KBAL Kimball International

Kristine Juster CEO
T.J. Wolfe EVP & CFO
Greg Burns Sidoti & Company
Kara Anderson B. Riley Securities, Inc.
Call transcript
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Good morning, ladies and gentlemen. At this time, I would like to welcome everyone to Kimball International Third Quarter Fiscal Year 2021 Conference Call.

As with prior conference calls, today's call, May 4, 2021 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 forward-looking statements. Risk factors that may influence the outcome of forward-looking statements can be seen in the Kimball International's Form 10-K.

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

may you Juster, begin.

Kristine Juster

business us for Thank our quarter you, joining everyone, results outlook. third review to and discuss our

in began our most due was on third our challenging I period will the that quarter review several to X. pandemic outline key Slide factors The since

First, our normally third is in orders seasonally this contract lowest fiscal furniture experiences and quarter. industry quarter. our in The a drop-off revenue

Second, revenues data of raw our continued the there high that Most the due Kimball in quarter. industry ahead in slower came showing year-to-date gains And and most the capture said, third were third several logistics third, quarter, the costs materials, than and were in inflationary forecast, pronounced our to anticipated units, as revenues. Workplace in price order quarter on is early below business in Kimball the for business That to of to account order is close rates cadence recovery, which is expected, supporting Health points progress. signs increases. conditions and our market of as well-positioned share our International that significantly view XX% rates our of International's pressures

strong time, compared they third conditions bidding bidding indicating levels, same order indication rates workplace progressively end a Although the of orders. the declined the quarter, at in health conversion of increased both hard in QX activity At improved two period rates in market a ahead. and into pickup these double-digit throughout activity in another to into better and the April, markets

the We quarter. considerable recovery in margin fourth sequential in also gross our expect

rebound March gross third a our and compared quarter. contribute take begin to margin, hold to increases substantial will in price As the to

traction gaining terms within the one to end acquisition. achieving Connect stage Poppin on and in our X.X priorities markets, strategy, targets, have continue synergies cost on of to our we well execute progress we and saving our identified our growth that Importantly, in targeted meaningful revenue drive making

$XX our review experience, let's recovery. Health more end X, on ramping see Interwoven, pandemic of hospitals. to and this behavioral the markets, as with return with other markets centers, team public respect has and administrative medical we Kimball health, and Now International's announced of out business is billion the in had of including of a an faster health modernize of health with Beginning The together rates a continue increased areas positioning specialty the our workers, services, Slide geographies. a brought enabling expansion quickly hospitals a extensive Order meaningful relative professionals to within brand, the third funding, new And Veterans the compared industry and which program knowledge the engage QX. us we quarter. orders, we in strategies progressively and to organizations, targeted to third quarter, saw key Administration, health to government has in across where pickup the bidding opportunities increased in significant and the country. of academic end reflecting market health launch than Also sales number announced of dedicated previously to VA expansion the a projects, official throughout such of

improved substantial support veterans funding health VA, purchase consider an and to have be health tele-health, XXX bill business. behavioral well education, allocates passed care. The qualified to for growth driver products by and We mental recently stimulus the public over as services, for training important the as and

all rooms, total a thoughtfully Embra, the designed treatment all provide Specialty that around Products ease caregiver Health health customized in patient of improvement and XX% people storage, for provide lighting, for accounted third quarter. introductions with make the power, of exam the launched product modular elements rooms, recently a delivery solutions Interwoven family We of health approximately aesthetic. care. at our the The stations, in sales areas, space, at of care and New for home more feel design warmth of seating and residential and allows lounge of flexibility designed spaces. The and

expansion on market. the Our solutions, such progress targeting Veterans driven provides both the of Administration. of update is by health Slide new as the in product Hospitality and markets an X new an

pandemic sales, leisure the higher sales up the we off to margins, quarter were market products, one hospitality But year from for end of down date travel impact this our year in work ago. continued reflecting Custom XX% up and XX% accounted activities. as Third sequentially, were considerably, carry on of backlog. orders our which

