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KBAL Kimball International

Participants
Kristie Juster Chief Executive Officer
Michelle Schroeder Executive Vice President and Chief Financial Officer
Greg Burns Sidoti & Company
Thomas Forte D.A. Davidson
Call transcript
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Operator

Good morning, ladies and gentlemen. My name is Jonathan, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball International Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. [Operator Instructions] As with prior conference calls, today's call, August 3, 2020, will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the forward-looking statements. influence the of Kimball may be statements that in seen International factors the forward-looking outcome can Risk Form XX-K.

the Kristie Officer Kimball turn I International. would deck available call, like to an of International; Web site. section today's Executive presenters call CEO making Kimball International's be Michelle Juster, During Schroeder, is today's President references of earnings Kimball slide the presentation on of Vice is call On that Investor Juster. over to Relations will the Kristie and and Ms. Chief Financial now to

you Juster, may begin.

Kristie Juster

opportunity Good review business afternoon, everyone. We appreciate XXXX discuss fourth this year and our performance and to full quarter outlook. our

related and that year ago Our income of fourth was effectively International with resilience operating quarter our was of am stable family our of and This Phase X quarter, and COVID business slightly Kimball in have collaboration our including restructuring implemented plan operations while a revenue. year's our conditions. to savings, pleased Together adjusted ahead demonstrated our plan to and last the June I these cost its operating in report results EBITDA performance success our across driven initiatives transformation adjusted the of of ability levels difficult decline streamlining despite brands. XXXX. execute of under fourth ongoing substantial enabling reflects

products. XX onset focusing we regulations. safety four our to fourth curtailed state manufacturing our the COVID-XX, we the business ensure of with that industry workforce our production from of and quarter, at and that in facilities, only help to You health may to of recall Early operated all considerably comply

dealing back providing then this facilities serving line Our of ship to by teams the May. crisis and by excellent health products the on vertical did critical the with rest an quick early progressively bringing key job facilities

And environment Therefore, while fourth and call In accelerate recognize operate, markets we given we the move end environment showing, with our implementation we by deliveries. were our our phase with rates customers as to impacts X.X. slowed order addition Connect pleased likely shutdown, the Phase we reduced which difficult And remain revenues to next respectable production across postponed of decided to the of quarter to restructuring which periods our our ahead. COVID-XX our in that forward strategy, the Connect business Kimball Xwo is in plan. of International are we

X, Before summary this and and for our let's Slide discussing of fourth company, full chapter which move a financials. new XXXX to our quarter provide X year

you accomplishments the X, details financial fourth referred the for to. which can the Here see summary on quarter, operating Slide I just

offset in to As our transformation you margin revenue which cost can plan see, program. thanks we served improvement, savings to driven the significant restructuring succeeded by achieving and decline,

fiscal view Slide same only year. provides better XXXX, even the for to a we an the significant of metrics of X review made operating in one progress Moving is which have

come. Also, tax margins rate. XX Our gross margins higher EPS transformation there's the for the more XXX savings XX year our million Total with to $X EBITDA diluted basis for year a adjusted X% to cost in plan points. and despite up of margin basis points, lower expanded were XXX and effective revenues considerably up was year-over-year,

strong foundation We to are International. as of speaks at proud performance very it Kimball this the have we

Connect that continued Our a success. of strategy for the laid first strong indicator performance in foundation XXXX fiscal International the year has is Kimball

performance on to savings. builds by our culture fuel remain we expanding dedication Slide phase pillars the X.X now earlier, is As our of growth. driven we that our our outline centers cost a with work next capabilities the our through our people purpose constant, On enter time X, which shared around strategy four and the Connect high innovation accelerating inspire future the believe our to called and

of in service step Kimball in is which X.X All International, growth to strategy. done our at Connect the accelerating change the is this

manage economic to designed yielding is International, us the additional through plan Kimball current enable well downturn cost by share to savings. as Our as effectively gains driving for market

