Millerknoll (MLKN) Q1 2027 earnings call

Good morning, and welcome to our first quarter fiscal 2027 conference call. On with me are Jeff Stets, MILLERKNOLL's Interim Chief Executive Officer, and Kevin Veltman, Chief Financial Officer. Joining them for the Q&A session are John Michael, President of North America Contract, and Debbie Probst, President of Global Retail. We issued our earnings press release for the quarter ended August 29, 2026, before market opened today, and it is available on our Investor Relations website at millernoll. com.

A replay of this call will be available on our website within 24 hours. Before I turn the call over to Jeff, please remember our safe harbor disclosure regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties, and other factors which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release. The forward-looking statements are made as of today's date and accept as may be required by law. We assume no obligation to update or supplement these statements. We also refer to certain non-GAAP financial metrics, and our press release includes the relevant non-GAAP reconciliations.

With that, I'll turn it over to Jeff.

Thanks, Wendy. Good morning and welcome, everyone. Before Kepner reviews our financial results and outlook, I'd like to update you on the priorities we outlined last quarter and our commitment to driving improved performance and disciplined execution across the organization. Overall, we delivered solid margin performance, earnings, and cash generation despite revenue headwinds. First quarter sales were $923 million, Down 3.4% year-over-year, primarily reflecting softer-than-anticipated revenue in our North America contract and global retail segments.

Adjusted earnings per share were $0.53, and excluding an $0.11 per share net benefit from IEPA tariff refunds, adjusted earnings per share were $0.42, above our guidance range and reflecting disciplined execution and cost management. Demand conditions varied across our business. Orders were particularly strong in international contract and continued to grow in global retail, while North America contract orders were softer than we anticipated. At the same time, several of our internal demand indicators and customer verticals remained quite constructive. We're encouraged by the progress our teams are making against this and by the actions underway to strengthen MILLERKNOLL's performance. As I previewed on our last earnings call, we are focused on three key areas.

First, we are elevating the level of operational discipline we bring to setting priorities and running the business by concentrating our resources on the initiatives where we believe we can create the greatest value for the organization and for our stakeholders. Last quarter I said this is about focusing on those efforts that will help us grow the top line and improve profitability.

And across the company, our teams have sharpened their priorities and aligned resources behind the opportunities that can have the greatest impact.

Let me put a finer point on that. In North America's contract, we are concentrating our selling resources on winning global and national account opportunities and leveraging the strength of our brands and our credibility with A&B and commercial real estate specifiers. In international contract, new products are gaining traction in the marketplace. Notably, our recently introduced concert line by NOEL is driving early wins in the private office category, which is an area of our business previously underpenetrated in Europe. We are also targeting efforts aimed at training dealers and expanding distribution coverage in the Asia-Pacific region where we see premium growth opportunities.

And in global retail, we're executing our store growth strategy and applying our learnings, such as an increased emphasis on our smaller format Herman Miller stores, while continuing to optimize our marketing investments to build awareness and customer acquisition.

Second, we're maintaining rigorous cost discipline and aligning expenses with revenue levels. In the near term, we're making more deliberate decisions about where we deploy capital and resources, while reducing expenses where we can. Our first quarter earnings performance, excluding net tariff refunds, demonstrates early progress toward this goal.

Third, we're sharpening our focus on capital allocation, cash flow, and balance sheet strength to support debt reduction during FY27 while preserving our capacity to invest in growth. By bringing greater discipline to capital deployment, we're building upon our business's proven cash generation capabilities.

Next, I'll offer some segment highlights for the quarter. In North America contract, first quarter sales declined year over year, due in part to the timing of orders pulled forward late in fiscal 2025 that benefited sales in the first quarter of fiscal 2026. Still, first quarter orders were softer than we expected, with trends varied across sectors. We had continued strength in insurance, financial, and business services.

Conversely, order patterns were soft in relation to last year within the healthcare sector and with federal, state, and local government customers.

Looking more broadly, we continue to operate in a dynamic environment and are navigating the recent trade developments between the U. S. and Canada. Now, we manufacture in both countries, and our supply chain touches both countries. We're being proactive on both sides of the border and working closely with suppliers, customers, and our own production teams to manage the flow of product, and make adjustments where we can. Our full year outlook includes the most up-to-date assessment of the U. S. -Canada tariff actions, and based on that assessment, we estimate an approximate 7 cents per share impact from costs related to these new tariffs. Given this backdrop, we are managing expenses and production levels carefully while prioritizing investment in our most important growth initiatives.

