025 with a strong balance sheet, including $576 million of available liquidity. Against the dynamic macroeconomic conditions we faced in 2025, I'm really proud of the efforts of our teams across MillerKnoll to continue to deliver the best products and experiences in our industry, allowing us to finish the year with strength.

Speaker Change: And as I mentioned, we closed fiscal 2025, with a strong balance sheet, including $576 million of available liquidity.

Speaker Change: Against the dynamic macroeconomic conditions, we faced in 2025 and I'm really proud of the efforts of our teams across the Miller and all to continue to deliver the best products and experiences in our industry, allowing us to finish the year with strength.

Speaker Change: Now, let's turn to fiscal 2026, and our Q1 guidance and outlook, which is informed by our most up to date information on tariffs and related mitigation efforts.

Jeffrey Stutz: Now let's turn to fiscal 2026 and our Q1 guidance and outlook, which is informed by our most up-to-date information on tariffs and related mitigation. Our outlook reflects the normal seasonality we experience in the global retail segment as consumers shift spending to experiences and travel in the summer months.

Speaker Change: Our outlook reflects the normal seasonality, we experienced in the global retail segment as consumers shift spending to experiences and travel in the summer months.

Jeffrey Stutz: Given what remains a rather volatile environment with respect to tariff policies and geopolitical issues around the world, we are limiting our guidance this quarter to the first quarter only. We do, however, remain committed to being transparent and resuming our full-year outlook for sales and earnings as visibility. Taking this into consideration, in the first quarter of fiscal 2026, we expect net sales to range between $899 million and $939 million, up 6.7% versus the prior year at the midpoint of $919 million. Gross margin is expected to range from 37.1% to 38.1%. Adjusted operating expenses is expected to range from $290 million to $300 million.

Jeffrey Stutz: Even though it remains a rather volatile environment with respect to tariffs policies and geopolitical issues around the world. We are limiting our guidance this quarter to the first quarter only.

Speaker Change: Do however remain committed to being transparent and resuming our full year outlook for sales and earnings as visibility improves.

Speaker Change: Taking this into consideration in the first quarter of fiscal 2026, we expect net sales to range between $899 million and $939 million.

Speaker Change: Up six 7% versus the prior year at the midpoint of $919 million.

Speaker Change: Gross margin is expected to range from 37, 1% to 38, 1%.

Speaker Change: Adjusted operating expenses is expected to range from 290 million to $300 million and adjusted diluted earnings per share are expected to range between 32 and 38 cents.

Jeffrey Stutz: And adjusted diluted earnings per share are expected to range between $0.32 and $0.38. The Gross Margin and EPS Outlook includes our estimate of net tariffs currently in place. In total, we expect tariff-related costs to reduce Q1 earnings by between $9 million and $11 million before tax, or between $0.09 and $0.11 per share after tax. To give some further context, currently, approximately 17% to 19% of our consolidated cost of goods sold is imported into the U.S. from other countries. We expect the impact from the tariff-related cost to decrease over time as our pricing actions layer into the results.

Speaker Change: The gross margin and EPS outlook includes our estimate of net tariffs currently in place in <unk>.

Speaker Change: Total, we expect tariff related costs reduced Q1 earnings by between $9 million and $11 million before tax or between nine cents and <unk> 11 per share after tax.

Speaker Change: To give some further context, Kurt currently approximately 17% to 19% of our consolidated cost of goods sold is imported into the U S from other countries.

Speaker Change: We expect the impact from the tariff related cost a decrease over time as our pricing actions later into the results.

Jeffrey Stutz: Further, we believe our collective mitigation actions to fully offset these costs as we move into the second half of the fiscal year.

Speaker Change: Further we believe our collective mitigation actions to fully offset these costs as we move into the second half of the fiscal year.

Speaker Change: Another factor to keep in mind that is included in our expectations for operating expense and EPS are the costs associated with planned new store openings and our global retail segment.