X.X, growth sure health, will a build eBusiness, and to This are focused plan look more forming be designed a four major new able marketplace. business reorganization pivoting accelerate go-to-market post-COVID in through X. announcing into that Specifically, and maximizing are expertise market-centric market gains as opportunities a deeper, to we we wide Connect the ways. we to on driving to hospitality Slide company new shown units, our is four workplace, Today

new to new building vertical portfolio. bring from the First, product brand will a home and work including we workplace, expertise

Second, in it expertise will enable additional our health. build of

it sales environments. ability brands commercial responsible will into eBusiness a business establishes give direct developing the unit, expand us to And ecommerce hospitality which broader be our dedicated will market. Third, in it for new across end fourth, our

expertise. our of alignment brands and is operations several and a will business will this Innovation in Smith; Koorosh Connect and of signal of will share provides also ecommerce over Sharghi. in the of X information issued next is with our by new and and share of we together with leaders. agility in a Health supported President Officer four million. our their we centerless are the units restructuring announcing between track implemented the a Each on record at global Kourtney Phase proven And and to In structure also unit charge be market that leader to will Goetz; team. of Our of least President one Sigler; President unit that background Strategy is is we organization role move Kathy XX of new program, Workplace Chief respective afternoon forward area announces is unlock restructuring a gain businesses. Hospitality Phyllis years. a which We leadership eBusiness new brings the million X.X., XX am contributor our eBusiness total I on and for level result streamline each efficiency President we The and these clear of strategy. executive year our the commitment business of of of revenue our pleased meaningful make

in facility expect turn optimization approximately together year ongoing more a point, to review our the like of operational over call million At and savings of Michelle to quarter XXXX workforce our excellence We I'd comprise this in initiatives our fiscal this with program, for results. XX Schroeder fiscal drive that cost the reductions XXXX. to CFO, detailed Michelle? fourth

Michelle Schroeder

Kristie, afternoon, everyone. and Thanks, good

quarter I will reflecting our you color performance, strong difficult million, Turning fiscal XX% the XXX.X to crisis. more detailed around our overview share fourth COVID-XX this environment to Net position. by business the financial a X, some Slide well liquidity as XXXX quarter of give caused as health decreased sales

break accounted X.X Given the Workplace down our would launch the education of Connect new which revenue our of year-over-year declined total vertical, XX% sales. of approximately we revenue and and for commercial, the unit financial, be by total of performance government you our can Slide revenues. Health designation, our XX% helpful and thought comprised to business revenue it XX% see declined X. strategy, on XX% represented

third hospitality why only sales. an was of which revenue of revenue third Our end total at our decline represented high is backlog XX% the remaining and quarter, the for the down XX%. unusually We quarter had XX% fourth market hospitality hospitality

That by from from actually category this approximately the the rates, in we cost low for hit decline expanded driven plan lines. leverage the future our hospitality declines, savings as of how of periods. compared pricing to our we of selected therefore Despite Given transformation sell. two revenue gross our market markets. relatively hospitality year-over-year points well XX% other XX further said, ongoing this higher margin been on has to by and will COVID-XX And as XX% fixed the loss basis current product by hard product import revenue costs volume lower order are

We also care health procedures. medical saw and the employees costs during quarter appointments elective lower as delayed

is this are improvement. gross to very consecutive quarter of year-over-year pleased margin We the seventh note that

XX.X% point expenses sales Our $XX.X XXX to CEO points savings, costs retirement selling in million. plan to lower adjusted together million of and to basis employee million percentage by XX an basis, or decline an in XX.X% spending a as an the and aggressive represented transformation and costs health $XX.X incentive costs administrative reduction focus and a On on decreased and which reduce our million, resulted SG&A supplemental XX.X XX.X compensation basis care plan, administrative to and impact of transition excluding selling with

to the the quarter fiscal estimate primarily $X.XX our share, Net per diluted XXXX. income share XX% average compared fiscal tax $X.XX fourth XX% due This million effective approximately was in of We in fourth compensation. to XX.X%, $X.X diluted only XXXX XX.X% of per of fiscal in XX% variation or rate decreased other year XXXX. tax to year's quarter to $X.XX rate to equivalent effective last share. per will was stock deductibility and compared to Our quarter, in the

