Greg Burns

Greg Burns asked for more details on the profit headwinds expected in the first quarter and why they are anticipated to dissipate later in the year. He also requested an update on the performance and outlook for the hospitality market.

Answer

Vincent Paul Berger II explained that first-quarter profit pressure is due to the timing of revenue recognition (choppy contract side, tough comps), expense timing (Steelcase comp hitting Q1), and ongoing investments. He expects double-digit EPS growth to accelerate in Q2, Q3, and Q4 as these factors normalize. Jeffrey D. Lorenger confirmed that the hospitality market remains solid with a strong pipeline, ongoing investments, and a market-leading position in room furniture, expecting performance at or above the prior year.

Greg Burns asked for more details on the profit headwinds expected in the first quarter and why they are anticipated to dissipate later in the year. He also requested an update on the performance and outlook for the hospitality market.

Answer

Vincent Paul Berger II explained that first-quarter profit pressure is due to the timing of revenue recognition (choppy contract side, tough comps), expense timing (Steelcase comp hitting Q1), and ongoing investments. He expects double-digit EPS growth to accelerate in Q2, Q3, and Q4 as these factors normalize. Jeffrey D. Lorenger confirmed that the hospitality market remains solid with a strong pipeline, ongoing investments, and a market-leading position in room furniture, expecting performance at or above the prior year.

Greg Burns inquired about the $1.20 accretion from the Steelcase acquisition, specifically whether it solely reflects the previously outlined synergies and if there's potential for additional savings. He also asked for an update on the $0.75-$0.80 EPS contribution from KI and Mexico initiatives, and sought clarification on current industry-wide office furniture volumes relative to pre-pandemic levels to gauge potential uplift.

Answer

Vincent Paul, EVP and CFO, confirmed the $1.20 accretion is based on the $120 million synergies previously discussed, expressing confidence in this figure while noting they will seek more savings post-integration. He added that $45 million-$50 million from KI and Mexico is expected between 2025-2026, with a slight acceleration into 2025. Jeff Lorenger, Chairman, President and CEO, estimated current office furniture volumes are 30%-35% below pre-pandemic levels, indicating significant potential for mid-single-digit volume growth even with a partial recovery.

Greg Burns of Sidoti & Co. inquired about the $1.20 accretion from the Steelcase acquisition, specifically whether it solely reflects outlined synergies or if there's potential for further upside. He also asked for an update on the realization of $0.75-$0.80 in synergies from KI and Mexico initiatives, and sought clarity on current industry-wide office furniture volumes compared to pre-pandemic levels, assessing potential future uplift.

Answer

Vincent Paul, Executive Vice President and CFO, confirmed the $1.20 accretion is tied to the previously announced $120 million in synergies, expressing confidence in this figure while noting the potential to identify additional savings post-integration. He further detailed that $45-$50 million in KI and Mexico synergies are expected between 2025 and 2026, with a slight front-loading into 2025. Jeff Lorenger, Chairman, President and CEO, estimated current office furniture volumes are still 30-35% below pre-pandemic levels, even after accounting for pricing and tariffs, highlighting significant growth potential.

Greg Burns from Sidoti & Company, LLC asked for details on growth investments in the Workplace Furnishings segment, the long-term operating margin target for that business, and the current revenue contribution from the SMB market.

Answer

CEO Jeffrey Lorenger detailed investments in personnel, streamlining the dealer experience, and accelerating new product development cycles. CFO Vincent Berger stated the long-term goal is to push the Workplace Furnishings operating margin towards 12%, an improvement of 200-250 basis points driven by KII synergies and Mexico initiatives. He also confirmed that the SMB business constitutes 40-45% of the segment's revenue.

Greg Burns from Sidoti & Company, LLC asked for details on the growth investments being made in the Workplace Furnishings segment, the long-term target operating margin for that business, and what percentage of the workplace business is comprised of SMBs.

Answer

CEO Jeffrey Lorenger explained that investments in Workplace Furnishings are focused on increasing people capacity, streamlining the dealer experience through automation, and accelerating new product development cycles. CFO Vincent Berger stated that the business, which was previously at 9.5% margin, has a runway to reach a 12% return, driven by KII synergies and the Mexico ramp-up. He also confirmed that the SMB segment constitutes 40% to 45% of the Workplace Furnishings business.

