EPS of $0.14 increased by 865.5% from previous year
Gross margin of 39.6%
Net income of 9.90M
"Traffic at NeoCon is back, close to pre-COVID levels, and conversations with customers have shifted from the theoretical return to office ideas to specific project needs. We believe there is opportunity through our Design with Impact programs to solve these needs." - Andi Owen
MillerKnoll Inc (MLKN) QQ4 2024 Earnings Analysis: Margin Expansion, Strategic Growth Initiatives, and 2025 Outlook
Executive Summary
MillerKnoll reported a mixed QQ4 2024 with a resilient margin profile and meaningful operating leverage despite a year-over-year revenue decline. Consolidated net sales were $889.0 million, a 7.1% YoY decrease and a 5.2% organic decline in the Americas Contract segment, while consolidated gross margin expanded to 39.6% (up 250 bps YoY) driven by price realization, improved product mix, better inventory management, and channel performance. The company delivered adjusted operating margin of 8.3% in Q4 2024, up 240 bps YoY, underscoring efficiency gains from synergies realized since the Knoll merger and ongoing cost discipline. Net income for the quarter was $9.9 million, with earnings per share of $0.14. Free cash flow for the quarter was $56.5 million, and cash from operating activities was $78.4 million, supported by working-capital reductions. The fourth quarter also reflected a sequential backlog increase of $44 million to $684 million, indicating improving demand and a more constructive pipeline heading into fiscal 2025.
For the full year 2024, MillerKnoll reported net sales of approximately $3.6 billion and adjusted earnings per share of $2.08, aided by annualized run-rate savings from cost synergies of roughly $160 million, exceeding initial targets. Management characterized international contract expansion and Retail optimization as key growth vectors, with material investments in showrooms, digital platforms, and an enhanced dealer network. Looking ahead, MillerKnoll guided fiscal 2025 net sales to be above 2024 levels and an adjusted EPS range of $2.10–$2.30. First-quarter guidance implied net sales of $872–$912 million and adjusted EPS of $0.38–$0.44, recognizing seasonal softness in the retail channel.
Strategically, management emphasized ongoing international dealer onboarding, expansion of MillerKnoll showrooms, and product launches (30+ new products in Design Days) to sustain momentum. Sustainability leadership and awards (EcoVadis Gold, SEAL Sustainable Innovation Award) were highlighted as differentiators. The combination of improving contract demand, a recovering housing backdrop, and a disciplined cost structure positions MillerKnoll to pursue growth in 2025, albeit with exposure to macro headwinds in housing and retail discretionary spending.
Key Performance Indicators
Revenue
888.90M
QoQ: 1.90% | YoY:-7.09%
Gross Profit
352.40M
39.64% margin
QoQ: 4.57% | YoY:-0.65%
Operating Income
62.60M
QoQ: 20.15% | YoY:439.66%
Net Income
9.90M
QoQ: -55.41% | YoY:800.00%
EPS
0.14
QoQ: -54.84% | YoY:865.52%
Revenue Trend
Margin Analysis
Key Insights
Q4 2024 net sales: $889.0 million; organic decline of 5.2% from the prior year. Revenue YoY: -7.1% (four-quarter data). QoQ revenue change: +1.9%.
Gross margin: 39.6% in Q4 2024, up 250 basis points YoY; QoQ up 100 bps.
Operating margin (adjusted): 8.3% in Q4 2024, up 240 basis points YoY.
Net income and EPS: net income $9.9 million; diluted EPS $0.14.
Revenue and profitability snapshot:
- Q4 2024 net sales: $889.0 million; organic decline of 5.2% from the prior year. Revenue YoY: -7.1% (four-quarter data). QoQ revenue change: +1.9%.
- Gross margin: 39.6% in Q4 2024, up 250 basis points YoY; QoQ up 100 bps.
- Operating margin (adjusted): 8.3% in Q4 2024, up 240 basis points YoY.
- Net income and EPS: net income $9.9 million; diluted EPS $0.14.
- Cash flow: operating cash flow $78.4 million; free cash flow $56.5 million.
- Balance sheet: cash and equivalents $230.4 million; net debt to EBITDA 2.63x; total debt $1.763 billion; total stockholders’ equity $1.385 billion.
- Backlog: $684 million, up $44 million sequentially.
- Full-year 2024: net sales $3.6 billion; adjusted EPS $2.08; run-rate synergies at $160 million.
