What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-03-31 compared with 2025-01-06 · 270 added, 191 removed, 263 unchanged (64% of the section changed)

6 unchanged sentences

The Company's products are sold primarily through independent contract office furniture dealers, direct customer sales, owned and independent retailers and the Company’s eCommerce platforms.

The following is a summary of results for the three months ended November 30, 2024:

• Net sales were $970.4 million and orders were $921.9 million, representing an increase of 2.2% and decrease of 2.3%, respectively, when compared to the same quarter of the prior year.

This increase in sales for the current quarter marked the first period of year-over-year sales growth in two years.

On an organic basis, which excludes the impact of foreign currency translation and the impact of the closure of the HAY eCommerce channel in North America, Net sales were $968.1 million (*) and orders were $921.5 million (*) , representing an organic increase of 2.4% (*) and decrease of 1.9% (*) , respectively, when compared to the same quarter of the prior year.

• Gross margin in the second quarter was 38.8%, a decrease of 40 basis points when compared to the same quarter of the prior year, related primarily to unfavorable channel and product mix.

The Company has modified its reporting segments in accordance with changes in the organizational structure effective March 1, 2025, the last day of the third quarter of fiscal year 2025.

The Company has aligned internal management reporting to correspond to this new structure, resulting in the following changes to reporting segments.

• The activities related to the Maharam, Spinneybeck|FilzFelt, Knoll Textiles, and Edelman brands, which were previously reported within the International Contract & Specialty segment, have been moved to the North America Contract segment.

• The activities related to the Holly Hunt brand, which were previously reported within the International Contract & Specialty segment, have been moved to the Global Retail segment.

• The activities related to Latin America Contract, which were previously reported within the Americas Contract segment, have been moved to the International Contract segment.

Following these modifications, the Company's three reportable segments are North America Contract (formerly Americas Contract), International Contract (formerly International Contract & Specialty), and Global Retail.

The following is a summary of results for the three months ended March 1, 2025:

• Net sales were $876.2 million and orders were $853.1 million, representing an increase of 0.4% and 2.7%, respectively, when compared to the same quarter of the prior year.

On an organic basis, which excludes the impact of foreign currency translation and the impact of the closure of the North American HAY eCommerce channel within the Global Retail segment, Net sales were $885.8 million (*) and orders were $862.2 million (*) , representing an organic increase of 1.8% (*) and 4.1% (*) , respectively, when compared to the same quarter of the prior year.

• Gross margin in the third quarter was 37.9%, a decrease of 70 basis points when compared to the same quarter of the prior year, related primarily to unfavorable channel and product mix, lower fixed cost leverage, and higher commodity costs.

• Operating expenses increased by $120.4 million or 40.9% as compared to the same quarter of the prior year.

The increase was driven primarily by increased marketing spend, higher variable expense and higher compensation and benefit costs.

The increase was driven primarily by $130.0 million of indefinite-lived intangible impairment charges in the quarter, offset in part by lower incentive compensation expense as compared to the same quarter of the prior year.

• The effective tax rate was 88.3% compared to 16.0% for the same quarter of the prior year.

The change as compared to the prior year resulted primarily by a change in the mix of earnings within various tax jurisdictions.

• Diluted earnings per share was $0.49 as compared to diluted earnings per share of $0.45 in the prior year.

Adjusted diluted earnings per share was $0.55 (*) , a 6.8% (*) decrease as compared to prior year adjusted diluted earnings per share.

The change as compared to the prior year resulted primarily from the impact of the estimated annual effective tax rate on the current quarter pre-tax loss driven by the impairment of indefinite-lived intangible assets during the quarter.

• Diluted loss per share was $0.19 as compared to diluted earnings per share of $0.30 in the prior year.

Adjusted diluted earnings per share was $0.44 (*) , a 2.2% (*) decrease as compared to the prior year quarter adjusted diluted earnings per share.

(*) Non-GAAP measurements;

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The following summary includes the Company's view of the economic environment in which it operates:

• MillerKnoll finished the second quarter of fiscal year 2025 in line with our expectations.

Although most of our market segments continue to experience broad-based macroeconomic pressures, several areas of our business are showing signs of growth and the business has maintained the gross margin improvement that occurred in fiscal year 2024.

• The Americas Contract segment in the second quarter reported Net sales totaling $504.2 million, up 5.9% compared to the prior year period on a reported basis and up 6.2% (*) organically.

Americas Contract had new orders of $456.8 million, which was an increase of 4.4% from the prior year and and increase of 4.9% (*) on an organic basis.

This quarter marked our third consecutive period of order growth in the Americas Contract segment.

• The International Contract & Specialty segment delivered Net sales in the second quarter of $246.3 million, an increase of 2.1% from the year-ago period on a reported basis and an increase of 1.1% (*) organically.

New orders in this segment totaled $218.7 million, representing a year-over-year decrease of 6.5% on a reported basis and a decrease of 7.2% (*) organically.

• Net sales in the second quarter for the Global Retail segment totaled $219.9 million, a decrease of 5.3% over the same quarter last year on a reported basis and an decrease of 4.0% (*) organically.

Orders in the quarter totaled $246.4 million, down 9.6% compared to the same period last year on a reported basis and down 8.4% (*) organically.

Both sales and orders were impacted by a shift in timing of the cyber week holiday promotion period, which fell into both the second and third quarters of fiscal year 2025 and fell entirely within the second quarter last fiscal year.

The timing of this cyber week holiday promotion period shifted approximately $12 million in Net sales, and $27 million in orders from our fiscal second quarter into the third quarter.

• MillerKnoll's results in the third quarter of fiscal year 2025 reflect the advantage of our diversified business model, with relative strength in certain markets and channels mitigating softness in others, along with a disciplined focus on our cost structure amidst very dynamic macroeconomic conditions.

• The North America Contract segment in the third quarter reported Net sales totaling $468.2 million, up 1.4% compared to the prior year period on a reported basis and up 1.7% (*) organically.

North America Contract had new orders of $434.0 million, which was a decrease of 1.8% from the prior year and a decrease of 1.5% (*) on an organic basis.

• The International Contract segment delivered Net sales in the third quarter of $145.5 million, a decrease of 5.0% from the year-ago period on a reported basis and a decrease of 1.5% (*) organically.

New orders in this segment totaled $159.2 million, representing a year-over-year decrease of 1.6% on a reported basis and an increase of 1.4% (*) organically.

• Net sales in the third quarter for the Global Retail segment totaled $262.5 million, an increase of 1.9% over the same quarter last year on a reported basis and an increase of 3.9% (*) organically.

Orders in the quarter totaled $259.9 million, up 14.7% compared to the same period last year on a reported basis and up 16.9% (*) organically.

Both sales and orders were positively impacted by a shift in timing of the cyber week holiday promotion period, which fell into both the second and third quarters of fiscal year 2025 and fell entirely within the second quarter last fiscal year.