Greg Burns from Sidoti & Company, LLC asked for details on growth investments in the Workplace Furnishings segment, the long-term target margin range for that business, and what percentage of the workplace business is comprised of SMB.

Answer

Chairman, President & CEO Jeffrey Lorenger detailed that investments in Workplace Furnishings are focused on people capacity, streamlining the dealer experience through automation, and accelerating new product cycles. EVP & CFO Vincent Berger stated the goal is to expand the segment's margin by 200-250 basis points toward a 12% return. Berger also confirmed that the SMB business represents 40-45% of the Workplace Furnishings segment.

Greg Burns from Sidoti & Company, LLC asked for details on growth investments in the Workplace Furnishings segment, the long-term margin target for that business, and the proportion of the segment attributable to SMB customers.

Answer

Chairman, President & CEO Jeffrey Lorenger detailed that investments in Workplace Furnishings are focused on increasing people capacity, streamlining the dealer experience, and accelerating new product cycles. EVP & CFO Vincent Berger stated the company sees a path to a 12% return in the segment, representing a 200-250 basis point improvement driven by KII synergies and the Mexico ramp. Berger also confirmed that the SMB business constitutes 40% to 45% of the Workplace segment's revenue.

Greg Burns from Sidoti & Company, LLC asked about the specific areas of growth investment in the Workplace Furnishings segment, the long-term target margin for that business, and the current size of the SMB portion of the workplace business.

Answer

CEO Jeffrey Lorenger detailed that investments in Workplace Furnishings are focused on people capacity, streamlining the dealer experience through automation, and accelerating new product cycles. EVP & CFO Vincent Berger added that the business is targeting a 12% return, driven by 200-250 basis points of margin expansion from KII synergies and Mexico operations. Berger also confirmed that the SMB business represents 40% to 45% of the Workplace Furnishings segment.

Greg Burns asked for a breakdown of the $64 million adjusted pro forma order number, specifically how much was organic versus acquisition contribution. He also expressed concern about a potential slowdown in municipal and publicly funded markets due to the allocation and spending of post-pandemic federal funds.

Answer

Ian Hudson, SVP and CFO, and Jennifer Sherman, President and CEO, clarified that the vast majority, almost all, of the $64 million (representing 14% year-over-year growth in Q4, excluding acquired backlog and third-party refuse orders) was organic. Jennifer Sherman addressed concerns about municipal markets by stating that no meaningful contributions from pandemic infrastructure projects were seen in 2024 or 2025, and these projects are expected to continue for several years. She highlighted water taxes as a growing revenue stream supporting sewer cleaners and municipal vacuum trucks, and noted strong Q4 orders for sewer cleaners and street sweepers, emphasizing the importance of diversification within the publicly funded revenue stream.

Greg Burns asked why the Work Truck Solutions segment's momentum accelerated into year-end, contrary to earlier expectations, the timeline for the new Missouri facility, the reason for flat Attachments segment margins in Q4 despite strong parts and accessories mix, the impact of cost avoidance on future margin leverage, and the normalized margin profile for the Attachments segment at average volumes.

Answer

Sarah Lauber, EVP and CFO, attributed the Solutions segment's strong year-end performance to the team's effective execution in completing and delivering trucks, leveraging their backlog and securing new business. Mark Van Genderen, President and CEO, stated the new Missouri facility is targeted to come online in early summer (Q2), expected to increase Henderson's volume by 8-10%. Sarah Lauber suggested the flat Q4 Attachments margins could be due to the initial impact of Venco Venturo and variable compensation. Regarding future margins, Sarah Lauber explained that while incremental margins remain consistent, 2026 plans include investments for growth, and volumes are still below average. Mark Van Genderen emphasized prudent management of past cost reductions. Sarah Lauber concluded that Attachments, which ended 2025 at 19% margin, could reach the mid-twenties with average volumes.

Greg Burns asked why the Work Truck Solutions segment's performance accelerated into year-end, contrary to earlier expectations of moderation. He inquired about the timeline for the new Missouri facility's capacity coming online and the reason for flat Q4 Attachments margins despite a strong, beneficial parts and services mix. He also questioned if the flattish margin guide for 2026 implies a cost structure reset before future leverage, and what normalized margins for Attachments would look like at average historical volumes.