Jeffrey Stutz: Another factor to keep in mind that is included in our expectations for operating expense and EPS are the costs associated with planned new store openings in our global retail segment. Given the time it takes to prepare a new store for daily operation, we normally begin to incur occupancy and other pre-opening expenses one to two quarters before the first products are sold in the store. As Andy mentioned, we're opening three new stores this quarter. We estimate approximately $4 million to $7 million in operating expenses tied to these new locations in the first quarter. Further, we would expect to incur similar expenses in each quarter this year, consistent with our planned new store opening.

Speaker Change: Given the time it takes to prepare a new store for daily operation, we normally begin to incur occupancy and other pre opening expenses one to two quarters before first the first products are sold in the store.

Speaker Change: As Andy mentioned, we're opening three new stores. This quarter, we estimate approximately 4 million to $7 million in operating expenses tied to these locate new locations in the first quarter.

Speaker Change: Further we would expect to incur similar expenses in each quarter. This year consistent with our planned new store openings.

Speaker Change: For all other details related to our outlook. Please refer to our press release.

Jeffrey Stutz: For all other details related to our Outlook, please refer to our press release.

Operator: And with that overview of the performance and outlook, I'll now turn the call over to the operator and we'll take your questions. Thank you.

Speaker Change: With that overview of the performance and outlook I'll now turn the call over to the operator and we'll take your questions.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and try to queue.

Operator: We will now begin the question and answer session.

Operator: If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not in mute when asking your question. Again, press star 1 to join the call.

Speaker Change: If you would like can we draw your question simply press Star. One again, if you are called upon to ask your question and our listening via speaker phone or your device. Please pick up your handset to ensure that your phone is not and you've been asking your question again fresh far wanted to join the queue.

Speaker Change: And our first question comes from the line of Greg Burns with Sidoti and company. Your line is open.

Gregory Burns: And our first question comes from the line of Greg Burns with Sidoti and Company. The line is open. Good afternoon. So I just wanted to kind of dig into the pull forward effect from the pricing actions you've taken. Obviously, strong order growth this quarter. Can you just give us maybe a little bit of insight into...

Greg Burns: Good afternoon.

Speaker Change: So I just wanted to kind of dig into the pull forward effect from the.

Speaker Change: The pricing actions you've taken obviously strong order growth this quarter could you just give us maybe a little bit of insight into.

Gregory Burns: Um, you know, what you've seen in the early part of of the current quarter has that slowed down and our order is going to Do you expect orders, I guess, to be down year over year because of the pull forward? How has that dynamic played out since the quarter ended?

Speaker Change: Yeah, what you've seen in the early part of the current quarter has that slowed down as our orders going to <unk>.

Speaker Change: Do you expect orders to be down year over year because of the pull forward what how has that dynamic played out since the quarter ended.

Speaker Change: Yeah, Greg This is Jeff.

Jeffrey Stutz: Yeah, Greg, this is Jeff. So we're three weeks, we've got three weeks of data. And as we would fully expect, we're down mid single digits in order entry, in total, the consolidated level, year over year during that period of time, which is in no way a surprise given the level of pull forward that we saw in the fourth quarter. So it's, it's, it's line lines right up with our expectations, you know, time will tell where we'll as we progress through the quarter, our expectation is that we're going to resume growth. But we'll see where it goes.

Speaker Change: So we're three we've got three weeks of data and as we would fully expect we're down mid single digits in order entry in total at the consolidated level our year over year during that period of time, which is in no way a surprise given the level of pull forward that we saw in the fourth quarter. So it's it's it's line wise.

Speaker Change: Right up with our expectations, you know time will tell where it will as we progressed through the quarter. Our expectation is that we're going we're going to resume growth, but we'll see where it goes.

Speaker Change: Okay, and then in terms of the the retail store openings.

Gregory Burns: Okay, and then in terms of the retail store opening. can just talk about, you know, what... your confidence level and, you know, such.

Speaker Change: Could you just talk about you know what.

