Good evening, and welcome to MillerKnoll's fourth quarter earnings conference call. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kevin Veltman, Senior Vice President and Integration Lead for MillerKnoll. You may begin. Good evening. Joining me today on our fourth quarter earnings call are Andi Owen, Chief Executive Officer, Jeff Stutz, Chief Financial Officer, and John Michael, President of the Americas Contract. We have posted the press release on our investor relations website at millerknoll.com. Wherever any figures are presented on a non-GAAP basis, we have reconciled the GAAP and non-GAAP amounts within the press release. Before I turn it over to Andi for a brief overview of the quarter, I would like to remind everyone that this call will include forward-looking statements. For information on factors that could cause actual results to differ materially from these forward-looking statements, please refer to the earnings press release as well as our annual and quarterly SEC filings. Any forward-looking statements that we make today are based on assumptions as of this date, and we undertake no obligation to update these statements as a result of new information or future events. At the conclusion of our prepared remarks, we will have a Q&A session. Today's call is scheduled for 60 minutes. With that, I'll turn the call over to Andi. Thanks, Kevin. Good evening, everyone, and thank you so much for joining us. You know, it has been an extraordinary year in our company's history, and Jeff and I are looking forward to discussing our fourth quarter results with you. Just over a year ago, we began the journey to become MillerKnoll, transforming our industry and creating one of the most influential design companies in the world. We've accomplished a great deal. To date, we completed the organizational and global design process, introduced a unified sales team and the MillerKnoll dealer network in North America. We've made meaningful progress toward our goal of delivering $120 million in cost synergies, having captured $66 million in run rate cost synergies at the end of our fiscal 2022. We delivered strong results this past year while simultaneously contending with a very volatile macroeconomic environment. Across our global operations, we've taken decisive actions to mitigate supply chain disruptions and inflationary pressures while investing for the future. We've remained focused on the strategic priorities that guide us as we drive meaningful growth across our global business. Our team delivered fourth quarter and fiscal year 2022 results that reflect both the strength and potential of MillerKnoll. We're confident that our unique combination of contract and retail businesses and our collective of brands will continue to enhance our ability to compete and grow as we move through fiscal year 2023 and beyond. Jeff will take you through the details of our fourth quarter performance. Before I hand off to him, I wanted to comment briefly on the progress we're making in a few key areas. We achieved several critical integration milestones in the fourth quarter. Most notably, on June 1st, we launched our North America MillerKnoll dealer network. Customers now have access to our full portfolio of brands through a unified dealer network, giving them more choice and creating more opportunities for our dealer partners. This has always been one of the most compelling reasons for creating MillerKnoll, and we've already seen our dealer partners leverage the full portfolio of our solutions to secure significant wins in several regions across North America. We're also making excellent progress building the international MillerKnoll contract dealer network to cross-sell the MillerKnoll collective of brands. Our international dealer cross-sell pilot now includes 32 dealers from 17 countries on three continents. We'll expand our pilot into the Middle East and Africa later on this year. Earlier this month, we held our first annual MillerKnoll Design Days. Along with our dealers and cross-brand sales teams, we welcomed the design community and customers to a series of events, exhibits, and showroom tours at our approximately 70,000 sq ft of showroom and retail space in Chicago. The design and innovation pipeline is robust across our collective of brands. We introduced more than 12 new products at Design Days, including new task seating solutions from both Herman Miller and Knoll, new textiles from Maharam and Knoll Textiles, an innovative new sit-to-stand desk from Geiger, sofa and lounge seating at Muuto, and new cafe tables and stools from NaughtOne. At the same time, we've made considerable progress building our commitment to our people, planet, and communities. Early in the fourth quarter, the Diversity in Design Collaborative launched its first formal initiative called Designed By. Based in Detroit, Designed By was created to raise awareness of design as a viable career path for underrepresented high school students and include a series of special events and speakers. We also introduced our 2030 sustainability goals in the quarter. These goals are shared across our collective of brands and build upon our history of environmental stewardship. They're targeted at reducing our carbon footprint by 