MillerKnoll, Inc. Reports First Quarter Fiscal 2024 Results
- Increased adjusted earnings guidance
- Significant profit improvement in Americas Contract segment
- Organic order growth of 2.1% in Americas Contract segment
- Gross margin increased by 450 basis points
- Run-rate cost synergies achieved $142 million
- Net sales decreased by 14.9%
- Adjusted earnings per share decreased by 15.9%
Business Highlights
- Full year adjusted earnings guidance increased to a range of
to$1.85 per share.$2.15 - Gross margin improved 450 basis points on a consolidated basis over the prior year, with expansion reported in all three segments.
- Significant profit improvement in the Americas Contract segment which delivered reported and adjusted year-over-year operating margin expansion of 460 and 570 basis points respectively.
- Organic order growth of
2.1% for the Americas Contract segment over the prior year.
First Quarter Fiscal 2024 Financial Results
(Unaudited) | |||
Three Months Ended | |||
(Dollars in millions, except per share data)(1) | September 2, | September 3, | % Chg. |
(13 weeks) | (14 weeks) | ||
Net sales | $ 917.7 | $ 1,078.8 | (14.9) % |
Gross margin % | 39.0 % | 34.5 % | N/A |
Operating expenses | $ 317.8 | $ 321.3 | (1.1) % |
Adjusted operating expenses* | $ 302.7 | $ 309.7 | (2.3) % |
Effective tax rate | 24.4 % | 18.8 % | N/A |
Adjusted effective tax rate* | 24.6 % | 23.1 % | N/A |
Earnings per share - diluted | $ 0.22 | $ 0.34 | (35.3) % |
Adjusted earnings per share - diluted* | $ 0.37 | $ 0.44 | (15.9) % |
*Items indicated represent Non-GAAP measurements; see the reconciliations of Non-GAAP financial measures and related explanations below. | |||
1 The first quarter of fiscal 2023 included 14 weeks of operations as compared to a standard 13-week period. The additional week is required periodically in |
To our shareholders:
Our teams around the world delivered great results for the first quarter of the new fiscal year. We exceeded our July earnings guidance for the quarter through a combination of strong sales, on the high end of our guidance, and gross margin expansion in each of our business segments. We are off to a very good start to our new fiscal year and are encouraged by the momentum from our ongoing integration efforts and the broader implementation of the MillerKnoll strategic vision.
Having said this, as a global enterprise we are currently facing challenges arising from specific macroeconomic factors impacting certain sectors of our business. While the specter of economic recession in
First Quarter Fiscal 2024 Consolidated Results
The first quarter of the prior year, fiscal year 2023, included 14 weeks of operations as compared to the first quarter of fiscal year 2024, which has a standard 13-week period. The additional week is required periodically to align the company's fiscal year more closely with the calendar months. This difference should be considered when comparing the company's first quarter financial results to the prior year period and is also the main variance between reported and organic calculations for the quarter.
Consolidated net sales for the first quarter were
Gross margin in the quarter was
Consolidated operating expenses for the quarter were
Operating margin for the quarter was
Reported earnings per share were
As of September 2, 2023, our liquidity position reflected cash on hand and availability on our revolving credit facility totaling
As of the end of the first quarter, we have achieved
First Quarter Fiscal 2024 Results by Segment
Americas Contract
For the first quarter, the Americas Contract segment posted net sales totaling
Adjusted operating margin for this segment was
International Contract and Specialty
The International Contract and Specialty segment delivered net sales in the first quarter of
Adjusted operating margin within this segment was
Global Retail
Net sales in the first quarter for our Global Retail segment totaled
Adjusted operating margin was
Second Quarter and Fiscal 2024 Outlook
While economic uncertainty persists in parts of our business, we maintain a generally optimistic outlook. For full year fiscal 2024, we are increasing our guidance and expect to generate adjusted diluted earnings in the range of
As it relates to the second quarter of fiscal year 2024, we expect net sales to range between
Andi Owen | Jeff Stutz | ||
President and Chief Executive Officer | Chief Financial Officer |
Webcast and Conference Call Information
The Company will host a conference call and webcast to discuss the results of the first quarter of fiscal 2024 on Tuesday, September 26, 2023, at 5:00 PM ET. To ensure participation, allow extra time to visit the Company's website at https://www.millerknoll.com/investor-relations/news-events/events-and-presentations to download the streaming software necessary to participate. An online archive of the webcast will also be available on the Company's investor relations website. Additional links to materials supporting the release will also be available at https://www.millerknoll.com/investor-relations.
