Millerknoll, Inc. · NASDAQ:MLKN
Millerknoll — Miller Herman — Raymond James 39th Annual Institutional Investors Conference (March 2018)
39 slides from Millerknoll's conference presentation, Mar 5, 2018
Slide 1: Delivering Growth by Design
Delivering Growth by Design NASDAQ: MLHR Raymond James 39th Annual Institutional Investors Conference Brian Walker, President, CEO Jeff Stutz, Executive Vice President, CFO
Slide 2: Forward-looking statements
2 This information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about
Slide 3: Company Snapshot
Headquarters: Zeeland, MI, USA Founded: 1905 Employees: ~8,000 FY17 Revenue: $2.28B FY17 Adj. EBITDA: $264M Company Snapshot Over 600 dealers in 109 countries and 32 Design Within Reach retail studios North America 56% Specialty 13% Consumer 14% ELA 17% 3
Slide 4: Strategic Position
4 Strategic Position
Slide 5: Capitalizing on an expanded total addressable market
Capitalizing on an expanded total addressable market Strategic Position North America (Contract) European (Contract) Target Emerging Markets (Contract) Consumer Lifestyle Healthcare/Education/Hospitality Small/Medium Business Textiles $14B $16B $10B $6B $3B $3B $2B $1B $10B $2B $2B 2012—$28B 2017—$4
Slide 6: Unparalleled multi-channel reach including direct to consumer
Unparalleled multi-channel reach including direct to consumer Strategic Position – Over 600 contract dealers in 109 countries – 32 Design Within Reach retail studios – Direct to consumer catalog – Multiple global e-commerce storefronts – Opportunities to grow share of channel/customer wallet Catalog
Slide 7: Positioned for global growth
7 Positioned for global growth Strategic Position – Growing and profitable business outside North America – Favorable trends and demographics in Asia-Pacific – Further growth opportunities: • Leverage Herman Miller and POSH brands in Asia-Pacific • Expand dealer networks and e-commerce platforms • R
Slide 8: The global leader dedicated to creating inspiring places
8 Work Heal Learn The global leader dedicated to creating inspiring places Strategic Position Live
Slide 9: Investment Thesis
9 Investment Thesis
Slide 10: Our Compelling Story
10 Our Compelling Story Investment thesis Powerful brands deliver design and innovation leadership A higher ambition culture Strategic priorities and value-drivers Compelling financial outlook and opportunity for margin expansion Strong track record of performance and healthy returns on capital
Slide 11: Driven by a sense of purpose and values
11 Driven by a sense of purpose and values A higher ambition culture “A business is rightly judged by its products and services, but it must also face scrutiny as to its humanity.” - D.J. De Pree, Herman Miller Founder Eleven Consecutive Perfect Score in Human Rights Campaign Foundation’s Corporate
Slide 12: An inspiring brand that customers value
12 An inspiring brand that customers value Powerful brands deliver design and innovation leadership * Twitter followers as of December 2017 (Herman Miller, Allsteel, Haworth, Knoll, and Steelcase) #1 in Brand that Inspires, Contract Magazine Survey Social Media Followers – Nearly 5X all major compet
Slide 13: A portfolio of leading global brands
13Powerful brands deliver design and innovation leadership Healthcare Performance textiles Ergonomic work tools Asia distribution Nemschoff Maharam Colebrook Bosson Saunders POSH A portfolio of leading global brands TIMELESS CRAFT The convergence of world-class designers, impeccable craftsmanship, a
Slide 14: Strategic priorities and value-drivers
14Strategic priorities and value-drivers
Slide 15: Bringing innovative solutions through the Living Office framework
15 Bringing innovative solutions to our customers through the Living Office framework Strategic priorities and value-drivers – An insight-driven and research-based framework for making place a strategic asset – Delivers measurable results through improved: • Workplace Effectiveness • Work Activity S
Slide 16: Commitment to innovation
16 Commitment to innovation Strategic priorities and value-drivers – Innovation Priorities: – 24% of our sales were from new products in fiscal 2017 – Introduced 50 new products and extensions in fiscal 2017 – Industry-leading investment in design, research and development at 3.2% of sales in fiscal
Slide 17: Dealer ecosystem and digital tools
17Strategic priorities and value-drivers Leverage Dealer Eco-System Digital Tools Sales & Marketing Through Herman Miller Elements “Bend” Price/Performance Curve Increase Dealer Share of Wallet Dealer Excellence Make Herman Miller Easy to do Business With
Slide 18: Clear path to revenue growth and margin expansion in Consumer business
18 Clear path to revenue growth and margin expansion in Consumer business Strategic priorities and value-drivers – Double digit revenue growth opportunity from Design Within Reach by transforming legacy studios to larger formats and adding new locations • Increase studio count to low forties and squ
Slide 19: Profit Optimization Initiative
19 Profit Optimization Initiative OPERATING MARGIN OF: $25 TO $35M (BY FY20) BUSINESS UNIT SYNERGIES LOGISTICS OPTIMIZATION FACILITIES CONSOLIDATION GENERAL COST RATIONALIZATION > 10% OF SALES (BY FY20) Strategic priorities and value-drivers
Slide 20: Strong track record of performance and healthy returns on capital
20 Strong track record of performance and healthy returns on capital
Slide 21: Organic revenue growth and robust EBITDA growth over last 5 years