50%, designing out waste and stopping the use of single-use plastics, and sourcing better materials by using 50% or more recycled content and purchasing materials that are responsibly and sustainably produced. Our teams across the globe work hard every day to have a positive impact on our communities and the planet, and these goals will push us to do even more. We are united across brands and regions in our commitment to sustainability, and I'm excited to see how we activate our plans to make a difference across the collective. Our MillerKnoll team has delivered exceptional results this past year, even amidst a challenging backdrop of macroeconomic pressures. We enter fiscal year 2023 from a position of strength and with a great deal of momentum. We're focused on delivering against our strategy to stand out MillerKnoll, create a differentiated omni-channel customer experience, accelerate growth across channels and geographies, and use our business ultimately as a force for good. With that, I'll turn it over to Jeff, who will discuss our results in detail before we open it up for questions. Thanks, Andi. Good evening, everyone, and certainly appreciate you joining us today. Our fourth quarter results reflect outstanding efforts of our global teams to fuel positive momentum for our business and overcome the ongoing impact of macroeconomic pressures. Supply chain mitigation efforts helped return lead times and reliability to near normal levels for almost all products and geographies. Strong production levels across our global footprint helped drive the highest sales volumes of the fiscal year. Consolidated net sales in the fourth quarter of $1.1 billion reflect an increase of 77% on a reported basis and 23% organically over the prior year. Notably, our international business saw record sales of $136 million in the quarter, an increase of 28% over last year on a reported basis, and up 37% organically. Consolidated demand continued to exceed prior year levels, with orders of $1 billion up 47% over last year on a reported basis, and an increase of 4% organically. Customers are seeking premium and custom solutions that deliver the workplace experiences and amenities their employees are demanding, and the breadth and depth of our portfolio continues to resonate. Along those lines, brands like HOLLY HUNT, Spinneybeck|FilzFelt, Geiger and our Textiles brands continued to see strong demand in the quarter. With that, I'll turn to the retail business. Retail is coming off a very strong fiscal year 2022, where we saw record orders and sales levels. Despite this strong performance for the full year, during the fourth quarter, order levels declined by 12% compared to last year as consumers shifted their spending to travel and other experiences and faced the uncertain economic environment. Despite these near-term pressures, new orders for the retail segment were up 63% on a two-year stack basis compared to the fourth quarter of fiscal 2020. Excluding the workplace category, which creates tougher comparisons given the pandemic-driven growth last year, the two-year order growth for retail was 77%. The retail investments we're making in product assortment expansion, new stores and studios, and e-commerce platforms are bringing new customers to our brands and positioning us for long-term growth. We opened eight Herman Miller stores in the fourth quarter, including three in Japan and one DWR retail studio. We have three store openings planned for the first quarter of fiscal 2023. We also introduced a new HAY website in the U.S. and began a series of global website launches for Herman Miller and Herman Miller Gaming in native languages to further extend our reach outside of North America. Gross margin of 34.8% at the consolidated level was 160 basis points lower than the same quarter last year, primarily driven by higher commodity costs and inflationary pressures. On a sequential basis, consolidated gross margin improved 180 basis points as we began to see the impact of price increases flow through orders in the fourth quarter. We expect additional traction from these price increases will drive further margin expansion in future quarters. Reported operating margin for the quarter was 5.2%, while adjusted operating margin was 6.5% compared to 7.3% in the prior year. Consolidated operating margin improved sequentially by 230 basis points from the prior quarter, and the sequential expansion in operating margin this quarter was driven by improved operational performance, the realization of integration savings, price increases, and well-managed operating expenses. We reported diluted earnings per share of $0.28 in the quarter, and adjusted earnings per share was $0.58 in the quarter, which compared to $0.59 a year ago. For the full fiscal year, net sales were $3.95 billion, a year-over-year increase of 60%. On an organic basis, net sales increased by 14% compared to the prior year. A net loss per share for the full year totaled $0.37. On an adjusted basis, earnings per share for the full year totaled $1.92 compared to diluted earnings per share of $3.07 in fiscal 2021. At the end of the fourth quarter, our liquidity position reflected cash on hand and availability on our revolving credit facility totaling $527 million. We