Speaker Change: Your confidence level and such like I guess.

Gregory Burns: I guess aggressive expansion this year or accelerating the expansion of the retail footprint this year, given kind of the softer demand environment that we're currently in.

Speaker Change: Aggressive expansion this euro or accelerating the expansion of the retail footprint this year given kind of the softer.

Speaker Change: Demand environment that we're currently in and then could you just talk about how long it takes the store to fully mature and start to absorb some of those incremental upfront costs.

Gregory Burns: And then could you just talk about how long it takes a store to fully mature and start to absorb some of those incremental upfront costs?

Speaker Change: And then lastly, I guess just what are your expectations for the margin profile of the retail business in the near term given all the the store openings that you project. Thank you.

Jeffrey Stutz: And then lastly, I guess just what are your expectations for the margin profile of the retail business in the near term, given all the store openings that you project? Thank you. You may have to repeat that three part question as we lean into it. So first, let me talk a little bit about the confidence in the retail business. You know, it takes time to land real estate in open stores. So as we pace these 10 to 15 stores over the next 12 to 18 months, we anticipate that we will start to see a little bit better housing market.

Speaker Change: You may have to repeat that three part question, Greg I mean, as we lean into it. So first let me talk a little bit about the confidence in the retail business. You know it takes time to land real estate and open stores. So as we pace. These 10 to 15 stores over the next 12 to 18 months, we anticipate that we will start to see a little bit better housing market. It will start to see things.

Debbie Propst: It will start to see things calm down a little bit. So we have great confidence in that. But more importantly, we believe that our retail prospect and our stores, both the DWR brand and the Herman Miller brand lean into white space in the market that we that we do not see. So right now we are very understored compared to our competitors. We are under-assorted. And if you compare us to many of the folks out there in the residential home furnishings market, we're filling a need. So that gives us great confidence to open and expand. And I would say we are not moving any more quickly than we think is prudent.

Speaker Change: Calmed down a little bit so we have great confidence in that but more importantly, we believe that our retail cross back in our stores. Both but do you have you are a brand in the Herman Miller brand lean into white space in the market that we that we'd be about C. So right now we're very under stored compared to our competitors. We are under absorbed it and if you compare us.

Speaker Change: Too many of the folks out there in the residential home furnishings market and we're feeling a need because that gives us great confidence to open. The next fan and I would say we are not moving any more quickly than we think is prudent and we're certainly getting the best real estate as we do that so we feel confident in how we're expanding gummy, but would you bet I think there was a question on March.

Debbie Propst: And we're certainly getting the best real estate as we do this. So we feel confident in how we're expanding.

Debbie Propst: Debbie, what would you add?

Debbie Propst: I think there was a question on margin profile. Yeah, we've shared that our long term goal is to be in the mid-teens from an operating income performance for the segment. And our growth strategy models us towards that over the next few years. And I think if you look at where some of our competitors were when they were the fleet size that we have today, our operating income today is in line with where they were when they were at the fleet size that we have now. So we're confident in the modeling, much because we're conservative in the expectation we have from these stores on the basis of current market conditions.

Speaker Change: <unk> profile, yeah, we've shared that and our long term goal is to be in the.

Speaker Change: Mid teens from an operating income performance for the segment and our growth strategy models is towards that over the next few years and I think if you look at where some of our competitor tourists were when they were asleep size that we have today. Our operating income today is in line with where they were when they were.

Speaker Change: Sure.

Speaker Change: The fleet size, but we have no so where we're confident and the modeling that much because we're conservative in the expectation we have from these stores on the basis of current market conditions. So if market conditions improve and we have instant upside to that strategy.

Debbie Propst: So if market conditions improve, then we have instant upside to that strategy. And I would also add that the assortment growth is an important lever to alongside store growth, because our entire fleet will become more productive as we grow our assortment and our expectations around store performance in the new markets will also improve as our assortment grows.

