Executive Summary

Q2 FY2025 was in line with company expectations: revenue of $970.4M (+2.2% YoY), GAAP EPS $0.49 (+8.9% YoY), and adjusted EPS $0.55 (down YoY), with gross margin holding at 38.8% despite mix headwinds .
Results tracked within prior guidance ranges (Q2 revenue $950–$990M; adj. EPS $0.51–$0.57); management reiterated improving internal and external demand indicators into 2H, but narrowed full-year adjusted EPS to $2.11–$2.17 (midpoint lowered) .
Americas Contract drove growth (sales +5.9% YoY; adjusted op margin 10.2%, +80 bps YoY), while Global Retail declined (sales -5.3% YoY; adjusted op margin 4.2%, -290 bps YoY) as the Black Friday/Cyber period straddled Q2/Q3, shifting ~$12M revenue into Q3 .
Orders dipped (-2.3% YoY) to $921.9M and backlog ended at $709.4M; leverage ticked to 2.94x net debt/EBITDA, with $55.3M CFFO and ~$23.1M buybacks in Q2; $93.1M total returned in 1H FY25 .
Potential stock catalysts: narrowed FY25 EPS range (midpoint lower), seasonal Q3 softness with retail timing shift, improving contract demand indicators (funnel and mockups), and tariff policy risk/mitigation playbook discussed on the call .

What Went Well and What Went Wrong

What Went Well
- Americas Contract momentum: third straight quarter of order growth; adjusted operating margin 10.2% (+80 bps YoY) on price and fixed-cost leverage; management cited strong funnel/mocks/pricing activity year-over-year .
- Gross margin resilience: consolidated GM 38.8% (slightly down YoY on mix), sustaining FY24 expansion in a softer macro .
- Holiday/cyber execution indicators: mid-single-digit YoY order growth during the 12-day Black Friday/Cyber period; retail newness outperforming and better promotional response; ROAS up 5% despite higher CAC (call commentary) .
- Quote: “We continue to be optimistic for the year ahead…leading indicators…strengthening our overall demand picture.” – CEO Andi Owen .
What Went Wrong
- Retail softness and mix: Global Retail sales -5.3% YoY; adjusted operating margin 4.2% (down 290 bps YoY) due to seasonal marketing spend leverage and timing shift of holiday/cyber .
- Orders modestly down: consolidated orders $921.9M (-2.3% YoY; -1.9% organic) with noted pre-election pause; recovery post-election noted but orders still slower than expected .
- International Specialty pressure: orders -6.5% YoY (reported) and -7.2% organic amid softness in textiles and luxury clients at HOLLY HUNT; adjusted operating margin 10.5% (-80 bps YoY) on deleverage in some Specialty businesses .

Financial Results

Quarterly financials (oldest → newest)

Metric	Q4 FY2024	Q1 FY2025	Q2 FY2025
Revenue ($M)	$888.9	$861.5	$970.4
Gross Margin %	39.6%	39.0%	38.8%
Operating Margin % (GAAP)	2.7%	1.8%	6.4%
Adjusted Operating Margin %	8.3%	5.8%	7.1%
GAAP Diluted EPS ($)	$0.14	($0.02)	$0.49
Adjusted Diluted EPS ($)	$0.67	$0.36	$0.55
Operating Expenses ($M)	$328.7	$321.1	$314.5
Adjusted Operating Expenses ($M)	$278.8	$286.9	$308.1

Q2 FY2025 YoY comparison

Metric	Q2 FY2024	Q2 FY2025
Revenue ($M)	$949.5	$970.4
Gross Margin %	39.2%	38.8%
Operating Margin % (GAAP)	6.4%	6.4%
Adjusted Operating Margin %	7.9%	7.1%
GAAP Diluted EPS ($)	$0.45	$0.49
Adjusted Diluted EPS ($)	$0.59	$0.55