expect first quarter revenue to range between $1.08 billion and $1.12 billion, and adjusted earnings per share be between $0.32 and $0.38. This guidance reflects the impact of an additional week of sales based on the company's accounting calendar, which is required periodically to realign the company's fiscal periods with the calendar months. The guidance also considers near-term inflationary environment that we are navigating and the actions we're taking to help mitigate these pressures, as well as the expected timing of shipments from our backlog. With a backlog that's 45% higher than last year organically, we enter the first quarter on a strong foundation. However, it's important to point out that we are seeing the expected timing of shipments extend further than normal and have reflected that in our guidance. We have a great deal of momentum as we continue to extend the full benefit of MillerKnoll to our customers. We're confident in our strategy, and we're well equipped to navigate this period of macroeconomic uncertainty from a position of strength. Our collective of brands can meet the needs of both our contract and residential clients around the world, and we will continue to capitalize on the unique opportunities in front of us as we unlock the full potential of MillerKnoll in fiscal 2023. With those prepared remarks, we'll now turn the call over to the operator and we'll take your questions. Thank you. Ladies and gentlemen, as a reminder to ask the question, you would need to press star then one on your telephone. To withdraw a question, press the pound key. Again, that's star one to ask the question. Our first question comes from the line of Steven Ramsey with Thompson Research Group. Your line is open. Good evening. Maybe just to clarify a couple of things that, on the supply chain, it seems like you talked about some normalization there, but then also some lead times of shipments extending. Can you maybe reconcile those things and if that is impacting certain segments over another. I would say on the whole, Steven, and I'll turn it back to Jeff since he made the comment on lead times extending. Supply chain volatility continues, but it has improved for us. As we've seen our own lead times internally get back to normal levels, we're certainly encouraged by that. That's not to say we aren't seeing some suppliers experiencing their own supply chain issues, but we have seen, on the whole, much improved customer experience, both on the contract and retail side. Jeff, what would you add? Yeah, I think that's right. I think you do have to draw a distinction, I think, Steven, between our own manufacturing lead times here domestically in the U.S. and those of our primary suppliers, which is much improved from where it's been. Now I will say that for certain products that are built abroad and that we import, and this really affects our retail business probably a bit more acutely, some of those are still facing extended lead times. You know, there's still port congestion in a number of locations, whether you're coming from Asia. You've got the disruption from the war in Ukraine affecting certain suppliers still in Eastern Europe. That's an area where we're feeling the effects of it. In terms of the backlog, the longer-dated backlog has probably as much to do with anything today as customers iterating on designs and really trying to be thoughtful and careful about, you know, kind of the types of designs that they wanna have. Also, frankly, still a little bit of people getting in line, in terms of, you know, concern around the supply chain environment. Very helpful. That may dovetail nicely into my next question on the strong pickup of customer visits, dealer sentiment being high. What drove that stark improvement in customer visits in the quarter? Is it converting to action on the part of customers as fast as maybe pre-COVID levels? Or do you think the process to purchase is maybe a little different right now but then normalizes over time? Just curious how kind of it's playing out right now and where you see it going. You know, Steven, we've seen an uptick in customer visits. I think it's a number of things. I think the reality of getting back to collaborative work environments for the contract side of the business is starting to hit people and has been for the last several months. We've seen a frenzy of activity on the dealer side in the A&D community. People are really getting out there and visiting and getting back together and spending time together, both inside and outside of work. I will also say that those visits, and I think Design Days is a perfect example compared to the potentially past NeoCon, are very intentional. People are coming to visit us with an idea for projects, looking at their space, reevaluating their space. I think the latest Leesman Survey said 93% of people were looking at changing their space. The visits are much more intentional. The one caveat to that that I'll say is that people are iterating on design much more than they used to. While our design teams are very busy, A&D firms are very busy, they're spending time trying to adapt to the hybrid environment and potentially reiterating on design a little bit more than we've seen in the past. John, I know you