MLKN — MillerKnoll, Inc.

Summary of MillerKnoll, Inc. Q3 2026 Earnings Call

1. Key Financial Results and Metrics

• Adjusted EPS: $0.43, down from $0.44 YoY.
• Consolidated Net Sales: $927 million, up 5.8% YoY; organic growth of 3.8%.
• Orders: $932 million, up 9.2% as reported; organic growth of 7.2%.
• Consolidated Backlog: $712 million, up 3.7% YoY.
• Gross Margin: Increased by 20 basis points to 38.1%.
• Cash Flow from Operations: $61 million; debt reduced by $41 million, lowering debt-to-EBITDA ratio to 2.75x.
• Liquidity: $594 million available.
• Dividend: Quarterly cash dividend of $0.1875 per share, yielding 3.9%.

2. Strategic Updates and Business Highlights

• North America Contract Segment: Net sales of $489 million, up 4.4%; orders increased 13.1%. Strong gross margin and operating income.
• International Contract Segment: Net sales of $157 million, up 7.8%; orders down 0.7% YoY due to softness in Latin America and the Middle East.
• Global Retail Segment: Net sales of $281 million, up 7.1%; comparable sales increased 5.5%. New store openings planned, with 14-15 total for the fiscal year.
• Product Launches: Anticipated launches at upcoming industry trade shows, focusing on workspace and healthcare products.
• Operational Efficiency: Continued success with the MillerKnoll Performance System (MKPS) enhancing production quality and efficiency.

3. Forward Guidance and Outlook

• Q4 Net Sales Guidance: Expected between $955 million and $995 million, with an anticipated impact of $12 million from Middle East-related orders.
• Gross Margin Projection: Expected between 37.5% and 38.5%, factoring in higher logistics costs due to oil price increases.
• Adjusted Operating Expenses: Forecasted between $311.5 million and $321.5 million, reflecting increased compensation and new store costs.
• Adjusted EPS Guidance: Expected between $0.49 and $0.55, considering the impact of the Middle East conflict.

4. Bad News, Challenges, or Points of Concern

• Impact of Severe Weather: Adverse weather conditions led to lower retail traffic and store closures, significantly impacting sales.
• Middle East Conflict: Ongoing geopolitical tensions are expected to disrupt sales and increase costs, with a direct estimated impact of $8 million to $9 million on earnings.
• Cost Pressures: Anticipated increases in costs for plastics and other materials due to rising oil prices, although not yet fully realized.
• Order Volatility: Some caution in order patterns due to geopolitical uncertainties, particularly in regions affected by conflict.

5. Notable Q&A Insights

• Weather Impact: Management noted that severe weather primarily affected the Retail segment, with significant closures and reduced traffic.
• Cost Pressures: Discussions highlighted potential future increases in component costs, particularly related to oil and logistics.
• Consumer Behavior: Retail remains resilient despite inflationary pressures, with strategic initiatives helping to maintain demand.
• Government Business: Some slowdown in federal government contracts due to funding redirection towards conflict support, though ongoing projects are expected to require furniture.
• Tech Sector Activity: Robust demand noted in tech-focused regions, indicating continued growth potential in the Contract segment.

Overall, MillerKnoll demonstrated solid performance amid challenging conditions, with strategic initiatives in place to drive future growth despite potential headwinds from geopolitical and economic factors.