We to international travel each and to an trend, build is as expect hospitality, a we navigate on with pace. different be what this in recovery uneven leisure, business, likely at ramping

that our given QX costs fixed XX% source costs, We much our QX results. freight to are a on had products. our ocean where impact costs lower, significant business, of be tend in closely Higher we however, hospitality and approximately managing this

from We able partially are margin higher to as QX expect in offset the costs with to QX, show improvement pricing. we

a to As broader business increased travel. but international previously, stated later continue we activity ramp for in had leisure and we see anticipate travel, the

business. we represents begin of largest move the market, Workplace our the discussion which to Slide where let's Now our portion X, of

Although across impact sight. early on in a spending recovery market continues the that felt furniture indications be industry, the is see pandemic workplace we to

third trend April. Our quarter, the order into progressively increased continued rates and through that

the model International's to on are engaged a in of of of forming where role the an as driving home, corporate locations, can that, a work be the the levels, offices rate develop you the and clear omni-channel new retain, position workplace. centralized hybrid to be work work The X, hub comprised strong for forming our a of of a capabilities most by work, Slide work points put we which culture, in us Additionally, share of a outlook bidding our our It satellite areas, from new and and Kimball creating At that product the hybrid able role signal locations. attract, as will in taught that, new share combination of is the collaboration, learning, indicates in qualified community complimented us that research. research new on future which from proprietary crucial anywhere, employers work, the plays while the office new we innovation. These flexibility in both satellite and workforce. and environment, are is a concept happen QX from a center per gain employers play home. important the providing by number office, some data opportunities diverse double-digit opportunity. On and did value development is the pandemic of will has dollar at increased teamwork,

the take place workplace areas. International than of Moving to positioned the approximately well business to is the of for which, in environment. XX% taking And where faster atmosphere in systems, secondary how to re-entry Approximately can advantage Slide a category, of are collaborative transitioning suited Kimball is our ancillary new derived is are larger contrast rate of X, office markets, at metropolitan office ideally XX% from workplace products our workplace market. you see in the

announced gains. are like is acquisition outlined acquisition, X of comfortable less attractiveness of over living secondary several and completed key we and the a due Austin, X dense, The share of Poppin these which summary priorities to appeal of in last more Miami favorable in the months. climate ability Nashville and future situation. to markets mid a Stage accelerate we XXXX, Additionally, is when we driver our gaining market been business their On a on have focused Slide the the December

in to XXXX. in and These International Poppin secondary locations First, relationships. will where showroom has X long we markets have fiscal open XX identified markets for standing Kimball expansion, plan be

introductions work we with home scaling for summer corporate expanding Second, alongside and product program. our our are sponsorship late scheduled portfolio from new

new because PoppinPro products from price, quality customers excited the that up, the This Slide dynamic system a products affordable and in individual, Third, suite will and it and at will D in private transactions, XX existing open teleconferencing, and and To access PoppinSpaces at gives unique two services. with the add of Poppin's happens our ability the and pop-up XX an International sum marketplace. adaptability and flexibility workspaces an quality an for new all The the PoppinPro, about the the offered cost PoppinSpaces. colors providing the dealer products network them private Each their this enabling simplicity provides without group International use, to provides offices new the innovative in International that life categories, officially and fun workplace. rooms and wherever are assortment for which categories PoppinPro with brand. today's a full Kimball X,XXX meeting and our to of tailored benefit products, design, work are collaboration, includes Slide of provide post-pandemic and just-launched are on meetings Poppin by access gain to dealers, environment of needs look launch community PoppinPods to space the flexible closer Kimball and launch supports portfolio speed gain meet productive simple, high over the well-suited with will product month of of the program spaces. construction. a solutions later of program Kimball to categories of and Dealers employees all A to is freestanding that they

of June to quarter. turn will Wolfe, a I T.J. review for quarter financial T.J? third Now guidance Financial the our call Chief and our the Officer, over for the

