0000066382-26-000010
SEC filingOrganic sales declined 2.5% in Q2 due to volume drops, but gross margin expanded 20 bps via mix and pricing, offsetting tariff impacts.
For the three months ended November 29, 2025, MillerKnoll reported net sales of $955.2 million, a decrease of 1.6% year-over-year. Organic sales, excluding a $8.7 million beneficial currency translation effect, declined 2.5%. Orders grew 5.5% to $972.5 million, signaling potential future revenue recovery. Gross margin improved 20 basis points to 39.0%, driven by favorable channel and product mix (up ~90 bps) and incremental list price increases (up ~50 bps), partially offset by tariff-related costs (down ~70 bps) and unfavorable fixed cost leverage (down ~50 bps) on lower volumes. Operating expenses rose 2.9% to $323.7 million, primarily from retail expansion costs ($4 million) and higher compensation ($4 million). Operating earnings fell 22.4% to $48.5 million, yielding an operating margin of 5.1% vs. 6.4% a year ago. Net earnings attributable to MillerKnoll declined 29.0% to $24.2 million, and diluted EPS dropped from $0.49 to $0.35. Adjusted diluted EPS, excluding amortization of Knoll intangibles and restructuring charges, was $0.43, down 21.8% from $0.55.
Management did not provide specific numerical guidance for future periods. The MD&A highlights ongoing investments in retail store footprint, capital expenditures expected between $120 million and $130 million for fiscal 2026, and a focus on mitigating tariff impacts through pricing actions. The company maintains a strong liquidity position with $548.3 million available, including $180.4 million cash and $367.9 million in revolver capacity. Forward-looking statements caution about macroeconomic uncertainties, trade policy changes, and inflationary pressures.
Cash and cash equivalents stood at $180.4M as of November 29, 2025, down from $193.7M at May 31, 2025. Total debt increased to $1,350.2M from $1,337.0M, reflecting net borrowings and the new accounts receivable securitization facility ($90.0M, with $54.3M drawn). The securitization, entered in September 2025, matures in 2028 and provides additional liquidity. The company maintains a $725.0M syndicated revolving credit facility with $367.9M available after borrowings and letters of credit. Shareholders' equity increased slightly to $1,299.7M from $1,275.8M, driven by retained earnings partially offset by other comprehensive loss.
No material purchase commitments were disclosed in the notes. The company has performance bonds of $12.4M and standby letters of credit of $12.1M, none of which have triggered any liability. Warranty reserves totaled $70.6M at quarter-end, relatively flat sequentially. The supplier financing program liability was $2.4M. There are no significant off-balance-sheet arrangements beyond these.
During the six months ended November 29, 2025, MillerKnoll returned $25.6M to shareholders via dividends ($0.1875 per share quarterly) and repurchased or withheld $12.2M in common stock (including tax withholdings). No new buyback authorization was announced. Capital expenditures were $61.3M, up 36% from $44.9M in the prior-year period, representing 3.2% of sales. The company reduced Term Loan A by $2.5M and Term Loan B by $53.1M (net of refinancing), while tapping the revolver and securitization. The August 2025 amendment to Term Loan B extended maturity to 2032 and resulted in a $7.8M loss on debt extinguishment.
Three reportable segments: North America Contract (53% of Q2 sales), International Contract (18%), and Global Retail (29%). All segments saw adjusted operating earnings decline YoY: NAC $49.2M (-8%), International $16.6M (-27%), Global Retail $5.7M (-43%). Geographic mix: US sales $684.2M (72%), international $271.0M (28%). Revenue by product category: Workplace $356.7M, Performance Seating $229.7M, Lifestyle $316.1M, Other $52.7M. Depreciation and amortization was $36.6M in Q2, with NAC contributing the most ($21.6M).
Operating cash flow (CFO) of $74.0M exceeded net income of $46.3M, with the primary reconciling items being depreciation and amortization ($72.0M) and stock-based compensation ($15.1M), partially offset by working capital outflows. Notably, the net use of cash from working capital was $66.2M (increase in current assets of $20.7M and decrease in current liabilities of $45.5M), indicating temporary cash drag from operations. Non-cash items like loss on debt extinguishment ($7.8M) and restructuring expense ($2.0M) also added back.
Capital expenditures of $61.3M, the highest in recent periods, consumed 83% of CFO, leaving limited free cash flow for capital returns. Dividends ($25.6M) and share repurchases ($12.2M) totaled $37.8M, which would exceed any implied FCF (CFO minus capex = $12.7M), suggesting reliance on debt or cash reserves to fund returns. Indeed, financing activities show net debt proceeds of $55.9M (proceeds from issuance and credit facility less repayments).
Anomalies include a $7.8M loss on debt extinguishment related to refinancing, which boosted CFO but was a non-cash item. Overall, cash generation from operations remains solid, but heavy capex and working capital demands constrain flexibility.