see a lot of customers. What would you add? I think to add to that, Andi, we do see, to your point, 93%+ of customers have acknowledged that they have to do something in their space. I think they're finding it harder and harder to attract workers back to the office. Perhaps some companies that previously thought they wouldn't have to do a whole lot are beginning to realize that they are gonna have to take action in order to create an office place that is a destination that their employees want to come. To tack on to the comment about Design Days, if you look at the number of appointments we had at Design Days as well as the traffic through the showrooms, it actually exceeded pre-COVID levels in terms of customer appointments scheduled. To Andi's point, validates the fact that we didn't really have a lot of people just looking and kicking tires. We had people with real projects, that needed to make decisions, that wanted information. Very helpful. Last thing for me quickly, Herman Miller stores outpacing expectations. What areas are outperforming or performing better than expectations? Why is that? Do you expect that to continue as you open more stores this year? Yeah, Steven, I think what we're finding in the Herman Miller stores is that it's an easy concept to set up. It's a small square footage. It's profitable to run. It's efficient. The customer is really responding to not just the workspace product, but the Herman Miller brand as a whole. As you know, we have many iconic residential designs that are resonating as well. We're seeing pretty much all the product check from a workspace standpoint. We're also seeing the lifestyle product check in the Herman Miller stores. We're very excited about all aspects of this business. It's also, which is very nice these days, it's very inventory light, which adds to the efficiency and productivity. Excellent. Thank you, Andi. Thank you. Our next question comes from the line of Reuben Garner with The Benchmark Company. Your line is open. Thank you. Good afternoon, everybody. Hey, Reuben. Maybe, Jeff, can we hit on the price cost situation? I know you guys have had another round of inflation to deal with. Heard a couple of your competitors now using surcharges is a way to kinda get through this period of maybe more temporary pressures. Have you guys and I think additional pricing actions in addition to surcharges, what are your thoughts there? Have you guys made any additional announcements on the pricing side? Thanks for the question, Reuben. So we've not made any additional announcements, but the pricing is a question that is constantly being talked about, and we do have plans for additional increases, so there will be more details on those forthcoming, but nothing announced publicly. To your point, yeah, I mean, there's inflationary pressure from a number of areas. There's certainly a notable area where we're seeing some relief in the market price, and that's in particular in the area of steel, where the market price of steel has been really since the beginning of May coming back in our favor a bit. So that's a positive. Most other areas, though, in fairness, are seeing cost rises. Obviously, transportation is a big conversation these days with diesel prices, so we're certainly feeling the effects of it. As it relates to surcharges, you know, we've attempted to use surcharges in the past, and frankly, our experience is that we just haven't had a great deal of success with it, and our belief is that list price increases on discount management are the better way to approach it. Okay, got it. I Oh, go ahead, Andi. No, I was just gonna say that one of the most important things as we look at this price-cost equation to remember is, as we start to see our price increases kick in, we continue to see margin improvement quarter over quarter as we get the benefit from those. We're happy to see that. That kinda dovetails into my follow-up. What's embedded in the guidance for next quarter from a price-cost standpoint? Are we back to neutral yet, or is there still some catch up to do and it'll be the kind of following quarters? Yeah. We've got our guide, our sequential guide coming from Q4 assumes at the midpoint about 100 basis points of price increase benefit. Pretty meaningful to Andi's point. You know, that's not all gonna flow through. If you do the math on that, I think the midpoint of our guide is 35.2%. Expectation for a bit more sequential pressure from freight and transportation, just given the recent trends in diesel pricing. As I mentioned, some of the port congestion and so forth, you know, inbound freight for the retail business has continued to be a bit of a challenge. We expect about 50 basis points of pressure, again, at the midpoint of the guide. You know, a little bit of other non, you know, non-steel but other commodities, call it about 10 basis points with our best estimate. The balance of that, math would get you to probably mix in kind of everything else, maybe another 40 basis points of margin pressure. The main point would be a pretty significant benefit sequentially from pricing. Great. One more from me. On the integration front, sounds like good progress on the cost side. Can you talk about what you're seeing so far in the early