T.J. Wolfe

which afternoon, Kimball Thanks, good performance provide includes for quarter International's Kristie, fiscal the fourth details quarter in the XXXX guidance a gross will margin. our and and significant third of financial about everyone. in more rebound I

million sequential Poppin Let's declined I X% year-on-year. on Net Slide with by dynamics order from a sales end XX $XXX.X in XX% highlights. increased financial $X.X revenue will an discuss sequentially contribution million market moment. key start including to but

savings due material Of our gross million and related margin the inflation, excellence of of higher transformation operational health to leverage points basis plan base. part mitigate a levels, these Our $X loss the pressures. in to costs, last third raw XX.X%, margin revenue quarter third program below logistics the to million on of mainly total year's lower quarter, and $X care helping was XXX

lines product selective industry-wide the X inflationary Health to Workplace pressures. that announced increases help our some went we reminder, a and of offset March As cost effect into in price

declined first savings and management million. to from million a full expense realization of $X quarter pricing expect price Selling transformation did the a see which Given but will not gross with the more third quarter, in quarter benefit material meaningful margin, the timing benefit the XXXX. of fourth from $XX.X our in of we to and of cost during benefiting fiscal see $X.X a by the administrative million increase, contribution program

million selling Excluding $X.X adjustments, the year. and Poppin or costs were XX.X% sales of administrative to million acquisition-related the $XX.X SERP acquisition, prior charges, XX.X% and adjusted amortization of in $XX.X compared or from million

portion quarter Our savings $X in total in achieve continued fiscal bringing program transformational XXXX, fourth plan to in to We cost $XX in third in year-end. SG&A our puts as a track transformation Poppin. by which savings were increase on spend our a and of us quarter savings the million firmly the the of million, these $XX.X recovery anticipation we to million, expansion of savings year-to-date reinvest fiscal business

diluted million This income $X.XX was loss EBITDA ago including to charges third as acquisition. negative the quarter. Adjusted earnings Adjusted diluted in related amortization fiscal was $X.XX $X.X per special per well per EPS in as the share, earnings XXXX. diluted million net $X.XX compared of of restructuring negative in quarter the net or million million. after-tax compares to year was $X.X share and $X.X GAAP $X.XX Poppin of of share or $X.XX to Our $X.X

mind sales, take XX% product represented Workplace accounted and total new quarter market third XX% a total by we introductions under sales sales of through on our increased sales revenue Health quarter. sequentially XX% total our XX% this XX% for the is let's in of third quarter. Hospitality our for our total XX, that for keeping seasonally sequentially. And at in our Workplace revenue declined this approximately Workplace lowest worked for revenues, as decreased revenue of X% look accounted Now performance which quarter. XX% quarter. of just backlog sequential and sequentially Slide closer the end accounted

well. XX% As the only contract Kristie sequential improvement revenue see Workplace, QX. seasonal period We reporting Thus, the furniture fourth in of throughout the normally of ramp our saw while revenue we education in Historically into progressively and around versus quite were XX% trend decreased X% from order noting a Within compared in in soft, particular April in full orders shows quarter as Hospitality the for decline and by quarter and in quarter. X%, including mentioned improved this in it's a few year. first to the is the was orders Workplace Workplace Poppin decline has Health increase throughout third Orders QX Health saw to this vertical. us, of quarter. were improvement weeks April Workplace, worth and positive orders new and positive orders of for for during Workplace that industry order experiences rates in momentum the rate Poppin rates for in QX continued the of markets sequentially. that in in X% Slide quarter definite this part which declined total March. both month earlier, XX sequential in there Health, order end been decline into the a a signs a And which increased a a trends and results as QX we Health in

too it the signals early beginning this of call is optimistic are we it recovery. industry cautiously a to that trend, an While

machinery switch million expect expenditures in equipment of million million ago CapEx be we on flows sheet quarter. generated Capital million compared was XXXX. our expenditures and and Now of CapEx in in our were million approximately XX. flow of third $XX.X We Slide year in $X.X we cash and cash fiscal the $XX a and $X capital equivalents. year to to operating with manufacturing were majority Year-to-date ended the and million The the investments let facilities period $X $XX the $X.X quarter, technology. me compared cash balance million. third to in full comparable to In quarter cash