Although sales and orders in the quarter benefited from the shift in the timing of this year's holiday/cyber promotional period versus the prior year, orders were up over 4% in the segment and up 14% in the North America region, even after adjusting for this timing difference.

(*) Non-GAAP measurements;

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The fiscal year ending May 31, 2025 ("fiscal 2025") and the fiscal year ended June 1, 2024 ("fiscal 2024") both contain 52 weeks.

The remaining sections within Item 2 include additional analysis of the three and six months ended November 30, 2024, including discussion of significant variances compared to the prior year periods.

The remaining sections within Item 2 include additional analysis of the three and nine months ended March 1, 2025, including discussion of significant variances compared to the prior year periods.

Reconciliation of Non-GAAP Financial Measures

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Adjusted Earnings per Share and Organic Growth (Decline).

Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact from amortization of Knoll purchased intangibles, integration charges, restructuring expenses, Knoll pension plan termination charges and the related tax effect of these adjustments.

Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact from amortization of Knoll purchased intangibles, integration charges, restructuring expenses, impairment charges, Knoll pension plan termination charges and the related tax effect of these adjustments.

These adjustments are described further below.

Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects and the impact of the closure of the HAY eCommerce channel in North America.

Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects and the impact of the closure of the North America HAY eCommerce channel in the Global Retail segment.

The adjustments made to arrive at these non-GAAP financial measures are as follows:

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Knoll integration-related costs include severance, asset impairment charges associated with lease and operations facility consolidation activity, and expenses related to synergy realization efforts and reorganization initiatives.

• Impairment charges:

Includes non-cash, pre-tax charges for the impairment of the Knoll and Muuto trade names as well as impairment of goodwill attributed to the Global Retail and Holly Hunt reporting units.

• Restructuring charges:

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Three Months Ended

November 30, 2024

Americas Contract International Contract & Specialty Global Retail Total

March 1, 2025

North America Contract International Contract Global Retail Total

Net sales, as reported $ 468.2 $ 145.5 $ 262.5 $ 876.2

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Three Months Ended

December 2, 2023

Americas Contract International Contract & Specialty Global Retail Total

March 2, 2024

North America Contract International Contract Global Retail Total

Net sales, as reported $ 461.7 $ 153.1 $ 257.5 $ 872.3

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(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period.

Six Months Ended

November 30, 2024

Americas Contract International Contract & Specialty Global Retail Total

Nine Months Ended

March 1, 2025

North America Contract International Contract Global Retail Total

Net sales, as reported $ 1,469.1 $ 474.3 $ 764.7 $ 2,708.1

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% change from PY (0.7) % 1.7 % (0.9) % (0.3) %

Six Months Ended

December 2, 2023

Americas Contract International Contract & Specialty Global Retail Total

Nine Months Ended

March 2, 2024

North America Contract International Contract Global Retail Total

Net sales, as reported $ 1,481.2 $ 471.9 $ 786.4 $ 2,739.5

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Three Months Ended

November 30, 2024

Americas Contract International Contract & Specialty Global Retail Total

March 1, 2025

North America Contract International Contract Global Retail Total

Orders, as reported $ 434.0 $ 159.2 $ 259.9 $ 853.1

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Three Months Ended

December 2, 2023

Americas Contract International Contract & Specialty Global Retail Total

March 2, 2024

North America Contract International Contract Global Retail Total

Orders, as reported $ 441.9 $ 161.8 $ 226.6 $ 830.3

2 unchanged sentences

(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period.

Six Months Ended

November 30, 2024

Americas Contract International Contract & Specialty Global Retail Total

Nine Months Ended

March 1, 2025

North America Contract International Contract Global Retail Total

Orders, as reported $ 1,453.4 $ 476.4 $ 781.1 $ 2,710.9

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% change from PY 3.0 % — % 0.7 % 1.8 %

Six Months Ended

December 2, 2023

Americas Contract International Contract & Specialty Global Retail Total

Nine Months Ended

March 2, 2024

North America Contract International Contract Global Retail Total

Orders, as reported $ 1,413.3 $ 484.7 $ 790.0 $ 2,688.0

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The following table reconciles earnings per share - diluted to adjusted earnings per share - diluted for the periods ended as indicated below:

Three Months Ended Six Months Ended

November 30, 2024 December 2, 2023 November 30, 2024 December 2, 2023

Earnings per share - diluted $ 0.49 $ 0.45 $ 0.47 $ 0.67

Three Months Ended Nine Months Ended

March 1, 2025 March 2, 2024 March 1, 2025 March 2, 2024

(Loss) earnings per share - diluted $ (0.19) $ 0.30 $ 0.29 $ 0.97

Amortization of Knoll purchased intangibles 0.09 0.08 0.25 0.24

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Restructuring charges 0.06 0.02 0.06 0.10

Impairment charges 1.91 — 1.85 —

Knoll pension plan termination charges — — 0.01 —

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Key Highlights

The following table presents certain key highlights from the results of operations for the three and six months ended:

Three Months Ended Six Months Ended

(In millions, except share data) November 30, 2024 December 2, 2023 % Change November 30, 2024 December 2, 2023 % Change

The following table presents certain key highlights from the results of operations for the three and nine months ended:

Three Months Ended Nine Months Ended

(In millions, except share data) March 1, 2025 March 2, 2024 % Change March 1, 2025 March 2, 2024 % Change

Net sales $ 876.2 $ 872.3 0.4 % $ 2,708.1 $ 2,739.5 (1.1) %

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Operating expenses 414.6 294.2 40.9 % 1,050.2 923.6 13.7 %

Operating earnings 62.5 60.4 3.5 % 77.7 100.7 (22.8) %

Operating (loss) earnings (82.2) 42.8 (292.1) % (4.5) 143.5 (103.1) %

Other expenses, net 18.6 15.3 21.6 % 53.1 50.6 4.9 %

Earnings before income taxes and equity income 44.9 44.3 1.4 % 43.2 65.4 (33.9) %

Income tax expense 9.8 9.5 3.2 % 8.7 14.6 (40.4) %

Equity income (loss) from nonconsolidated affiliates, net of tax 0.1 (0.4) (125.0) % 0.2 (0.3) (166.7) %

Net earnings 35.2 34.4 2.3 % 34.7 50.5 (31.3) %

(Loss) earnings before income taxes and equity income (100.8) 27.5 (466.5) % (57.6) 92.9 (162.0) %

Income tax (benefit) expense (89.0) 4.4 (2,122.7) % (80.3) 19.0 (522.6) %

Equity income (loss) from nonconsolidated affiliates, net of tax 0.1 — N/A 0.3 (0.3) (200.0) %

Net (loss) earnings (11.7) 23.1 (150.6) % 23.0 73.6 (68.8) %

Net earnings attributable to redeemable noncontrolling interests 1.0 0.9 11.1 % 2.8 1.2 133.3 %

Net earnings attributable to MillerKnoll, Inc.