Speaker Change: I would also add that the assortment grows as an unfortunate leave our two alongside store growth because our entire fleet will become more productive as we grow our assortment and our expectations around the store performance in the new markets will also improve as our assortment growth and I think he also understand that startup time too much.

Debbie Propst: And I think you also want to know about store time to maturity. So the time to maturity in our current FY26 planning, the new store possessions become less of a drag in the back half of this year. So right now we're carrying and Q1 will carry seven possessions that we don't have open yet. So the time to maturity on well, the time from possession to opening on a Herman Miller is only about two to four months, and it's about three to six months on a DWR. And then the stores become profitable within the first. faster for Herman Miller just because it's a smaller footprint.

Speaker Change: So the time to mature and our current FY 'twenty six planning and the the new store possessions.

Speaker Change: Become.

Speaker Change: Become less of a drag in the back half of this year. So it was the right now we're carrying Q1, who carry seven possessions that we don't have opened yet so.

Speaker Change: The time to maturity on on well the time from possession to opening on a Herman Miller is only about two to four months three to six months on a D. W. R. And then the stores become profitable within the first year.

Speaker Change: Faster for our Herman Miller, just because it's a smaller footprint.

Debbie Propst: Okay, great. And just just to clarify, I appreciate kind of the long term model and where you see the operating margins heading. But should we just expect kind of margins to be around that 5% level, I guess, in the near term until these stores mature, and then you start to see leverage like for the for the next couple of quarters? Is it should our expectation be that that models that that margin stay at these current levels? Yeah, I would hold there as we look at this year as an investment and you're Greg and just from from a cautious standpoint, I think certainly in year two and three, we'll see that start to pump up or right now that feels like a safe, a safe place to bet.

Speaker Change: Okay, Great and then just just to clarify.

Speaker Change: I appreciate kind of a long term model and where do you see the operating margins heading but should we just expect kind of margins to be around the 5% level I guess in the near term until these stores mature and then you start to see leverage like for the next couple of quarters.

Speaker Change: Should all right it shouldn't be that that models that that margins stay at these current levels.

Speaker Change: Yeah, I wouldn't hold there as you look at this year is an investment year, Greg and just from from a cautious stand point I think certainly in your two and three you will see that start to pop up.

Speaker Change: Hopper right now that feels like a safe place to go.

Gregory Burns: Okay, great. Thank you.

Speaker Change: Okay, great. Thank you.

Speaker Change: Yeah.

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

Reuben Garner: Our next question comes from the line of Reuben Garner with Benchmark Company. Thanks. Good evening, guys.

Reuben Garner: Thanks, Good evening guys.

Jeffrey Stutz: Jeff, can you clarify, did you say that you guys estimated that North American pull forward was in the range of $55 to $60 million in the quarter? Is that right? Yep, that's accurate. And well, and Reuben, just to clarify, that's for that's that's North America, but that's our estimate for the consolidated enterprise as well, because we just there was there was no meaningful pull ahead at all that we estimate in the international side of the business. So yes.

Speaker Change: Jeff can you clarify did you say that you guys estimated that north American pull forward was in the range of $55 million to $60 million in the quarter is that right.

Speaker Change: Yes, that's accurate.

Speaker Change: And.

Speaker Change: Well Andrew.

Speaker Change: Just to clarify that's that's that's North America, but that's our estimate for the consolidated enterprise as well because we just there was no meaningful pull ahead at all that we estimate in the international side of the business. So yes.

Speaker Change: Okay and is there any way to gauge like did.

Reuben Garner: Okay.

Reuben Garner: And is there any way to gauge, like, you know, what period that was actually pulled forward from? In other words, like, was that all pulled out of the month of June? Was it pulled from things that were in the pipeline for the rest of the year?

Speaker Change: What period that was actually pulled forward from in other words like what was that.

Speaker Change: All pulled out of the month of June was it pulled from things that were in the pipeline for the rest of the year and then in the past you guys have kind of given us some of your internal metrics like the 12 month funnel and otherwise how have those trended I know last quarter was a little bit more mixed but are those.

