MillerKnoll(MLKN) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated orders for Q1 2025 were $936 million, up 2.4% year-over-year on a reported basis and up 3.5% organically [11] - Consolidated net sales for Q1 2025 were$ 862 million, reflecting a decrease of 6.1% year-over-year on a reported basis and a decrease of 5.3% organically [12] - Consolidated gross margin was 39%, essentially flat compared to the prior year [12] Business Line Data and Key Metrics Changes - Americas Contract segment net sales were $455 million, representing an organic decrease of 7% from the same quarter a year ago [13] - International Contract and Specialty segment net sales were$ 214 million, down 6.5% on a reported basis and down 6.3% organically year-over-year [14] - Retail segment net sales were $193 million, a reported decrease of 2.8% and essentially flat performance on an organic basis [15] Market Data and Key Metrics Changes - Orders in the Americas Contract segment totaled just under$ 513 million, up 5.7% over last year organically [13] - Orders in the International Contract and Specialty segment totaled $234 million, resulting in a year-over-year increase of 2.7% on a reported basis [14] - Retail business in North America outperformed year-on-year retail industry comparisons by approximately 6 points during the quarter [8] Company Strategy and Development Direction - The company launched several initiatives to support its contract business and meet evolving client needs [5] - New flagship locations were introduced in London and New York to enhance customer experience [6] - The company is focused on growth and positioning itself for the future, with a strong emphasis on team experience and talent acquisition [9][10] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the year ahead, citing improved demand trends and a strong backlog position [10][17] - The company anticipates that a slight drop in interest rates will stimulate order placements from customers and trade partners [9] - Management noted that the retail segment is expected to benefit from improving macroeconomic conditions and a rebound in the housing market [9][35] Other Important Information - The company generated$ 21 million in cash flow from operations and repurchased approximately 1.5 million shares for a total cash outlay of approximately $44 million [13] - The company has been certified as a 2024 US Great Place to Work, highlighting its commitment to associate experience [9] Q&A Session Summary Question: Guidance for Q2 margins and revenue - Management indicated that gross margin improvements are expected due to increased order activity, but a shift in business mix may keep margins lower [20][21] Question: Retail market outlook - Management expressed optimism about retail demand trends, anticipating improved consumer confidence due to recent interest rate cuts [22] Question: Delivery times for orders - Management explained that longer delivery times are due to an increase in larger, more complex projects and changing customer behavior [25][26] Question: Industry groups driving order growth - Management noted strong activity in financial services, healthcare, and technology sectors, with many companies looking to bring employees back to the office [28][29] Question: Long-term margin expectations - Management believes that economic improvements will allow for better overhead cost leverage, potentially leading to higher margins in the future [32][33] Question: Integration of Knoll and other brands - As of Q1, 60% of the international dealer network has been integrated, with plans to complete the process by the end of the fiscal year [36] Question: Back-to-work and hybrid trends - Management noted a shift towards more frequent in-office collaboration and expressed confidence in their product portfolio for hybrid work environments [37][38]