Net (loss) earnings attributable to MillerKnoll, Inc.

$ (12.7) $ 22.2 (157.2) % $ 20.2 $ 72.4 (72.1) %

Earnings per share - basic $ 0.49 $ 0.45 8.9 % $ 0.47 $ 0.67 (29.9) %

(Loss) earnings per share - basic $ (0.19) $ 0.31 (161.3) % $ 0.29 $ 0.98 (70.4) %

Orders $ 853.1 $ 830.3 2.7 % $ 2,710.9 $ 2,688.0 0.9 %

Backlog $ 686.4 $ 639.4 7.4 %

The following table presents select components of the Company's Condensed Consolidated Statements of Comprehensive (Loss) Income as a percentage of Net sales, for the three and six months ended:

Three Months Ended Six Months Ended

November 30, 2024 December 2, 2023 November 30, 2024 December 2, 2023

The following table presents select components of the Company's Condensed Consolidated Statements of Comprehensive (Loss) Income as a percentage of Net sales, for the three and nine months ended:

Three Months Ended Nine Months Ended

March 1, 2025 March 2, 2024 March 1, 2025 March 2, 2024

Net sales 100.0 % 100.0 % 100.0 % 100.0 %

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Operating expenses 47.3 % 33.7 % 38.8 % 33.7 %

Operating earnings 6.4 % 6.4 % 4.2 % 5.4 %

Operating (loss) earnings (9.4) % 4.9 % (0.2) % 5.2 %

Other expenses, net 2.1 % 1.8 % 2.0 % 1.8 %

Earnings before income taxes and equity income 4.6 % 4.7 % 2.4 % 3.5 %

Income tax expense 1.0 % 1.0 % 0.5 % 0.8 %

(Loss) earnings before income taxes and equity income (11.5) % 3.2 % (2.1) % 3.4 %

Income tax (benefit) expense (10.2) % 0.5 % (3.0) % 0.7 %

Equity income (loss) from nonconsolidated affiliates, net of tax — % — % — % — %

Net earnings 3.6 % 3.6 % 1.9 % 2.7 %

Net (loss) earnings (1.3) % 2.6 % 0.8 % 2.7 %

Net earnings attributable to redeemable noncontrolling interests 0.1 % 0.1 % 0.1 % — %

Net earnings attributable to MillerKnoll, Inc.

Net (loss) earnings attributable to MillerKnoll, Inc.

(1.4) % 2.5 % 0.7 % 2.6 %

The following chart presents graphically the primary drivers of the year-over-year change in Net sales for the three and six months ended November 30, 2024.

The following chart presents graphically the primary drivers of the year-over-year change in Net sales for the three and nine months ended March 1, 2025.

The amounts presented in the graph are expressed in millions and have been rounded.

Net sales increased $20.9 million or 2.2% in the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024.

Net sales increased $3.9 million or 0.4% in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024.

The following items contributed to the change:

• Increased sales volume within the Americas Contract and International Contract & Specialty segments of approximately $26 million and $6 million, respectively;

• Increased sales volume within the Global Retail and North America Contract segments of approximately $9 million and $7 million, respectively;

• Price increases, net of incremental discounting, which drove an increase in Net sales of approximately $1 million.

• Foreign currency translation increased Net sales by approximately $2 million.

Offset in part by:

• Decreased sales volume within the Global Retail segment of approximately $13 million, driven primarily by a shift in the timing of the holiday cyber promotional period, which fell across both the second and third quarters of the current year.

• Foreign currency translation decreased Net sales by approximately $10 million.

• Decrease of $2 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year.

Net sales decreased $35.3 million or 1.9% in the first six months of fiscal 2025 compared to the first six months of fiscal 2024.

• Decreased sales volume within the International Contract segment of approximately $1 million.

Net sales decreased $31.4 million or 1.1% in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024.

The following items contributed to the change:

• Decreased sales volume within the Americas Contract, Global Retail and International Contract & Specialty segments of approximately $24 million, $9 million and $4 million, respectively.

• Decreased sales volume within the North America Contract and Global Retail segments of approximately $30 million and $12 million, respectively.

• Decrease of $12 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year.

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Offset in part by:

• Increased sales volume within the International Contract segment of approximately $18 million.

• Price increases, net of incremental discounting, which drove an increase in Net sales of approximately $14 million.

Gross margin was 38.8% in the second quarter of fiscal 2025 as compared to 39.2% in the second quarter of fiscal 2024.

Gross margin was 37.9% in the third quarter of fiscal 2025 as compared to 38.6% in the third quarter of fiscal 2024.

The following factors summarize the major drivers of the year-over-year change in gross margin percentage:

• Unfavorable product mix negatively impacted margin by approximately 140 basis points.

Offset in part by:

• Reduced freight and product distribution costs, as compared to the same period of the prior year, which increased gross margin by approximately 40 basis points.

• Leverage on higher sales volumes and increased production levels positively impacted margin by approximately 40 basis points.

• Price increases, net of incremental discounting, contributed to margin improvement of approximately 20 basis points.

Gross margin was 38.9% in the six months ended November 30, 2024, as compared to 39.1% for the same period in the prior fiscal year.

• Increased commodity costs negatively impacted margin by approximately 40 basis points.

• Unfavorable channel and product mix negatively impacted margin by approximately 30 basis points.

• Loss of leverage on lower sales volumes negatively impacted margin by approximately 30 basis points.

These factors were offset in part by:

• Reduced freight and product distribution costs, net of freight revenue, as compared to the same period of the prior year which increased gross margin by approximately 30 basis points.

Gross margin was 38.6% in the nine months ended March 1, 2025, as compared to 39.0% for the same period in the prior fiscal year.

The following factors summarize the major drivers of the year-over-year change in gross margin percentage:

1 unchanged sentence

• Unfavorable channel and product mix negatively impacted margin by approximately 20 basis points.

• Increased commodity costs negatively impacted margin by approximately 20 basis points.

These factors were offset in part by:

• Price increases, net of incremental discounting, contributed to margin improvement of approximately 30 basis points.

• Reduced freight and product distribution costs, as compared to the same period of the prior year which increased gross margin by approximately 10 basis points.

• Reduced freight and product distribution costs, net of freight revenue, as compared to the same period of the prior year.

Operating Expenses

The following chart presents graphically the primary drivers of the year-over-year change in Operating expenses for the three and six months ended November 30, 2024.

The following chart presents graphically the primary drivers of the year-over-year change in Operating expenses for the three and nine months ended March 1, 2025.

The amounts presented in the graphs are expressed in millions and have been rounded.

Operating expenses increased by $2.9 million or 0.9% in the second quarter of fiscal 2025 compared to the prior year period.

Operating expenses increased by $120.4 million or 40.9% in the third quarter of fiscal 2025 compared to the prior year period.