and incentive ago. adjusted Please CEO costs, transition adjustments a year tax charges by favorable X% and to share note increased accrual, year-to-date current quarter approximately the adjusted decreased X.X year fourth X.X compensation one-time of a positive that $X.XX million restructuring had net to earnings benefit or pre-tax $X.XX. million EPS earnings after $X.XX Excluding compared which to annual per

and increase environment business lower fourth was incentive COVID-XX year's adjusted with health spending in of care mentioned reduced to related X% to we EBITDA by million, XXX the and much quarter. the of compared the favorably difficult EBITDA across ago quarter margin pleased the earlier, to company a year expanding light to In as which very impacted compensation addition, In points basis costs, are costs, XX.X% $XX.X was this employee pandemic. our late the

liquidity, to XX.X Turning Capital technology. and working fiscal the the operations renovation to year related headquarters which our million for Slide most serves to manufacturing a which of million, as we year in and showroom our X, performance products $XX.X showing from were flow equipment and for were expenditures upgrades generated cash our cash automation, XXXX. increased in

XX.X capital and repurchases. the we For form of in the returned year, share to dividends million shareholders of

in economic resources weather we finished as the current restructuring Our of the the million. split million gross abate. investments savings net once selling million incurred as expect $XX crisis necessary Phase return be financial margin the to $XX XX.X X million to with giving us We year cash from million, in restructuring Together to our in pre-tax expected fiscal costs. in approximately total XXXX remainder and of admin will with fiscal charge our efficiencies, operating incurred will savings cost in These We total XXXX. only the million position, resume for strong a reduction also The million $XX and invested was to XX.X%. savings an with Kristie to XX.X savings estimate year equivalents $XX the to be between program. make ongoing but growth fiscal XXXX. approximately credit, $XX available a capital be downturn, additional of on year our not well our in cash a mentioned

As and Kristie pandemic, growth on we further call navigate and move reinvest savings will now coming back to initiative opportunities business through back will path to insight turn the advantage take of we our crisis. forward out the of during forward. into the I provide our of to the the Kristie. some

Kristie Juster

of down move with scale to our by this us fourth in so XXXX. COVID-XX U.S. plants trends were soft lower QX which had business several we our together quarters. end pleased quoting within Please order COVID-XX levels. our caused workforce These of am Michelle. level news shows comparisons International reduced a in a expect all the volume hospitality XXXX XX% fiscal first XXXX of million is that country to is next parts over in expect the vertical. resurgence XX% the decline to there $XXX off rates XX, year-over-year, quarter of report good are visibility, And lower I operating, activity backlog status that slightly below certain of reasonable market. revenue a revenues to The led levels, experience of to Based at the in the be will Thanks, year-over-year environment. with we that a Slide quarter today's the XX Kimball

beginning a in takeaways small this Kimball to XX Slide forward structure to environment our on is workplace. with return and relevant. are are is improving strong much some an challenging cost financial consider the International position markets where and key business mid-sized Lastly we commercial of moving employees in

Connect us capture provide will for And strategy new Our opportunities. our a targeted gains. long-term verticals multiple enable opportunities to market share X.X

and organization in the design and for solutions of workspaces personal a standardization that thinking are requirements. professional our meet We distancing developing need social

time Our company aligned effectively to culturally the in is for stakeholders. has change and of our to execute our proven excel ability

like we'd Operator, We for for opportunities inspired see the are questions. the call now by ahead to Kimble we open International.

Operator

from comes question first the Our line Instructions] of Sidoti [Operator from Company. Greg & Burns

please. question, Your

Greg Burns

terms the I what the your digital maybe I right address structure. work of current with work you talk hoping So, about it's your the address ecommerce trying that's But have question new in of where home maybe product also you're well set to from a and some from require you. home, ecommerce background some of maybe And Thank as to the a to address going products strong stand think what and us the structure? trend, new you're can growing organizational operating think presence. set you to capabilities on regarding develop to as ability with you that's give

Kristie Juster

thanks great, for Sure, the question.