backlog share $X.X bringing the the $XXX.X of and returned in and year-to-date third be million backlog the to we the quarter, third expect in our form purchases, quarter, to fourth Based in Workplace rates, our of of resulting This offset the and $XX million we million. at capital levels. figure Health due order quarter, shareowners of dividends revenue the to lower quarter a revenue on be of to Hospitality tenor Hospitality decline entering revenue in increase in with sequential quarter by the end a to line

price QX hold basis QX. the rebound by takes of as significantly offsetting pressures and levels approximately a are gross projecting to We margin continued expanding commodity portion XXX points freight from March the increase in

to including work We in initiatives, are fourth planning selectively investments growth increase the our resources. quarter return to and health selling and Poppin, administrative incremental around

Kristie We will her Kristie? the if planned and throughout back I needed. to continue quarter to now investments, monitor turn adjust incoming the for remarks. call will closing orders

Kristine Juster

a right our believe ramp. market strong business wellbeing, us share enable long-term at To verticals to on will are currently upswing. to is Kimball the ESG. and in accelerated deliver T.J. comment generation maintaining product And lead geographies, supports International's culture we are conditions would our caring commitment like value indications company-wide right cost the Slide responsible across organization that emphasizes we compiling in to up corporate approach a and the a data you, governance a take employee position stewards Thank strong efficiencies our pace. and to digital wrap the on early to I are to of as environment, also on an moment are We The the diverse and new categories. safety that practices. and that being right having machine, XX, workplace With we International changing capture is Kimball

more coming now to and demonstrate and diversity, meaningful to broader we Directors our on the Our to forward would commitment in and reporting for I sharing executive focus call questions. look ESG months. our Board the information Of leadership open like


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

question please. Your

Greg Burns

seeing? improvements I seeing -- sales order some that’s green just see that the there? of year? pick with of seeing terms of up might you translating quoting how In you you signs business with improvements, of smaller about half in that are larger with the in terms the second Any first, signs the it businesses of early And there you what and of are activity, are you mean, talk maybe centralized can there are to maybe longer it cycles? like projects is smaller start shoots

T.J. Wolfe

Greg. Sure,

think I translated in of into in day-to-day slow orders, we which longer and January orders noted in increase and X% so look you when when look Health. you the clearly this over to through would throughout this, a our start then over shipments. less than April But a was slow kind saw a it to in it day-to-day the progressive your We March, quarter in value longer February Workplace we and when those month project throughout the duration. year. orders talked previous strengthening was April, $XX,XXX and And significant down to about at a what the we think was past in increase performance progression from saw are orders at we -- January the what actually call larger strongest in question I quarter, versus the which

very were those we think seeing. encouraging I activities were so types about of signs the And

think picking but saw so orders, QX, the And first before this during begin of is well. verticals buying So hypothesis we our we the and of that to of up was kind playing would as again, out. beginning starts size this, come day-to-day from about also larger orders the and education see within I that the season talked signs the that we projects, back the

green points are data specific we we think feel. the to I are look two So shoots those that

Greg Burns

at be how company going through it or that any playing maybe mostly you see you work do and around addressing you the -- mostly a sponsored or BXC like website programs look on, opportunity When type to from like, digital are that out, further plans investments have home is Okay. through channels?