Financial highlights for the three months ended September 2, 2023 follow:
MillerKnoll, Inc. Condensed Consolidated Statements of Operations | |||||
(Unaudited) (Dollars in millions, except per share and common share data) | Three Months Ended | ||||
September 2, 2023 | September 3, 2022 | ||||
Net sales | $ 917.7 | 100.0 % | $ 1,078.8 | 100.0 % | |
Cost of sales | 559.6 | 61.0 % | 706.7 | 65.5 % | |
Gross margin | 358.1 | 39.0 % | 372.1 | 34.5 % | |
Operating expenses | 317.8 | 34.6 % | 321.3 | 29.8 % | |
Operating earnings | 40.3 | 4.4 % | 50.8 | 4.7 % | |
Other expenses, net | 19.2 | 2.1 % | 17.1 | 1.6 % | |
Earnings before income taxes and equity income | 21.1 | 2.3 % | 33.7 | 3.1 % | |
Income tax expense | 5.1 | 0.6 % | 6.3 | 0.6 % | |
Equity income, net of tax | 0.1 | — % | — | — % | |
Net earnings | 16.1 | 1.8 % | 27.4 | 2.5 % | |
Net (loss) earnings attributable to redeemable noncontrolling interests | (0.6) | (0.1) % | 1.6 | 0.1 % | |
Net earnings attributable to MillerKnoll, Inc. | $ 16.7 | 1.8 % | $ 25.8 | 2.4 % | |
Amounts per common share attributable to MillerKnoll, Inc. | |||||
Earnings per share - basic | |||||
Weighted average basic common shares | 75,327,544 | 75,482,572 | |||
Earnings per share - diluted | |||||
Weighted average diluted common shares | 75,707,536 | 76,266,966 | |||
MillerKnoll, Inc. Condensed Consolidated Statements of Cash Flows | |||
Three Months Ended | |||
(Unaudited) (Dollars in millions) | September 2, 2023 | September 3, 2022 | |
Cash provided by (used in): | |||
Operating activities | $ 130.9 | $ (64.8) | |
Investing activities | (26.3) | (10.2) | |
Financing activities | (111.1) | 77.0 | |
Effect of exchange rate changes | 0.5 | (16.5) | |
Net change in cash and cash equivalents | (6.0) | (14.5) | |
Cash and cash equivalents, beginning of period | 223.5 | 230.3 | |
Cash and cash equivalents, end of period | $ 217.5 | $ 215.8 | |
MillerKnoll, Inc. Condensed Consolidated Balance Sheets | |||
(Unaudited) (Dollars in millions) | September 2, 2023 | June 3, 2023 | |
ASSETS | |||
Current Assets: | |||
Cash and cash equivalents | $ 217.5 | $ 223.5 | |
Accounts receivable, net | 298.0 | 334.1 | |
Unbilled accounts receivable | 25.1 | 29.4 | |
Inventories, net | 473.2 | 487.4 | |
Prepaid expenses and other | 83.9 | 101.8 | |
Total current assets | 1,097.7 | 1,176.2 | |
Net property and equipment | 529.9 | 536.3 | |
Right of use assets | 399.2 | 415.9 | |
Other assets | 2,156.4 | 2,146.4 | |
Total Assets | $ 4,183.2 | $ 4,274.8 | |
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY | |||
Current Liabilities: | |||
Accounts payable | $ 252.0 | $ 269.5 | |
Short-term borrowings and current portion of long-term debt | 36.3 | 33.4 | |
Short-term lease liability | 75.5 | 77.1 | |
Accrued liabilities | 340.7 | 322.8 | |
Total current liabilities | 704.5 | 702.8 | |
Long-term debt | 1,298.8 | 1,365.1 | |
Lease liabilities | 377.0 | 393.7 | |
Other liabilities | 273.0 | 273.0 | |
Total Liabilities | 2,653.3 | 2,734.6 | |
Redeemable Noncontrolling Interests | 107.6 | 107.6 | |
Stockholders' Equity | 1,422.3 | 1,432.6 | |
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity | $ 4,183.2 | $ 4,274.8 | |
Non-GAAP Financial Measures and Other Supplemental Data
This presentation contains non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies. These non-GAAP financial measures are not measurements of our financial performance under GAAP and should not be considered an alternative to the related GAAP measurement. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Our presentation of non-GAAP measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence of our GAAP results. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included within this presentation. The Company believes these non-GAAP measures are useful for investors as they provide financial information on a more comparative basis for the periods presented.