John Michael: And then in the past, you guys have kind of given us some of your internal metrics, like the 12-month funnel and otherwise. How have those trended? I know last quarter was a little bit more mixed, but are those still tracking positively? Yeah, go ahead, John. Sure. Hi, Reuben. It's John. In terms of where the orders are going to fall when they start to ship, significant amount in Q1 and Q2, and obviously a lesser amount in the back half of the year. You might recall in the last couple quarterly calls, we pointed at a funnel called awarded not ordered yet.

Speaker Change: Still tracking positively.

Speaker Change: Oh yeah.

Sean: Yeah. Yeah go ahead, John sure Hi, Ruben it's Sean.

Sean: From a in terms of where the where the orders are going to fall when they start to ship a significant amount in Q1 and Q2.

Reuben Garner: And obviously, a lesser amount in the back half of the year you might recall in the last couple of quarterly calls we've we pointed in our funnel called awarded not ordered yet.

John Michael: And so those were things where customers were just hesitating for whatever reason. And I think the pricing action sort of provided some motivation to sort of get off the fence and get the orders placed. From a leading indicators perspective, looking at the funnel, I think if you look at funnel additions, still very strong. Pricing requests were up over 35% year over year. Contract activations were actually up over 50% year over year. That's from the time we let pricing to the time we actually see an order. Mock-up activity was still very robust. So I think overall, all the leading indicators still continue to point the right direction.

Reuben Garner: And so those were things where customers were just hesitated for whatever reason and I think the pricing action sort of provided some moat some motivation.

Reuben Garner: Just wanted to get off the fence and get the orders placed.

Reuben Garner: From a leading indicators perspective looking at the funnel.

Reuben Garner: I think if you look at Faneuil additions still very strong pricing requests were up over 35% a year.

Reuben Garner: Year over year contract Activations were actually up over 50% year over year. That's from the time, we led pricing to the time, we actually see an order mock up activity was still very robust. So I think overall, all the leading indicators still continue deploying the right direction.

Speaker Change: And does anything jump out whether it's geographically or in terms of end markets within the North American contract channel that but.

John Michael: And does anything jump out, whether it's geographically or in terms of end markets within the North American contract channel that, that, uh, stand out in the quarter. or Size of Projects or anything like that. Yeah, we're still seeing a lot of strength in in the key verticals that were focused on those being public sector and health care. In terms of order or project size, we've seen growth in the 1 to 5 million category. And really, across all the different vertical segments, pretty strong growth.

Speaker Change: The standout in the quarter.

Reuben Garner: Or size of that size of the projects or anything like that.

Reuben Garner: Yes, we're still seeing a lot of strength in the key verticals that were focused on those being public sector and health care.

Reuben Garner: In terms of order or project size, we've seen growth in the one to 5 million category and really across all the all the different vertical segments.

Reuben Garner: Strong growth the only one that's down slightly is banking.

Jeffrey Stutz: The only one that's down slightly is banking, but that's off of a very significant comp from against last year. Yeah, Reuben, this is Jeff. If I could just, I'm sorry, I just want to jump in and add one more bit of color on the pull-ahead. You know, we still had, you know, if you normalize for that pull-ahead, there was still mid-single-digit order growth in the America's contract segment for the quarter. So I wouldn't want you to walk away and assume that all the pull-ahead, if you normalize for it, you know, creates a negative story. We still felt really good about the underlying demand indicators.

Reuben Garner: But that's off of a very significant comp from against last year.

Jeff: Yes, Reuben this is Jeff if I can just.

Speaker Change: Sorry, I just wanted to jump in and add one more bit of color on the pull ahead.

Speaker Change: We still have you know if you're if you normalize for that pull out there was still still low mid.

Reuben Garner: Mid single digit.

Reuben Garner: Order growth in the in the Americas contract segment for the quarter. So I wouldn't want you to walk away and assume that all the pull ahead, if you normalized for it.