Tariff refunds were also beneficial to help mitigate these pressures to our full year outlooks. And Kevin will cover those details shortly. Over the last several months, I've spent considerable time with the North America contract team meeting with dealers and customers, and one message has come through very clearly. Strong partnerships are a competitive advantage in this business, and our brands benefit from deeply credible key target markets alongside differentiated product offerings. Our dealers and customers tell us they need two things from us.

First, we need to continue to simplify the process of doing business with us. And second, we need to maintain and expand our leadership in product innovation. We're delivering on these needs by improving responsiveness, service levels, and operational execution while also accelerating our new product innovation clock speed. We continue to be optimistic in this business. Despite the demand softness we saw this past quarter, which varied by sector, our internal forward demand indicators continue to point to healthy conditions across North America. Project funnel and funnel additions were up year over year, along with particularly notable growth in awarded contracts.

Externally, Class A leasing in the U. S. continues to show strength, with the latest four-quarter net absorption in Class A buildings improving to the highest total since mid-2020.

All of this suggests the order softness we experienced in the first quarter represents a timing issue rather than a structural slowdown in general business conditions. Turning to international contract, we remain encouraged by the opportunities in this business. Although sales declined year over year, reflecting difficult comparisons in several markets, orders increased across most regions. Activity was particularly strong in Asia, the Middle East, and portions of Europe and Latin America. We saw healthy demand from financial services and private office customers, along with strength in healthcare and technology. We remain focused on expanding and strengthening our international dealer network, increasing engagement and improving alignment as we continue building our international business.

During the quarter, our Asia-Pacific team hosted dealers representing more than 20 countries at an event in Jakarta, Indonesia. Key leaders from across Mujanol participated, helping us strengthen relationships in the region and position us for further growth. Within the global retail segment, we delivered another quarter of sales and order growth, together with meaningful year-over-year operating margin improvement, even after excluding the net benefit from tariff refunds.

While June and July had softer than expected sales and orders, performance strengthened significantly across channels and geographies in the month of August. For the first quarter, North America orders increased 7.5%, and this represents our eighth consecutive quarter of North America retail order growth. A key indicator of our ability to effectively navigate a challenging industry environment while advancing our long-term strategy.

During the quarter, we opened a DWR store in Raleigh, North Carolina, and Herman Miller stores in Columbus, Ohio, St. Louis, Missouri, and San Antonio, Texas. And looking ahead, we expect to open five to seven new stores during the second quarter and continue to plan for approximately 14 to 18 new store openings throughout FY27. Beyond expanding our physical footprint, the retail team is developing new ways to engage customers and build awareness of our brands.

These initiatives are designed to reach more consumers across our target markets and included a DWR furnished home on Shelter Island, sponsorship of the summer celebration of the iconic Glass House, and increased storytelling on social media with design partners. So, with those brief opening comments, I'll now hand the call over to Kevin, who will provide additional details on segment financial performance and our outlook for FY27.

Thanks, Jeff, and good morning, everyone. I'll start with an overview of our first quarter results and segment detail, followed by our outlook for the second quarter in full fiscal year. As Jeff mentioned first quarter consolidated net sales were million down 3 on a reported basis and 3 lower organically Consolidated orders for the quarter were million up 3 as reported and 3 on an organic basis Our consolidated backlog was million at quarter end down 3 from a year ago First quarter reported gross margin increased 320 basis points to 41.7%, and adjusted gross margin was 41.8%. The recognition of $16.5 million in refunds from the U. S. government related to previously expensed IEPA tariffs contributed 180 basis points to the year-over-year increase.

Excluding this benefit, adjusted gross margin improved 150 basis points over last year, primarily reflecting pricing realization partially offset by inflationary cost pressure. Including variable incentive impacts, the net benefit of tariff refunds was approximately $0.11 of adjusted diluted earnings per share. Our quarterly supplemental slide deck posted on our Investor Relations website provides further detail of the dollar and margin impacts by segment.

Adjusted earnings per share were $0.53 in the first quarter compared to $0.45 in the prior quarter. Excluding the net benefit from tariff refunds, adjusted earnings per share were $0.42. This reflects price realization and improved cost management, partially offset by lower sales volume and inflation pressure.

