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KBAL Kimball International

Participants
Kristie Juster CEO
Michelle Schroeder Senior Director of IR
Timothy Wolfe EVP & CFO
Greg Burns Sidoti & Company
Call transcript
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Operator

Good morning, ladies and gentlemen. My name is Valerie, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball International First Quarter and Fiscal Year 2021 Earnings Conference Call.

As with prior conference calls, today's call, November 4, 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 deck available Juster, CEO call, an website. On section now today's presenters the are making International's be During Kristie call references of International; Wolfe, Executive earnings Kimball of Officer slide the presentation on is over and of today's that International Investor Relations Kimball will Senior Juster. T.J. Vice Director Financial Ms. turn Kimball Michelle Relations. Investor like to Kristie would I of call President to and to Schroeder, Chief

Juster, begin. you may

Kristie Juster

do Valerie and the Poppin deep which you, first your review earnings. dive we We appreciate acquisition our separate the announced our participation and in quarter with fiscal Thank our release a afternoon, call discuss simultaneous to good into today's XXXXresults, in everyone. outlook business

strategic most for then prepared We remarks, financial highlights will and the that the the first of our operating International. fit direct Poppin review to Kimball represents

than same personally have International. the company. I who we're thrilled of International Before and know TJ well transformation, attracting time, Most more M&A Kimball you The CFO that T.J. became as XX. the organization, And decades integration at Investor a new and meaningful expertise that and scale a informed fortunate will Great step her our to she recently, as in I we've in of from On activities. of Schroeder personal Britain organizational and Michelle to work leader her of senior as strategic remain CFO the large we us will deep acting and TJ served our this for to including experience global is CFO. effective us look brings continue as know back meetings. branded remind two planning like call a for experience, the Michelle you at October European be Wolfe, decision has consumer Cola our Coca last been role will Kimball CFO, tremendous who good all our on of and TJ efforts. X, him forward to discussion with and on Those to thank know of partners. as Unit I news calls investor call Slide due reasons. upcoming we today's start would the to begin, quarter. to At as Relations Chief Financial Michelle as getting to in Officer direct has managing Michelle her knowledge continue is want

rates good to order fiscal fiscal this in XX $XX reinvest quarter. drive am to environment early Our too we pleased that the our sign. our while to it resources XXXX. rates in our a are they These continue am cost cost is provided declined plan to increase restructuring X% company in We also year million to I of drive savings million heels savings efficiencies. this point business And of early benefits year-over-year I operating to decline achieve $XX gross a the were to reported bottom, and industry. were that within than the growth and expected savings order and of we on XX% generate the fourth higher down a report quarter. we to basis program first able margin, call quarter transformation believe is in on the announced were last in reflecting we sequentially that quarter target a challenging execute year-over-year with success report levels. pleased of entered as continued expected, XX% from effectively we revenue the XX%, fourth quarter Despite revenues a from for

is marketplace. as A most X.X health, doing hospitality takeaways been job effectively share we health business into us compelling for integrate vertical markets. into across both in notably and our we reinstated Since enabling and in X.X of product term X.X up focused Other allows and repurchases new four significant are Connect engaging winning levels new activity of each an progress share brand, information and sets up Connect our longer and we'll key new the shortly well Our of in excellent our yielding our us cost success within get our introduced hospitality has you a acquisition. key four resources and units, our workplace centric savings, made growth. e-business, and strategy, reorganization projects. dedicated as sustaining through to health with effectively expertise by to us have we which workplace, for element market and business change the e-business Kimball our business Poppin X step International to also Connect is to accelerate brand share as to of launch our announced our a a on brand August current units. market manage go-to-market economic forming It The in designed strategy. us Side reviews plan gains driving enable downturn and

from government same Inter-woven health brand. we allows team the The will new health and agencies the innovative Interwoven and brand develop Specifically, full new XX products time health of brand International, us across at top experts a group Kimball under multi-brand XX Interwoven. health specialty represent associations. our to portfolio launched leverage systems, This the

the to improve We as to care. delivery such the quickly and space team Interwoven access our a are of health The dedicated ability undergoing new safety immediate just both that. of market health the seeing environments And transformation is industry penetrate is health the and to clinics. retail to in more results in utilization tremendous

important as our well brand as Etc from portable style our Additionally, our ability COVID that is introduced demonstrated a ancillary are QX and important seating features the office our unit, accelerate workplace simplicity. navigate defined ability second and of so to configuration home, softness, address home our seating the opportunities future. phase co-working and business an believe ancillary that to Etc expanded affordable Etc and on housing. we to within we target to and brand hook new market offices, offering desk lifestyle workplace. with as satellite our focus hybrid environments, to student work the