Q2 FY2025 actual vs company’s Q2 guidance issued with Q1 results

Metric	Guidance (Q2FY25)	Actual (Q2FY25)	Outcome
Revenue ($M)	$950–$990	$970.4	In line
Gross Margin %	38.5%–39.5%	38.8%	In line
Operating Expenses ($M)	$305–$315	$314.5	In line
Adjusted EPS ($)	$0.51–$0.57	$0.55	In line

Segment breakdown – Q2 FY2025 vs Q2 FY2024

Segment	Net Sales Q2FY24 ($M)	Net Sales Q2FY25 ($M)	Op Margin Q2FY24	Op Margin Q2FY25	Adj. Op Margin Q2FY24	Adj. Op Margin Q2FY25
Americas Contract	476.1	504.2	7.4%	9.4%	9.4%	10.2%
International Contract & Specialty	241.2	246.3	9.9%	9.7%	11.3%	10.5%
Global Retail	232.2	219.9	6.3%	4.0%	7.1%	4.2%

KPIs and balance sheet (oldest → newest)

KPI	Q4 FY2024	Q1 FY2025	Q2 FY2025
Orders ($M)	$933.0	$935.9	$921.9
Backlog ($M)	$683.6	$758.0	$709.4
Net Debt / Bank Covenant EBITDA (x)	2.63x	2.84x	2.94x
Cash from Operations ($M)	$78.4	$21.1	$55.3
Share Repurchases (sh / $)	1.4M / $37.3M	1.5M / $43.7M	1.0M / $23.1M

Non‑GAAP adjustments (Q2 FY2025 EPS bridge): +$0.08 intangibles amort., +$0.00 integration, +$0.00 restructuring, tax impact -$0.02 → Adjusted EPS $0.55 vs GAAP $0.49 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EPS (diluted)	FY2025	$2.20 (midpoint maintained at Q1)	$2.11–$2.17	Narrowed; midpoint lowered
Net Sales ($M)	Q3 FY2025	—	$903–$943	New
Gross Margin %	Q3 FY2025	—	38.1%–39.1%	New
Adjusted Operating Expenses ($M)	Q3 FY2025	—	$293–$303	New
Interest & Other Expense, net ($M)	Q3 FY2025	—	$16.7–$17.7	New
Adjusted Effective Tax Rate %	Q3 FY2025	—	21.5%–23.5%	New
Adjusted EPS (diluted)	Q3 FY2025	—	$0.41–$0.47	New
Retail holiday/cyber shift	FY2025	—	~$12M Q2 sales shifted to Q3	Timing shift noted

Management rationale: midpoint lowered due to slower-than-expected macro improvements and lower-than-expected orders in 1H; full-year still implies YoY growth in sales and EPS .

Earnings Call Themes & Trends

Topic	Q4 FY2024 (Q-2)	Q1 FY2025 (Q-1)	Q2 FY2025 (Current)	Trend
Demand/Back-to-Office	Shift from “theoretical” RTO to specific projects; orders up in Americas; backlog +$44M seq.	Larger projects >$5M up >40%; backlog duration extended; sectors: financials, pharma, public sector; improving tech	Third consecutive Americas order growth; funnel/mocks/pricing up strongly; large project growth continues	Improving
Retail macro/housing	Retail GM improvement; industry softness persists; investing in stores/assortment	Outperformed industry by ~6 pts in NA; optimistic as rates ease; marketing efficiency	Holiday/cyber orders up mid-single digits in 12-day window; timing split Q2/Q3; ROAS +5% despite CAC +15%	Stabilizing; poised for 2H
Tariffs/Supply chain	—	—	Tariff mitigation playbook (alt sources, advance buys, pricing, duty drawback, exclusions); key exposures China/Canada; less China exposure post reconfiguration	Manageable risk
International & Specialty	Growth in India/Middle East/China/Korea; adjusted margin strength	Orders grew (APMEA-led); adjusted margin +140 bps YoY	Orders down YoY; softness in textiles/luxury; adjusted margin -80 bps	Mixed
Integration/Dealer network	>50% of global network transitioned; showrooms expansion	~60% of international network integrated; targeting 100% by FY25 end	London flagship: doubled client appointments; Belgium textiles fulfillment center	Continued progress
Sustainability/Regulatory	EcoVadis Gold; circular design; product launches	Sustainable materials; awards	PFAS elimination targets: NA by May 2025; global by May 2027	Advancing
AI/Technology	—	—	No material AI initiatives discussed	Neutral