Turning to cash flow and capital allocation, we generated $49 million in cash from operations during the quarter and invested $33 million in capital expenditures. We ended the quarter with $580 million of available liquidity. Our net debt-to-EBITDA ratio was 2.75 times, as defined by our lending agreement. In July, our board of directors declared a quarterly cash dividend of $0.1875 per share, payable on October 15 to shareholders of record on August 29 of 2026.

At an annual indicated dividend of $0.75 per share, the yield is 3.7% based on yesterday's closing stock price. With that, I will move to our performance by segment in the first quarter. NET sales in the North America contract segment were $506 million, down 5.3% on a reported basis and 5.2% lower organically, primarily due to a challenging prior year sales comparison associated with the order pull forward in the fourth quarter of fiscal 25 that we have discussed in prior quarters. Orders were $484 million, down 1.7% as reported and down 1.6% organically from the prior year, despite a favorable orders comparison. As a reminder, we estimate that $55 to $60 million of orders were pulled forward from Q1 FY26 to Q4 FY25 related to tariff pricing actions.

Reported operating margin was 9.4%, and adjusted operating margin was 10.7%, down 70 basis points year-over-year. The decline primarily related to deleverage and lower sales and inflationary cost pressure, partially offset by pricing realization and the net benefit from tariff refunds. International contract segment net sales were $157 million, down 6.4% on a reported basis and down 6.2% organically year-over-year. Orders were $181 million, up 17.3% versus prior year on a reported basis, and up 17.9% organically, which included a notable project win in South Korea.

First quarter reported operating margin was 2.4%, and adjusted operating margin was 4.6%, down 390 basis points compared to prior year. The decline primarily reflected the leverage on lower sales, showroom investments, and timing of sales events, as well as higher incentive compensation. In the global retail segment, net sales were $261 million, up 2.6% on a reported basis and up 2.8% organically.

Segment comparable sales were flat, and comp sales in North America grew 1.9%. Orders in the quarter improved to $249 million, up 4.3% year-over-year on a reported basis and up 4.7% organically. In North America, orders grew 7.5%, reflecting continued market share growth. Reported operating margin was 6.1% in the quarter, and adjusted operating margin was 7%, up 580 basis points year-over-year. The improvement included a 410 basis point net benefit from tariff refunds. The improvement also reflected pricing realization and cost savings, partially offset by planned investments in new store openings.

Excluding the net tariff benefit, adjusted operating margin improved 170 basis points year-over-year as our priority to expand operating margins for this segment gains traction. Now let's turn to our Q2 and Fiscal 27 full-year outlooks, which includes our most up-to-date estimates on inflation, tariffs, and related mitigation efforts. For the second quarter of fiscal 27, we expect net sales of $972 million to $1.012 billion. At the midpoint, this represents a year-over-year increase of approximately 4%. We expect gross margin of 38.3% to 39.3%, and adjusted operating expenses of $321 million to $331 million. Adjusted diluted earnings per share are expected to be $0.43 to $0.49. This outlook includes estimates for the most recent U. S. and Canada tariff actions.

For the full year, with the lower-than-expected sales and orders in the first quarter, we reduced our expected net sales range to $3.88 billion to $4.03 billion, reflecting 3% growth year-over-year at the midpoint. We are maintaining our expected adjusted earnings per share range of $1.85 to $2.15. This includes an estimated $0.07 per share of unfavorable impact from the most recent U. S. and Canada tariff actions. As I mentioned last quarter in fiscal 27, from an operating expense perspective, our guidance continues to assume an estimated incremental new store expense of approximately $6 million per quarter on a year-over-year comparison. For all other details related to our outlook, please refer to our first quarter results press release.

With that, I will turn the call back over to Jeff.

Thanks for that, Kevin. Before we begin Q&A, I want to thank our teams around the world for their continued focus and commitment to delivering for our customers. We're making progress against our priorities to strengthen the business, and we remain focused on improving our operating performance, creating long-term value for our shareholders, and serving our customers. So with those as opening remarks, we'll now open the call for your questions.

