MillerKnoll, Inc. Reports Third Quarter Fiscal 2022 Results

MillerKnoll’s third quarter consolidated net sales were $1.0 billion, reflecting an increase of 74.3% on a reported basis and 20.3% organically compared to prior year. Orders in the quarter of $1.1 billion were 93.6% higher on a reported basis and increased 31.5% organically over the prior year. Sales and orders reflected organic growth across all business segments.

Sales growth continued to be constrained by the company’s ability to produce and ship orders due to the impact from global supply chain and labor supply disruptions. They estimate these disruptions adversely impacted net sales by approximately $34 million during the quarter. The company says it has implemented a range of countermeasures to combat these pressures and began to see improvement in production levels in the second half of the quarter.

Gross margin for the quarter was 640 basis points lower than the prior year, due largely to the impact of rising commodity prices, particularly steel, and other inflationary pressures including labor and transportation. Recent price increases have helped to offset some of these inflationary pressures, and we expect to see second and third quarter price increases begin to flow through fourth quarter results.   

Consolidated operating expenses for the quarter were $310.3 million, compared to $175.8 million in the prior year. Consolidated adjusted operating expenses of $298.9 million were up $123.4 million from last year, primarily due to the inclusion of Knoll adjusted operating expenses of $100.2 million and additional variable selling expenses.

Operating margin for the quarter was 2.6% compared to 9.3% during the prior year. On an adjusted basis, which excludes acquisition and integration-related charges of $15.1 million and a gain recognized in operating expenses on the divestiture of an owned dealer of $2.0 million, consolidated operating margin was 4.0% compared to 9.4% in the prior year.

The company reported net income per share of $0.16 for the quarter. Adjusted earnings per share were $0.28 in the quarter, compared to $0.65in the prior year.

At the end of the third quarter, their liquidity position reflected cash on hand and availability on their revolving credit facility totaling $543 million.

The International Contract segment delivered strong performance this quarter with sales up 25.9% and orders up 70.0% over last year. Both sales and orders were up in all regions and across all brands and order levels of $158.1 million reflected record order levels for this business. Strong activity from local customers in the quarter helped accelerate demand, especially in China and Europe, as companies sought to differentiate their workplaces and attract top talent.

Knoll sales were up 28% and orders were up 37% from last year on a pro forma basis. The company saw an easing of supply chain pressures in the quarter and expect to see pricing actions have further impact on fourth quarter orders.

Knoll Contract delivered growth in North America and is positioned to grow in Asia as well. Spinneybeck|FilzFelt also set a record for orders in the quarter.

Holly Hunt, their luxury residential design brand also delivered record order levels in the quarter. Holly Hunt realized growth across every product category and is benefiting from its recently launched eCommerce initiative.

The Americas Contract segment continued to grow in the quarter. Net sales were up 25.6% and orders were up 36.3%. Geiger and Maharam saw particularly strong performance in the quarter. The combination of easing of supply chain and labor pressures and tremendous efforts to improve reliability and lead times during the quarter helped drive the highest sales volumes of the fiscal year. The impact of recent price increases began to flow through this quarter as well, which helped begin to mitigate inflationary pressures.

Outlook

MillerKnoll expects sales in the fourth quarter of fiscal year 2022 to range between $1,075 million and $1,115 million. The mid-point of this range implies a revenue increase of 76% compared to the same quarter last fiscal year on a reported basis and 23% on an organic basis, excluding the impact of the Knoll acquisition, dealer divestiture, and foreign currency translation. The company anticipates earnings per share to be between $0.46 and $0.52 for the quarter.