Kimball International, Inc. Reports Second Quarter 2023 Results
–Strong Growth in Sales and Operating Profits–
–Leadership in Ancillary Products and Secondary Geographies Continues to Drive Industry-leading Performance–
–Maintains Fiscal 2023 Guidance for Adjusted EBITDA Growth of 47% Despite Industry Headwinds–
Kimball International, Inc. (NASDAQ: KBAL) today announced results for the second quarter ended December 31, 2022.
Selected Financial Highlights:
Second Quarter FY 2023
- Net sales of $183 million, increased 21% year-over-year
- Gross margin expanded 550 basis points to 36.2%
- Net loss of $36.1 million inclusive of a non-cash charge; Adjusted net income of $3.0 million
- Diluted EPS of $(0.99); Adjusted diluted EPS was $0.08
- Adjusted EBITDA of $16.0 million, up $12.0 million year-over-year
- Backlog of $144.8 million
Management Commentary
CEO Kristie Juster commented, “This marked our fourth consecutive quarter of substantial year-on-year growth in Adjusted EBITDA driven by sales gains and production efficiencies, representing the effective execution of our strategic choices. Second quarter sales growth of 21% included significant contributions from all our end markets, and especially from our Hospitality end market, where our leading market share position is enabling us to capture growth opportunities from that industry’s post-Covid recovery.
“While upstream activity remains strong, we experienced a decline in orders rates in Workplace and Health during November and early December due to delayed decisions from clients in the face of recessionary concerns and after cycling significant year-over-year growth comps. However, our order rates improved through the month of January, giving us confidence the softening demand was temporary.
“Our optimized go-to-market strategy, which includes a portfolio of high appeal affordable products and greater focus on our direct and day-to-day businesses, is enabling us to adapt to these changing market conditions and successfully navigate the evolving hybrid workplace. We expect these initiatives, together with our cost-out and operational excellence programs, to provide Kimball International with resiliency in today’s business environment.”
Overview
Second Quarter Fiscal 2023 Results
Consolidated net sales increased 21% to $183 million from the year ago quarter, driven by growth in all three of the Company’s end markets. Gross margin expanded 550 basis points year-over-year to 36.2%, due to continued price benefits amid moderating inflation and the easing of supply chain disruptions as well as benefits from LIFO accounting impacts. Selling and administrative expenses (S&A) declined as a percentage of net sales to 31.1%, 330 basis points below the 34.4% reported in last year’s second quarter. Adjusted S&A was $54.7 million, or 29.9% of net sales, compared to $48.5 million, or 32.0% of net sales, in last year’s second quarter. Net loss was $36.1 million, or $(0.99) per diluted share, inclusive of a $36.7 million after-tax non-cash goodwill impairment charge associated with the Poppin acquisition. Adjusted net income was $3.0 million, or $0.08 per diluted share, compared to adjusted net loss of $(5.7) million, or $(0.16) per diluted share in the second quarter of fiscal 2022. Adjusted EBITDA was $16.0 million compared to $4.0 million in the year ago quarter. Adjusted EBITDA margin was 8.8%, up from 2.7% in the year ago quarter.
Capital expenditures in the second quarter of fiscal year 2023 amounted to $6.1 million. Kimball International returned $5.2 million to shareholders in the form of dividends and share repurchases in the second quarter of fiscal year 2023.
Summary and Outlook
“This was another quarter of strong performance for Kimball International, which has put us on track to achieve our fiscal 2023 guidance for EBITDA growth of 47% at the midpoint. While we have adapted our revenue guidance to reflect heightened recessionary risk, we are confident in our ability to continue to grow profitability. As we move into the second half of fiscal 2023, we will continue to leverage our leadership in providing high-demand ancillary products to high growth domestic markets, reignite our Hospitality business and all while driving sustained gross margin improvement and diligence in investments for our future,” Ms. Juster concluded.
FY 2023 Guidance Ranges
Revenue: $720 million to $740 million; 10% YoY growth at midpoint
Adjusted EBITDA: $48 million to $52 million; 47% YoY growth at midpoint
The Company expects a sequential decline in Q3 revenue and gross margin with a recovery in Q4 as it enters the annual education buying season in the spring.
The full text of Kimball International’s 2Q23 earnings release, including all tables, and archived replay of the company’s Feb. 2 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.
