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. 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, and 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. And 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 remain 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, and 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. And most notably, on June 1, we launched our North America MillerKnoll dealer network. Customers now have access to our full…

Thanks, Andi. Good evening, everyone. I 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. Our 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 reflects 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 the 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. And excluding the…

Thank you. [Operator Instructions] 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 you made the comment on lead times extending. Supply chain volatility continues, but it has improved for us. So, 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 there's -- you 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. 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. And so that's an area where we're feeling the effects of it. But -- and then in terms of the backlog, the longer-dated backlog has probably much to do with anything today as customers iterating on designs and really trying to be thoughtful and careful about kind of the types of designs that they want to have and also frankly still a little bit of people getting in line in terms of concern around the supply chain environment.

Very helpful. Let me 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.

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 environment for the contract side of the business is starting to hit people and has been for the last several months. So, we've seen a frenzy of activity on the dealer side, in the A&D community. So, 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 potentially past neocons, 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. So, 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. So, 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%-plus 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. And so, perhaps some companies that previously thought they wouldn't have to do a whole lot are beginning to realize that they are going to have to take action in order to create an office place that is a destination that their employees want to come. To tag 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, and 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. And then, last thing from me quickly. Herman Miller stores outpacing expectations. What areas are outperforming or performing better than expectations? Why is that? And then, 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. And the customer is really responding to not just the work space product, but the Herman Miller brand as a whole. And as you know, we have many iconic residential designs that are resonating as well. So, we're seeing pretty much all the products to check from a work space standpoint. We're also seeing the lifestyle product check in the Herman Miller stores. So, 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 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. I heard a couple of your competitors now using surcharges as a way to kind of 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 the question that is constantly being talked about, and we are -- 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, we've used -- 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 and discount management are the better way to approach it.

Okay. Got it. And so, from a -- go ahead, Andi.

No. I was just going to say 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. So, we're happy to see that.

And so that kind of dovetails into my follow-up. What's embedded in the guidance for next quarter from a price/cost standpoint? Are you working your way? Are we back to neutral yet? Or is there still some catch up to do and it will be the -- kind of the following quarters?

Yeah. So, we've got our guide -- our sequential guide coming from Q4 assumes at the midpoint about 140 basis points of price increase benefit, so pretty meaningful to Andi's point. That -- now that's not all going to flow through if you do the math on that. I think the midpoint of our guide is 35.2%. So, 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, inbound freight for the retail business has continued to be a bit of a challenge. So, we expect about 50 basis points of pressure again at the midpoint of the guide. And then, a little bit of other non-steel, but other commodities, call it, about 10 basis points was our best estimate. And then, the balance of that math would get you to probably mix and kind of everything else, maybe another 40 basis points of margin pressure. But the main point would be a pretty significant benefit sequentially from pricing.

Great. And then one more from me. So, on the integration front, it 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 dissynergies 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. So, 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. So, really we're just starting to kick off that exercise with a big focus on being able to transact business across all of the brands across North America. And so, 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, we're -- 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. And 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. Congratulations on getting through the first year of the integration and my wish is for best -- good luck going forward too. Jeff, 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. We've got -- there's a decent amount of investment in inventory for the retail business particularly in -- 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. Now, there's a number of -- there's some investment in newness as well, because part of the strategy for the retail team is to build out new assortment, but we had no concerns on the quality of the inventory. So, 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, that business has seen. You may recall orders in the international business were up something on the order of 77% last quarter. They were up year-on-year again this quarter. Our international business has been -- has had a terrific year and, as a result, has seen their backlog increase and inventory levels increase very much in line with that. So, I'll leave it at that. I mean you're absolutely right. Inventories are up. We're going to manage that down in the form of managing future inventory purchases to work our way through that, but there are no concerns with the ability to move it.

And just to make sure I understand international. Is it the international contract or international retail that --?

Yeah. I meant the international contract. Thanks for clarifying. Yeah.

Okay.

And if I can add to that, Budd, just from a historic perspective on the retail business. 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. And our inventory levels are actually below pre-pandemic levels right now. So, we feel good about where we're investing in the quality of that inventory.

Okay. That's great. And -- but the mix that we talked about, Jeff, you -- I think you referred to 40 bps of mix. That's the same issue that we had last quarter where we had such an outsized growth of seating in retail that it's hard to compare over the next couple of quarters. Is that where that mix issue is coming from?

Yeah. Principally, that's what I'm referring to, Budd. It's -- well, you saw the retail orders were down a bit this quarter. So as retail, which has structurally higher gross margins in the business with lower order entry levels this quarter, just the overall business mix with retail is a contributor to that, and the big driver there would be the higher margin task seating.

And 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 or other stuff that -- other than retail for the home?

Budd, I don't -- we're not providing a guide anything beyond Q1. Certainly, that market factor is not something that's going to turn quickly. So that -- we will be dealing with that. But of course, we just opened eight stores. We've got three more opening up in the first quarter. So, those will be a contributor, albeit small to start. But we're doing a number of things. I think Debbie and the Retail team are -- they're doing a number of things, as I mentioned, with new products to add to the assortment, the investments in stores and so forth. So, I think, those will help. But the market pressures right now are real and we'll probably be facing some of those in the near-term at a minimum.

Okay.