Answer

Sarah Lauber, EVP and CFO, attributed Work Truck Solutions' strong year-end to the team's execution in completing and delivering trucks, leveraging backlog and new business wins. Mark Van Genderen, President and CEO, stated the new Missouri facility is targeting Q2 (early summer) for operation, adding 8-10% volume for Henderson. Ms. Lauber suggested Q4 Attachments flat margins could be due to the initial impact of Venco Venturo and variable compensation, noting that while Q4 volume was different, the mix might not be dramatically different. Ms. Lauber explained that 2026 plans include investments for growth, and Attachments volumes are still below average, impacting margins. Mr. Van Genderen emphasized prudence in spending to maintain prior cost savings. Ms. Lauber concluded that Attachments ended 2025 at 19% margin and expects to reach the mid-twenties with average volumes.

Greg Burns followed up on the confidence in large deals resuming, asking for specific reasons or customer feedback supporting this expectation.

Answer

Mike Baur, CEO, stated that the confidence is based on information gathered from sales teams, partners, and suppliers during a recent sales kickoff, suggesting that large deals will continue to happen, albeit potentially broken up over the quarter.

Greg Burns inquired about the specific period costs highlighted by ScanSource, including their nature and whether they are expected to persist into the second half of the fiscal year or remain localized to the current quarter.

Answer

Steve Jones, Senior EVP and CFO, explained that the period costs in COGS were primarily due to mix and freight expenses, while SG&A included a customer-specific bad debt reserve. He indicated these costs are considered more period-related and not expected to continue.

Greg Burns inquired about the importance of ePlus's ability to offer integrated solutions across AI, cloud, and networking, and how this dynamic contributes to growth and market share gains.

Answer

CEO and President Mark Marron highlighted integrated solutions as a key differentiator, noting that customers prefer to work with fewer strategic partners. He likened this approach to the company's success with converged infrastructure in the past, where they integrated various vendor solutions with managed services.

Greg Burns, an Analyst at Sidoti & Company, asked about the inventory build and the expected delivery timeline for associated projects, sought quantification of AI's impact on the business, including its size and growth rates, and inquired about the growing importance of integrated solutions across AI, cloud, and networking for market share.

Answer

Elaine Marion, CFO, stated that the sequential inventory increase of $85 million aligns with demand, expecting inflated levels for several quarters. Mark Marron, CEO and President, added that AI is now a tailwind, driving growth in data center, cloud, networking, and security as customers define use cases and modernize systems. He emphasized integrated solutions as a key differentiator, likening it to past success with converged infrastructure, and noted that traditionally, AI and inventory tick up at year-end.

Greg Burns of Sidoti & Company, LLC questioned the timing of the financing business divestiture and asked about ePlus's readiness to capitalize on the AI opportunity, including any needs for organic or inorganic investment.

Answer

CEO and President Mark Marron explained that divesting the financing business was a long-considered strategic move, timed to align with market shifts toward AI and cybersecurity. He stated the sale simplifies the business model to a pure-play technology provider, frees up significant cash for strategic growth, and enables shareholder returns like the new dividend. On AI readiness, Marron noted that while ePlus is well-positioned in foundational infrastructure, the company will invest in building its AI consultative service capabilities, potentially through acquisitions, to help clients develop use cases.

Greg Burns followed up on the retail momentum, asking if the assortment growth was leading to larger order sizes, more new customers, or increased engagement from existing customers. He also inquired about the roadmap for doubling the store count, the planned annual pace of openings, and the expected margin profile of the retail business, specifically when leverage from new store investments might start to show through.

Answer

Wendy Watson, VP of Investor Relations, highlighted that average order value is up year-on-year beyond pricing increases (which were only about 2.5% due to North American sourcing), driven by assortment expansion and design services. She also confirmed seeing greater demand from new customers. Andi Owen, Chief Executive Officer, added that new stores in new markets are attracting new customers. Watson stated that the company plans to open 14-16 stores per year, with leases signed through the middle to back half of the next fiscal year. Both Watson and Owen explained that the company is currently in the depth of investment for new stores, but they expect incremental operating income dollars from these investments to start showing by the beginning of the next fiscal year, with leverage on overhead and expense beginning in Q4 and Q1 of next year.

Greg Burns asked about the specific dynamics driving retail momentum, inquiring whether it was due to larger order sizes, an increase in new customers, or enhanced engagement with existing customers. He also sought clarification on the roadmap for doubling the store count, the expected annual pace of new store openings, and the future margin profile of the retail business, particularly when leverage from current investments might become apparent.

