— Workplace and Health Achieved Net Sales and Order Growth of 16% and 51% and Represented 86% of Total Net Sales —
— Poppin Business Model Returning to Near Pre-Pandemic Levels —
—Reiterates FY 2022 Guidance for 15%-20% Revenue Growth and Gross Margin Expansion in the Second Half of the Year —
Kimball International, Inc. (NASDAQ: KBAL) today announced results for the first quarter ended September 30, 2021.
Selected Financial Highlights:
First Quarter FY 2022
- Net sales of $156.6 million
- Gross margin was 31.3%
- Net loss of $5.0 million; Adjusted net income was $0.8 million
- Diluted EPS of $(0.14); Adjusted diluted EPS was $0.02
- Adjusted EBITDA of $4.9 million
- Backlog of $170.8 million
Management Commentary
CEO Kristie Juster commented, “First quarter demand trends were in line with our expectations, reflecting the recovery in our business that we signaled at the end of last fiscal year. Kimball International’s revenue performance, together with robust order rates underscores our differentiated market positioning and supports our guidance for strong double-digit revenue growth and improving gross margin in the second half of fiscal 2022.
“Sales in our Workplace and Health markets accounted for 86% of first quarter revenues and increased 16% in the aggregate, with growth across most verticals. We were particularly pleased with the contribution from our Poppin acquisition, where sales increased 22% sequentially from fourth quarter fiscal 2021 levels and are on track to exceed pre-pandemic levels by the end of this fiscal year. Importantly, approximately 60% of Poppin’s first quarter revenue was generated through the core B2B channel, which is an indication of strength in its historical business model.
“We continue to benefit from our broad portfolio of ancillary products, which accounted for 85% of revenues in Workplace and Health over the trailing 12 months, and our geographic positioning in secondary markets from which we derived 78% of our revenue over the same period. New product introductions also continued to drive revenue growth in our Workplace and Health markets and accounted for 25% of first quarter revenues, demonstrating how well Kimball International’s designs address changing dynamics within our key verticals. This strong showing from the major portion of our business was achieved within the constraints of the widely publicized supply chain disruptions that have delayed shipments across the U.S. Despite these challenges and inflationary pressures, we succeeded in expanding gross margin by 70 basis points on a sequential basis, reflecting benefits from the March 2021 price increase and higher production efficiencies.
“Robust order growth in the first quarter was broad-based, with strong year-on-year increases across all Workplace and Health verticals, and the highest order level in our Hospitality market in a year. These trends are consistent with our strategy of capturing growth in the Health market as it ramps post-COVID, pivoting to more customized projects in the Hospitality market, and gaining traction in Workplace by expanding our offerings with products and solutions that provide flexibility and adaptability. The Poppin order acceleration is aided by growth in core markets, success of Poppin Pro and strong demand for our new categories of Pods and Spaces.”
Overview
First Quarter Fiscal 2022 Results
Consolidated net sales increased 6% to $156.6 million, compared to the prior year first quarter. Organic net sales were $141.4 million. Double-digit sales growth in Workplace and Health was offset in part by the year-over-year decline in Hospitality sales. We also experienced some pull forward of orders ahead of our announced price increase. Gross margin of 31.3% declined 410 basis points from 35.4% in the year ago quarter. Positive margin impact from our price increases and manufacturing efficiencies were more than offset by raw material inflationary pressures, increased freight and higher labor costs. We anticipate gross margin improvement in the second half of the fiscal year as our pricing actions and cost savings initiatives begin to catch up with inflationary pressures. Selling and administrative expenses (S&A) of $50.2 million increased $8.5 million compared to the prior year primarily related to the Poppin acquisition and investments to accelerate future sales growth. Adjusted S&A was $48.6 million or 31.1% of net sales, compared to $40.8 million or 27.6% of net sales in last year’s first quarter. Net loss was $5.0 million, or $(0.14) per diluted share, inclusive of a non-cash after-tax contingent earn-out charge of $3.4 million, intangible amortization expense and restructuring charges. In last year’s first quarter, the company reported earnings per diluted share of $0.14. For the current quarter, adjusted net income and adjusted earnings per share were $0.8 million, and $0.02 per diluted share, respectively. Adjusted EBITDA for the quarter was $4.9 million compared to $15.8 million in the year ago quarter.
The Company ended the first quarter in a strong financial position, with $111.2 million in short-term liquidity available, which includes cash, and cash equivalents, plus the unused amount of our credit facility.
Summary and Outlook
First quarter results and order trends, together with market research data confirm that our Workplace and Health markets are firmly in a recovery phase. Kimball International continues to build momentum with its innovative products and an integrated go-to-market strategy that enables us to offer more design possibilities than ever before.
“We reaffirm our guidance for revenues to increase 15% to 20% for the full year, with the most significant growth occurring in the second half of the year. While demand for our products remains strong, continued supply chain and labor issues have constrained our near-term ability to produce and ship, which has extended our lead times. Similarly, we believe gross margin expansion will also take place in the second half of the fiscal year, benefiting from higher volumes, a second price increase and ongoing efficiency projects. At the same time, we are projecting higher S&A spending than in fiscal 2021 to drive future growth as we continue to invest in building our sales force, marketing and promotional campaigns, and the opening of new Poppin showrooms in Miami, Austin and Atlanta during fiscal 2022.
“The Company’s second quarter guidance, as detailed below, contemplates continued supply chain constraints, as well as the potential for temporary operational challenges related to complying with the vaccine mandate for government suppliers.
“Kimball International continues to be at the forefront of research into emerging workplace trends. In partnership with Ipsos, a global leader in market research, Kimball International gathered insights to learn about the future of workspaces. These findings have directly impacted the products and spaces highlighted in each showroom, and have guided the expansion of our product portfolio, including our new modular architectural workplace solution called EverySpace. It is an extensive platform of flexible work environments for open plan workstations, private offices and collaborative spaces. We were excited to launch, EverySpace along with 21 other new product introductions at our National Sales Meeting in September and NeoCon in October.
“Over the past several months, we have been encouraged by the increased level of new project opportunities along with overall demand, and as we navigate this challenging environment, I want to recognize and thank our employees for their hard work and continued focus on serving our customers.” Ms. Juster concluded.
The full text of Kimball International’s 1Q22 earnings release, including all tables, and a replay of the company’s Nov. 4 conference call webscast may be accessed via the company’s Investor Relations website at www.ir.kimballinternational.com.
About Kimball International, Inc.
Kimball International is a leading omnichannel commercial furnishings company with deep expertise in the Workplace, Health and Hospitality markets. We combine our bold entrepreneurial spirit, a history of craftsmanship and today’s design-driven thinking alongside a commitment to our culture of caring and lasting connections with our customers, shareholders, employees and communities.
For over 70 years, our brands have seized opportunities to customize solutions into personalized experiences, turning ordinary spaces into meaningful places. Our family of brands includes Kimball, National, Etc., Interwoven, Kimball Hospitality, D’style and Poppin.
Kimball International is based in Jasper, Indiana.