The following factors contributed to the change:

• Variable selling and marketing costs increased by approximately $6 million driven by increased net sales as compared to the prior year period ;

• Compensation and benefit costs, which increased approximately $4 million;

• Foreign currency translation increased Operating expenses by approximately $2 million.

• Impairment charges of $130 million related to goodwill attributed to the Holly Hunt and Global Retail reporting units as well as related to the Knoll and Muuto indefinite-lived trade name intangible assets in the current year period.

• Increased restructuring charges related primarily to workforce reduction actions of $3 million as compared to the prior year period.

Offset in part by:

• Acquisition related integration charges contributed a decrease in Operating expenses as compared to the same period of the prior year of approximately $7 million;

• Restructuring charges related to reductions in the Company's workforce in the prior year of approximately $2 million that did not occur in the current year.

Operating expenses increased by $6.2 million or 1.0% in the first six months of fiscal 2025 compared to the first six months of fiscal 2024.

• Incentive compensation which decreased approximately $12 million;

• Decreased foreign currency translation, acquisition related integration charges, and variable selling and marketing costs as compared to the prior year period.

Operating expenses increased by $126.6 million or 13.7% in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024.

The following factors contributed to the change:

• Acquisition related integration charges contributed an increase in Operating expenses as compared to the same period of the prior year of approximately $18 million;

• Foreign currency translation increased Operating expenses by approximately $2 million;

• Compensation and benefit costs increased approximately $1 million.

• Knoll acquisition related integration charges contributed an increase in Operating expenses as compared to the same period of the prior year of approximately $10 million.

• Selling and marketing costs, which increased by approximately $4 million.

These increases were offset in part by:

• Variable selling and marketing costs, which decreased by approximately $7 million driven by variability on lower net sales and the impact of cost synergies achieved through the acquisition of Knoll;

• Restructuring charges related to reductions in the Company's workforce in the prior year of approximately $7 million that did not occur in the current year.

• Incentive compensation which decreased by approximately $12 million.

• Decreased restructuring charges related to workforce reduction actions taken as compared to the prior year period of approximately $5 million.

Other Income/Expense

During the three months ended November 30, 2024, net Other expense was $17.6 million, representing an increase of $1.5 million compared to the same period in the prior year, driven primarily by increased foreign currency losses.

During the six months ended November 30, 2024, net Other expense was $34.5 million, representing a decrease of $0.8 million compared to the same period in the prior year.

This change is driven primarily by increased interest income in the current year offset in part by increased interest expense as compared to the same period of the prior year.

During the three months ended March 1, 2025, net Other expense was $18.6 million, representing an increase of $3.3 million compared to the same period in the prior year.

The change is driven primarily by:

• Reduced net periodic benefit income due to the termination of the Knoll pension plan in the current year.

• Reduced interest income in the current year.

These factors were offset in part by a reduction in foreign currency losses as compared to the same period of the prior year.

During the nine months ended March 1, 2025, net Other expense was $53.1 million, representing an increase of $2.5 million compared to the same period in the prior year.

This change is driven primarily by:

• Increased interest expense in the current year as compared to the prior year;

• Reduced net periodic benefit income due to the termination of the Knoll pension plan in the current year.

These factors were offset in part by a reduction in foreign currency losses as compared to the same period of the prior year.

See Note 9 of the Condensed Consolidated Financial Statements for additional information.

2 unchanged sentences

These operating segments are determined on the basis of how the Company internally reports and evaluates financial information used to make operating decisions.

The segments identified by the Company are Americas Contract, International Contract & Specialty, and Global Retail.

Effective as of March 1, 2025, the last day of the third quarter of fiscal 2025, the Company implemented an organizational change that resulted in a change in the reportable segments.

The Company has recast historical results to reflect this change.

Below is a description of each reportable segment.

The North America Contract segment includes the operations associated with the design, sourcing, manufacture and sale of furniture products directly or indirectly through an independent dealership network for office, healthcare, and educational environments throughout the United States and Canada as well as the global operations of the Spinneybeck|FilzFelt, Maharam, Edelman, and Knoll Textile brands.

The International Contract segment includes the operations associated with the design, sourcing, manufacture and sale of furniture products, indirectly or directly through an independent dealership network in Europe, the Middle East, Africa, Asia-Pacific and Latin America.

The Global Retail segment includes global operations associated with the sale of modern design furnishings and accessories to third party retailers, as well as direct to consumer sales through eCommerce, direct-mail catalogs, and physical retail stores, along with the global operations of the Holly Hunt brand.

Unallocated expenses are reported within the Corporate category.

For descriptions of each segment, refer to Note 14 of the Condensed Consolidated Financial Statements.

The charts below present the relative mix of Net sales and Operating earnings across each of the Company's segments during the three and six month periods ended November 30, 2024.

The charts below present the relative mix of Net sales and Operating earnings across each of the Company's segments during the three and nine month periods ended March 1, 2025.

This is followed by a discussion of the Company's results, by reportable segment.

The amounts presented in the charts are in millions and have been rounded.

Americas Contract

Three Months Ended Six Months Ended

(Dollars in millions) November 30, 2024 December 2, 2023 Change November 30, 2024 December 2, 2023 Change

North America Contract

Three Months Ended Nine Months Ended

(Dollars in millions) March 1, 2025 March 2, 2024 Change March 1, 2025 March 2, 2024 Change

Net sales $ 468.2 $ 461.7 $ 6.5 $ 1,469.1 $ 1,481.2 $ (12.1)

5 unchanged sentences

• Increased sales volumes within the segment of approximately $7 million;

• Price increases, net of incremental discounting of $4 million;

offset in part by

• Unfavorable foreign currency translation of approximately $1 million.

For the six month comparative period, Net sales decreased 0.8%, or 0.5% (*) on an organic basis, over the prior year period due to:

For the nine month comparative period, Net sales decreased 0.8%, or 0.7% (*) on an organic basis, over the prior year period due to:

• Decreased volumes within the segment of approximately $30 million;

1 unchanged sentence

offset in part by

• Price increases, net of incremental discounting of $19 million;

• Price increases, net of incremental discounting of approximately $20 million.

(*) Non-GAAP measurements;

see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."

For the three month comparative period, operating earnings increased $12.4 million, or 35.3%, over the prior year period due to:

• Increased Gross margin of $10.5 million due to the increase in net sales discussed above and an increase in gross margin percentage of 20 basis points.

The increase in gross margin percentage was due primarily to:

◦ The impact of incremental list price increases, net of contract price discounting which provided an approximately 50 basis point improvement over the prior year;

◦ Leverage of fixed costs on increased production volumes w hich had a positive impact on margin of approximately 70 basis points.

These increases were offset by:

◦ Unfavorable product mix which had a negative impact on margin of approximately 100 basis points.