Answer

Debbie Propst, President of Global Retail, and Andi Owen, Chief Executive Officer, explained that retail growth is driven by a combination of factors: an increase in average order value (beyond modest 2.5% pricing increases, thanks to North American sourcing), expanded product assortment, increased penetration of design services, and the attraction of new customers through new store openings in new markets. Debbie Propst confirmed plans to open 14-16 new stores annually, with leases already secured for the next fiscal year. She noted the business has seasonal operating income, with the back half of the year performing better, and anticipates incremental operating income from new store investments starting early next fiscal year. Andi Owen added that the company is currently in the peak investment phase for new stores, expecting the negative impact on the bottom line to diminish in Q3 and Q4 as new stores begin to generate offsetting revenue, leading to leverage of overhead and expense by Q4 and Q1 of the next fiscal year.

Greg Burns inquired about the competitive implications of recent industry consolidation, the potential for further M&A, and MillerKnoll's acquisition strategy. He also asked about the performance of the international retail business compared to North America and the long-term view for those markets.

Answer

CEO Andi Owen stated that industry consolidation is positive, reinforcing MillerKnoll's competitive differentiation, and confirmed an opportunistic approach to M&A and acquisitions. VP of Investor Relations Wendy Watson and President of Global Retail Debbie Propst explained that international markets are primarily wholesale, slower to recover, but showing green shoots, especially with HAY and Muuto brands.

Greg Burns asked about the competitive implications of recent industry consolidation and whether MillerKnoll anticipates further M&A activity. He also questioned the lagging performance of the international retail business compared to North America and the company's long-term strategy to bolster these markets.

Answer

Andi Owen, Chief Executive Officer, stated that industry consolidation is a positive development, shifting the industry into growth mode, and MillerKnoll remains opportunistic regarding M&A. Debbie Propst, President of Global Retail, clarified that international markets are primarily wholesale and have been slower to recover from over-inventory and COVID, though direct-to-consumer channels are performing well. She noted green shoots with HAY and Muuto brands and progress with Knoll and Herman Miller brands.

Greg Burns asked about the impact of recent industry consolidation on MillerKnoll's competitive landscape and potential M&A strategies. He also inquired about the performance of the international retail business, which is lagging North America, and the long-term outlook and strategies for bolstering these markets.

Answer

CEO Andi Owen views industry consolidation as positive, shifting the industry to growth, and stated MillerKnoll is always opportunistic regarding M&A. For international retail, Ms. Owen noted these markets are primarily wholesale, slower to recover but starting to rebound. President of Global Retail Debbie Propst added that international DTC is performing well, while wholesale faces challenges, though green shoots are appearing with HAY, Muuto, Knoll, and Herman Miller brands.

Greg Burns inquired about the impact of recent industry consolidation on MillerKnoll's competitive outlook, potential for further M&A, and strategies to bolster the lagging international retail business compared to North America.

Answer

Andi Owen (CEO) viewed industry consolidation as positive, presenting opportunities for MillerKnoll, and confirmed the company is always opportunistic regarding M&A. For international retail, Andi Owen noted it's a smaller, primarily wholesale business that has been slower to recover but is showing signs of rebound. Debbie Propst (President of Global Retail) added that direct-to-consumer channels internationally are performing well, while wholesale faces challenges, though green shoots are appearing, particularly with HAY and Muuto brands.

Greg Burns of Sidoti & Company, LLC inquired about the planned number of satellites and cost for the Eros constellation, the expected full-year revenue split between imagery and engineering, and sought more clarity on how the U.S. government spending outlook affects demand for both Gen 3 and Gen 2 services.

Answer

CEO Brian O’Toole stated that specifics on the Eros constellation's size and cost would be shared closer to deployment but assured that the compelling economics of Gen 3 would apply to the new system. CFO Henry Dubois provided a full-year revenue split forecast of approximately 70% imagery and analytics to 30% professional and engineering services. O'Toole added that despite budget dynamics, there remains significant U.S. government demand for Gen 3 capabilities.

Asked about current and future data center capacity, the specifics of the new pay-per-use AI colocation model, and the timeline for improved profitability following recent investments.

Answer

The company reported 138MW of total operational data center capacity, with two new facilities in Mumbai coming online later in the financial year. They clarified the AI colo model is a 'bring your own GPU' service where Sify provides the specialized infrastructure on a usage basis. Profitability improvements are expected in 12-18 months as investments in the Digital IT Services business mature.