MillerKnoll Reports Second Quarter Fiscal Results for 2025

December 19, 2024  by Karen Parrish in Business Strategy, Industry   

Financial Highlights

- Consolidated net sales in the second quarter were up 2.2% year-over-year, driven by strength in International Contract & Specialty and in Americas Contract.

- Maintaining gross margin strength, with consolidated gross margins of 38.8% in the quarter.

- Returned approximately $93.1 million to shareholders through share repurchases and dividends through the first half of fiscal 2025.

 

To our shareholders:
We are pleased with our second quarter performance, which was in-line with our expectations and demonstrates the advantage of our collective of brands, diverse business channels and global footprint. Although most of our market segments continue to experience broad-based macroeconomic pressures, we are encouraged by signs of growth in several of our businesses.

In Americas Contract, sales and orders were both up mid-single-digits year-over-year, and this quarter marked our third consecutive period of order growth. In our International Contract & Specialty segment, order activity improved over last year in the Middle East and parts of Asia, however, this was offset by relative weakness in other components of the segment. In the Global Retail segment, orders were up mid-single-digits year-over-year during the important twelve-day Black Friday holiday/cyber promotional period running from the Friday before Thanksgiving through Giving Tuesday (the "holiday/cyber promotional period"). On a comparative basis, orders and sales in the fiscal second quarter were impacted by a timing shift in the holiday/cyber promotional period for our retail business, with the full promotional period falling in the second quarter in the prior year and across the second and third quarters this year. From this shift in timing, approximately $12 million in net sales will fall in our fiscal third quarter.

We are also pleased with our team's ability to maintain the gross margin expansion we delivered in fiscal 2024 while strategically managing operating expenses and positioning our business segments for profitable growth. We are proud of our cash flow generation and ability to return capital to our shareholders while investing in profitable growth and maintaining a strong balance sheet. Through the first six months of the fiscal year, we have returned approximately $93.1 million to our shareholders through dividends and share repurchases. We remain confident in our global design leadership across our collective of brands and the competitive advantages our team drives by relentlessly focusing on innovative solutions, quality, and best-in-class levels of service with global scale and reach.

Second Quarter Fiscal 2025 Consolidated Results
Consolidated net sales for the second quarter were $970.4 million, up 2.2% on a reported basis and up 2.4% organically. Orders in the quarter of $921.9 million were 2.3% lower as reported and 1.9% lower on an organic basis compared to the prior year.

Gross margin in the quarter was 38.8%, down slightly from the same quarter last year, primarily from product mix in the quarter.

Consolidated operating expenses for the quarter were $314.5 million, compared to $311.6 million in the prior year. Consolidated adjusted operating expenses were $308.1 million, an increase of $11.2 million year-over-year, driven primarily by increased marketing spend, higher variable expense and higher compensation and benefit costs.

Operating margin for the quarter was 6.4% which is flat with the same quarter last year. On an adjusted basis, consolidated operating margin for the quarter was 7.1% compared to 7.9% in the same quarter last year.

Reported diluted earnings per share were $0.49 for the quarter, compared to diluted earnings per share of $0.45 in the prior year. Adjusted diluted earnings per share were $0.55 for the quarter compared to $0.59 for the same period last year.

As of November 30, 2024, our liquidity position reflected cash on hand and availability on our revolving credit facility totaling $470.4 million. During the second quarter, the business generated $55.3 million of cash flow from operations. We repurchased approximately 1.0 million shares for a total cash outlay of $23.1 million. We ended the second quarter with a net debt-to-EBITDA ratio, as defined by our lending agreement, of 2.94x. Our scheduled debt maturities (which exclude the maturity of the revolver) for the remainder of fiscal year 2025 and for fiscal years 2026 and 2027 are $25.6 million, $46.8 million and $276.4 million respectively.

Third Quarter and Fiscal 2025 Outlook
The table below presents our expectations for third quarter and selected full year fiscal 2025 financial operating results:

We are encouraged with both internal and external indicators that collectively support an expectation of improving demand trends in most of our markets.  While we expect our fiscal third quarter to be impacted by typical seasonal softness in our Americas and International Contracts businesses as the calendar year comes to a close and by the timing of the Chinese New Year holiday, our full year guide reflects the improving demand trends. We narrowed our full year adjusted earnings per share range and modestly lowered the midpoint given the slower than expected macroeconomic improvements and lower than expected orders in the first half of the year. Our updated guidance continues to reflect full year sales and EPS growth over fiscal 2024. 

Due to the timing dynamic of this year's holiday/cyber promotional period, we estimate approximately $12 million in Global Retail net sales shifted from our fiscal second quarter into our fiscal third quarter, as compared to the prior year. This is reflected in our third quarter guidance.

Andi Owen, President & CEO
Jeff Stutz, Chief Financial Officer

Webcast and Conference Call Information
An online archive of the webcast is available on the Company's investor relations website. Additional links to materials supporting the release will be available at https://www.millerknoll.com/investor-relations.