EPS of $-0.19 decreased by 161.3% from previous year
Gross margin of 37.9%
Net income of -12.70M
""Our results in the third quarter of fiscal year 2025 reflect the advantages of our diverse business model, strong performance in certain markets and channels, mitigated softness in others, and a disciplined focus on our cost structure helped us weather unpredictable and dynamic macroeconomic conditions."" - Andi Owen
MillerKnoll Inc (MLKN) QQ3 2025 Earnings Analysis: Diversified Growth, Tariff Headwinds, and Strategic Re‑Segmentation Driving Outlook
Executive Summary
MillerKnoll delivered a resilient quarterly top line in Q3 FY2025 with consolidated net sales of $876.2 million, up modestly year over year on a reported basis and 1.8% organically, supported by a substantial uptick in Global Retail orders. However, the quarter was significantly impacted by non-cash impairment charges and restructuring costs that produced a GAAP net loss of $12.7 million and an EPS of -$0.19. Management’s narrative emphasizes the durability of a diversified business model and disciplined cost control as the key protectors of long‑term growth in a volatile macro environment. The company also highlighted a segment reorganization (North America Contract, International Contract, and Global Retail) as a pathway to improved visibility, with ongoing investments in product cadence, retail footprint expansion, and tariff mitigation strategies.
Looking forward, MillerKnoll guided for Q4 2025 net sales of $910–$950 million with a gross margin of 37.5–38.5% and adjusted diluted EPS of $0.46–$0.52. Tariff-related costs are expected to be $5–$7 million pre-tax (~$0.05–$0.07 per share), with management emphasizing continued pricing actions and supply‑chain flexibility to offset volatility. The balance sheet remains solid with cash of $169.8 million, net debt to EBITDA at 2.93x, and available liquidity of $468 million, which supports ongoing investments in growth initiatives and selective share repurchases. The quarter’s impairment charges (notably Holly Hunt and Global Retail) underscore the ongoing need to align the cost structure with demand dynamics, even as orders and backlog show positive momentum in Retail and International segments. Investors should weigh the synchronized upside from backlog expansion and retail growth against profitability headwinds from impairments and tariff uncertainty.
Key Performance Indicators
Revenue
876.20M
QoQ: -9.71% | YoY:0.45%
Gross Profit
332.40M
37.94% margin
QoQ: -11.83% | YoY:-1.36%
Operating Income
-82.20M
QoQ: -231.52% | YoY:-257.77%
Net Income
-12.70M
QoQ: -137.24% | YoY:-157.21%
EPS
-0.19
QoQ: -113.19% | YoY:-161.29%
Revenue Trend
Margin Analysis
Key Insights
Revenue and growth: Consolidated net sales of $876.2 million, up year over year on a reported basis and +1.8% organically. Organic revenue uplift was driven by Global Retail strength despite mixed contract demand (North America and International).
Gross profit and margin: Gross profit $332.4 million; gross margin 37.9% (0.379). YoY gross profit declined 1.36%; QoQ decline of 11.83% indicates mix and leverage headwinds.
Operating performance: Operating income at a GAAP level was −$82.2 million with an operating margin of −9.38%. The print reflects substantial non-cash charges; adjusted operating income and margin were not disclosed at segment totals in the transcript, but the quarter notes benefited from cost containment on the margin line.
Net income and earnings per share: Net income −$12.7 million; net income margin −1.45%; EPS −$0.19 (diluted). On an adjusted basis, EPS was $0.44, essentially in line with the prior year’s adjusted EPS of $0.45.
Backlog and orders: backlog $686.0 million, up 7.4% YoY. Orders were $853.0 million, up 2.7% as reported and +4.1% organically. Backlog growth and improving order cadence underpin future revenue visibility.
Financial Highlights
Key metrics and trend highlights (Q3 FY2025 vs prior year where available):
- Revenue and growth: Consolidated net sales of $876.2 million, up year over year on a reported basis and +1.8% organically. Organic revenue uplift was driven by Global Retail strength despite mixed contract demand (North America and International).
- Gross profit and margin: Gross profit $332.4 million; gross margin 37.9% (0.379). YoY gross profit declined 1.36%; QoQ decline of 11.83% indicates mix and leverage headwinds.
- Operating performance: Operating income at a GAAP level was −$82.2 million with an operating margin of −9.38%. The print reflects substantial non-cash charges; adjusted operating income and margin were not disclosed at segment totals in the transcript, but the quarter notes benefited from cost containment on the margin line.