The non-GAAP financial measures referenced within this presentation include: Adjusted Operating Earnings (Loss), Adjusted Earnings per Share, Adjusted Operating Expenses, Adjusted EBITDA, Adjusted Bank Covenant EBITDA, and Organic Growth (Decline).
Adjusted Operating Earnings (Loss) represents reported operating earnings plus integration charges, amortization of Knoll purchased intangibles, and restructuring expenses. These adjustments are described further below.
Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact from amortization of Knoll purchased intangibles, integration charges, restructuring expenses, and the related tax effect of these adjustments. These adjustments are described further below.
Adjusted Operating Expenses represents reported operating expenses excluding integration charges, amortization of Knoll purchased intangibles, and restructuring expenses. These adjustments are described further below.
Adjusted EBITDA is calculated by excluding income tax expense, interest income and expense, depreciation and amortization expense, restructuring and integration charges from net income.
Adjusted Bank Covenant EBITDA is calculated by excluding depreciation, amortization, interest expense, taxes from net income, and certain other adjustments. Other adjustments include, as applicable in the period, charges associated with business restructuring actions, integration charges, impairment expenses, non-cash stock-based compensation, future synergies, and other items as described in our lending agreements.
Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects, the impact of the additional week in fiscal 2023, and the impact of the closure of the Fully business.
The adjustments to arrive at these non-GAAP financial measures are as follows:
Amortization of Knoll purchased intangibles: Includes expenses associated with the amortization of acquisition related intangibles acquired as part of the Knoll acquisition. The revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. We exclude the impact of the amortization of Knoll purchased intangibles as such non-cash amounts were significantly impacted by the size of the Knoll acquisition. Furthermore, we believe that this adjustment enables better comparison of our results as Amortization of Knoll Purchased Intangibles will not recur in future periods once such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets. Although we exclude the Amortization of Knoll Purchased Intangibles in these non-GAAP measures, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.
Integration charges: Knoll integration-related costs include severance, accelerated stock-based compensation expenses, asset impairment charges, and expenses related to synergy realization efforts and reorganization initiatives.
Restructuring charges: Includes costs associated with actions involving targeted workforce reductions.
Tax related items: We excluded the income tax benefit/provision effect of the tax related items from our non-GAAP measures because they are not associated with the tax expense on our ongoing operating results.
Certain tables below summarize select financial information, for the periods indicated, related to each of the Company's reportable segments. The Americas Contract ("
A. Reconciliation of Operating Earnings (Loss) to Adjusted Operating Earnings (Loss) by Segment | ||||
Three Months Ended | ||||
September 2, 2023 | September 3, 2022 | |||
Net sales | $ 490.4 | 100.0 % | $ 537.4 | 100.0 % |
Gross margin | 174.8 | 35.6 % | 144.2 | 26.8 % |
Total operating expenses | 133.4 | 27.2 % | 123.8 | 23.0 % |
Operating earnings | $ 41.4 | 8.4 % | $ 20.4 | 3.8 % |
Adjustments | ||||
Restructuring | 4.3 | 0.9 % | — | — % |
Integration charges | 3.1 | 0.6 % | 2.9 | 0.5 % |
Amortization of Knoll purchased intangibles | 3.2 | 0.7 % | 3.2 | 0.6 % |
Adjusted operating earnings | $ 52.0 | 10.6 % | $ 26.5 | 4.9 % |
International & Specialty | ||||
Net sales | $ 228.3 | 100.0 % | $ 272.5 | 100.0 % |
Gross margin | 96.9 | 42.4 % | 113.4 | 41.6 % |
Total operating expenses | 85.5 | 37.5 % | 85.5 | 31.4 % |
Operating earnings | $ 11.4 | 5.0 % | $ 27.9 | 10.2 % |
Adjustments | ||||
Restructuring | 0.7 | 0.3 % | — | — % |
Integration charges | 0.7 | 0.3 % | 0.5 | 0.2 % |
Amortization of Knoll purchased intangibles | 2.1 | 0.9 % | 2.0 | 0.7 % |