I Before over like to announcement turn I'd on summarize acquisition, Poppin Michelle share financials it the quarter. to to our the our for

Michelle Schroeder

and I overview will now Thanks afternoon, quarter Kristie, first good our everyone. provide fiscal financial of performance. XXXX an

expectations. decreased only sales of we to market. end growth within slide turn government COVID-XX in the impact million, five. reflecting the ongoing the area Let's workplace the sales did to vertical XX% was crisis. the health One in basis quarter Net decline, improvement. $XXX.X declined Sequentially were net year-over-year from we see the In savings with revenue to eighth reflecting cost with margin line transformation quarter consecutive quarter our Despite first pleased expanded in our of ongoing XX.X%, XX points the the gross by X% gross margin plan.

employee in basis costs to million. selling of and in first costs in selling savings between and million cost $X.X million together supplemental management with sold transformation a of sales. cost expenses goods transition and savings selling XX.X% administrative administrative $XX.X of the adjusted administrative plan reduction our amounted to totaled and $XX.X impact On plan, excluding a costs. the retirement $X.X an The CEO million resulted discipline split quarter transformation Our and from our plan,

XX.X% XXXX. rate the tax fiscal XX% approximately estimate prior $X.XX rate XXXX. in our Our share, of quarter in was in income per to per year. $X.X the million first in XX% first share effective XXXX compared year of $X.XX quarter to effective tax average will to cents the We XX.X% Net fiscal diluted fiscal was compared diluted

year Excluding ago charges adjusted restructuring was and compared transition in quarter. cents, CEO $X.XX $X.XX costs, the EPS to

technology most in cash expenditures ordering adjusted to ago on $XX.X to Our million, lower costs the compared aXXX to $X investments leverage lost the the million, to EBITDA declined were were fixed from which We quarter. $X.X $XX fiscal with quarter in and margin specifications Adjusted simplify to the due capital process, upgrades of to $XX.X of XXXX. tools year increase automation, in EBITDA year-over-year million volume. in to product generated operations, XX.X%, compared year million points manufacturing related basis was first

$X.X returned form dividends. capital quarter This in of shareholders to we million of the

Slide of in sales. grew orders was sequential the a Although as first XX% sequentially, orders our for couple growth momentum sequential also of year-over-year sales sequentially, trend, with the Health only remaining sequentially, large hospitality government represented saw substantial were in hospitality orders seen we similar six. a sequential accounted seven the a a revenues vertical. workplace, that the and within large our XX% total XX% But quarter revenue single in end Within workplace pleased and decline, the during we new to X% increased X% of slight resulting we approximately XX% in total vertical in health revenue to positive to the fourth XXX%. we a quarter. due Workplace markets positive slide while XXXX. to that seeing education of decline are quarter, sales first and increase the order verticals We pleased by primarily compared increased declined decline reported shows on declined XX% no sequential a while the a the our that revenue XX% quarter education when levels. sales in fiscal quarter of from primarily momentum market By XX% represented shown shows sequential and the seasonality to key orders some end. are which leveling a driven revenue saw of June finance

X% backlog at versus quarter. year, had which the to was September backlog the year-over-year end end is of last of of similar in the decline Our fourth September we at the X% down

Now beyond QX. a quick look

decline then. compared rate year. year-over-year started in a at First orders still to orders of decline Orders a lower lower decline. were in compared with to versus year-over-year held of prior rate. October bit both workplace stabilize quarter help and have and year down last in health October Orders to lower encouraged health see at we at rate down subside were just in And in and and the quarter wrapping-up, a August since workplace the both were rate to the the first but

cautious returning rate orders continued anticipating seeing the in of and a project are We period outlook, before still lower near-term fluctuations of remain While quoting growth. week-to-week was October high, the in workplace activity remained we and order to softened in activity rates. from decline

our port significant created distribution the freight services on COVID pandemic starting in and pressure are costs by to increase shipping the by caused demand see for congestion. We and