- Net income and earnings per share: Net income −$12.7 million; net income margin −1.45%; EPS −$0.19 (diluted). On an adjusted basis, EPS was $0.44, essentially in line with the prior year’s adjusted EPS of $0.45.
- Backlog and orders: backlog $686.0 million, up 7.4% YoY. Orders were $853.0 million, up 2.7% as reported and +4.1% organically. Backlog growth and improving order cadence underpin future revenue visibility.
- Segments (highlights): North America Contract net sales $468.0 million (+1.4% reported; +1.7% organic); New orders $434.0 million (−1.8% reported; −1.5% organic). International Contract net sales $146.0 million (−5% reported; −1.5% organic); New orders $159.0 million. Global Retail net sales $263.0 million (+1.9% reported; +3.9% organic); New orders $260.0 million (+14.7% reported; +17% organic). Retail’s GAAP margin was negative due to asset impairments (reported −36%), with adjusted margin at 6.2%. Management cited stronger December and improving February–March momentum in contract as indicators of demand normalization, and robust retail demand in North America.
- Cash flow and liquidity: Operating cash flow of $62.0 million; free cash flow $38.8 million. Net debt to EBITDA was 2.93x; cash and cash equivalents were $169.8 million; available liquidity $468 million.
- Capital allocation: Share repurchases of ~786k shares for $18.0 million; capex of $23.2 million (net cash outflow).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
876.20M
0.45%
-9.71%
Gross Profit
332.40M
-1.36%
-11.83%
Operating Income
-82.20M
-257.77%
-231.52%
Net Income
-12.70M
-157.21%
-137.24%
EPS
-0.19
-161.29%
-113.19%
Key Financial Ratios
currentRatio
1.67
grossProfitMargin
37.9%
operatingProfitMargin
-9.38%
netProfitMargin
-1.45%
returnOnAssets
-0.33%
returnOnEquity
-1.01%
debtEquityRatio
1.43
operatingCashFlowPerShare
$0.91
freeCashFlowPerShare
$0.57
dividendPayoutRatio
-100.8%
priceToBookRatio
1.17
priceEarningsRatio
-28.93
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key takeaways from management discussions (themes and quotes):
- Strategy and segmentation: Andi Owen highlighted the segment reorganization as a strategic step to align business-to-business sales in North America under one reporting framework and to place Latin America within International Contract. This reorganization is intended to improve visibility into end-market performance and growth opportunities.
- Demand dynamics and product strategy: Andi emphasized a diverse product pipeline and expansion of retail footprint, including 2 stores opened in Q3 (Palm Springs and Fairfax) with planned openings in Q4 (Paramus and Coral Gables) and a goal of 10–15 new locations in fiscal 2026. She underscored growth in new product introductions (spring–summer 2025 launches up more than 65% vs 2024) and continued store expansion to build brand presence and traffic.
- Tariffs and pricing: The company outlined tariff-driven uncertainty and introduced a 4.5% list price increase effective June 2 (with potential surcharges if necessary) to offset rising input costs and tariff exposure. Jeff Stutz stressed that pricing is part of a broader mitigation plan including supplier collaboration, value engineering, and supply-chain flexibility to offset tariff costs over time.
- Margin headwinds and impairment charges: Jeff Stutz explained that non-cash impairment charges (notably $130 million related to goodwill impairment at Holly Hunt and Global Retail, plus impairment of Knoll and Mutoh trade names) and restructuring charges contributed to the GAAP loss in the quarter. He noted an annualized savings target from restructuring of roughly $4–$4.5 million, illustrating ongoing cost discipline despite growth investments.
- Near-term outlook: Andi and Jeff pointed to a cautious but constructive Q4, with management emphasizing momentum in contract leading indicators and in Global Retail orders, while cautioning on macro and tariff risks. The company signaled intent to offset tariff impact through price, surcharges if needed, and cost actions, but stressed the extra level of caution given policy volatility.
"Our results in the third quarter of fiscal year 2025 reflect the advantages of our diverse business model, strong performance in certain markets and channels, mitigated softness in others, and a disciplined focus on our cost structure helped us weather unpredictable and dynamic macroeconomic conditions."
— Andi Owen
"We believe through pricing and other mitigation efforts, we can offset those."
— Jeff Stutz
Forward Guidance
Outlook and risks (as stated in the Q3 call):
- Q4 2025 guidance: Net sales expected to be $910–$950 million; gross margin guidance 37.5–38.5%; adjusted diluted EPS guidance $0.46–$0.52. Tariff-related costs are anticipated to be $5–$7 million pre-tax (~$0.05–$0.07 per share).