Management Commentary

“We continue to be optimistic for the year ahead…leading indicators…strengthening our overall demand picture.” – CEO Andi Owen .
“Order growth trends improved as the quarter progressed…funnel additions, customer mock-up requests and pricing activity all continue to remain well ahead of last year.” – CFO Jeff Stutz (Americas) .
“We saw mid-single-digit year-over-year increase in orders during [the] 12-day Black Friday holiday cyber promotional period…new product launches performing above expectations.” – Management letter .
“We do have a playbook [for tariffs]…alternative sources, advance purchasing…pricing actions…duty drawback, exclusions…transfer pricing strategies.” – CFO Jeff Stutz .
“We now have the ability to offer our full complement of textiles in Europe [via] a new fulfillment center in Belgium.” – CEO Andi Owen .

Q&A Highlights

Tariffs exposure/mitigation: Prior 2018 playbook ready (sourcing shifts, early buys, pricing, duty drawback, exclusions); main exposures China and Canada (Toronto wood case goods) but overall less China-exposed post reconfiguration .
Orders cadence: Broad pre-election slowdown followed by post-election pickup; book-to-ship steady; leading indicators robust (12-month funnel +64%, mockups +~30%) .
Margin trajectory: Q3 margins pressured by lower revenue and channel mix; FY improvement driven more by top-line acceleration than unusual margin uplift; Q4 gross margin expected modestly better than Q2 with higher revenue .
Retail trends: Holiday timing shift implies ~$12M sales/$27M orders pushed to Q3; marketing efficiency improved (ROAS +5% YoY despite higher CAC) and AOV up ~10% .
Back-to-office: Customer discussions increasingly about how/when to bring employees back; larger projects continue to grow; hybrid tilting toward more in-office days .

Estimates Context

S&P Global/Capital IQ consensus for Q2 FY2025 (EPS and revenue) was not available due to request limits at the time of analysis. As a result, we benchmarked actual results against company-issued guidance. We cannot assert Street beats/misses based on S&P Global in this report.
Company guidance tracking: Q2 revenue, gross margin, operating expenses, and adjusted EPS all landed within guidance ranges issued at Q1; FY25 adjusted EPS range narrowed to $2.11–$2.17 (midpoint lowered) .

Key Takeaways for Investors

Americas Contract is inflecting: sustained order growth and rising segment margins suggest improving office-cycle dynamics; leading indicators (funnel, mockups, pricing) support positive 2H setup .
Retail headwinds are timing- and macro-driven: Q2 under-levered marketing on lower YoY sales and holiday split; ~$12M revenue shift aids Q3; initiatives (newness, design services, marketing stack) are improving unit economics and AOV .
Watch Q3 seasonal softness then a 4Q revenue-led margin uptick: management expects leverage from higher sales rather than unusual margin drivers; full-year EPS still up YoY .
Tariffs are a monitored risk but manageable: diversified footprint and a tested mitigation playbook reduce potential impact if policy changes materialize .
Capital returns continue within leverage guardrails: 1H FY25 returned ~$93.1M via buybacks/dividends; net debt/EBITDA at 2.94x, liquidity $470.4M (cash + revolver availability) .
Near-term catalyst path: execution against Q3 guide (including holiday shift), continued momentum in Americas orders, retail demand as rates/housing stabilize, and clarity on tariff policy.
Medium-term thesis: diversified brand collective, improved gross margin structure, and international distribution upgrades position MLKN to benefit from a multi-year workplace refresh and a retail normalization cycle .

MILLERKNOLL, INC. (MLKN)·Q2 2025 Earnings Summary