• Decreased Operating expenses of $1.9 million driven primarily by:

◦ Decrease in acquisition related integration costs of approximately $6 million in the current period.

Offset in part by:

◦ Increase of $4 million related to costs associated with distribution channel and technology initiatives.

For the six month comparative period, operating earnings decreased $11.9 million, or 15.6%, over the prior year period due to:

For the three month comparative period, operating earnings decreased $8.5 million, or 33.3%, over the prior year period due to:

• Decreased Gross margin of $2.0 million and a decrease in gross margin percentage of 90 basis points.

The decrease in gross margin percentage was due primarily to:

◦ Increased commodity costs negatively impacted margin by approximately 30 basis points;

◦ Loss of leverage of fixed costs w hich had a negative impact on margin of approximately 60 basis points.

• Increased Operating expenses of $6.5 million driven primarily by:

◦ Increased impairment and restructuring charges in the quarter offset in part by reduced incentive compensation as compared to the prior year period.

For the nine month comparative period, operating earnings decreased $23.9 million, or 22.4%, over the prior year period due to:

• Decreased Gross margin of $17.0 million due to the decrease in sales discussed above and a decrease in gross margin percentage of 80 basis points.

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◦ Increased commodity and product distribution costs which had a negative impact on margin of 20 basis points.

◦ Increased freight and distribution charges negatively impacted margin by 20 basis points.

These changes were offset in part by:

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The following factors contributed to the change:

◦ Increase in acquisition related integration costs of approximately $13 million in the current period.

◦ Trade name impairment charges of $18 million in the current year period.

◦ Increased acquisition related integration costs of approximately $6 million in the current period.

Offset in part by:

◦ Decreased variable selling and marketing costs of $7 million;

◦ A decrease of approximately $4 million in restructuring charges related to reductions in the Company's workforce taken in the prior year;

◦ A decrease of approximately $4 million in compensation and benefit costs.

International Contract & Specialty

Three Months Ended Six Months Ended

(Dollars in millions) November 30, 2024 December 2, 2023 Change November 30, 2024 December 2, 2023 Change

◦ A decrease of approximately $7 million in incentive compensation.

◦ Decreased selling and marketing costs of approximately $6 million.

◦ A decrease of approximately $4 million in restructuring charges related to reductions in the Company's workforce.

International Contract

Three Months Ended Nine Months Ended

(Dollars in millions) March 1, 2025 March 2, 2024 Change March 1, 2025 March 2, 2024 Change

Net sales $ 145.5 $ 153.1 $ (7.6) $ 474.3 $ 471.9 $ 2.4

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Operating earnings % 6.8 % 11.4 % (4.6) % 8.8 % 9.0 % (0.2) %

For the three month comparative period, Net sales increased 2.1%, or 1.1% (*) on an organic basis, over the prior year period due to:

• Increase in sales volume of approximately $6 million, which was driven by sales growth within the APMEA and Europe regions;

• Favorable foreign currency translation of approximately $2 million;

offset in part by

For the three month comparative period, Net sales decreased 5.0%, or 1.5% (*) on an organic basis, over the prior year period due to:

• Unfavorable foreign currency translation of approximately $5 million;

• Incremental discounting, net of price increases, which negatively impacted sales approximately $1 million;

For the six month comparative period, Net sales decreased 2.1%, or 2.5% (*) on an organic basis, over the prior year period due to:

• Incremental discounting, net of price increases, which negatively impacted sales by approximately $7 million;

• Decreased sales volume of approximately $4 million, driven by lower sales volume within the textiles and Holly Hunt businesses, which more than offset volume increases in Europe and APMEA;

• Decrease in sales volume of approximately $1 million.

For the nine month comparative period, Net sales increased 0.5%, or 1.7% (*) on an organic basis, over the prior year period due to:

• Increased sales volume of approximately $18 million, driven by APMEA and portions of mainland Europe;

offset in part by:

• Favorable foreign currency translation of approximately $2 million.

• Incremental discounting, net of price increases, which negatively impacted sales by approximately $10 million;

• Unfavorable foreign currency translation of approximately $5 million.

(*) Non-GAAP measurements;

see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."

Operating earnings were $23.8 million in both the second quarter of fiscal 2025 and the second quarter of fiscal 2024.

Although Operating earnings were flat to the prior year, summarized below are factors that most significantly impacted Operating earnings during the quarter:

• Increased Gross margin of $0.8 million due to the increase in net sales discussed above, offset by a decease in gross margin percentage of 50 basis points due primarily to incremental discounting, net of price increases.

For the three month comparative period, operating earnings decreased $7.6 million or 43.4%, over the prior year period due to:

• Decreased Gross margin of $4.9 million due to the decrease in sales explained above and a decrease in gross margin percentage of 140 basis points.

The decrease in gross margin percentage was due primarily to:

◦ A decrease in gross margin percentage of 70 basis points due primarily to incremental discounting, net of price increases;

◦ Unfavorable product and business mix negatively impacted margin by 50 basis points;

◦ Loss of leverage of fixed costs on lower sales volumes which had a negative impact on margin of approximately 50 basis points.

These decreases were offset in part by:

◦ Favorable foreign currency translation positively impacted margin by 30 basis points.

• Increased Operating expenses of $2.7 million.

The following factors contributed to the change:

◦ Increase in variable selling and marketing costs of $3 million.

◦ Increase in restructuring and impairment charges during the quarter of $4 million.

This increase was offset in part by:

◦ Decreased variable compensation and benefit costs and benefits from cost synergies achieved through the acquisition of Knoll .

For the six month comparative period, operating earnings decreased $2.1 million, or 6.0%, over the prior year period due to:

• Decreased Gross margin of $1 million due to the decrease in sales explained above, offset in part by an increase in gross margin percentage of 70 basis points due primarily to favorable product and business mix.

• Increased Operating expenses of $1 million which was largely due to an increase in integration related charges in the current year of $4 million.

This increase was offset in part by a decrease of $3 million in variable compensation and benefit costs and cost synergies achieved through the acquisition of Knoll.

◦ Foreign currency translation, which decreased operating expenses.

For the nine month comparative period, operating earnings decreased $1.1 million, or 2.6%, over the prior year period due to:

• Increased Gross margin of $4.9 million due to the increase in sales explained above and an increase in gross margin percentage of 90 basis points.

The increase in gross margin percentage was due primarily to favorable product and business mix which increased margin by approximately 120 basis points offset in part incremental discounting, net of price increases which had a negative impact on margin.

• Operating expenses increased slightly from the prior year.

An increase in restructuring charges, acquisition related integration charges, and impairment charges was partially offset by reduced incentive compensation in the current period as compared to the prior year.