a have commercial from With we been will working end Etc. the saying work have spec actually at of business assortments the working on Phase been traditionally furniture to environment. August. that we the structure Let launch we we'll then have as actually And And by will spec home that be Etc. a me that that, before start different actually coming resources on we the brand, been working a brand some product on on what's is bring X end. is the out portfolio. assortment Phase and hospitality, development that having had has of plays year then, be out been in our it our our product that that X transpiring

three that strategy the specifically lately. with time from about working we've we've new ecommerce. market things. business our as said, is to do bit we're just selling going direct progress One, think be to broader pleased really The the that that making. So on on to really work then, our reach working that work seen here hospitality to extend is excited for It we both of And is portfolio. going also development it is as And ecommerce a is our home within acceleration when efforts. our about we home our and I'm we're we're from going We a that workplace us. been for and for service I provide towards -- and portfolio for designed

So play important the unit role will for eBusiness an us.

we've structural that at But would today, or do beginning are I have that journey. that of we so, that environment. dotcom to through our resources incremental will we we is been six the And some just months the up that BXB to that a business added the that we that. be last also going over We experience an announced and grow believe change with gearing retailers, we've say relationship for

our to pleased of in of going [B that So very have front] [ph] part forward. portfolio

Greg Burns

Okay.

I how So or going like in to ecommerce of Amazon? to more Kindle wholesale -- the just ecommerce or the properties through is strategies and it Mayfair so more strategy branded through understand be address terms going be to like exact you're is is going ecommerce? What it like

Kristie Juster

is those be go-to-market. brand, brands newest which that our support will how home unit be the Etc. ecommerce each eBusiness mainly a of is of going work from strategy to distinct geared And portfolio they the The our Sure. will will in toward environment. all The of brands. have brand,

of that in we're see then, we the And of And kind opportunity capability will brands expertise that are a relationship. be that for right on that's building -- actually we BXB initial at brands. do So those we will working charge be servicing our an all and now.

Greg Burns

Okay.

your interact enable traditional the to tools with brands? digital more leveraging of kind it's So channel to

Kristie Juster

and reseller.com. Yes,

Greg Burns

on the I some a by your a digital market cash buying ecommerce capabilities lot them are And native build on internally? are the balance brand Okay. buy sheet, developing or have versus on digital then, in than of rather maybe maybe thoughts thoughts, your what know what you going

Kristie Juster

comm. been us. and will both after step an we've go we that working acquisition I that We through for on and organically and will believe be think that important forward

So, that we embarking future. upon be will definitely in the

Greg Burns

next the to cost of returning then, savings. And Okay. phase the

You some business. mentioned, the you're to be of reinvesting going

So, reinvest the you really some in back growth a initiatives. of lot and business have

and the net perspective, XX about you from those across loaded do what model modeling we should million, XX year? end that of How or more a back should things? So we think expect million how that ratably

Michelle Schroeder

This Michelle. Greg. Hi, is Yes.

lower due see we restructuring things. look savings normal to to the at due the we're that actions then that going are of little is the a because in two to we partly operational and the really taking initial the So savings different year bit partly savings part every year. just excellence It's

we the So as be on those as work first it'll to ramp and savings the go we the executed, get through bit here restructuring but actions in related year. will the little a that quarter,

So the the back heavy the we in savings what of first quarter, be will as half see the year. as not

Greg Burns

fourth could maybe some maybe that help some had the comp cost variable back other COVID, maybe seemed savings those that to and in quarter some then, online. And of greater coming you of furloughed items savings employees terms that have coming because due might back us, one-time -- Okay. be to and some items, were

SG&A the for quarter should going Like level we if thinking good savings in the how XX face you're 'XX? So, fourth into projecting? we of these maybe be that fiscal about look or first million to what's a quarter, at

Michelle Schroeder

we That's adjustments good go of out have the will in low. end because press the million our we had did for a of accrual unusually our incentives nine SG&A those COVID not worth forward. the hitting We through Obviously, quarter release. question March. Yes. the in in already pointed With was that X.X of accrued last fourth quarter, months

to end to had in reduce had quarter adjustment we accruals So the those make we down year our to incentive. a fairly fourth large actual

impact the of put be. not actions we to the see tried spending as to quarter in And aggressively going COVID again. happen fourth that in what So delay will to some we was

spending the we said, as to growth on plan go going year. initiatives we to are as we pick up So, through

as year. investment play the gate we we through gate see will out We'll level of we that revenue that spending, with the revenues Now, have. that

say is in it's But I it volumes was as going going would was forward. SG&A not not be low QX. So obviously, that be lower with it the high going as pre-COVID as to as