Hey, Greg, good morning. I'll turn things over to John, and he can cover kind of his take on this. Maybe just would reiterate that we certainly are seeing in the background continued supportive indicators inclusive of, you know, corporate profitability. The Class A leasing commentary that we offered we think is bullish. You know, CEO confidence has been relatively resilient, and so those are supportive. We have internal metrics that I highlighted in my prepared remarks. I think, you know, our issue is more of some of the resilient sectors that we've seen strengthen. Just had a down quarter, and that happens in a project-driven business, but I'll let John unpack that further.

Thanks, Jeff. Hi, Greg. Yeah, to tag on to what Jeff said, I think overall when we look at the indicators, they're positive. I mean, I'm looking at the six that we look at on a regular basis are all pointing in the right direction. And I will say the reports from the sales organization are that customers seem to be taking a little bit longer to convert from awarded project to orders. And we see that in our indicators as well. We think there's a couple of things driving that. Certainly there's at the state and local level, which is part of our public sector group, We see some uncertainty and some hesitation probably related to the midterms that are around the corner.

From a federal government perspective, a lot of activity in key agencies, but certainly some of the agencies that experienced some of the downsizing and whatnot over the last 12 to 18 months have been a little slower to return than normal. And in our healthcare sector, a very positive outlook, but a little bit of a pause during the quarter, really based on the timing of projects.

We do. Yeah, the forecast for the balance of the year shows growth, but obviously we're a little bit behind after the first quarter, but the teams are working hard to catch that up.

Hi Greg Thanks for the question This is Debbie So the great news is that the cohort of stores that we opened in the back half of FY26 or through the back half of FY25 and all of FY26 are really showing progress and getting to a point where we have profitability out of those stores in FY27 Okay, and they're performing to, like, where you expected them to be from, you know, maybe a revenue and margin contribution at this point? We're seeing the second, the first comp year ramp actually a little bit more than we expected. So what we've seen through the store growth strategy is a little bit of a softer initial ramp for DWR than we initially performed, but the second year actually showed more progress.

So we remain committed to our store growth strategy, and we like the economics and the progress that we're seeing.

Yeah, Ruben, this is Kevin. Let me talk you through that. So, within the quarter, we saw generally improvement as the quarter went on, particularly in August for NAC, as well as the overall business. August was a growth quarter year over year. And then as we look through the first three weeks of September, we're up 9% orders year over year, and that is growth across each of our three segments as well right now.

Okay, great. Very encouraging. And then in your outlook, can you talk about what you've assumed from a price-cost standpoint and how you guys have handled kind of the latest round? And obviously, steel has kind of trended up through the year. Diesel's moved higher. You know, what's the latest price increase or surcharges or any other kind of metrics you look at to offset these factors? And what's kind of embedded for the full year from our price cost standpoint?

Yeah, Ruben, in the first quarter, maybe to set the stage, as you may recall, we talked last quarter about some pricing actions. that we took back in April across our retail and North America contract in particular. And so those actions have been flowing through in the first quarter. Inflation ramping up, but frankly, it ramped up a little bit slower than we expected during Q1. But to your question, it's still very real. And so we had price cost, as we look at it, was slightly favorable in Q1. We expect as inflation ramps up, While our pricing actions are also ramping up, we expect it to be a slight headwind, call it 20 to 30 basis points year over year in the second quarter.

And it's the things you talked about, oil continuing to remain close to $100 and the derivative effects of that.

Maybe the other point I would make is we're following the playbook we've done, whether it's tariffs or other inflation. And we're following the playbooks we've used in the past to work our way through.

Yeah, Ruben, this is Jeff. You had asked about, you know, what kind of pricing actions. Kevin, I agree with everything Kevin said. I might add to that that, you know, we had not done a surcharge action for the international contract business. That has been the latest pricing action is actually effective earlier this month and average of about 4%. So that should layer into our results going forward. And as Kevin said, we're following what has become a relatively familiar playbook for the business, specifically as it relates to Canada tariffs. We're pulling out as many stops as we can, including pulling component inventory into inventory ahead of the implementation date, customer order timing, trying to get in front of that wherever possible.

But we're working really hand-in-hand with our key suppliers on some sharing arrangements and leveraging dual supply wherever we see the opportunity, you know, supplying component parts or, in some cases, finished goods from, you know, outside of the tariff regime regions around the world. So, again, these are all actions that we're familiar with from past experience, but these are things we're pursuing with vigor.