Adjusted operating earnings | $ 14.9 | 6.5 % | $ 30.4 | 11.2 % |
Retail | ||||
Net sales | $ 199.0 | 100.0 % | $ 268.9 | 100.0 % |
Gross margin | 86.4 | 43.4 % | 114.5 | 42.6 % |
Total operating expenses | 84.2 | 42.3 % | 96.7 | 36.0 % |
Operating earnings | $ 2.2 | 1.1 % | $ 17.8 | 6.6 % |
Adjustments | ||||
Restructuring | 0.2 | 0.1 % | 0.5 | 0.2 % |
Integration charges | — | — % | 0.2 | 0.1 % |
Amortization of Knoll purchased intangibles | 0.7 | 0.4 % | 1.3 | 0.5 % |
Adjusted operating earnings | $ 3.1 | 1.6 % | $ 19.8 | 7.4 % |
Corporate | ||||
Operating expenses | $ 14.7 | — % | $ 15.3 | — % |
Operating (loss) | $ (14.7) | — % | $ (15.3) | — % |
Adjustments | ||||
Integration charges | 0.1 | — % | 1.0 | — % |
Adjusted operating (loss) | $ (14.6) | — % | $ (14.3) | — % |
MillerKnoll, Inc. | ||||
Net sales | $ 917.7 | 100.0 % | $ 1,078.8 | 100.0 % |
Gross margin | 358.1 | 39.0 % | 372.1 | 34.5 % |
Total operating expenses | 317.8 | 34.6 % | 321.3 | 29.8 % |
Operating earnings | $ 40.3 | 4.4 % | $ 50.8 | 4.7 % |
Adjustments | ||||
Restructuring | 5.2 | 0.6 % | 0.5 | — % |
Integration charges | 3.9 | 0.4 % | 4.6 | 0.4 % |
Amortization of Knoll purchased intangibles | 6.0 | 0.7 % | 6.5 | 0.6 % |
Adjusted operating earnings | $ 55.4 | 6.0 % | $ 62.4 | 5.8 % |
B. Reconciliation of Earnings (Loss) per Share to Adjusted Earnings per Share | ||
Three Months Ended | ||
September 2, 2023 | September 3, 2022 | |
Earnings per share - diluted | $ 0.22 | $ 0.34 |
Add: Amortization of Knoll purchased intangibles | 0.08 | 0.08 |
Add: Integration charges | 0.07 | 0.06 |
Add: Restructuring charges | 0.05 | 0.01 |
Tax impact on adjustments | (0.05) | (0.05) |
Adjusted earnings per share - diluted | $ 0.37 | $ 0.44 |
Weighted average shares outstanding (used for calculating adjusted earnings per share) – diluted | 75,707,536 | 76,266,966 |
C. Reconciliation of Operating Expenses to Adjusted Operating Expenses | ||||
Three Months Ended | ||||
September 2, 2023 | September 3, 2022 | |||
Operating expenses | $ 317.8 | 34.6 % | $ 321.3 | 29.8 % |
Restructuring charges | 5.2 | 0.6 % | 0.5 | — % |
Integration charges | 3.9 | 0.4 % | 4.6 | 0.4 % |
Amortization of Knoll purchased intangibles | 6.0 | 0.7 % | 6.5 | 0.6 % |
Adjusted operating expenses | $ 302.7 | 33.0 % | $ 309.7 | 28.7 % |
D. Reconciliation of Net Earnings to Adjusted EBITDA | ||
Three Months Ended | ||
September 2, 2023 | September 3, 2022 | |
Net income | $ 16.7 | $ 25.8 |
Income tax expense | 5.3 | 6.3 |
Interest income and expense | 16.9 | 16.2 |
Depreciation and amortization expense | 37.2 | 39.5 |
Restructuring and integration charges | 7.8 | 5.1 |
Adjusted EBITDA | $ 83.9 | $ 92.9 |
E. Reconciliation of Net Earnings to Adjusted Bank Covenant EBITDA and Adjusted Bank Covenant EBITDA Ratio (provided | |
September 2, 2023 | |
Net earnings | $ 34.8 |
Income tax expense | 3.3 |
Depreciation expense | 114.0 |
Amortization expense | 39.1 |
Interest expense | 76.5 |
Other adjustments(*) | 178.1 |
Adjusted bank covenant EBITDA | $ 445.8 |
Total debt, less cash, end of trailing period (includes outstanding LC's) | $ 1,131.2 |
Net debt to adjusted bank covenant EBITDA ratio | 2.5 |
*Items indicated represent Non-GAAP measurements; see the reconciliations of Non-GAAP financial measures and related explanations above. |
F. Organic Sales Growth by Segment | ||||
Three Months Ended | ||||
September 2, 2023 | ||||
International & Specialty | Retail | Total | ||
Net sales, as reported | $ 490.4 | $ 228.3 | $ 199.0 | $ 917.7 |
% change from PY | (8.7) % | (16.2) % | (26.0) % | (14.9) % |
Adjustments | ||||
Currency translation effects (1) | (0.4) | (3.0) | (2.0) | (5.4) |
Net sales, organic | $ 490.0 | $ 225.3 | $ 197.0 | $ 912.3 |
% change from PY | (1.7) % | (10.9) % | (13.6) % | (6.9) % |
Three Months Ended | ||||
September 3, 2022 | ||||
International & Specialty | Retail | Total | ||
Net sales, as reported | $ 537.4 | $ 272.5 | $ 268.9 | $ 1,078.8 |
Adjustments | ||||
Fully closure | — | — | (22.8) | (22.8) |
Impact of extra week in FY23 | (38.7) | (19.6) | (18.2) | (76.5) |
Net sales, organic | $ 498.7 | $ 252.9 | $ 227.9 | $ 979.5 |
(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable |
G. Organic Order Growth by Segment | ||||
Three Months Ended | ||||
September 2, 2023 | ||||
International & | Retail | Total | ||
Orders, as reported | $ 487.3 | $ 227.9 | $ 198.5 | $ 913.7 |
