MillerKnoll(US:MLKN)2024-12-19 00:21Financial Data and Key Metrics Changes - Consolidated net sales for Q2 were $970 million, a 2.2% increase year-over-year, with a 2.4% organic increase [22] - Consolidated orders were $922 million, down 2.3% as reported and 1.9% lower on an organic basis [22] - Gross margin for the quarter was 38.8%, slightly down from the previous year, primarily due to product and channel mix [23] - Cash flow from operations was $55 million, with approximately $93 million returned to shareholders through dividends and share buybacks in the first six months of the fiscal year [24] Business Line Data and Key Metrics Changes - Americas Contract Segment: Net sales were $504 million, up 6.2% organically, with new orders of $457 million, up 4.9% year-over-year [25] - International Contract and Specialty Segment: Net sales were $246 million, up 2.1% reported and just over 1% organically, with orders down 6.5% reported and over 7% organically [26] - Retail Segment: Net sales were $220 million, a reported decrease of 5.3% and down 4% organically, with new orders down 9.6% reported and 8.4% organically [28] Market Data and Key Metrics Changes - Strong order growth in the Middle East and parts of Asia, with excitement building for the brand internationally [9] - Positive trends in the Americas Contract segment, with leading indicators such as project funnel additions and customer mockup requests up year-over-year [8] Company Strategy and Development Direction - Focus on expanding the dealer distribution internationally and enhancing the product assortment [48] - Plans to open new stores and expand product offerings in early 2025, including Design Within Reach Studios and a Herman Miller store [12] - Emphasis on sustainability, with initiatives to eliminate PFAS from the product portfolio by 2025 in North America and 2027 globally [16] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the year ahead, citing momentum in several business segments and improving demand indicators [7] - Anticipation of improved market conditions in the Americas Contract business, supported by external indicators like the Architecture Billings Index [30] - Guidance for full-year adjusted earnings per share narrowed to between $2.11 and $2.17, reflecting expectations of a softer third quarter [32] Other Important Information - The company is closely monitoring tariff proposals and has a playbook ready to mitigate potential impacts [14] - Management highlighted the importance of adapting to changing work environments and the need for spaces that facilitate in-person connections [80] Q&A Session Summary Question: Exposure to tariffs and potential impacts - Management discussed their playbook for managing tariff impacts, including identifying alternative supply sources and potential pricing actions [38][40] Question: Slower order development and sales cycles - Management noted a unique slowdown pre-election but observed a pickup post-election, indicating no long-term concerns [44] Question: International demand dynamics and integration of Knoll - Management acknowledged strong demand in the APMEA region but noted softness in other areas, emphasizing the project-based nature of international business [50] Question: Feedback from customers post-election - Dealer sentiment has improved, with leading indicators showing positive trends, including a significant increase in funnel additions [60] Question: Trends in work-from-home and hybrid policies - Conversations with executives indicate a focus on bringing employees back to the office, with an increase in larger projects [81] Question: Retail business performance during the holiday period - Management indicated that the positive performance was due to a well-executed promotional strategy combined with ongoing initiatives driving momentum [90]