stages, in terms of revenue dyssynergies and then also revenue, maybe synergies that, I don't know if it's too early for that part of it, but just any color that you could give on what you're seeing, especially with some of the latest steps you've taken to integrate the two. Yeah, Reuben, this is Kevin. I'll start with that. Cross-sell, as we mentioned in the release, June 1, we kicked off an exercise to bring MillerKnoll dealers and put those in place in North America. Really we're just starting to kick off that exercise with a big focus on being able to transact business across all the brands across North America. We're in the early days of that. We've had some level of dealer flips to date, but within the expectations that we had at the start of when we did the modeling around the deal. John, I don't know if you'd add anything to that. Thanks, Kevin. I would just say from a cross-sell perspective, I think we're four weeks in at this point, and we see the momentum building every week. It's something that the dealers have been waiting for for a number of months, and we had a very well-orchestrated ramp-up to cross-sell that included dealer activation, virtual training sessions, deep dives on products. Then really the culmination was Design Days, where the power of the MillerKnoll collective of brands really came to life for our dealers and for customers and designers. So as we look at the early success of cross-sell, we're really encouraged and we expect to see it accelerate in the coming weeks. Great. Thanks, guys, and good luck going forward. Thanks, Reuben. Thank you. Our next question comes from the line of Budd Bugatch with Water Tower Research. Your line is open. Thank you for taking my questions, and congratulations on getting through the first year of the integration. My best wishes for good luck going forward too. Jeff, I'd like to ask. Thanks, Budd. I'd like to ask a few questions about the balance sheet, if I could. The inventories look like they rose pretty substantially from the third quarter. Can you talk about the quality of the inventory? I know most of it, typically would be in WIP, but now with retail, is that most of that increase in retail? No, it's a great question, Budd. I would say it's really two areas. Retail is definitely a contributor to this. There's a decent amount of investment in inventory for the retail business. Particularly, I would say, it's high quality in the sense that it's products that are not terribly seasonally sensitive, number one. They tend to be high volume products. There's some investment in newness as well because part of the strategy for the retail team is to build out new assortment. We have no concerns on the quality of the inventory. Retail is a component of it. The international business, though, would be another area that I'd point out, and that's more a function of the order growth that business is seeing. You may recall orders in the international business were up something on the order of 77% last quarter. They were up year-over-year again this quarter. Our international business has had a terrific year and as a result has seen their backlog increase and inventory levels increase very much in line with that. I'll leave it at that. I mean, you're absolutely right. Inventories are up. You know, we're gonna manage that down in the form of managing future inventory purchases to work our way through that. There are no concerns with the ability to move it. Just make sure I understand the international. Is it the international contract or international retail that's where that is? Yeah. Yeah, I meant international contract. Thanks for clarifying. Yep. Okay. Just to add to that, Budd, just from a historical perspective on the retail business. You know, Debbie and the team have done an excellent job managing through more aged inventory, getting the outlet businesses to a place where we're really working through anything that might be liable. Our inventory levels are actually below pre-pandemic levels right now. We feel good about where we're invested and the quality of that inventory. Okay, that's great. The mix that we talked about, Jeff, and you, I think you referred to 40 basis points of mix. That's the same issue that we had last quarter, where we had such an outsize growth in seating in retail that it's hard to compare for the next couple of quarters. Is that where that mix issue is coming from? Yeah. Principally, that's what I'm referring to, Budd. Well, you see, you saw the retail orders were down a bit this quarter. As retail, which has structurally higher gross margins in the business, with lower order entry levels this quarter, you know, that just the overall business mix with retail is a contributor to that. The big driver there would be the higher margin task seating. Should we expect retail volumes to stay down in that around 10% area for the next couple of quarters until you cycle through the issue with people now going and spending on other stuff other than retail? For the home. Yeah. I don't you know we're not providing a guide or anything beyond Q1. You know, certainly that market factor is not something that's gonna turn quickly, so that you know we're you know we will be dealing with that. Of course, we just opened eight