Greg Burns

maybe of us and operating going to you are it, or that you this Maybe of make savings about maybe us range like a on directionally ideas, range might margins what think expect investments based a think like Okay. cost projected detrimental help you detrimental, give that your year. the

Michelle Schroeder

the have about Yes. up to in ended We year. we the third in but -- for and We XX% our last profit quarter XX% about that marginal our actually talked compared detrimental quarter line. EBITDA a last on little QX, up call was EBITDA said of

So didn't decrement we the actually QX. on a line have EBITDA in

Now marginal profit, what is again, XX% to going XX% forward. we forward, looking going around would anticipate probably at, that

Greg Burns

Okay, Is on queue? great. in queued anyone no there I back Thanks. going. hop I'll the up, but else one's queue, can keep if in the

Kristie Juster

have do waiting. one We person

Greg Burns

Okay. All back right. queue. I will the Thanks. hop in

Operator

from Forte next in Our Instructions] Thomas the [Operator question Davidson. D.A. comes line.

question Your please.

Thomas Forte

had other first home the your So should business? question parts of for is, the the about ecommerce I investors your efforts and relative margins think are to how from work

Kristie Juster

Tom, Kristie. thanks the for question. Its

ramping be can Ultimately, certainly but will that doubt really think looking that not at that in long-term what no we've excited us the basis we're we we will for when about. as from So different channels out our there's decretive strategy. the about start, ecommerce talked business, portfolio of those prove that a we be margin

but working investments start, very And some on that and good the can those all incremental and perspective. initiatives I innovation we cost is our in see feel about things, and long-term so our our making

Thomas Forte

rest portfolio. from work the then, home And of versus the

Kristie Juster

That's correct.

Thomas Forte

Same Comments again. apply

Sorry.

Kristie Juster

Tom. hear you. that, couldn't I again, Sorry, Say

Thomas Forte

would they have apply your my some than products. comments of points home margin, from The legacy products, that your for the thought price same initial work be may on lower relative

products, points margin your if home the profile for potentially same the the with even price are for work be So lower.

Kristie Juster

strategic portfolio can't is I get within that that International. I although don't see working we now. like margins would costs But the think will objective be do same of start standpoint, from in that. a as Kimball startup items you lower our with a to are there through other we you being the some that product a volumes initial We we That and associated area, the reason have leads

Thomas Forte

then, had I more one And Great. question.

near trends, trends you maybe geographical New major -- can about have thoughts major that you on of cities talk kind also on real parts So of about And like talk the the of the then in for versus U.S. term York? maybe office can the reopened geographical cities landscape others? outside your

Kristie Juster

Sure.

and do geographies we offer track and they brands how our progress. So

kind do Our of portfolio back in we back especially We geared secondary Kimball see online towards as markets into those progress the are coming entering markets, markets. definitely That our of strength and that is been business those see has International. making the offices. always

focus increased the from continue grow resources. markets that we seen secondary we conversations certainly of an activity. our are in a So to and year-over-year projects reinforce with of And And to But project and we're seeing amount of doubt in it's activity. increased continuing starting key ours. to customers, the] [ph] home be as we're area the have filled. stay. we to our the [that trend pleased that of is measure and is, funnel here we're our There's We're very believe number that no quoting work year-over-year

feel since those a markets than So rate we've can seen the to form faster crisis. starting at we

Thomas Forte

Great.

well. congrats Thank business leaders. Michelle, And taking questions. your Stay for and you. new Kristie to my thanks So

Operator

Thank you.

Our Burns Company. of Sidoti Greg next question at the is a line & follow-up from

Your question, please.