Yeah, Ruben, this is Jeff. I'll give you some just high-level perspective on the heading of our focus on cost, discipline, and Kevin, you can fill in any additional color you see fit. You know, this is really – I mentioned this last quarter. This is really an enterprise-wide effort to – and it's really about making smarter, deliberate choices on where we spend. And I mentioned, I think, on the call last quarter that, you know, it really all ties into some of the priority setting that you've heard us talk about, the idea that, you know, recognizing we do all kinds of things incredibly well at MILLERKNOLL, but we can't do everything. And so we have to be smart about and choiceful about where we, you know, put our resources.

And that includes a focus on all expense lines. And so we're really – we've tasked our teams to really make that evaluation. We're also – so that touches on the SG&A side of the business, but it also touches on cost of goods sold. Our supply management team continues to do incredible work with our supply base and, you know, finding opportunities to reduce the water level on cost of goods sold. We're evaluating manufacturing capacity. We've already made moves in that category, which we've outlined for you in past calls. But just a reminder, we've closed two plants, and we're in the process of closing our third year in West Michigan.

And there are longer-term opportunities to consider other actions down the line, and we're certainly evaluating all of those things. So that's just a little kind of context to it. This is a ground-up review on the part of the organization. And, you know, as we move forward, we'll certainly unpack more details on that for you. I will say, and maybe, Debbie, you can feel free to talk about this. One of the actions we took this quarter that's reflected in the special charge line items or the restructuring line items relates to some workforce reductions and some reorganization we did with the Holly Hunt brand. So, Kevin or Debbie, please feel free to chime in with some additional color.

Yeah, maybe overall, and Debbie can share a little bit more on Holly Hunt, which this would be included in this. As we look at our OPEX bridge, there's $3 million to $5 million of savings reflected in that bridge. And obviously, we've talked about the other things. You have standard wage package and the new stores that is helping to fund. But that's about what was flowing through when we look year over year, of which some of the target things at Holly Hunt, as we look at the performance improvement opportunities in that business.

Yeah, we're working very quickly to improve the outlook of that particular business, and I was pleased to see the business, from an order trend perspective, return to growth in Q1 after four consecutive quarters of decline. Some of the restructuring elements that we've been working on, we talked in the last call about some of the leadership adjustments that we had made, And obviously, we will have the wraparound effect of some of those cost savings throughout the course of the year.

We're also looking at our overall corporate footprint supporting that entity and making adjustments there to right-size the corporate footprint, as well as looking at showroom rationalization. This quarter, we'll be closing our Minneapolis showroom and moving to an outside sales rep structure in that market. So those are a few examples of work that has happened thus far.

Thank you.

John, why don't you start us off, and Debbie, you can chime in.

Yeah I think in terms of the pipelines from a contract perspective it encouraging I think we seen what been interesting for the last 30 to 60 days is the activity Talking to our dealer network the activity is still very robust Some of the projects are larger and as a result they take a little longer to come to fruition And I'd say in the immediate past, we've seen a lot of activity in smaller projects. So it requires a similar amount of effort from a dealer processing perspective, but the size of the projects have been a bit smaller. So we're really seeing customers in kind of two groups, those that did some retooling of their workplace previously and are making some modest adjustments to it, and then some others that have waited and now realize that they have some significant work to do over the next 6 to 12 months to make sure the workplace is ready for the future of work.

As you've seen in the headlines, a lot of the larger organizations are bringing their workforces back to workforce four or five days a week. And I think over time, that bodes well in terms of the project activity that we'll see.

From a global retail perspective, the change in our full year outlook is largely reflective of our soft June and July, We may end up feeling like we can make up that softer than expected revenue. And that softness in June and July, those are typically our softest months of the year, was largely driven by web, and in particular, our outdoor category, where we're missing some inventory due to the PFAS regulations. That is subsequently in a much better position, and we saw a very strong August around the globe, but in particular in our North America comp, where we outpaced the prior five or so months in terms of comp trends.

And quarter to date, we're also seeing strength, and the back half of our year is forecasted more or less in line with what we're seeing right now. Okay, very helpful. And just maybe doubling down then on the global retail side, I guess there was a lot of noise during the quarter between macro pressures and then changes in the digital marketing landscape. So I guess just from what you're seeing from an underlying fundamentals perspective, we should see, I guess, an acceleration in trends from maybe the first quarter as we go through. So is that reasonable? And then I guess just from a contribution from the new stores entering the comp base, I guess, how do you think about that here going through the second half of the year, remainder of the year?