stores. We've got three more opening up in the first quarter. Those will be a contributor, albeit you know small to start. We're doing a number of things. I think Debbie and the retail team are doing a number of things, as I mentioned, with new products to be added to the assortment, you know, the investments in stores and so forth. I think those will help. You know, the market pressures right now are real, and we'll probably be facing some of those, you know, in the near term at a minimum. Yeah. I would say, Budd, the one thing to really think about with this retail business, because, you know, it is pretty nascent. Over the last couple of years, you do have that huge workspace blip that you have to normalize for. I like to look at the two-year stacked comps for retail, which really kinda gives you that underlying health of the business. If you include it with workspace at a two-year, we're at about a 63 comp as the business has grown and about a 77% comp without workspace. All those other categories outside of that kind of COVID work from home drive are healthy. I think we really have to look at that. As I say, total growth, we might see some of that come down with what's happening in the environment as people turn to travel and experiences. We're going to see this business continue to grow from a category in a two-year stacked comp perspective. I also think one of the things. Oh, sorry. Go ahead, Budd Bugatch. Go ahead. I'm sorry. No, no. Please. No, I would just say as we think about Debbie and the initiatives that she has in place with the retail team, from a marketing standpoint, from a customer data standpoint, we believe that many of them will offset a good portion of these macroeconomic pressures just because of the newness of this business and the categories that we still have to exploit. Make sure I do understand something about the retail. Are you in the customer's home at this point in time? Are you doing design projects in the home, or is it pretty much all in-store and online? We are doing all of the above, and we are relaunching our trade program. We're relaunching our interior design program online. We are doing all of the above. We have a very, very strong interior design capability in our stores, and we use that in a variety of ways, so for sure. Gotcha. Yeah, a couple more questions, if I could. The net leverage ratio for the debt, my calculation was just over three. Is that right? I mean, it was down nicely from the last quarter, or have I got it wrong? What's the secured lien first leverage ratio, or if I got the name right? Budd, the key point that I think is important to understand is that our bank covenants give us credit for the synergy plans that we have in place. If you account for the synergies that we are targeting, we were at, I think, 2.6- Mm-hmm. net debt to EBITDA leverage at the end of the quarter. You might be doing it without the inclusion of the targeted synergies that we have in our sights moving forward. Mm-hmm. That could be the difference there. No, I had the $120 million. That's what they give you credit for, right? That's the targeted synergies. Or is it more? No, it's $120 million, but the net debt to EBITDA for the quarter was 2.6x. Yeah. I'd love to get offline, Andi. We can take it offline, Budd, if your calculations are different. Well, we're certainly happy to do that. Can you give us maybe the interest expense? 'Cause I know it's embedded in that other item. What was the interest expense in the quarter? $12.8 million in the quarter. By the way, this is a rolling four-quarter calculation. Again, that might be. We can talk more about the mechanics, but just so you're aware, that's on a rolling four-quarter basis. Oh. In the quarter. I got that too. Yeah. Yeah, okay. Yep. Okay. Yes, sir. Okay, well, we certainly happy to take that offline. My last question is, I just wanted to make sure I understood the EPS add back. Are you adding back $0.11 for taxes? I didn't quite understand the language on that. Budd, this has been a little bit of a unique year because our effective tax rate on a GAAP basis for the quarter, for the fourth quarter is almost 50%. That's GAAP. Right. On an adjusted basis, it's $21.5 million. One of the things that contributes to that difference is that on a GAAP basis, on the full year, now I'm gonna talk about for the full year, because of all the integration-related charges, we are in a net loss position. On a GAAP basis in a net loss position, we end up becoming limited on our use of certain credits, like Foreign-Derived Intangible Income, foreign tax credits in general. When we work down to an adjusted EPS, the assumption is that you wouldn't be limited on those credits. You end up with a fairly significant tax adjustment to work your way back down to the adjusted EPS for the quarter. It is confusing, admittedly. The $0.11 You left it. I think you left me as it's a unique year. I think we'll do that offline. Thank you very much. Good luck. Fair enough. Thank you, Budd. Happy to reconnect. Appreciate it. Thanks. Same, Andi. Thank you very much. Yeah. Thank you. Our next question comes from the line of Alex Fuhrman with Craig-Hallum. Your line is open. Hey, guys. Thanks for taking my question here. You know, first thing I