Reuben Garner: You know creates a negative story, we still felt really good about the underlying demand indicators.

Reuben Garner: Great.

Reuben Garner: Great and then our next question is on the profitability. So what you're suggesting is that because of the pull forward Ah you're facing the tariffs, but you don't have the surcharge to offset it how how long.

Jeffrey Stutz: And then next question is on the profitability. So what you're suggesting is because of the pull forward, you're facing the tariffs, but you don't have the surcharge to offset it. How long, is that just a one quarter dynamic or does that kind of lead into Q2 and Q3 as well when these orders are ultimately shipped? And that's typically a two-quarter dynamic for us, so we imagine it'll be the biggest impact in Q1, it'll lessen a bit in Q2, and then we should see pretty healthy coverage in Q3 and Q4, Jeff, would you add? Yeah, I think that's right, and I think it's important to note that, you know, the issue with pull-ahead, the nature of pull-ahead is that, you know, customers are trying to get their order in in front of the effectivity of these price changes, be it a surcharge or a price increase, so what you have is, you know, we grew backlog $78 million in the quarter, you know, a large portion of that backlog, the large majority of that backlog was pre-pricing, so that's part of the reason why as we go through Q1 and Q2, we're going to see, you know, the sales book not have the full benefit of pricing because of that pull-ahead, and that's not an unusual dynamic in this business.

Reuben Garner: Is that just a one quarter dynamic or does that kind of bleed into Q2 and Q3.

Reuben Garner: As well when these orders are ultimately ship.

Reuben Garner: And that is typically a two quarter a dynamic for us. So we imagine it'll be the biggest impact in Q1, it will lessen a bit in Q2, and then we should see pretty healthy coverage in Q3, and Q4 inch out, especially that yeah. I think that's right and I think it's important to note that the issue with pull ahead. The nature of pull out is that you know customers are trying to do.

Reuben Garner: Their order in in front of the affectivity of these price changes be it a surcharge or a list price increase. So what you have is we grew backlog $78 million in the quarter. You know a large portion of that backlog. The large majority of that backlog was pre pricing. So that's part of the reason why as we go through Q.

Reuben Garner: You won in Q2, we're going to see.

Reuben Garner: The sales book not have the full benefit of pricing because of because of that pull at the end and that's not an unusual dynamic in this business.

Reuben Garner: Yeah.

Reuben Garner: Okay, and then if I could sneak one more in on.

Reuben Garner: Okay, and then if I could sneak one more in on the balance sheet and cash flow. starting a new fiscal year.

Reuben Garner: On the balance sheet and cash flow.

Reuben Garner: Starting a new fiscal year, Jeff any thoughts on the puts and takes of what might impact free cash flow this year and or kind of <unk>.

Jeffrey Stutz: Jeff, any thoughts on the puts and takes of what might impact free cash flow this year and or kind of targeted leverage levels by the end of the year? Yeah, I think what I'll say is, in my prepared comments, I highlighted the fact that we leaned into share buybacks in fiscal 2025. We've made a real conscious effort to turn our attention to two primary areas, part of which is informing a higher CapEx estimate, and that is to build out of these stores that we've talked about, but also a focus on paying down debt. We were opportunistic with the share buybacks, but we also acknowledged the need to manage that debt level down, particularly in an environment like this where you have geopolitical uncertainty and so forth.

Reuben Garner: <unk> leverage levels by the end of the year.

Reuben Garner: Yeah, I think what what what I'll, what I'll say is that in my prepared comments I highlighted the fact that we were we leaned into share buybacks in fiscal 2025, we have.

Reuben Garner: We've made a real conscious effort to turn our attention to two primary areas and part of which is informing a higher cap capex estimate.

Reuben Garner: Estimating that as the build out of these stores that we've talked about but also you know our focus on paying down debt, we were opportunistic with the share buybacks, but we also acknowledge the need to manage that debt level down, particularly in an environment like this where you have geopolitical uncertainty and so forth. So we think that that's the prudent approach.