% change from PY | (4.7) % | (9.7) % | (20.4) % | (9.8) % |
Adjustments | ||||
Currency translation effects (1) | (2.3) | (2.9) | (2.1) | (7.3) |
Orders, organic | $ 485.0 | $ 225.0 | $ 196.4 | $ 906.4 |
% change from PY | 2.1 % | (3.6) % | (6.4) % | (1.3) % |
Three Months Ended | ||||
September 3, 2022 | ||||
International & | Retail | Total | ||
Orders, as reported | $ 511.3 | $ 252.4 | $ 249.4 | $ 1,013.1 |
Adjustments | ||||
Fully closure | — | — | (23.0) | (23.0) |
Impact of extra week in FY23 | (36.2) | (18.9) | (16.6) | (71.7) |
Orders, organic | $ 475.1 | $ 233.5 | $ 209.8 | $ 918.4 |
(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable |
H. Consolidated MillerKnoll Backlog | |
Q1 FY2024 | |
MillerKnoll Backlog | 694.0 |
I. Sales and Earnings Guidance - Upcoming Quarter | |
Company Guidance | |
Q2 FY2024 | |
Net sales | |
Gross margin % | |
Operating expenses | |
Interest and other expense, net | |
Effective tax rate | |
Adjusted earnings per share - diluted |
About MillerKnoll
MillerKnoll is a collective of dynamic brands that comes together to design the world we live in. MillerKnoll brand portfolio includes Herman Miller, Knoll, Colebrook Bosson Saunders, DatesWeiser, Design Within Reach, Edelman, Geiger, HAY, Holly Hunt, Knoll Textiles, Maars Living Walls, Maharam, Muuto, NaughtOne, and Spinneybeck|FilzFelt. MillerKnoll is an unparalleled platform that redefines modern for the 21st century by building a more sustainable, equitable and beautiful future for all.
Forward-Looking Statements
This communication includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements relate to future events and anticipated results of operations, business strategies, the anticipated benefits of our acquisition of Knoll, the anticipated impact of the Knoll acquisition on the combined company's business and future financial and operating results, the expected amount and timing of synergies from the Knoll acquisition, and other aspects of our operations or operating results. These forward-looking statements generally can be identified by phrases such as "will," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of MillerKnoll or the price of MillerKnoll's stock. These forward-looking statements involve certain risks and uncertainties, many of which are beyond MillerKnoll's control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to: general economic conditions; the impact of any government policies and actions to protect the health and safety of individuals or to maintain the functioning of national or global economies, and the Company's response to any such policies and actions; the impact of public health crises, such as pandemics and epidemics; risks related to the additional debt incurred in connection with the Knoll acquisition; MillerKnoll's ability to comply with its debt covenants and obligations; the risk that the anticipated benefits of the Knoll acquisition will be more costly to realize than expected; the effect of the announcement of the Knoll acquisition on the ability of MillerKnoll to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom MillerKnoll does business, or on MillerKnoll's operating results and business generally; the ability to successfully integrate Knoll's operations; the ability of MillerKnoll to implement its plans, forecasts and other expectations with respect to MillerKnoll's business after the completion of the Knoll acquisition and realize expected synergies; business disruption following the Knoll acquisition; the availability and pricing of raw materials; the financial strength of our dealers and the financial strength of our customers; the success of newly-introduced products; the pace and level of government procurement; and the outcome of pending litigation or governmental audits or investigations. For additional information about other factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to MillerKnoll's periodic reports and other filings with the SEC, including the risk factors identified in MillerKnoll's most recent Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. The forward-looking statements included in this communication are made only as of the date hereof. MillerKnoll does not undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances, except as required by law.
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SOURCE MillerKnoll