- Tariff and macro risk: Management highlighted ongoing tariff uncertainty as a key variable, noting that April developments could materially affect demand and pricing dynamics. They will provide updates as policy evolves. The company plans to offset tariff costs through price increases, pricing discipline, supplier collaboration, and better leverage of fixed costs.
- Growth levers to monitor: North America and International Contract demand trajectories (leading indicators, funnel, awarded projects), Global Retail momentum (order growth, store openings, and new product introductions), and the effectiveness of price actions and cost containment on margins.
- Investment thesis and risk considerations: The firm benefits from a diversified model across segments and a strengthening retail footprint, but profitability hinges on resolving impairment-related headwinds and maintaining momentum in contract pipelines amid tariff uncertainty and macro volatility. Investors should monitor the pace of new store openings, backlog conversion to orders, and the trajectory of adjusted margins as tariff mitigation efforts take hold.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MLKN Focus
37.94%
-9.38%
-1.01%
-28.93%
LZB
44.30%
6.74%
2.78%
16.59%
MBC
33.10%
8.02%
2.26%
20.24%
BSET
53.00%
-8.41%
-2.73%
-6.89%
AMWD
15.00%
5.30%
1.80%
17.68%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Outlook: Neutral with cautious optimism. MillerKnoll benefits from a diversified, growth-oriented strategy and a strengthening retail engine, but near-term profitability remains encumbered by impairment charges and tariff-driven cost pressures. The Q4 guide implies modest top-line growth (4% mid-point) with manageable margin range, but performance hinges on successful tariff mitigation, backlog-to-revenue conversion, and stabilization of contract orders in a volatile macro environment. Given solid liquidity, backlog, and retail expansion momentum, the company is positioned to monetize improving demand signals while remaining vigilant to policy and operational headwinds.
Key Investment Factors
Growth Potential
Backlog stands at $686 million, up 7.4% YoY, with better order momentum in Global Retail (reported orders up ~15%, organic up ~17%). North America Retail direct-to-consumer channel is expanding footprint with 2 openings in Q3 and a pipeline of 15+ sites planned for North America in 2026, suggesting meaningful near- to mid-term revenue growth potential in the consumer-led retail channel.
Profitability Risk
Tariff exposure and policy volatility remain the dominant downside risk to near-term demand and cost structure. Impairment charges (Holly Hunt, Global Retail, Knoll, Mutoh trade names) signal the sensitivity of goodwill and intangibles to market conditions and segment reorganization. High leverage (debt to capitalization ~0.59; net debt to EBITDA ~2.93x) and negative GAAP margins pressure earnings quality and could constrain capital allocation flexibility in a downturn.
Financial Position
Solid liquidity with cash of $169.8 million and available liquidity of $468 million. Net debt to EBITDA of 2.93x remains within covenant headroom. Backlog growth supports visibility, and operating cash flow of $62 million in Q3 aided balance sheet resilience. Capex outlays modest at $23.2 million in the quarter and free cash flow of $38.8 million, though GAAP profitability is pressured by impairment charges and tariff costs.
SWOT Analysis
Strengths
Diverse, multi-segment model (North America Contract, International Contract, Global Retail) providing revenue diversification and risk spreading
Backlog of $686 million supports near-term visibility
Strong retail footprint expansion and product cadence (new stores, Design Within Reach and Herman Miller)
Cash generation and liquidity strength (net cash provided by operations $62m; available liquidity $468m)
Growing direct-to-consumer retail channel with rising order intake in March quarter
Weaknesses
Significant impairment charges (Holly Hunt goodwill, Global Retail impairment, Knoll/Mutoh trade names) weigh on GAAP profitability
High leverage metrics (net debt/EBITDA ~2.93x) and negative GAAP margins press earnings quality
Tariff exposure and policy uncertainty threaten near-term demand and cost structure
Q3 GAAP margin contraction and reliance on non-cash charges for reported results
Opportunities
Expanded Global Retail footprint and enhanced showroom experiences (Paramus, Palm Springs, etc.) to drive top-line growth
Continued price discipline and tariff mitigation to protect margins
International Contract expansion in less mature markets (APMEA, Middle East, India, Japan, Europe)
Product innovation and exclusive collaborations to sustain mixed-shift to higher-margin offerings
Threats
Tariff policy shifts and retaliatory tariffs could dampen end-market demand
Macro volatility and consumer sentiment impact on retail demand
Competition in the office furnishings market and cycle sensitivity in contract spend
Execution risk in rapid store expansion and integration of Knoll and other brands
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