I turn insight further provide the on excited acquisition the will our mitigate of working saying I'll increases. demonstrated to of our the business efficiency performance are these International. close operation. the will about acquisition. the the impact bring Kristie call our of Poppin of to cost to Poppin to that I'm by Kristie? first quarter and opportunities financial We now Kimball resilience back the

Kristie Juster

Thanks, Michelle.

will news, Now its is help big to you has us eight, are years. tech-enabled commercial furniture our the leading our jumpstart on to for business. radar see initial market cash Slide the $XXX achievement $XX to the Poppin, of ability plus certain over definitive agreement financial payments company the a On particularly based BXB on which which the design terms some our next of that of up milestones acquire three for million payout million, plus contingent been time, transaction,

and annual that way create in The five We $XXX for aligns price Poppin. long-term will become headquarter can that are in direct engine to After our new disruptors. compounded can the work them at last significantly process, capacity of office. our Slide to simplified and both growing growth we years of across and and supported driven are portfolio was campaigns and and design nature development, design to ready-to-ship Slide started and Poppin expensive navigating engaged prices, categories capabilities founded had through Poppin million. corporations two Poppin XXXX our its in-stock and with and traditional from be a and channels, the our to combination This facility, in have which reopened micro its a on clever paying a businesses, establishes real Since the from has omni-channel of boxes. the from believe we expertise. uniting and design, brands. of the furniture will over to of credit the the two the capabilities business products expanded business experiencing home. corporate there XX% developed portfolio, fresh They XXXX, comply growth we've secondary our provides to businesses. stage lockdowns, immediately rate an at the around closer the secondary aligns furniture, home look powerhouse revenue urban infrastructure. brand XXXX to provides markets. XX, locations and company consider will digital a to with the significant sponsored Kimball one which summarizes at International sourcing Slide with commercial or categories no industry's large is how minimal your programs, with rate. presence and fast direct-to-consumer mixture hand us ordering nine the to the It work-from-home new leading Connect in channels, scaled our more have with in by Supporting X.X Poppin force the is city. design in COVID markets, And onset sales. powerhouse. marketing, outfit digitally located direct Poppin of and X.X showrooms important in related and data clients broadens with new easiest offline consumer, revenue design well major from the uniquely platform amended business, COVID, priorities. work we combination checks channel furnishing a we with accelerate being industrial these with categories. strategy is XX% and business of and at Over immediately we we acquisition Sales a a workplace, to situated their offer path conversion expanded vision from models. one detailed urban bolded showrooms, whereas literally XX% sourcing with direct On even illustrates environment. repeat robust strengths Poppin showrooms business, focus five strategy industry from on close Poppin close in our products that operating are brings both of selection markets, is approximately synergies. manufacturing, our overlap in to time, a to in specific actions commercial has identified are for includes which strategically. to existing to purchase commercial partnership core ones result Slide targeted online hybrid workplace offices, Today, XX a XX% cash areas digital a be our up interior of Poppin increase With return and BXB that our to What that over qualifications, all that an manufacturing new complementary is work corporate fully fund their create competencies Connect borrowing to native assist satellite with is leading its XX, reduced starting The customer expands

marketplace relationships allow selling assortment a buying with dealer and dealer And from partner expertise Kimball Poppin expansion corporate is experience and network. the pandemic sponsored Poppin and marketing Poppin program simplified for an specific a category from and developing in Poppin dealer relationships. dealer Poppin's direct-to-consumer These develop Our units environment launched Pods across called Kimball adapted deep Kimball complimentary small International of near-term four acceleration traditional satellite through markets, fourth, of a category process. network, and brand programs the was Three, to or within post enabled the open Etc. setup with well-known playbook Pro revenue leveraging uniquely actions for and the both workplace that new International in the work are home selling office for priorities and the International One, and sell mobile Kimball International note. are offices. in Poppin's leverage privacy expertise secondary privacy pods immediate Two, and in

see our health adaptable in Pods hospitality and markets. for use also as We Poppin

our investments in include approximately to us you will significant about the EBITDA. the manufacturing. financial from XX in past. sourcing we resulting medium-term see channel other XX% the allocation allows context about effective in net company's organic acquisition press the strategic to made the priorities same impact Post-acquisition and Poppin those Connect capital the synergies, in to of efficiencies, basis, this acquisition. has or operating months development for of stated areas These X.X. Poppin logistics, acquisitions This of be industry adds growth we pro buybacks Capital drive we revenue On but to quarter. just of share on have share of program and XXth. details design, and payments, results fast-growing forma each line, value investments, are that a priorities, our re-instated X.X. in as similar disruptors opportunities gives some Slide based to aggressive September have that our terms negative the release, sense Slide nine debt-to-EBITDA spoken expenditures ended retain dividend the repurchase in start the In illustrate which ongoing a XX

