MillerKnoll(MLKN) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated net sales were just under $1.03 billion, up 64% on a reported basis and 11% organically compared to last year [24] - Orders for the quarter reached $1.16 billion, an increase of 84% year-over-year, with organic orders at $796 million, reflecting a sequential improvement of 6% and a 26% increase over the prior year [25] - Adjusted gross margin was 34.8%, down from 39% the previous year, primarily due to rising commodity costs and inflationary pressures [27][28] - Adjusted operating margin for the consolidated business was 5.9%, compared to 11.7% in the prior year [31] - The company reported a consolidated net loss per share of $0.05, while adjusted earnings per share were $0.51, excluding special charges related to the integration of Knoll [32] Business Line Data and Key Metrics Changes - Global Retail orders were up almost 21% year-over-year, with sales growth of approximately 18% [25] - The Americas Contract segment saw net sales increase by 4% and new orders improve by 29% year-over-year [26] - The Knoll segment reported year-on-year sales and orders increasing by 5% and 30%, respectively [26] - The International Contract segment experienced orders up 30% and sales up 23% over the same quarter last year, with European orders specifically up 42% [27] Market Data and Key Metrics Changes - Demand in Europe, including the UK, was particularly strong, contributing to the overall growth in the International Contract segment [27] - The company faced challenges such as inflationary pressures, supply chain disruptions, and labor shortages, which impacted its ability to ship orders [11][24] Company Strategy and Development Direction - The integration of Herman Miller and Knoll has created a stronger organization focused on long-term success, with a priority on building the MillerKnoll dealer network [9][16] - The company aims to achieve cost synergies of $100 million within two years of closing the Knoll acquisition, with expectations to increase run rate savings to $120 million by the end of year three [13][14] - The focus is on leveraging the combined portfolio and distribution network to enhance product offerings and customer choice [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic pressures and deliver on cost synergies despite challenges [23] - The company anticipates continued strong demand across all segments, with expectations for order pacing to remain robust [45] - Management highlighted the need to reimagine workplaces to meet the evolving expectations of the post-pandemic workforce [18][19] Other Important Information - The company has launched new e-commerce sites in France and Germany, exceeding early sales expectations [11] - The backlog at the end of the quarter was $967 million, reflecting a $130 million increase from the beginning of the quarter [76] Q&A Session Summary Question: How much of the organic orders increase is pricing-driven versus volume? - Management indicated that order trends were consistent across the quarter, with no significant pull-ahead impact from price increases [35][36] Question: What is the expected impact of price increases on future results? - Management expects that the retail business will benefit from price actions sooner than the contract business, with a gradual improvement in gross margins anticipated [39][42] Question: How is the company managing the backlog situation? - Management noted that while orders continue to outpace shipments, they are focused on improving throughput and managing discounting methodologies to balance demand and production capacity [66][69] Question: Can you elaborate on the international business profitability? - Management highlighted that the international business has been performing well, with less severe inflationary pressures compared to North America, contributing to better profitability [62][63] Question: What are the drivers of retail growth? - The retail segment's growth is primarily driven by assortment expansion and improvements in e-commerce and brick-and-mortar channels [88][90]