MillerKnoll, Inc.

Good evening, and welcome to Miller Knowles' Quarterly Earnings Conference Call. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Vice President of Investor Relations, Kerala Mangalini.

Good evening, and welcome to Miller Knowles' Third Quarter Fiscal 2024 Conference Call. I am joined by Andy Owen, Chief Executive Officer, and Jeff Stutz, Chief Financial Officer. Also available during the Q&A session is John Michael, President of America's Contract, and Debbie Prost, President of Global Retail. Before I turn the call over to Andy, please remember our safe harbor regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties, and other factors. which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We may also refer to certain non-GAAP financial metrics, which are reconciled and described in our press release posted on our investor relations website at millernol.com. With that, I will turn the call over to Andy.

Andy? Thanks, Carola, and good evening, everyone. While this past quarter presented its challenges, we're proud to highlight our resilience and strategic focus. Despite facing a lower volume of orders and sales, we maintained a steadfast commitment to enhancing our business operations. Our efforts yielded significant results as we successfully improved gross margins across all business segments, showcasing our ability to adapt and thrive in dynamic market conditions. Miller Knoll is an agile company. We have implemented several programs across our contract and retail business to boost demand, while also putting in place restructuring measures to better align our operating costs with the evolving economic landscape. With our Miller Knoll dealer network firmly established in the U.S., we've turned our focus now to showrooms, studios, and tools that make it easier to create design solutions for customers. Our showroom strategy is anchored in having fewer and more robust Millernol design centers in targeted cities around the world. We're bringing our brands together so that customers and design partners can experience the full breadth of our offering in one location. To this end, we will combine our showrooms in most markets, and we will also invest more heavily in dealer showrooms and dealer programs, especially in markets without a corporate showroom presence. This work is already underway in several major U.S. markets, namely Chicago, Washington, D.C., and the greater Los Angeles area. This follows showroom co-location enhancements that we previously announced in New York City, Toronto, and London. Simultaneously, in North America alone, more than 40 dealer showroom refreshments are in progress, with many more in plans. At DWR, we recently opened a new concept studio in the San Francisco Design District. The space introduces our products in a new way, showcasing rotating galleries and interactive exhibits. We understand that enhancing our environment yields great results, and we've been encouraged by the increased customer interest and foot traffic in this store. Across our retail experience, we know that most orders include a customer touchpoint in one of our stores. By enhancing these spaces and strategic locations, we believe that we'll continue to build market share, especially as macroeconomic conditions become more favorable. We are also making significant progress across our technology platform. This past January, we launched our Program Portal Experience. These are digital hubs which serve as a singular place for clients, dealers, and our architecture and design partners to access projects and product information in one place, providing a forum for collaboration and streamlined processes. Similarly, we've launched augmented reality capabilities on retail and contract websites a supplement to our highly functional 3D configurators. We've seen that customers who use these tools have a higher conversion rate and are faster to add products to the cart. These programs reflect the confidence we have in Miller & Noll's long-term value and the opportunities ahead. However, we are readless, and we understand that while encouraging, these initiatives and organizational enhancements are stepping stones to achieving our goals. Existing demand pressures, including the elevated cost of capital here in North America, are affecting the housing and office space market and slowing the decisions related to capital expenditures. This is taking a toll on the short-term results of our business. To match the current demand environment this quarter, we implemented targeted workforce reductions and realigned our leadership team against our different business segments and geographic areas. These moves will have a meaningful impact on our SG&A cost structure. Jeff will share more details on this later. For America's business, while the third quarter is usually a softer period, The step-up in activity that customarily comes through the end of the quarter did not materialize as expected. Our team was fast to act, however, focusing on price optimization and launching a series of initiatives to help our clients make decisions and therefore coax demand. We continue to see leading indicators trending positively. Client requests for mock-ups are up over 20% year-over-year, and contract activations and pricing requests are up over 30% in Q3. This quarter, we are very pleased to report growth across our international contract business as we continue to transition legacy Herman Miller dealers to full Miller Knoll dealers. This transition not only enhances the product portfolio of our existing dealerships, but also involves legacy dealers opening newly branded and furnished Miller Knoll showrooms, thereby enhancing our market presence. Furthermore, we also have aggressive plans underway to bring Knoll to new markets throughout Europe. Our network around the globe is unmatched in reach, and we are in a place to deliver designs for these regions as demand starts growing. Similarly, as macroeconomic pressures ease, we anticipate a release in pent-up retail demand and are preparing ourselves to meet this interest. Throughout our retail organization, we maintain a strong focus on inventory management and optimizing our product assortment. We've accelerated the introduction of more than 100 new styles to design within reach, adding hay, Muto, and Geiger products, introducing new DWR collections, and expanding the assortment from our strategic third-party vendors, as well as building out the normal offering through additional finish and materials options. Furthermore, we've expanded our design services, which has resulted in an increase in the penetration of orders from design services, as well as fewer returns. But right now, we are at an 11-year low in the luxury housing market, and our retail and specialty businesses track closely with that market, New home movers spend significantly more than the average. We'll continue to watch Fed rates as they have the potential to move in our favor this year, and when they do, we are prepared to capture the wins. Over the next few months, we will have exciting and significant opportunities to connect with our key clients around the globe and share the best of our collective with our core audiences at Salone and Milan and Design Days in Chicago. These are moments for us to visually demonstrate the forward-thinking, innovative spirit that will carry us to the future while establishing meaningful connections. Ahead of these events, our research and insights team is conducting seminars in over 40 cities across three continents, sharing actionable insights with organizations on navigating changes in the way we work and adapting their spaces to our evolving world. We're highlighting several successful project profiles in the upcoming launch of Season 4 of our About Place podcast. As companies navigate change and invest in their space, they continue to turn to us as a leader for our experienced, data-based perspectives on Designing for Tomorrow. Our industry has a once-in-a-lifetime opportunity to redefine how we think about spaces for decades to come. We have a chance right now to push the spaces where we live and work to better support individual wellness, productivity, and a sense of belonging. And when I look across our collective, there is no team more capable of rising to this occasion. We are focused and confident in the hard work we're doing right now. As always, I thank you for your continued support and the learning, and I will pass it on to Jeff for a deeper dive into this quarter's numbers. Jeff?