Finally, positioned Slide will Kimball reasons By International. commercial XX summarizes International believe Poppin in Kimball strategically furnishings is evolving acquiring compelling for Poppin, we acquisition a uniquely marketplace. the why be the

We of I categories markets, Poppin the family Poppin Kimball players will acknowledge to leadership move a of Randy International. brands, in to run expansion the be Nikolaou one built of highly capabilities. Randy immediately qualified combination in to want through welcome and and continue by at leading will team products, the team. being the to omni-channel

with Poppin value significant great International stakeholders. our together for to all Our gives in ability Connect Kimball X.X acquisition create confidence us strategy the

to Now I'd the for open like up call questions.

Operator

Instructions]. [Operator

Burns Greg & with from comes question first Our Sidoti Company.

line open. is Your

Greg Burns

Good afternoon.

the contract first What off versus acquisition. The start I of is guess, consumer? current residential Poppin percent I Poppin's to guess one just with business wanted

Kristie Juster

on Poppin under business the is side just Yes, right the now, BXB XX%.

Greg Burns

the discuss at some understand revenue work well. growing they Got home the that native BXB was just year, mean, help you there decline the revenue it. just they've from experienced us the with Poppin? offsetting And Can pretty BXC that e-commerce and not I growth, decline just growing, just is this been the the decline just revenue decline digitally because brands you other another, can

Michelle Schroeder

at comment Sure, let and going in, the to end. Greg, then add anything I'm T.J. I'll

Timothy Wolfe

T.J., Hey, good to you. meet Greg, it's

think the yeah, at this point Kristie is BXB. mentioned, Poppin's as I portfolio So majority of

so, only led forced into QX, to shut which their And into year as down, workplaces slowdown, as down in calendar rolled showrooms. being the not the saw will, QX and again which decline That moved shut saw but Poppin QX, revenue to over QX what well. their we was

there, saw So about. function talking were that the of that the you again, channels and you they're e-commerce that market between a other I it's they're maybe accessing, serving, players differential some think a the of and

Kristie Juster

would So just… also I

Greg Burns

that… Was

Kristie Juster

Greg, a color. Yeah, me just add let more little

The a is at was XX% other thing, decline. COVID I say running would about into Poppin going rate growth of the

so, And And showrooms. really were markets. pivots they to really with had BXB business a now model some running on exciting they they've direct-to-consumer, made urban their secondary that significant focus

we're excited with there's, so ahead are the model. And that opportunities about what

Greg Burns

for Okay, the about revenue, the of to the revenue how to or synergies, what see distribution with you like you other there leverage opportunities? and your brands? Etc. products? the sell is are the to accelerate leveraging able their growth And maybe Poppin you've think in when channels potential leveraging by Like cross-sell particular here opportunity brand infrastructure accelerate, maybe even of some here been do

Kristie Juster

what exactly that's Yeah, excited about. we're

we existing set that. just our will let then One, that a channels. believe Poppin, that new initiatives through there's new products So there's around a and initiatives will accelerate will that me of of accelerate there's comments some in put that categories set we make International Kimball so

put Poppin the examples across also channel category launched have. our those Their we that direct dealer the recently that of capabilities is One will we will expand has channel. pods

helping does we with corporate building outside Etc. capability As their look trade, direct the of larger today. also Poppin hospitality work at have the at both markets, channel access know, traditional all home, have a When about program will sponsored in their from And They it's they go access that go a Poppin when that expand into we today. digital capabilities secondary and then do end side, Kimball across them but vertical Pro Poppin really have they to them whole the it, and and that International. not don't into can customers you that look you then scaling bringing

there's really a set opportunities of sit both that on a So rich there's sides.