Kristine Juster

Yes, Greg, sponsorship. sponsorship efforts on our We've our BXB to this We've Kristie. Poppin gain initiative corporate talked about the environment corporate program. is focused the and with

We we process. now have so early in over that a it's and that signed stages corporations that have do that see hundred up for

some our Although basis, a of focus BXC is actually Poppin we transact able have BXC do from because that's the not to initiative. business

in that forming And is the model so of form the where good we're end hybrid and this focusing. in feel very as we're we it front new good feel will about workplace. We market

Greg Burns

XQ in of the business. I guess incremental And then Okay. on million, $XX to there's investments into terms back of the had be terms in are guidance about additional SG&A, some some talking your savings you

to do between SG&A sequentially third relative you flat? or up So two expect be dynamics, the quarter, those to

T.J. Wolfe

right. that's Greg, Yes,

you're So the forming that make the to we to is the and occur, innovation support VA, new you of if some have right goods a of standpoint. are we expertise, excellence. research, it investments related those has, workplace in The will it, right, the of but additional operational and these time launch for evaluate in the come think fall SG&A. really and at design And savings cost we we a through how in now from as we market, feel is gating we can been will that have of we're from we majority health to what about will the around sequential look increase have ramp as and looking PoppinPro, those, mentioned and

from sequential from in -- sequential a increase result improvement QX. So that will all

Greg Burns

when to can in Okay. for you implementing And terms sales Poppin, talk those, are just growth? some lastly, first the see impact about of where Poppin start phase we have those in terms might of on priorities you

Kristine Juster


this made pleased progress is the launch with actually we've PoppinPro The happening month. So, we're Poppin. very with that

calling the team done starting a dealer in dealers on activated to job these completely The our very customized just into approach launch Plus program local creating a are we actually Poppin are has with Poppin actually so We It's for The then Plus force, has going kind sales markets. launch key ground community, that PoppinPro through a this full thousand over an engaged much are A&D they'll the have outstanding launch plans. -- launch that of community. in together. and plans will internal for have been of we're what our digital tools then support putting some with And the for dealers. plans

just very category The is so well, have to The environments, will pleased. flexible last critical Spaces talked we that's the the are that also categories up new to brand quick we that on Pod dealers Poppin and the program categories office -- categories So launched sooner Poppin are about portfolio. walls open month that and as the leases. than the are anticipated, full Direct access that's under ship, focused setting short-term that that so we new

and as Kimball Poppin International showrooms. So stated and in great kind starting opportunities quickly We great to really will I And synergies our is what we it's our reality, to diligently the view. and progress I manufacturing are we're really to the piece with of as product markets can there, a then last make to that say the for in in team. we're future, excited well. there's that Poppin VAVE as about been are also engagement 'XX teams that that making X across do XX some really fun on happen very going happen. going we work secondary working have of those we and think say would are the and that we on

really the see to guys build of in and you see the very growth for for excited us Kimball progress International. pleased with in market So the in it and to Poppin it

Greg Burns

you. Thank great. Okay,


Our line from next comes Kara B. the question Riley Anderson of Instructions] of Securities. [Operator

please. question Your

Kara Anderson

guys. Hi,

T.J. Wolfe

Hi, Kara.

Kara Anderson

increase. to little the So I just want on a dig price

in XX% third year. benefit fourth price look won't material recall the that quarter, over course it meaningful alleviate full improvement Kimball next no pressures quarter, And back gross a pickup the year? the what of out in all kind increase seeing sight if margin take XQ is for you're the But of I'm like so and really points I the basis the more XXX you does next the in in level? called to you So to guessing of realization on

T.J. Wolfe

so question. great Kara, Yes,

kind let's increase. the So the of price of on go facts back

So that across the X%, specifically range this uniformly but and low so the X% direction the Because in backlog at of broad in that in it Health is of of order quarter, wasn’t that again, broadly. the this directionally it portfolios much really was Kind were of wasn't but in it, it. the Workplace you single-digit cycle, to all don't from deviations there -- QX. see

to begin price will it created in backlog increases, exceed works the But commodity in will you see You increase QX, the but the took. margin QX. then as that full you through we and out, by the as realization point cost the those compression see freight

of I to itself begin you'll think the the that back if is margins, at once because actually recover. cycling we volumes magnitude you the was kind when what to loss you drag the in of And really look of loss quarter, see big in leverage towards order a historical year-over-year actually were biggest non-COVID QX was path of reversing of begin 'XX. leverage look previous this quarter lever

biggest this certainly the path include the Freight in up certainly the recovery I P&L. back of path compression, commodity think and was the quarter. that backward -- a So material margin but will to leverage drag

