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Updating FY25 and FY26 EPS and Revenue Estimates

Herein, we refresh our estimates and economic model for MillerKnoll after its release and conference call for 4QFY24, which ended May 2024. As noted in our earlier earnings analysis note dated June 27, 2024, management delivered strong margins, enabling it to beat estimates with the report. The margin performance benefited from cost discipline and sustained pricing benefits. We now project 1QFY25 consolidated sales of $886 million and non-GAAP diluted EPS of $0.39. Similarly, we have reduced our full-year revenue estimate to $3.67 billion and non-GAAP diluted EPS estimate to $2.15. Figure 1 shows our previous and new estimates. Figure 2 compares our 1QFY25 estimates with the details provided by management. In its April 2021 announcement of the agreement to acquire Knoll, management promised $100 million of “run rate” cost synergies (within two years of closing) as the key financial rationale for the deal. Subsequently, it ratcheted that target up to $160 million and noted that, as of 4Q24, the target was met despite challenging fundamentals. As noted in our earlier analysis note, MLKN’s consolidated revenue decline obscured an improving order trend and fundamentals, particularly at the top of the funnel. Accordingly, management was prudently conservative in its guidance because activity has not yet manifested into orders and increased backlog. When and if it sees those gains, we are confident it will deliver better revenue and earnings. We are conservatively projecting modest increases in orders and backlog (Figure 3), reflecting accelerating top-of-funnel activity and 4QFY24 order growth trends. Included in this note are a series of charts, both long term and near term, showing MLKN’s absolute and relative performance over several relevant periods.