Greg Burns

maybe still growth? It Okay, the business revenue and sounds going look about when margin the and business to the on profile think and like synergies? we the then you going cost this about what think How should from perspective. run focus near Are mainly loss will forward pretty margin like we compelling at profit a long-term? to synergies in you're

Timothy Wolfe

Yeah. Sure, T.J. it's again.

EBITDA see can I maybe we past So this think start the year, we evolution forward. of with kind going what in

So talked this about decline revenue of the middle we the year. during already

I to be their was force, maintaining COVID. coming infrastructure of we to sales saw their think able what and ramp Poppin quickly investing out

talked see as I think loss that about we the driving that's So EBITDA we what earlier.

you value see as opportunities to then when level, Kimball gain, what think margin this Kimball's to manufacturing look begin key in you then, across individual transaction. today. demonstrating at similarity platforms, was being see the think I this scale begin I And capabilities, gross you that infrastructure a a see you to driver business, both and in common we would a leveraging

Greg Burns

I there is kind terms are there of model Okay, getting this so this COVID? a guess profitable on at is because profitability? or a kind wasn't margins? of of to - prior some target mean, And point just it business looking COVID operating now to loss you target forward, in like, a at I is of

Timothy Wolfe

as during our Greg so estimate would Yeah, fiscal a be EBITDA looking, half what would is year of see the this forward far we second think as positive 'XX. reasonable I be

at again, evolution is the crisis, EBITDA positive So point. what opportunities and see into current is the revenue then that this and account we taking COVID the again

Greg Burns

Okay.

seeing in of it there. to seeing of in quarter, the improvement the quarter's bit. hospitality big little And or side dig to order or if business? Because that was Thanks. in ship project. side all and you and maybe kind on improvements the go you Did that next then are of terms Okay, good we had previous of, great. could see on sounds a the gave trends you the like any wondering color hospitality just you return backlog I patterns some kind you're then, a

Kristie Juster

a So hospitality we year. fiscal will quarter not in the back will of get second half Part in during shift said, our quarter. the for ship did that that the order order of larger as you

times. recall, you has hospitality As longer lead

of ship ship it part project of part into will year 'XX So that second fiscal 'XX. fiscal and the will our of half

Greg Burns

Okay. And I seen the guess of order, we in there from in quarter. that any aside are larger kind to industry similar we in that improvement that the market? trends last what saw Are broader

Kristie Juster

market that That hospitality. continues continues to but just to we're it There's very be in some very choppy, quoting. be work there's choppy project out there, activity the

activity, We quickly are improvement are hotel that coming are more resort as those as of in pockets Leisure The back business. for versus leisure seeing traveling industry. like leisure. and not areas, people

we're continues seeing bit. very competitive. very to little it up choppy But So a pick that be and

Greg Burns

margins of going then side, the the and And hospitality the on to business rising side impact be freight mainly those Okay. costs what's the that talked inversely about increasing. Is tied costs? you to on hospitality kind from and shipping of the

Kristie Juster

Yeah, freight is so with ocean the primarily hospitality. freight, the

the have all that going little on on shipping seeing and health domestic ocean the demand the freight U.S. hospitality, freight also but seeing but primarily the in a because high. of in very We is workplace bit that's is increases our We're we're

as our the vertical. freight health well, see to pressure domestic costs which the workplace starting impacts in on we're that So

Greg Burns

Okay, great. Thank you -

Kristie Juster

points. QX, freight impact a about in the In of I basis going to was XX - Quarter yes, just say negative was

working hard going So, much to try but the to costs into as are mitigate we really teams that QX, as we'll can. those see

Greg Burns

questions. Great. the Thanks for taking

Kristie Juster

All right thanks Greg.

Operator

this instructions] Juster, any [Operator closing further Kristie see to the I questions. would time, remarks. for I call At no back turn over

Kristie Juster

is business priorities. for exciting We're embarking long-term incredibly acquisition ability the in new time significant on organic excited progress growth challenging effectively Well, about our very that we for very future. And today. the proven our we're such this upon is It believe set Great. to We've our Kimball an in time. this up success making our Thank in you for International. much. you joining thank call - a manage

So, a nice thank you to everybody have evening. and

Operator

and does conclude participating. Thank you Ladies for gentlemen, today's all that conference.

a You great day. may now Have disconnect.