21 $2.3B Organic revenue growth of 4% at a premium to North America Contract industry growth of 2%, and robust EBITDA growth over last 5 years Strong track record of performance and healthy returns on capital FY12 FY13 FY14 FY15 FY16 FY17 $2.1B $2.3B $1.9B$1.8B$1.7B FY12 FY13 FY14 FY15 FY16 FY17 $23
Slide 22: Focused acquisition partnership strategy
22 Focused acquisition partnership strategy accelerates our performance Strong track record of performance and healthy returns on capital Entering New Areas: Audience Channel Geography Product
Slide 23: Best-in-class lean enterprise delivers leverage
23 Best-in-class lean enterprise delivers leverage Strong track record of performance and healthy returns on capital – Focused improvement through: • Customer first orientation • Waste reduction • Asset efficiency – One of three U.S. companies showcased by Toyota Production System Support Center – F
Slide 24: Robust free cash flow and disciplined capital allocation
Robust free cash flow generation and disciplined approach to capital allocation drives average annual return on invested capital of 22% over last five years Strong track record of performance and healthy returns on capital 24 (1) Cash flow from operations less CAPEX plus domestic pension contributio
Slide 25: Compelling financial outlook and opportunity for margin expansion
25 Compelling financial outlook and opportunity for margin expansion
Slide 26: Supportive economic backdrop
26 Supportive economic backdrop Compelling financial outlook and opportunity for margin expansion (1) BIFMA (Nov 2017) (2) American Institute of Architects (Dec 2017) (3) National Association of Realtors (Dec 2017) BIFMA Forecast(1) +4.6% CY18 US Housing Starts(3) +9% US Architectural Billings Index
Slide 27: Opportunity for continued above-average revenue performance
Opportunity for continued above-average revenue performance over the next three to five years Compelling financial outlook and opportunity for margin expansion Core Contract Industry 1-3% New Products and Initiatives 1-1.5% Consumer Growth 1-1.5% Estimated Annual Organic Revenue Growth 3-6% Targeted
Slide 28: Operating income growth of 2x to 2.5x organic revenue growth
Operating income growth of 2x to 2.5x the rate of organic revenue growth Compelling financial outlook and opportunity for margin expansion – Structurally higher operating margins driven by: • Expanding business and channel mix • Consumer growth and higher exclusive product mix • Volume leverage • Le
Slide 29: U.S. Tax Reform impact to Herman Miller
29 U.S. Tax Reform impact to Herman Miller Compelling financial outlook and opportunity for margin expansion FY12 FY13 FY14 FY15 FY 16 FY17 FY18 FY19 & BEYOND 37% 30% 33% 30% 31% 25-27% Finalizing Estimate 49%
Slide 30: Our Compelling Story
30 Our Compelling Story Investment thesis Powerful brands deliver design and innovation leadership A higher ambition culture Strategic priorities and value-drivers Compelling financial outlook and opportunity for margin expansion Strong track record of performance and healthy returns on capital
Slide 31: Appendix
31 Appendix
Slide 32: Appendix – Segment Overviews: North America
32Appendix – Segment Overviews Overview FY17 Percent of Consolidated Revenues Macro-Economic Drivers Revenue Trend (in US$ millions) FY17 Adj. EBITDA Margin 16.2% Description: Design, manufacture and sale of furniture products for office, education and healthcare environments in the United States an
Slide 33: Appendix – Segment Overviews: ELA
33Appendix – Segment Overviews FY17 Percent of Consolidated Revenues FY16 Adj. EBITDA Margin Source: CSIL (2017) Regional Office Furniture Consumption (in US$ billions) GDP Forecast Region Annual 5 Year CAGR Consumption Europe $10.1 -0.1% China $11.3 5.2% India $2.4 6.6% Brazil $1.3 -10.6% Mexico $0
Slide 34: Appendix – Segment Overviews: Specialty
34 North America 56% Specialty 13% Consumer 14% ELA 17% FY17 Percent of Consolidated Revenues Revenue Trend (in US$ millions) FY17 Adj. EBITDA Margin 5 YEAR CAGR 12% (2% organic) 8.6% SpecialtyAppendix – Segment Overviews FY12 FY13 FY14 FY15 FY16 FY17 Overview Macro-Economic Drivers Description: Des
Slide 35: Appendix – Segment Overviews: Consumer
35 FY17 Percent of Consolidated Revenues Five Year Revenue Trend (in US$ millions) FY17 Adj. EBITDA Margin 64 64 68 271 5 YEAR CAGR 38% (14% organic) 4.9% ConsumerAppendix – Segment Overviews FY12 FY13 FY14 FY15 FY16 FY17 Overview Macro-Economic Drivers Description: Sale of modern design furnishings
Slide 36: Non-GAAP financial measures
36 This presentation contains Organic Sales Growth, Adjusted EBITDA, Adjusted EBITDA ratios, Adjusted Operating Earnings, and Adjusted Earnings Per Share, all of which constitute non-GAAP financial measures. Each of these financial measures is calculated by excluding items the Company believes are n
Slide 37: Reconciliation of Non-GAAP Measures: Organic Sales Growth
37Appendix –Reconciliation of Non-GAAP Measures Organic Sales Growth (Decline) by Reportable Segment ($ Millions); (unaudited) Sales, as reported Proforma Adjustments Dealer Divestitures Cumulative foreign exchange Acquisition - base year Sales, pro forma Compound Annual Growth Rate, as reported Com
Slide 38: Reconciliation of Non-GAAP Measures: Adjusted EBITDA by Segment
38Appendix –Herman Miller Inc. Reconciliation of Non-GAAP Measures Adjusted EBITDA by Reportable Segment ($ Millions) (unaudited) Segment Operating Earnings Add: Allocated Depreciation & Amortization Add: Acquisition-related Adjustments Add: Legacy Pension Expenses Add: Restructuring/Impairment Expe
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