wanted to ask about, I guess, is the retail business. Andi, if you could talk a little bit about that. Obviously, you saw tremendous growth during the COVID era business in your direct-to-consumer business. You know, that's been slowing down in recent quarters and seems like it was approximately flat year-over-year in the quarter you just reported. You know, pretty impressive considering, you know, the extraordinary growth you experienced during COVID. What should we be expecting over the next couple of quarters? Is it inevitable just that as you lap that extraordinary growth, we're gonna see a couple of down quarters before that business starts to make new highs again? You know, is potentially the impact of opening a few new retail locations, you know, going to blunt the impact of those comparisons? Yeah, it's a great question, Alex. I think we should still look to the retail business to hold steady despite the macroeconomic pressures. I think, as I said before, we're really looking at those two years stacked comps to normalize for that workspace blip. I think Debbie and the team are really being thoughtful about the category expansion. There are several categories that we have not been in before, whether that's rugs or artwork or even expansions of certain living rooms or dining room products. I think there's a lot of new product extensions that we'll be adding in. There's also new capabilities. We've been investing in technology. We've been investing new ways to track our customers. I think many of the things an established retail business might have had, we have been building over the last couple of years that will give us leverage to acquire new customers, which is what we desperately need to do, to market to them in different ways, and to also fulfill those categories that we haven't had before. I don't anticipate that we are going to see the explosive growth in the retail business that we did over the last year, but I do expect that we will continue to see that core base business continue to move in the right direction as we build sort of the base of a strong retail business. What would you add to that, Jeff? Anything? I think that's good. Okay. Yeah. That's really helpful. Thanks. Thanks, Andi. Then just one more, if I could, for the team on gross margin. Looks like now, you know, with the guidance in Q1, several quarters of pretty solid improvement relative to the 33% or so gross margin rate that we saw in the third quarter. I know it's tough, you know, to have visibility multiple quarters out, and you're only guiding to the one quarter. Just as you think about, you know, what you know today, given labor costs, material costs, you know, what you've got in terms of already announced price increases that maybe, you know, have or haven't been fully realized in your business, I mean, should we think of, you know, this kind of, you know, call it 35% or so, gross margin that you're guiding to in Q1 as being a base that you would hope to be expanding off of in future quarters? Yeah, it seems like there's so many dynamics pushing and pulling in both directions. Just curious kind of, you know, based on what we know right now, what would you expect the base case on gross margin to be in the second and third quarter of the year? I mean, Alex, we definitely expect it to be a base that we expand off of, and I'll caveat that by saying provided nothing else happens in the world that could impact that from a macroeconomic standpoint. As you look at the price lag, particularly in the contract business, we have not realized all of the price increases that we've put in place yet. We planned for more if we need to offset cost increases. I think it's fair to say, that's a good base to build off of. Jeff, I know you have something you wanna add, too. Yeah. No, I think that's right, Andi. The only thing I would add is we would be disappointed, very disappointed. Yes if that didn't happen. I said last quarter and I'll say it again, I think, you know, our belief is that we've got enough pricing that's been done, and again, we're contemplating the need for potential more, we can get this business back to levels that were at or above pre-COVID, and we're nowhere near that right now. We should see a continuous improvement in margin as we move through the balance of the year. Andi, your point is a good one, though. You know, you have to make an assumption around economic conditions in general. Our base case is not that we're gonna enter into an industry-wide recession. As long as we can get some continued volume growth, you know, we have every expectation that margins will continue to climb. I think the one thing we can't forget about too is we are integrating, and we have a much larger supply base. We have the ability to leverage and integrate those supply chains. That's an advantage that we have as we think about margin as well and just efficiencies along that way. That's great. Thank you both very much. Thank you, Alex. Thank you. Our next question comes from the line of Greg Burns with Sidoti & Company. Your line is open. Afternoon. Just wanna follow up on- You can hear us? Hi. The retail business. I understand you're up against tough comps coming out of COVID and work from home and that, but we have seen