Greg Burns

up what the follow you. they the of about, early a had and quarter just terms here the the through order in part how July? patterns. you're evolved Can just Thank seeing I throughout talk maybe first of you in quarter

Michelle Schroeder

great. Okay,

take I'll So that one.

in understand orders June our as there lowest we orders, the the a point orders pickup But still going start was July. was activity April, the some into in over of May, drop in people And probably rate the tried as that saw going on, May, then hit did activity we of So, a COVID to see continued. carried saw this was then, and June we be. in impact really what to to

seeing depressed. than May. So July in in what and orders we're we seeing But we're June higher orders did still that

Greg Burns

Okay.

for enough So and the than the consolidated are whole declines declines July the you mean, it good June or for… quarter was lower

Michelle Schroeder

Yes.

Greg Burns

then, now across similar specific unit Okay. maybe trends dynamics or there order is like weak the there want might reporting hospitality that business business out? you was that you stay to units that And or are the anyone any point was different

Michelle Schroeder

Yes.

for did was biggest quarter. hospitality decline see quarter. We XX% the like the in our earlier down the hospitality in So,

And as so we did of June into in into see July. improvement hospitality bit a we went little and

Greg Burns

Okay.

So in assessment? but it sounds we're seeing monthly like levels. the the order price sequential, at patterns still some improvement fair Is that a

Michelle Schroeder

Yes. That's correct.

Greg Burns

the quarter, may quarter. And any the terms noted specific might that this weighted want point then out? there in large a another unit of it's or backlog you to backlog, to you whether benefited that's more project -- had business guess one heavily you I this hospitality be within backlog that Is anything

Michelle Schroeder

-- last it's normal. year, No. of have that the end don't we backlog to the There's of compared QX, unusual our end but had pretty at not nature down was that We QX. the at

Greg Burns

hospitality here of you large year. the the the delayed what last -- back of maybe expecting in terms to Okay. a one months of And know that lot projects talking you of went about like those you about the in general in been nine maybe to that and I one projects pertains as six the for maybe some those business we Have the were then, previously? at vertical had hospitality. is end large talked were cancelled, hospitality outlook it

Kristie Juster

business. take to and of before, more we but hospitality health both see have again, going not business. will workplaces activity orders ramp say further will the in push ramp and and with we're hospitality are that business have the had and through hospitality But some order in through business. the than as And our those have the we to delayed our ahead Yes. starting of seen domestic comments. cancellation business business. of One, long-term, go a by to talked will And out we're we're especially we a slow of be very I seen hospitality couple I leisure to the business, order year. the that slower our that about and closely we've out in partners go some working side some working confidence in

Greg Burns

Okay.

I market Just referencing other the remarks markets, that opportunity, expand from your the think that mean that think into commercial capabilities? you prepared there what are what industry direct hospitality one sales about or can in hospitality more, you capabilities terms you but exactly your does leveraging of mentioned

Kristie Juster

Sure.

one has multifamily be way, geared exact those business markets toward And near before that Our that new operates we in a designers end specified us market. way, student of markets for way. direct fringes It development way, products for housing new designer hospitality forming hotels. that that the that business or markets on There that we're been been luxury, living housing in and that will the operates the new that end mainly actually conjunction and a through or end now sale. operate is the other are happens we've brand with those And dedicating resources term. -- calling and we're create same senior operates

those incremental So markets. through we've just started announcement and structure new this on resources end just put

Greg Burns

able Or be that is of…? market opportunity? maybe kind to incremental early size too you to the addressable Would Okay.

Kristie Juster

our We doing of are just beginning sizing research in and and the formally market insights. stages

happy be share we'll to with So that our formulate we as kind opinion. you, of

Operator

I'd Thank to further for questions And Instructions] this in to time. Juster any remarks. the like queue I'm hand not showing program further the you. at Kristie [Operator any back

Kristie Juster

International. the today thank Well, Kimball Jonathan, of we behalf you all, first call of joining appreciate everybody on very Great, much.

the of XXXX. managed for International. for Kimball into announcement confidence our in our through lot restructuring of in are with crisis and taking our We ahead a We're we X.X a and fiscal progress of with the very our how came proud have certainly crisis X Phase very we've And the decision lot decisive we action of pleased of in momentum. Connect

today So thank look for you Be and joining so forward with connect us everybody. to staying much safe.

Operator

Thank gentlemen, This and conclude you, conference. in ladies today's the for your does program. participation

disconnect. now day. may Good You