All right. There's a lot in that question, so let me make sure I capture it. So from a shifting digital landscape perspective, I think that's the first thing you mentioned, Philip. What you're referring to is obviously the rapid increase in AI search and I think some of the shifts in the price of digital advertising as a result of Google's shift to AI mode. We are definitely seeing increased digital advertising costs, and as such, in August, we leaned more heavily into our direct mail distribution, and we'll continue to do that throughout the balance of the year, particularly because of the upcoming midterms. Likely driving up digital marketing costs more as well. But we're very focused on making sure that we meet our customer where they are and moving very quickly to evolve our digital product roadmap and our brand marketing strategies to ensure that we get the best results we can out of AI search.

We feel like the heritage of our brands and the authenticity of our brands well positions us to speak to both humans and machines in the appropriate ways to drive traffic and progress in our business performance. And we have seen significant rebound of our web performance in August and into this month as well as we eliminated some of that inventory issue noise. As it pertains to the new stores, as I mentioned already, we're excited that we're going to be getting OI expansion in the global retail segment in FY27 from the new stores that opened in 25 and 26. And in light of the changing digital customer journey, I think our store growth strategy becomes more important than ever.

And our store comp performance in North America in Q1 was in line with Q4, but continues to be a real driver of our overall success as well.

Okay. Thank you. Yeah, no, you got it all. I appreciate it.

Yeah, Phillip, this is Kevin. I'll cover that. So capital allocation, our priorities remain the same. Invest in those growth opportunities to the point we're continuing to look at where are the opportunities that we believe generate the strongest returns. So the mixture and leaning into those Herman Miller stores is a good example of that. Paying down debt is our second priority, and we were at 2.75 from a net debt to EBITDA. From a covenant perspective this quarter, we were at 2.8 last quarter, and then maintaining the dividend and being opportunistic on share repurchase would round out the priorities.

Thanks, Philip.

That's a great question. This is Jeff. I'll start, and Kevin, welcome. Any additional comments you have? Yeah, we've been really working hard to try to bring more balance to the overall product mix that's sold through our international contract segment. You know, historically, that business has really indexed very heavily into task seating, which is really good because as an individual product category, it's high profit, which is really good for us. And we want to continue to do that, and we are doing that. We're focusing very heavily on that. But we're also recognizing the importance of finding ways to pull through other categories of furnishings, Because that's how you have access to larger project opportunities that will then bring, excuse me, carry with it profitable, you know, seating and ancillary products.

And so part of the answer is we've seen a bit of a pivot towards some other relatively lower gross margin product categories, But with the broader goal in mind of driving improved top-line performance and more profit dollars over time as opposed to just the percentage. So some of it is a product mix. And I'd also be remiss if I didn't highlight the fact that, you know, we're seeing cost inflationary pressures in that business and have been for some time, like everywhere in the company. Energy prices have put a real pinch on all manner of businesses across our international contract markets.

And so that's played a role as well. And the last thing would be, again, we have regional shifts and mix that, well, on one hand, you may pick up production volume in one part of the world where you have a manufacturing presence. It may shift, and in fact has shifted away from other areas where we maintain fixed overhead in terms of manufacturing, and then you lose some overhead leverage in that instance. And that's particularly been true across our factories in Europe. So those are some initial thoughts. I don't know, Kevin, if you'd add anything.

Yeah, I think I would just add the comment that international is definitely project-based and moves around from quarter to quarter, whether it's the mix of the products in the projects or which regions we're having activity. This quarter was a good example. So the operating margins this quarter were tied to the lower order levels and backlog going into the quarter. But then, as you saw in our ordered numbers, up almost 18% for the quarter, and that's the kind of volume that will flow through.

Asia Pacific is a good region for us as well, and so you'll see that move around from time to time. There are a few other things unique to this quarter. We have a new showroom that we're opening up in Mexico City, so you have some initial costs to get that ramped up. We had the timing of some sales and marketing events. One of the significant opportunities we see internationally is our share of wallets is lower than it is a North America contract as we expanded to some of the new product categories that Jeff was talking about. And so training folks on those and then expanding our dealer relationships in certain faster growing regions.

And so some of those sales and marketing events were tied to the opportunities that we see there.

Thank you all for joining us today. We look forward to speaking to you again next quarter.