some competitors talk about, you know, slowing demand and increased discounting and some other factors that would indicate, you know, you're just generally seeing a slowdown in discretionary consumer spending with inflation, how it is. Are you at all concerned with that impacting the business going forward? And do you still feel comfortable at the level of investments that you're making now given that kind of inflationary environment that we're in? Yeah. Greg, this is Jeff. I'll start and I'll give you. Listen, absolutely, we, as we look at where the economy is right now and where consumers are, which, you know, when the stock market's declining, historically our target customer in the retail business has been, you know, arguably sensitive to that. You know, it has not been a great run in the stock market. Obviously, with inflationary pressures, consumers are feeling the pinch there. Of course, it has our attention. But I will say this, that there's a lot of white space for this business to continue to grow into. You know, you can very clearly say we've got so much opportunity to expand outside of North America, and there's a number of markets inside North America that we don't have a presence in today in physical terms. There's lots of opportunity for us as well as, and this is probably even more important, categories that we are under-penetrated in that the team has been working really hard to expand and move more significantly into. There's lots of reasons for us to believe that we can continue to grow. I don't know that it's fair to assume that we can counter the you know, the macro, the bigger macro picture. You know, we feel great about where this business is positioned today versus where it's come from an overall earnings perspective. It's accretive to our consolidated operating margins today. We've got a terrific set of operators, and we know we can weather a period of challenge here and come out stronger on the other side. Okay. Are you seeing higher discounting or anything else that might give you concern about the margins going forward? No, not from a discounting perspective. The margin pressure that we're feeling is more related to transportation principally today, and that mix shift, which we are gonna anniversary that at some point here, right? The mix shift has gone against us here all fiscal year as we've been comping against, you know, what you would you'd probably argue is the best margin mix that you could dream up, which is a lot of high margin retail task chairs. Mix and transportation pressures are the bigger margin pressure. It hasn't been a discounting thing. Okay. On the contract side of the business, it—I mean, it doesn't sound like there's been any kind of slowdown in demand. Is the demand you're seeing now kind of like that pent-up demand that from COVID, and now that we're moving past that, you're starting to see some of that unlock? Because, you know, we're starting to see some of the forward-looking indicators like CEO confidence softening up and some other things. Prospectively, like looking forward, are you seeing any kind of forward-looking indicators softening up here on the contract side of the business and... Greg, we lost you. What, John, why don't you take that first part of his question? Sure. In terms of what we're seeing relative to demand, I think the CEO confidence metric that you talked about obviously is real. If you look at some of the metrics that are more closely related to our industry, like the Architecture Billings Index, that's still in a very positive place. Anecdotally, as we work with and talk to design firms, they are all very busy and looking to hire. I do think one thing we've seen is sort of waves of demand coming out of COVID. If you think back to this time last year, there was a tremendous amount of pent-up demand, after we all had our first round of vaccination. We've now been through a year where we've had a couple waves of variants where there's been some stopping and starting. As I mentioned earlier, I think a number of companies that thought maybe they didn't have to do much in terms of changing their space to accommodate the new work protocols have realized that they are gonna have to make some changes. We're seeing the activity across a larger number of companies than we would typically see in a normal economic environment. Okay. No forward-looking indicators that you would say, you know, anything's kinda softening on that side of the business? None that I would point to at this point. Okay. In terms of the extra week on the guide, how much did that extra week add to revenue and earnings for the guidance? Greg, well, if you just do the straight math, it's about $79 million in revenue for the extra week. Operating expenses account for, you could estimate that to be about $24 million. From an earnings perspective, you know, probably somewhere around $0.02-$0.03. Okay. All right, great. Thank you. Thank you. Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Andi for closing remarks. Thanks, Tawanda. Thank you everybody for your interest and for your support, and we look forward to updating you again next quarter. Enjoy the weekend and a happy Fourth of July. Bye, everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.