Kara Anderson


are four that would return get our So to correct? level, that quarters are volume to say we three, timelines projecting you also out, is if we expect it if back then fair like to

T.J. Wolfe


marry return absolutely. the with of You it would volume, find up

Kara Anderson

to sort you And that Poppin of the the comparison in order activity talk trends Okay. rates, the talked is how progressing you've about can about for business? bidding whole then

T.J. Wolfe

Sure. Yes.

of Poppin, business that what our core will at call when So priorities, acquisition, had our look Poppin seen. and we when commented remained you levels at Kristie as the it Stage progress X just depressed made we on with legacy have kind you to as look at the prior we've

in So as Poppin's major depressed did. ours remained markets cities

So million the saw were in Poppin's when that significantly prior COVID. you performance again this revenue, of that's rates $X kind below to what quarter,

for We begin their And depressed markets follow kind secondary to kind would metro continues. to International's line we've still ramp said deviations first, drag what metro large in Health Workplace, that given by markets. Kimball So markets. will recover is some look ramp followed and top with of they're of

they're to the again think as we look we I same the revenue begin come their to environment ramp So next grow see in are. experiencing will we out macro And the quarters. of

Kara Anderson

PoppinSpaces, then the And how those ask to just significance those for about it. new handle do to and Kimball? a those. on I are Got peers wanted I want And you get I product the categories on to the PoppinPods of compare there? guess, offering

Kristine Juster


So program. PoppinPods Kimball, through serviced for traditional for they new the are brand they be right and dealers will categories PoppinPro The the COVID. launched before

So Poppin really has category. that not experienced the benefit of

out walls, exciting And heard today. an to COVID. rolled We offices, then are lot brand they significant It's with the and then have very new. of into initial a place. do actually And just flexible the Although were that for it. Spaces Health category quite products feel launch, pleased with Spaces application post-pandemic construct our And we it's small that's to to those rooms. went We work the us. I about environment ability team really meeting take excitement going to

And workplace construction. up any keep the we spaces. set office without can the of of in hearing an our And literally is needed interiors on feedback type of flexibility in so these what that's you all the course, new about

we through network wholeheartedly Poppin with take support PoppinPro. two both and traditional and our product new direct the excited then to And are categories, so research will there those those that in pipelines support model that are And two product categories them.

Kara Anderson

And work-from-home can you success then data category any you Got points it. share? that the you've do around corporate sponsored have had that in

Kristine Juster

just that are we learning category. Yes,

that And we ability XXX think order sponsorships a little I it's shared, product corporate those directly. I to engaged employee's the are about over a literally upon. have

time, go are through it's organization. actually a seeing to product purchase how to the also for but new behavior It's on product. their volumes learn employee to ramp purchase to for the We actually their new a the still and the employee require internet employer over behavior learned the

that as building forward, has we So I we and of going kind go. it think significance are

So we’ve be, but still stages. confidence on early it in what the in will it's

Kara Anderson

you. it Got That’s me. it. for Thank

Kristine Juster

Thanks, Kara.


like At to to this over I'd call Thank turn for closing back you. the remarks. Juster time, Kristie

Kristine Juster

would joining And the us certainly our today. Yes. on progress. thank everybody informed I to call look on everyone like we to for keeping forward

us all beliefs up want what share our we’ve employees and set We to back been for and we our the on. the experienced that opportunities everybody to the feel to at the the to that of has. times during invited continue we’ve excitement to through COVID out frankly, over will employees And done ready Kimball also this we’ve pandemic. forward, that International can us just -- and truly offices they’ve week, we thank all for working that of can tremendous get that done I ramp of success we’ve going we our what the with are reconnection and COVID

really all are we thank we and you our So much your so pleased about evening. for time ahead this path


Thank you This participating. concludes for conference today's call.

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