- 2025 guidance: net sales above 2024; adjusted EPS $2.10–$2.30; Q1 2025 net sales guidance of $872–$912 million and EPS guidance of $0.38–$0.44.
- Segment highlights: Americas Contract net sales $417 million (down 12.2% YoY), new orders $480 million (+5.7% YoY); International Contract & Specialty net sales $245 million (+3.8% YoY); Global Retail net sales $227 million (down 7.2% YoY) with margin resilience aided by mix and efficiency.
- Backlog and order activity: order backlog increased by $44 million sequentially to $684 million; consolidated new orders $933 million in Q4 (+3% organic).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
888.90M
-7.09%
1.90%
Gross Profit
352.40M
-0.65%
4.57%
Operating Income
62.60M
439.66%
20.15%
Net Income
9.90M
800.00%
-55.41%
EPS
0.14
865.52%
-54.84%
Key Financial Ratios
currentRatio
1.53
grossProfitMargin
39.6%
operatingProfitMargin
7.04%
netProfitMargin
1.11%
returnOnAssets
0.25%
returnOnEquity
0.72%
debtEquityRatio
1.27
operatingCashFlowPerShare
$1.11
freeCashFlowPerShare
$0.8
dividendPayoutRatio
135.4%
priceToBookRatio
1.4
priceEarningsRatio
49.02
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key insights from management on strategic execution and market dynamics:
- Andi Owen highlighted diversification across contract and retail channels, global showroom expansion, and sustainability leadership as core growth catalysts. She underscored that traffic at trade shows is near pre-COVID levels and that customers are moving from theoretical to project-specific needs, signaling a near-term demand inflection in the contract channel.
- Jeff Stutz noted a net pricing benefit in Q4 that is expected to continue into Q1 2025, with a potential 70 basis point improvement from pricing. He also discussed seasonality in Retail (Q1 typically softer) and operating- and freight-related tailwinds as offsets.
- Debbie Propst emphasized higher-margin mix in Retail driven by design services and upholstery, plus higher shipping revenue that helped offset inbound cost growth, contributing to margin resilience.
- John Michael discussed the completed integration of legacy Knoll and Herman Miller dealer networks into MillerKnoll dealerships, with ongoing upside as dealers gain comfort with products and lead times lengthen (6–12 months), suggesting continued momentum in channel realization.
Traffic at NeoCon is back, close to pre-COVID levels, and conversations with customers have shifted from the theoretical return to office ideas to specific project needs. We believe there is opportunity through our Design with Impact programs to solve these needs.
— Andi Owen
We still have some net pricing benefit to benefit from. That was a big factor in the year-over-year improvement in the fourth quarter. Our expectation is that net pricing benefit could be as much as 70 basis points of improvement sequentially moving into Q1.
— Jeff Stutz
Forward Guidance
Outlook and assessment:
- Fiscal 2025 targets: Net sales above 2024 levels; adjusted EPS in the range of $2.10–$2.30. These targets imply modest organic growth, margin expansion from higher retail mix, and continued benefits from factory-lean initiatives and pricing.
- Near-term quarterly trajectory: Q1 2025 expected net sales of $872–$912 million with adjusted EPS of $0.38–$0.44, incorporating seasonal softness in Retail and expected pricing benefits.
- Growth drivers to monitor: (1) Contract recovery—particularly Americas and International segments; (2) Retail ramp—store openings, expansion of Design Within Reach, and expansion of assortments; (3) International expansion—dealer onboarding and 100% MillerKnoll Collective distribution by end-FY2025; (4) Product and pricing – continued net pricing benefits and new product cycles; (5) Operating leverage from higher volumes and Gartner-type synergies; (6) Sustainability initiatives and branding momentum.
- Key risks: cyclicality of housing and discretionary consumption, long project cycles in contract, potential pricing/discounting pressure, supply chain volatility, and FX exposure across international markets. Investors should monitor backlog progression, sell-through velocity on new products, and the pace of international dealer onboarding.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MLKN Focus
39.64%
7.04%
0.72%
49.02%
LZB
43.40%
9.27%
3.92%
8.95%
MBC
32.20%
9.67%
3.02%
13.04%
BSET
56.60%
1.08%
1.91%
10.41%
AMWD
18.60%
8.43%
2.94%
13.64%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Investment thesis: MillerKnoll is positioned to capitalize on a recovering contract market and an opportunistic retail channel, underpinned by a disciplined cost structure and ongoing synergy benefits from the Knoll integration. The Q4 2024 stabilizing order trends, backlog expansion, and a resilient gross margin framework provide a foundation for margin expansion in 2025 as volume improves and absorption improves in manufacturing. The company’s 2025 guidance of net sales above 2024 and adjusted EPS of $2.10–$2.30 reflects confidence in contractor demand, rising design services mix, and a favorable mix shift toward higher-margin upholstered and design-led products. Strong liquidity, deleveraging headroom, and robust cash flow support ongoing investments in international expansion, dealer-network optimization, and showroom modernization.
