Kimball International, Inc. Reports Fourth Quarter and Fiscal Year 2022 Results

— Substantial Increase in Fourth Quarter Profitability Driven by 21% Sales Growth and370 bps Gross Margin Expansion —
— Positive Business Momentum Reflected in 18% Workplace Order Rates Increase —
— Results Demonstrate Strength of Ancillary Product Portfolio and Secondary Market Focus —
— Guiding to Strong Fiscal 2023 Revenue Growth of 15% and EBITDA Growth of 47%, at the Midpoints —

Kimball International, Inc. (NASDAQ: KBAL) today announced results for the fourth quarter and fiscal year ended June 30, 2022.

Selected Financial Highlights:

Fourth Quarter FY 2022

  • Net sales of¬†$176.9 million, up 21% year-over-year
  • Gross margin expanded 370 basis points to 34.3%
  • Net income of¬†$4.4 million; Adjusted net income of¬†$9.0 million
  • Diluted EPS of¬†$0.12; Adjusted diluted EPS was¬†$0.24
  • Adjusted EBITDA of¬†$13.6 million, up¬†$10.7 million¬†year-over-year
  • Backlog of¬†$175.6¬†million

Management Commentary

CEO Kristie Juster commented, “We delivered a strong finish to fiscal 2022, which was in line with our expectations and reflected the positive momentum in our business that is continuing into fiscal 2023. Demand remained strong in our key Workplace and Health markets, where fourth quarter sales increased 33% year-on-year and represented 88% of fourth quarter revenues, led by our Commercial and Education verticals. This strong sales performance together with pricing initiatives taken to offset inflationary pressures and ongoing cost savings resulted in a substantial increase in profitability.

“Our ancillary product portfolio, which accounted for 87% of full year sales, is resonating in the market and continues to differentiate the Kimball International offering as it is designed to attract workers back to offices and accommodate their flexibility, customization and privacy needs. Also, over 75% of fiscal 2022 shipments were to secondary geographies, where the return-to-office has advanced more rapidly than in major metropolitan areas, and which continue to see population gains, especially post-pandemic.

‚ÄúPoppin sales returned to pre-pandemic levels and reflected strong demand across its product portfolio and markets, including our recently opened showrooms in¬†Miami,¬†Austin¬†and¬†Atlanta, as well as our integrated cross-sell channel through the¬†Kimball International¬†dealer network.¬†Poppin¬†is an essential part of our long-term value creation, and we look forward to further unleashing its full contribution.‚ÄĚ

Overview

Fourth Quarter Fiscal 2022 Results

Consolidated net sales increased 21% to $176.9 million from the year ago quarter, driven by double-digit growth of Workplace and Health end markets, which included a strong contribution from the Poppin business. Gross margin increased 370 basis points year-over-year to 34.3%, resulting from price increases to offset raw material inflation and operational excellence savings. Selling and administrative expenses (S&A) of $51.4 million declined year-over-year as a percentage of total net sales by 470 basis points to 29.0% in the fourth quarter of fiscal 2022. Adjusted S&A was $51.4 million, or 29.1% of net sales, compared to $46.5 million, or 31.8% of net sales, in last year’s fourth quarter. Net income was $4.4 million, or $0.12 per diluted share, inclusive of $4.7 million, or $0.12 per share in restructuring charges, compared to $7.4 million or $0.20 per diluted share in the year ago quarter. Adjusted net income was $9.0 million, or $0.24 per diluted share, up from net loss of $0.9 million, or $(0.02) per diluted share in the fourth quarter of fiscal 2021. Adjusted EBITDA was $13.6 million compared to $2.9 million in the year ago quarter.

Fiscal Year 2022 Results

Fiscal year 2022 net sales were $665.9 million, an increase of 17% from $569.0 million in the prior year. Gross margin of 31.7% reflected raw material inflation, higher freight and labor costs pressures, which were partially offset by increased pricing and operational excellence savings, compared to 32.1% in fiscal 2021. Selling and administrative expenses (S&A) of $202.3 million declined year-over-year as a percentage of total revenue by 150 basis points to 30.4% in fiscal 2022. Adjusted S&A was $196.6 million, or 29.5% of net sales, compared to $170.6 million, or 30.0% of net sales, in fiscal 2021. Net loss for fiscal year 2022 was $15.7 million, or $(0.43) per diluted share inclusive of a $34.1 million non-cash goodwill impairment charge associated with the Poppin acquisition that was offset partially by a non-cash contingent earn-out benefit of $17.0 million also associated with the Poppin acquisition. Fiscal year 2021 net income was $7.4 million, or $0.20 per diluted share. Adjusted net income in fiscal 2022 was $12.8 million, or $0.35 per diluted share, compared to $10.0 million, or $0.27 per diluted share in the prior year. Fiscal year 2022 adjusted EBITDA was $34.1 million, or 5.1% of net sales, compared to fiscal year 2021 adjusted EBITDA of $29.7 million, or 5.2% of net sales.

Capital expenditures net of proceeds from the sale of assets for fiscal year 2022 were $19.7 million. Kimball International returned $16.3 million to shareholders in the form of dividends and share repurchases in fiscal 2022.

Summary and Outlook

“Our second half fiscal 2022 results represented an inflection point for Kimball International, in which we demonstrated our ability to convert continued strong demand for our products into significant revenue growth and manage effectively through industry-wide inflationary, supply chain and labor issues, driving a step-change in profitability compared to first half levels, and resulting in a 570 basis point improvement in Q4 adjusted EBITDA margin year-over-year.

‚ÄúThe alignment of the¬†Kimball International¬†product portfolio with demand trends has enabled us to gain share and expand our addressable market, which combined with production and logistic efficiencies support our expectation for robust revenue and profit growth in fiscal 2023. We expect revenues to benefit from both volume growth and previously announced pricing actions, and profitability gains to result from higher utilization, favorable mix and operating efficiencies, primarily in the second half of the fiscal year. Most importantly, our employees represent a key competitive advantage that sets¬†Kimball International¬†apart. Their hard work and dedication to designing and delivering top quality products has been essential to our success to date and supports our confidence as we move forward on our growth trajectory,‚Ä̬†Ms. Juster¬†concluded.

The Company expects fiscal 2023 revenue and adjusted EBITDA to be weighted somewhat toward the second half of the year, with the fourth quarter being the strongest. We anticipate first quarter fiscal 2023 revenue will be similar to fourth quarter fiscal 2022 levels with Adjusted EBITDA tracking slightly lower due to higher labor and logistics costs and higher LIFO expense.

The full text of Kimball International’s 4Q22 earnings release, including tables, and an archived replay of the company’s Aug. 4 conference call webcast may be accessed 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.

www.kimballinternational.com