Global Retail

Three Months Ended Six Months Ended

(Dollars in millions) November 30, 2024 December 2, 2023 Change November 30, 2024 December 2, 2023 Change

Three Months Ended Nine Months Ended

(Dollars in millions) March 1, 2025 March 2, 2024 Change March 1, 2025 March 2, 2024 Change

Net sales $ 262.5 $ 257.5 $ 5.0 $ 764.7 $ 786.4 $ (21.7)

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Gross margin % 45.4 % 45.4 % — % 45.8 % 45.8 % — %

Operating earnings 8.7 14.7 (6.0) 13.2 16.9 (3.7)

Operating (loss) earnings (94.4) 12.1 (106.5) (80.8) 34.5 (115.3)

Operating earnings % (36.0) % 4.7 % (40.7) % (10.6) % 4.4 % (15.0) %

For the three month comparative period, Net sales decreased 5.3%, and 4.0% (*) on an organic basis, over the prior year period due to:

• A decrease in sales volume of approximately $13 million, driven primarily by a shift in timing of the cyber week holiday promotional period.

For the three month comparative period, Net sales increased 1.9%, and 3.9% (*) on an organic basis, over the prior year period due to:

• An increase in sales volume of approximately $9 million, driven primarily by a shift in timing of the cyber week holiday promotional period.

In the current year, the promotional period was split between the second and third quarters;

in the prior year the entire promotional period was included in the second quarter;

• Decrease of approximately $5 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year;

offset in part by:

• Price increases, net of incremental discounting which increased sales by approximately $1 million;

• Favorable foreign currency translation of approximately $1 million.

For the six month comparative period, Net sales decreased 4.2%, and 2.0% (*) on an organic basis, over the prior year period due to:

offset in part by:

• Unfavorable foreign currency translation of approximately $3 million;

• Decrease of approximately $2 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year.

• A decrease in sales volume of approximately $9 million, driven in part by the shift in timing for how the cyber week promotional period fell within our fiscal quarters ;

For the nine month comparative period, Net sales decreased 2.8%, and 0.9% (*) on an organic basis, over the prior year period due to:

• Decrease of approximately $12 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year;

• A decrease in sales volume of approximately $12 million;

• Unfavorable foreign currency translation of approximately $3 million;

offset in part by

• Price increases, net of incremental discounting, which increased sales by $1 million.

• Price increases, net of incremental discounting, which increased sales by approximately $4 million.

(*) Non-GAAP measurements;

see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."

For the three month comparative period, Operating earnings decreased $6.0 million or 40.8% over the prior year period due to:

• Decreased Gross margin of $6.3 million due to decrease in net sales discussed above and the gross margin percentage decrease of 30 basis points which was attributable to:

◦ The impact of increased inventory costs as compared to the prior year and loss of leverage of fixed costs negatively impacted margin by 170 basis points.

This decrease was offset in part by benefits realized from price increases, net of incremental discounting which positively impacted margin by 100 basis points as well as reduced product distribution costs which positively impacted margin by approximately 40 basis points.

• Decreased Operating expenses of $0.3 million primarily related to lower acquisition related integration costs and restructuring costs in the current period as compared to the prior year.

These increases were offset in part by increased variable selling costs in the current period.

For the six month comparative period, Operating earnings decreased $3.7 million, or 21.9% over the prior year period due to:

• Decreased Gross margin of $5.6 million due to the decrease in net sales discussed above, offset by an increase in gross margin percentage of 60 basis points.

The increase in gross margin percentage was due primarily to:

◦ Decreased product distribution costs and favorable product mix which had a favorable impact on gross margin percentage of 180 basis points;

◦ The impact of incremental list price increases, net of discounting, that increased gross margin percentage by 30 basis points.

For the three month comparative period, Operating earnings decreased $106.5 million over the prior year period due to:

• Decreased Gross margin of $2.3 million.

Gross margin percentage was flat to the prior year.

Summarized below are factors that most significantly impacted Gross margin percentage during the quarter:

◦ Benefits realized from price increases, net of incremental discounting which positively impacted margin by 20 basis points;

◦ Reduced freight and product distribution costs, net of freight revenue, as compared to the same period of the prior year which positively impacted margin by 20 basis points;

offset in part by:

◦ Loss of leverage of fixed costs negatively impacted margin by 40 basis points.

• Increased Operating expenses of $108.8 million primarily related to impairment charges incurred in the current quarter.

For the nine month comparative period, Operating earnings decreased $115.3 million over the prior year period due to:

• Decreased Gross margin of $9.3 million due to the decrease in net sales discussed above.

Gross margin percentage was flat to the prior year.

Summarized below are factors that most significantly impacted Gross margin percentage during the period:

◦ Reduced freight and product distribution costs, net of freight revenue, as compared to the same period of the prior year and favorable product mix which had a favorable impact on gross margin percentage of approximately 120 basis points;

◦ The impact of incremental list price increases, net of discounting, that increased gross margin percentage by approximately 20 basis points.

These increases were offset in part by:

◦ The impact of increased inventory costs as compared to the prior year which negatively impacted margin by 100 basis points.

◦ Loss of leverage on fixed costs attributable to lower sales volumes as compared to the prior year which had an unfavorable impact on gross margin percentage of 50 basis points.

• Decreased Operating expenses of $2 million driven by restructuring charges related to reductions in the Company's workforce in the prior year that did not occur in the current year and benefit from the realization of cost synergies achieved through the acquisition of Knoll.

Corporate unallocated expenses totaled $17.5 million for the second quarter of fiscal 2025, an increase of $4.3 million from the second quarter of fiscal 2024 related primarily to higher stock based compensation expense.

Corporate unallocated expenses totaled $33.2 million for the first six months of fiscal 2025, an increase of $5.3 million from the same period of fiscal 2024 related primarily to higher stock based compensation expense.

◦ The impact of increased inventory costs as compared to the prior year which negatively impacted margin by approximately 110 basis points.

◦ Loss of leverage on fixed costs attributable to lower sales volumes as compared to the prior year which had an unfavorable impact on gross margin percentage of approximately 30 basis points.

• Increased Operating expenses of $106.0 million primarily related to impairment charges incurred in the current quarter.

Corporate unallocated expenses totaled $14.7 million for the third quarter of fiscal 2025, an increase of $2.4 million from the third quarter of fiscal 2024 related primarily to higher stock based compensation expense.

Corporate unallocated expenses totaled $47.9 million for the first nine months of fiscal 2025, an increase of $7.7 million from the same period of fiscal 2024 related primarily to higher stock based compensation expense.

Liquidity and Capital Resources

The table below summarizes the net change in Cash and cash equivalents for the six months ended as indicated.

(In millions) November 30, 2024 December 2, 2023

The table below summarizes the net change in Cash and cash equivalents for the nine months ended as indicated.

(In millions) March 1, 2025 March 2, 2024

Cash provided by (used in):

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Cash Flows - Operating Activities

Net cash provided by operating activities for the six months ended November 30, 2024, totaled $76.4 million compared to $213.4 million in the same period of the prior year.