Key catalysts include: (1) execution of the 100% MillerKnoll Collective distribution target by FY2025, (2) sustained price realization benefits and ongoing cost synergies, (3) a more durable housing market which could lift retail demand, (4) continued product innovation and sustainability leadership that supports premium pricing. Valuation appears elevated versus several furniture peers based on current price/earnings discipline (peer multiples in the dataset show lower P/E ratios for peers like LZB, AMWD, BSET). This implies MillerKnoll may trade at a premium given its design-forward portfolio and margin trajectory, requiring ongoing evidence of demand acceleration and synergy realization to justify a higher multiple.
Investors should monitor: quarterly progress on contract backlogs and funnel-to-order conversion, the pace of international dealer onboarding and showroom expansion, retail same-store sales and margin trajectory, and the degree to which pricing benefits persist alongside any potential discounting pressure. If the company sustains its 2025 margin expansion, backlog progression, and product introductions, MillerKnoll could deliver meaningful upside driven by higher-margin mix and leveraged fixed-cost absorption.
Key Investment Factors
Growth Potential
Growth potential centers on (1) expanding MillerKnoll Showrooms domestically and internationally, (2) accelerating contract and retail order intake via digital-platform investments and enhanced dealer tools, (3) leveraging the synergy savings ($160m annualized) to fund margin expansion and share gains, (4) new product introductions across Knoll, Herman Miller, and associated brands, and (5) increasing upholstery and high-margin product mix through design services.
Profitability Risk
Main risks include a slower-than-expected housing market recovery impacting Retail; protracted contract win rates or delayed project activations; price competition and discounting pressure; currency and geopolitical exposure across international markets; and execution risk in integrating dealer networks and streamlining operations.
Financial Position
Financial strength is supported by a solid liquidity position (cash and equivalents $230.4m), robust operating cash flow ($78.4m in Q4), and a disciplined balance sheet with net debt/EBITDA of 2.63x. The company benefits from synergies that have materialized to a run-rate of $160m and an improving gross margin trajectory (Q4 gross margin 39.6%). The capital structure remains leveraged but within covenant limits, enabling continued investment in growth initiatives.
SWOT Analysis
Strengths
Diversified contract and retail exposure across Americas Contract, International Contract & Specialty, and Global Retail.
Strong margin resilience with Q4 2024 gross margin of 39.6% and adjusted operating margin of 8.3%.
Significant backlog ($684m) and improving order trends (Q4 new orders +3% YoY; Americas Contract orders +5.7%).
Robust cash generation and balance sheet strength (net debt/EBITDA 2.63x; $78m cash from operations in Q4).
Synergy realization from Knoll integration (annualized run-rate savings of $160m).
Strategic international expansion and dealer-network consolidation enhancing distribution footprint.
Weaknesses
Q4 2024 revenue declined YoY (-7.1%); organic decline in the quarter and softening housing market impacting Retail.
Reliance on cyclically sensitive sectors (office furniture, housing market) could amplify downside in a downturn.
Long project cycles in contract sector may delay revenue visibility despite growing funnel activity.
Dependency on channel partners and showroom economics could introduce execution risk in international expansion.
Opportunities
Scale international distribution and end-market penetration (100% MillerKnoll Collective distribution by FY2025).
Launch of 30+ new products and expanding high-margin upholstery offerings via design services.
Ongoing store openings and acquisitions to broaden omni-channel reach (DWR and Herman Miller networks).
Sustainability leadership (EcoVadis Gold, SEAL Award) as a differentiator to command premium pricing and win higher-margin projects.
Threats
Macroeconomic headwinds in housing and discretionary retail spending affecting Retail volumes.
Competitive intensity in contract furniture, including pricing pressures in large projects.
Supply chain disruptions or cost volatility (freight, labor) that could impact margins.
Slower-than-anticipated adoption of MillerKnoll’s international dealer network, delaying revenue realization.