Yeah. And I would say, Budd, the one thing to really think about with this retail business because it is pretty nascent. Over the last couple of years, you have that huge work space blip that you have to normalize for. So, I like to look at the two-year stack comp for retail, which really kind of gives you that underlying health of the business. And if you include it with work space at a two-year, we're at about a 63% comp as the business has grown and about a 77% comp without work space. So, all those other categories outside of that kind of COVID work-from-home drive are healthy. So, I think we really have to look at that. So, 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. But we're going to see this business continue to grow from a category in a two-year stack comp perspective. And so, I also think one of the things -- sorry. Go ahead, Budd.

Go ahead. I'm sorry. I am good.

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.

And to make sure I do understand something about 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. So, 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. A couple of more questions if I could. The net leverage ratio for the debt, my calculation was just over 3. Is that right? I mean, it was down nicely from the last quarter. Or have I got it wrong? And what's the secured lien first leverage ratio, or if I got the name right?

So, 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. So, if you account for the synergies that we are targeting, we were at, I think, 2.6 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. So 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 2.6.

Yeah. We can take that offline, Budd, if your calculations are different.

Well, certainly happy to do that. And can you give us maybe the interest expense? Because 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. In the quarter --

Yeah. Okay. Yeah.

Okay.

Okay. Well, we're certainly happy to take that offline. And 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.

Yeah. So, Budd, this has been a -- it's 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. On an adjusted basis, it's 21.5%. And one of the things that contributes to that difference is that on a GAAP basis, on the full year -- and I'm going to talk about for the full year, because of all the integration related charges, we are in a net loss position. And 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. And so, when we work down to an adjusted EPS, the assumption is that you wouldn't be limited on those credits. And so, 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, but understand --

You left -- 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.

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. 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 a tremendous growth during the COVID era business in your direct-to-consumer business. That's been slowing down in recent quarters. And it seems like it was approximately flat year-over-year in the quarter you just reported, but pretty impressive considering 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 going to see a couple of down quarters before that business starts to make new highs again? Or is potentially the impact of opening a few new retail locations 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-year stack comps to normalize for that work space 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. So, I think there's a lot of new product extensions that we'll be adding in. There's also new capabilities. So, we've been investing in technology. We've been investing in new ways to track our customers. So, I think many of the things that 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. So, 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?

Okay.

I think that's great. Yeah.

Okay.

That's really helpful. Thanks Andi. And then, just one more if I could, for the team on gross margin. It looks like now 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 to have visibility multiple quarters out and you're only guiding to the one quarter. But just as you think about what you know today given labor costs, material costs, what you've got in terms of already announced price increases that maybe have or haven't been fully realized in your business. I mean should we think of this kind of, 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? It seems like there are so many dynamics pushing and pulling in both directions. Just curious kind of 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. But 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, to offset cost increases. So, I think, it's fair to say that's a good base to build off of. Jeff, I know you have something you want to add to.

Yeah. No. I think that's right, Andi. The only thing I would add is we would be disappointed -- very disappointed if that didn't happen. I said last quarter and I'll say it again, I think 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. And so, 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 have to make an assumption around economic conditions in general. Our base case is not that we're going to enter into an industry-wide recession. And so, as long as we can get some continued volume growth, we have every expectation that margins will continue to climb.

And 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. So 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.

Good afternoon.

Hi, Greg.

I just want to follow-up on…

Hi, Greg.

Hi -- the Retail business. So, I understand you're up against tough comps coming out of COVID and work-from-home. But we have seen some competitors talk about slowing demand and increased discounting and some other -- some of the factors that would indicate you're 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're -- as we look at where the economy is right now and where consumers are -- which when the stock market is declining, historically, our target customer in the retail business has been arguably sensitive to that. And it has not been a great run in the stock market. And obviously, with inflationary pressures, consumers are feeling the pinch there. So, 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. We are -- we -- 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's -- in physical terms. And so, there's lots of opportunity for us as well as -- and this is probably even more important, categories that we are underpenetrated in that the team has been working really hard to expand and move more significantly into. So, 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 macro -- the bigger macro picture, but we feel great about where this business is positioned today versus where it's come from. From an overall earnings perspective, it's accretive to our consolidated operating margins today. And 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?

Not -- 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 going to anniversary that at some point here, right? But the mix shift has gone against us here all fiscal year as we've been comping against what you would probably argue as the best margin mix that you could dream of, which is a lot of high margin retail task chairs [ph]. And so, mix and transportation pressures are the bigger margin pressure. It hasn't been a discounting thing.

Okay. And then on the contract side of the business, 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 from COVID and now we're moving past that you're starting to see some of that unlock, because we're starting to see some of the forward-looking indicators like CEO confidence softening up and some other things. So, prospectively, like looking forward, are you seeing any kind of forward-looking indicators softening up here on the contract side of the business [technical difficulty]?

Greg, we lost you. 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. But if you look at some of the metrics that are more closely related to our industry, like the Architectural 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. But 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 of waves of variants where there's been some stopping and starting. But 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 going to have to make some changes. So, we're seeing the activity across a larger number of companies than we would typically see in a normal economic environment.

Okay. So, no forward-looking indicators that you would say anything is kind of softening on that side of the business?

None that I would point to at this point.

Okay. Okay. And then in terms of the extra week on the guide, how much did that extra week add to revenue and earnings in -- for the guidance?

Greg, it's about 79 -- well, if you just do the straight math, it's about $79 million in revenue for the week -- for the extra week. Operating expenses account for -- you could estimate that to be about $24 million. And from an earnings perspective, probably somewhere around $0.02 to $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 happy 4th of July. Bye everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.