The decrease in cash inflow is due primarily to lower net income and changes in working capital.

Net cash provided by operating activities for the nine months ended March 1, 2025, totaled $138.4 million compared to $273.9 million in the same period of the prior year.

The decrease in cash inflow is due primarily to lower net income recorded in the current period as well as changes in working capital.

Our working capital consists primarily of receivables from customers, inventory, prepaid expenses, accounts payable, accrued compensation, and accrued other expenses.

Working capital changes were primarily affected by payment of variable compensation in the six months ended November 30, 2024, as well as timing of collection of our receivables.

Working capital changes were primarily affected by payment of variable compensation in the nine months ended March 1, 2025, the r ecognition of the tax benefit of the current quarter’s operating loss, as well as timing of collection of our receivables and inventory on hand.

Cash Flows - Investing Activities

Cash used in investing activities for the six months ended November 30, 2024, was $44.8 million, as compared to $41.3 million in the same period of the prior year.

The change in cash outflow in the current year, compared to the prior year, was primarily due to increased capital expenditures in the current year offset in part by:

• A decrease in the total volume of notes receivable entered into with certain independently owned dealers in the current quarter as compared to the same period of the prior year;

• In the six months ended December 2, 2023, the Company received $3.5 million of proceeds related to the sale of its investment in Maars.

At the end of the second quarter of fiscal 2025, there were outstanding commitments for capital purchases of $17.1 million.

Cash used in investing activities for the nine months ended March 1, 2025, was $60.3 million, as compared to $61.0 million in the same period of the prior year.

The change in cash outflow in the current year, compared to the prior year, was primarily due to the following:

• Cash proceeds of $6.0 million in the current period related to the sale of a manufacturing facility located in Wisconsin;

• A decrease in the total volume of notes receivable entered into with certain independently owned dealers in the current period as compared to the same period of the prior year;

offset in part by:

• In the nine months ended March 2, 2024, the Company received $3.5 million of proceeds related to the sale of its investment in Maars;

• Increased capital expenditures in the current year.

At the end of the third quarter of fiscal 2025, there were outstanding commitments for capital purchases of $20.6 million.

The Company plans to fund these commitments through a combination of cash on hand and cash flows from operations.

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This compares to full-year capital spending of $78.4 million in fiscal 2024.

Capital expenditures for the first six months of fiscal 2025 were $44.9 million compared to $39.9 million for the six months ended December 2, 2023.

Capital expenditures for the first nine months of fiscal 2025 were $68.1 million compared to $56.5 million for the nine months ended March 2, 2024.

Cash Flows - Financing Activities

Cash used in financing activities for the six months ended November 30, 2024, was $33.9 million, as compared to $170.8 million in the same period of the prior year.

The decrease in cash used in the current quarter, compared to the prior year, was primarily due to:

Cash used in financing activities for the nine months ended March 1, 2025, was $127.6 million, as compared to $213.1 million in the same period of the prior year.

The decrease in cash used in the current year, compared to the prior year, was primarily due to:

• The Company repurchased 3,286,029 shares at a cost of $84.8 million in the current year as compared to 4,594,116 share repurchases totaling $101.0 million in the same period of the prior year.

• Net borrowings on the credit agreement of $24.0 million in the current year compared to net payments of $48.8 million in the same period of the prior year.

This was offset in part by:

• The Company repurchased 2,500,379 shares at a cost of $66.9 million in the current year as compared to 3,060,686 share repurchases totaling $60.0 million in the same period of the prior year.

• Increased payments on our term loans in the current period as compared to the same period of the prior year of $7.5 million.

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The Company maintains an open market share repurchase program under our existing share repurchase authorization and may repurchase shares from time to time based on management’s evaluation of market conditions, share price and other factors.

At the end of the second quarter of fiscal 2025, the Company had a well-positioned balance sheet and liquidity profile.

At the end of the third quarter of fiscal 2025, the Company had a well-positioned balance sheet and liquidity profile.

The Company has access to liquidity through credit facilities as well as cash and cash equivalents.

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For additional information, refer to Note 12 to the Condensed Consolidated Financial Statements.

(In millions) November 30, 2024 June 1, 2024

(In millions) March 1, 2025 June 1, 2024

Cash and cash equivalents $ 169.8 $ 230.4

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Total liquidity $ 468.2 $ 552.7

Of the Cash and cash equivalents noted above at the end of the second quarter of fiscal 2025, the Company had $207.8 million of Cash and cash equivalents held outside the United States.

Of the Cash and cash equivalents noted above at the end of the third quarter of fiscal 2025, the Company had $164.8 million of Cash and cash equivalents held outside the United States.

The Company’s syndicated revolving line of credit, which matures in July 2026, provides the Company with up to $725 million in revolving variable interest borrowing capacity and allows the Company to borrow incremental amounts, at its option, subject to negotiated terms as outlined in the agreement.

Outstanding borrowings bear interest at rates based on the prime rate, federal funds rate, SOFR or negotiated terms as outlined in the agreement.

As of November 30, 2024, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $463.1 million with available borrowings on this facility of $249.3 million.

As of March 1, 2025, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $414.0 million with available borrowings on this facility of $298.4 million.

The Company intends to repatriate $104.3 million of undistributed foreign earnings all of which is held in cash in certain foreign jurisdictions with the remainder of undistributed earnings outside the U.S.

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The Company intends to remain indefinitely reinvested in the remaining undistributed earnings outside the U.S.

which is estimated to be approximately $347.5 million on November 30, 2024.

which is estimated to be approximately $347.5 million on March 1, 2025.

The Company believes cash on hand, cash generated from operations, and borrowing capacity will provide adequate liquidity to fund near term and foreseeable future business operations, capital needs, upcoming debt maturities, future dividends and share repurchases, subject to financing availability in the marketplace.

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Contractual obligations associated with ongoing business and financing activities will require cash payments in future periods.

A table summarizing the amounts and estimated timing of these future cash payments as of June 1, 2024, was provided in the Company's Annual Report on Form 10-K for the year ended June 1, 2024.

A table summarizing the amounts and estimated timing of these future cash payments as of June 1, 2024, was provided in the

Company's Annual Report on Form 10-K for the year ended June 1, 2024.

There have been no material changes in such obligations since that date.

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A summary of the more significant accounting policies that require the use of estimates and judgments in preparing the financial statements is provided in the Company's Annual Report on Form 10-K for the year ended June 1, 2024.

Goodwill is tested for impairment at the reporting unit level annually, or more frequently when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value.

When testing goodwill for impairment, the Company may first assess qualitative factors.

If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed.

The Company may also elect to bypass the qualitative testing and proceed directly to the quantitative testing.

If the quantitative testing indicates that goodwill is impaired, the carrying value of goodwill is written down to fair value.

During the third quarter of fiscal year 2025, the Company performed an assessment to determine whether there were indicators of a triggering event which could indicate the carrying amount of the reporting units may not be supported by the fair value.