Brian Gordon: So we think that that's the prudent approach, and so those are going to be the fundamental areas we're going to focus on. Great. Thank you, guys. Good luck in the new fiscal year.

Reuben Garner: So those are going to be the fundamental areas, we're going to focus on.

Speaker Change: Great. Thank you guys. Good luck in the new fiscal year.

Reuben Garner: You bet.

Operator: Next question comes from the line of Brian Gordon with Water Tower Research. Your line is open.

Brian Gordon: Next question comes from the line of Brian Gordon with Water Tower Research.

Brian Gordon: Hey, good afternoon, everyone. First, just kind of wanted to dig in a little bit on what you saw in the in the sales and order growth for North American Contract.

Brian Gordon: Hey, good afternoon, everyone.

Brian Gordon: First just kind of wanted to dig in a little bit on what you saw in the in the sales and order growth for North American contract I'm trying to get a handle on how much of that.

John Michael: And I'm trying to get a handle on how much of that, you know, pretty robust growth was kind of more transactional or shovel ready projects and how much of it was, you know, genuine pull forward of larger Brian, this is John. I would say that Most of it, much of it obviously had been in the funnel for a period of time, so you would consider that more project-oriented business. Did we pick up some day-to-day business as a result of the pricing actions? I'm sure we did, but the vast majority of it came from project opportunities.

Brian Gordon: Pretty robust growth was kind of more transactional or shovel ready projects and how much of it was genuine pull forward of larger projects.

Brian Gordon:

John Michael: Brian This is John I would say that.

Speaker Change: Most of it much of it obviously had been in the funnel for a period of time.

Speaker Change: So you would consider that more project oriented business.

Speaker Change: Did we pick up some day to day business as a result of the pricing actions I'm sure we did.

Speaker Change: But the vast majority of it came from from project opportunities.

Speaker Change: Okay. Thank you and then my next question maybe is best for Debbie.

Debbie Propst: Okay, thank you.

Debbie Propst: And my next question maybe is best for Debbie. I was kind of wondering, did you see any indications of like significant demand pull forward on the retail side? And then, you know, kind of maybe as a quick follow up to that, has the environment been getting more promotional from your Thanks for the question.

Speaker Change: Kind of wondering did you see any indications of a significant demand pull forward on the on the retail side.

Speaker Change: And then you know kind of maybe as a quick follow up to that has.

Speaker Change: Has the environment been getting more promotional are from your standpoint.

Speaker Change: Thanks for the question. So maybe I'll just start by saying, we're really happy with the quarter because with all of our retail brands channels and regions, we saw growth versus last year and with with pricing, increasing offsetting incremental discounting where that did exist and no real pull forward to speak of.

Debbie Propst: So maybe I'll just start by saying, we're really happy with the quarter because across all of our retail brands, channels and regions, we saw growth for us this last year, with pricing increasing, offsetting, incremental discounting where that did exist, and no real pull forward to speak of outside of a small amount in our Holly Hunt business where we do have a surcharge that was implemented in the quarter. Great, thank you very much.

Speaker Change: And I'd say that the smell them at our Holly Hunt business, where we did have a surcharge that was implemented in the quarter.

Speaker Change: Great. Thank you very much.

Speaker Change: Yeah.

Speaker Change: There are no further question trying to floor back to president and CEO Andi Owen for any closing remarks.

Andrea Owen: There are no further questions.

Andrea Owen: We turn the floor back to President and CEO Andy Owen for any closing remarks. Great, thank you all so much for your support of MillerKnoll, and we look forward to updating you again next quarter. Have a good night.

Speaker Change: Great. Thank you all so much for your support and we look forward to updating you again next quarter have a good night.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you all for joining and you may now disconnect.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you all for joining, and you may now disconnect.

Speaker Change: [music].

Operator: [music]