Although our annual impairment test is performed during the fourth quarter, we perform this qualitative assessment each interim reporting period.

Through this assessment management identified an impairment triggering event associated with lower-than-expected operating results.

This suggested that the fair value of one or more of our reporting units may have fallen below their carrying amount.

Accordingly, we performed a quantitative valuation of each reporting unit during the quarter.

The Company used the discounted cash flow method under a weighting of the income and market approach to estimate the fair value of our reporting units.

These approaches are based on a discounted cash flow analysis and observable comparable company information that use several inputs, including:

• actual and forecasted revenue growth rates and operating margins,

• discount rates based on the reporting unit's weighted average cost of capital, and

• revenue and EBITDA of comparable companies.

The Company selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, management’s long-term strategic plans, and guideline companies.

As a result of the third quarter fiscal year 2025 goodwill impairment test, the Company recognized a total non-cash impairment charge of $30.1 million and $62.2 million in its Global Retail and Holly Hunt reporting units, respectively.

The goodwill impairment charges were primarily caused by reduced sales and profitability projections as well as an increase in the discount rate.

After these impairment charges and before the changes in reporting units resulting from our segment re-organization, the Global Retail and Holly Hunt reporting units had remaining goodwill of $357.0 million and $33.0 million, respectively.

Additionally, the quantitative assessment in the third quarter of fiscal year 2025 resulted in the fair values of the Americas Contract, International Contract and Coverings reporting units exceeding their respective carrying values (the "cushion") by 32%, 63% and 10%, respectively.

Generally, changes in estimates of expected future cash flows would have a similar effect on the estimated fair value of the reporting unit.

For example, a 1.0% decrease in estimated annual future cash flows would decrease the estimated fair value of the reporting unit by approximately 1.0%.

The estimated long-term growth rate can have a significant impact on the estimated future cash flows, and therefore, the fair value of each reporting unit.

Of the other key assumptions that impact the estimated fair values, most reporting units have the greatest sensitivity to changes in the estimated discount rate.

In completing the goodwill impairment test, the respective fair values were estimated using discount rates ranging from 12.0% to 15.0% and long-term growth rates ranging from 2.5% to 3.0%.

The Company evaluated the sensitivity of changes in projected growth rate, discount rates and long-term growth rates for the reporting units with goodwill remaining as of March 1, 2025.

• A decrease in the forecasted sales by 500 basis points in all years or an increase in the discount rate of 100 basis points, leaving all other assumptions static, would not result in impairment for the Americas Contract, International Contract or Coverings reporting units.

• A decrease in the operating margin of 100 basis points in all years, leaving all other assumptions static, would not result in impairment for the Americas Contract or International Contract reporting units.

For the Coverings reporting unit it would result in impairment of $3.0 million.

• A reduction in the projected sales growth rate, decline in operating margins, an increase in the discount rate or a decline in the long-term sales growth rate for the Holly Hunt or Global Retail reporting units may result in the need to record an additional impairment charge.

Additionally, in the third quarter of fiscal year 2025 the Company implemented an organizational change that resulted in a change in the reportable segments and reporting units.

As a result, the Company performed the required impairment assessments directly before and immediately after the change in reporting units.

As a result of this change $26.1 million of goodwill was reassigned from the Americas Contract reporting unit to the International Contract reporting unit, based on the relative fair value approach.

Additionally, the $33.0 million of remaining goodwill for the Holly Hunt reporting unit was moved to the Global Retail reporting unit.

Subsequent to this change the Company has four reporting units, North America Contract, International Contract, Global Retail and Coverings.

Indefinite-Lived Intangibles

The Company evaluates indefinite-lived trade name intangible assets for impairment annually.

The Company also tests for impairment if events and circumstances indicate that it is more likely than not that the fair value of an indefinite-lived intangible asset is below its carrying amount.

An impairment charge is recorded if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value on the measurement date.

During the third quarter of fiscal year 2025, in conjunction with the goodwill impairment triggering event discussed above, the Company assessed its indefinite-lived trade names for indicators of impairment.

As a result, the Company recognized $37.7 million in non-cash impairment charges related to the Knoll and Muuto trade names.

The Company performed quantitative assessments during the third quarter of fiscal year 2025 in testing the indefinite-lived intangible assets which showed indicators that impairment was more likely than not.

In performing this assessment, we estimate the fair value of these intangible assets using the relief-from-royalty method which requires assumptions related to:

• actual and forecasted revenue growth rates,

• assumed royalty rates that could be payable if we did not own the trademark, and

• a market participant discount rate based on a weighted-average cost of capital.

In completing the third quarter fiscal year 2025 assessment of indefinite-lived trade name impairment, the respective fair values were estimated using discount rates ranging from 12.75% to 17.25%, royalty rates ranging from 1.00% to 3.00% and long-term growth rates ranging from 2.5% to 3.0%.

The Company’s estimates of the fair value of its indefinite-lived intangible assets are sensitive to changes in the key assumptions above as well as projected financial performance.

If the estimated cash flows related to the Company's indefinite-lived intangibles were to decline in future periods, the Company may need to record additional impairment charges.

New Accounting Standards

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Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements relate to future events and anticipated results of operations, business strategies, the anticipated benefits of our acquisition of Knoll, the anticipated impact of the Knoll acquisition on the combined Company’s business and future financial and operating results, the expected amount and timing of synergies from the Knoll acquisition, and other aspects of our operations or operating results.

This communication includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements relate to future events and anticipated results of operations, business strategies, the anticipated benefits of our acquisition of Knoll, the anticipated impact of the Knoll acquisition on the combined Company’s business and future financial and operating results, the expected amount and timing of synergies from the Knoll acquisition, the expected impact of recent and potential tariff changes on our business, and other aspects of our operations or operating results.

These forward-looking statements generally can be identified by phrases such as “will,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import.

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These forward-looking statements involve certain risks and uncertainties, many of which are beyond MillerKnoll’s control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to:

general economic conditions;

the impact of any government policies and actions to protect the health and safety of individuals or to maintain the functioning of national or global economies, and the Company's response to any such policies and actions;

general economic and geopolitical conditions, including the impact of supply chain challenges, tariffs, and recessionary pressures;

the impact of government policies and actions, including those relating to public health, government spending, and trade relations;

the impact of public health crises, such as pandemics and epidemics;

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the effect of the Knoll acquisition on the ability of MillerKnoll to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom MillerKnoll does business, or on MillerKnoll’s operating results and business generally;

the ability to successfully integrate Knoll’s operations;

the ability of MillerKnoll to implement its plans, forecasts and other expectations with respect to MillerKnoll’s business after the completion of the Knoll acquisition and realize expected synergies;

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the pace and level of government procurement;

foreign currency exchange fluctuations;

and the outcome of pending litigation or governmental audits or investigations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis