EX-99.1 2 aex991pressrelease12312021.htm KIMBALL INTERNATIONAL, INC. EX-99.1 Document

Exhibit 99.1

KIMBALL INTERNATIONAL, INC. REPORTS SECOND QUARTER 2022 RESULTS

— Strong Demand Drove 11% Revenue Growth; Revenue from Workplace and Health Up 18% —
— Adjusted Gross Margin Was 31.8%, a 40-Basis Point Sequential Expansion —
— Order Rates Up 28%, and Up 35% for Workplace and Health End Markets —
— Third Consecutive Quarter of Consistent Double-Digit Workplace and Health Order Growth —
— Reaffirms Full Fiscal Year 2022 Guidance —

JASPER, IN (February 3, 2022) - Kimball International, Inc. (NASDAQ: KBAL) today announced results for the second quarter ended December 31, 2021.
Selected Financial Highlights:
Second Quarter FY 2022
•Net sales of $151.4 million
•Gross margin of 30.7%; Adjusted gross margin of 31.8%
•Selling and administrative expenses (S&A) of $51.9 million; Adjusted S&A of $48.5 million
•Net loss of $21.3 million; Adjusted net loss of $5.7 million
•Diluted EPS of $(0.58); Adjusted diluted EPS was $(0.16)
•Adjusted EBITDA of $4.0 million
•Backlog of $196.9 million
Management Commentary

CEO Kristie Juster commented, “Demand for Kimball International products remained strong in the second quarter, driving double-digit, year-on-year revenue growth. Our Workplace and Health end markets accounted for 89% of second quarter revenues and posted combined revenue growth of 18%. Order rates continued to be robust, driving record backlog levels, which support our expectations for strong second half performance and underpin our confidence in our full year guidance.

“Revenue and order growth was broad-based across most of our key Workplace and Health verticals. Ancillary products that are the cornerstones of the new-forming collaboration and culture-focused workplace environment, accounted for 85% of second quarter sales. Shipments to smaller metropolitan areas that are primary markets for our products, represented 81% of second quarter sales. We did, however, experience continued supply chain disruption and inventory availability issues that affected Poppin’s in stock business model. These factors particularly impacted sales at Poppin, causing a pause in the positive sequential momentum in sales, which we expect to resume in the second half of this fiscal year.

“Our industry continues to experience supply chain and labor issues that have increased costs and constrained our ability to produce and ship. Despite these issues, we were able to deliver an adjusted gross margin that improved 40 bps sequentially. We expect improving operating conditions and additional price increases on orders booked in calendar 2021 to result in expanded gross and EBITDA margins as we convert strong demand into greater increases in revenue and profitability.”

Overview

Second Quarter Fiscal 2022 Results

Consolidated net sales increased 11% to $151.4 million from the year ago quarter led by continued strength in the Workplace and Health verticals and the addition of the Poppin business. Adjusted gross margin increased 40 basis points sequentially to 31.8% while declining from 33.5% in the second quarter of fiscal 2021, and continued to be pressured by raw material inflation and higher freight and labor costs, partially offset by price increases and ongoing cost saving programs. Adjusted selling and administrative expenses (S&A) of $48.5 million, or 32.0% of net sales, declined $0.1 million sequentially while increasing from $40.7 million in last year’s second quarter. Net loss was $21.3 million, or $0.58 per diluted share, inclusive of a $34.1 million non-cash goodwill impairment charge associated with the Poppin acquisition and attributable primarily to the near-term impact of the COVID-19 pandemic. This goodwill impairment reflects our revised assumptions about the near-term operating performance, however, we still believe in the value of both Poppin’s core business model as well as our PoppinPro distribution channel. The impact of these charges was offset partially by a non-cash contingent earn-out benefit of $22.5 million. Adjusted net


loss was $5.7 million, or $0.16 per diluted share. Adjusted EBITDA was $4.0 million compared to $9.1 million in the year ago quarter.
Net Sales by End Market
 Three Months Ended Six Months Ended 
(Unaudited)December 31, December 31, 
(Amounts in Millions)20212020% Change20212020% Change
Workplace *$106.1 $87.4 21 %$213.2 $182.7 17 %
Health28.5 27.0 6 %53.1 47.6 12 %
Hospitality16.8 21.8 (23 %)41.7 53.8 (22 %)
Total Net Sales$151.4 $136.2 11 %$308.0 $284.1 8 %
Orders Received by End Market
Three Months EndedSix Months Ended
(Unaudited)December 31,December 31,
(Amounts in Millions)20212020% Change20212020% Change
Workplace *$123.8 $87.1 42 %$239.0 $166.6 43 %
Health30.9 27.4 13 %60.5 49.7 22 %
Hospitality17.9 20.4 (12 %)50.9 58.5 (13 %)
Total Orders$172.6 $134.9 28 %$350.4 $274.8 28 %

* Workplace end market includes education, government, commercial, and financial vertical markets and eBusiness

Summary and Outlook

“We are pleased with the strong year-to-date demand we have experienced across our product portfolio, geographies, and vertical markets, which underscores the relevance of Kimball International’s innovative product designs that provide the flexibility and adaptability needed in today’s workplace.

“Consistently strong order rates in our Workplace and Health markets have resulted in a record backlog heading into the second half of fiscal 2022. Thus, we reaffirm our fiscal 2022 guidance for 15-20% revenue growth with adjusted gross margin in the third quarter similar to first half levels, followed by greater expansion in the fourth quarter as we benefit from higher volumes, price increases and ongoing efficiency projects. As previously noted, we expect to continue to invest in growth during fiscal 2022 by opening and scaling new Poppin showrooms in Miami, Austin and Atlanta, maintaining our commitment and focus around new product initiatives such as EverySpace, and continuing investment in our selling organization.”

Third Quarter FY 2022 Guidance Ranges
LowHigh
Revenue growth (year-over-year)
23%25%
Adjusted gross margin
Approx. 31%
Adjusted S&A
$50 million
$52 million

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company’s financial performance that excludes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States in the statements of income, statements of comprehensive income, balance sheets, or statements of


cash flows of the Company. The non-GAAP financial measures used within this release are (1) organic net sales, defined as net sales excluding acquisition-related net sales; (2) adjusted gross profit; (3) adjusted selling and administrative expense; (4) adjusted EBITDA; (5) adjusted operating income; (6) adjusted net income; and (7) adjusted diluted earnings per share. Adjusted operating income, adjusted net income, and adjusted diluted earnings per share each exclude restructuring expense, CEO transition costs, acquisition-related amortization and inventory valuation adjustments, goodwill impairment, contingent earn-out adjustments related to the acquisition, COVID vaccine incentive costs, costs of acquisition, and statutory income tax impacts for taxable after-tax measures, from the GAAP income measure. Adjusted gross profit excludes acquisition-related inventory adjustments and COVID vaccine incentive costs from the GAAP income measure. Adjusted selling and administrative expense excludes market value adjustments related to the SERP liability, CEO transition costs, acquisition-related amortization, costs of acquisition, and COVID vaccine incentive costs from the GAAP income measure. Additionally, adjusted operating income excludes market value adjustments related to the SERP liability. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation expense, amortization expense, restructuring expense, CEO transition costs, acquisition-related inventory valuation adjustments, costs of acquisition, goodwill impairment, contingent earn-out adjustments related to the acquisition, and COVID vaccine incentive costs. A reconciliation of the reported GAAP numbers to the non-GAAP financial measures is included in the Reconciliation of Non-GAAP Financial Measures table below. Management believes that Adjusted EBITDA and other metrics excluding restructuring expense, CEO transition expenses, market value adjustments related to the SERP liability, COVID vaccine incentive costs and acquisition-related adjustments are useful measurements to assist investors in comparing our performance over various reporting periods on a consistent basis by removing from operating results the impact of items that do not reflect our core operating performance.

The orders received metric is a key performance indicator used to evaluate general sales trends and develop future operating plans. Orders received represent firm orders placed by our customers during the current quarter which are expected to be recognized as revenue during current or future quarters. The orders received metric is not intended to be presented as an alternative measure of revenue recognized in accordance with GAAP.
Forward-Looking Statements

This document may contain certain forward-looking statements about the Company, such as discussions of Company’s pricing trends, liquidity, new business results, expansion plans, anticipated expenses and planned schedules. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These statements generally can be identified by the use of words or phrases, including, but not limited to, “intend,” “anticipate,” “believe,” “estimate,” “project,” “target,” “plan,” “expect,” “setting up,” “beginning to,” “will,” “should,” “would,” “resume” or similar statements. We caution that forward-looking statements are subject to known and unknown risks and uncertainties that may cause the Company’s actual future results and performance to differ materially from expected results including, but not limited to, the possibility that any of the anticipated benefits of the transaction between the Company and Poppin will not be realized or will not be realized within the expected time period; the risk that integration of the operations of Poppin with the Company will be materially delayed or will be more costly or difficult than expected; the effect of the announcement of the Poppin transaction, including on customer relationships and operating results; the risk that any projections or guidance by the Company, including revenues, margins, earnings, or any other financial results are not realized; adverse changes in global economic conditions; successful execution of Phase 2 of the Company restructuring plan; the impact on the Company of changes in tariffs; increased global competition; significant reduction in customer order patterns; loss of key suppliers; loss of or significant volume reductions from key contract customers; financial stability of key customers and suppliers; relationships with strategic customers and product distributors; availability or cost of raw materials, components and freight; changes in the regulatory environment; global health concerns (including the impact of the COVID-19 outbreak); or similar unforeseen events. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the Company are contained in the Company’s Form 10-K filing for the fiscal year ended June 30, 2021 and other filings with the Securities and Exchange Commission.
Conference Call / Webcast
Date:February 3, 2022
Time:5:00 PM Eastern Time
Dial-In #:1 800-773-2954 (International Calls - 1 847-413-3731)
Pass Code:50245049
A webcast of the live conference call may be accessed by visiting Kimball International’s Investor Relations website at www.ir.kimballinternational.com.


For those unable to participate in the live webcast, the call will be archived at www.ir.kimballinternational.com within two hours of the conclusion of the live call.
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



Financial highlights for the second quarter ended December 31, 2021 are as follows:
Condensed Consolidated Statements of Income
(Unaudited)Three Months Ended
(Amounts in Thousands, except per share data)December 31, 2021December 31, 2020
Net Sales$151,403 100.0 %$136,197 100.0 %
Cost of Sales104,959 69.3 %90,648 66.6 %
Gross Profit46,444 30.7 %45,549 33.4 %
Selling and Administrative Expenses51,921 34.3 %45,967 33.7 %
Contingent Earn-Out (Gain) Loss(22,510)(14.8 %)0 0.0 %
Restructuring Expense1,010 0.7 %1,616 1.2 %
Goodwill Impairment34,118 22.5 %0 0.0 %
Operating Income (Loss)(18,095)(12.0 %)(2,034)(1.5 %)
Other Income, net477 0.4 %1,409 1.0 %
Income (Loss) Before Taxes on Income(17,618)(11.6 %)(625)(0.5 %)
Provision (Benefit) for Income Taxes3,696 2.5 %213 0.1 %
Net Income (Loss)$(21,314)(14.1 %)$(838)(0.6 %)
Earnings (Loss) Per Share of Common Stock:
Basic$(0.58)$(0.02)
Diluted$(0.58)$(0.02)
Average Number of Total Shares Outstanding:
Basic36,749 36,962 
Diluted36,749 36,962 


(Unaudited)Six Months Ended
(Amounts in Thousands, except per share data)December 31, 2021December 31, 2020
Net Sales$308,013 100.0 %$284,141 100.0 %
Cost of Sales212,472 69.0 %186,236 65.5 %
Gross Profit95,541 31.0 %97,905 34.5 %
Selling and Administrative Expenses102,080 33.1 %87,654 30.9 %
Contingent Earn-Out (Gain) Loss(17,900)(5.8 %)0 0.0 %
Restructuring Expense2,465 0.8 %5,856 2.1 %
Goodwill Impairment34,118 11.1 %0 0.0 %
Operating Income (Loss)(25,222)(8.2 %)4,395 1.5 %
Other Income, net43 0.0 %2,226 0.8 %
Income (Loss) Before Taxes on Income(25,179)(8.2 %)6,621 2.3 %
Provision (Benefit) for Income Taxes1,184 0.4 %2,073 0.7 %
Net Income (Loss)$(26,363)(8.6 %)$4,548 1.6 %
Earnings (Loss) Per Share of Common Stock:
Basic$(0.72)$0.12 
Diluted$(0.72)$0.12 
Average Number of Total Shares Outstanding:
Basic36,785 36,968 
Diluted36,785 37,465 



(Unaudited)
Condensed Consolidated Balance SheetsDecember 31,
2021		June 30,
2021
(Amounts in Thousands)
ASSETS
    Cash and cash equivalents$16,323 $24,336 
    Receivables, net52,802 58,708 
    Inventories72,137 54,291 
    Prepaid expenses and other current assets23,404 22,012 
    Property and Equipment, net91,772 90,623 
    Right of use operating lease assets12,611 14,654 
    Goodwill47,844 81,962 
    Other Intangible Assets, net61,604 64,478 
    Deferred Tax Assets16,229 16,368 
    Other Assets17,190 17,163 
        Total Assets$411,916 $444,595 
LIABILITIES AND SHAREHOLDERS’ EQUITY
    Current maturities of long-term debt33 30 
    Accounts payable57,722 41,537 
    Customer deposits36,685 24,438 
    Current portion of operating lease liability6,237 6,590 
    Dividends payable3,620 3,532 
    Accrued expenses31,563 39,115 
    Long-term debt, less current maturities40,046 40,079 
    Long-term operating lease liability10,720 12,536 
    Long-term earn-out liability2,290 20,190 
    Other16,336 16,878 
    Shareholders’ Equity206,664 239,670 
        Total Liabilities and Shareholders’ Equity$411,916 $444,595 




Condensed Consolidated Statements of Cash FlowsSix Months Ended
(Unaudited)December 31,
(Amounts in Thousands)20212020
Net Cash Flow provided by Operating Activities$12,620 $24,521 
Net Cash Flow used for Investing Activities(11,313)(105,774)
Net Cash Flow (used for) provided by Financing Activities(9,649)32,456 
Net Decrease in Cash, Cash Equivalents, and Restricted Cash(8,342)(48,797)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period25,727 92,444 
Cash, Cash Equivalents, and Restricted Cash at End of Period$17,385 $43,647 







Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Amounts in Thousands, except per share data)
Organic Net Sales
Three Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Net Sales, as reported$151,403 $136,197 $308,013 $284,141 
Less: Poppin acquisition net sales13,494 2,678 28,718 2,678 
Organic Net Sales$137,909 $133,519 $279,295 $281,463 

Adjusted Gross Profit
Three Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Gross Profit, as reported$46,444 $45,549 $95,541 $97,905 
Add: Pre-tax COVID vaccine incentive1,569 0 1,569 0 
Add: Pre-tax Acquisition-related Inventory Valuation Adjustment62 42 205 42 
Adjusted Gross Profit$48,075 $45,591 $97,315 $97,947 
Adjusted Gross Profit %31.8 %33.5 %31.6 %34.5 %
Adjusted Selling and Administrative Expense
Three Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Selling and Administrative Expense, as reported$51,921 $45,967 $102,080 $87,654 
Less: Pre-tax Expense Adjustment to SERP Liability(680)(1,381)(587)(2,139)
Less: Pre-tax CEO Transition Costs0 (141)0 (282)
Less: Pre-tax Acquisition-related Amortization(1,610)(395)(3,220)(395)
Less: Pre-tax Costs of Acquisition0 (3,388)0 (3,388)
Less: Pre-tax COVID Vaccine incentive(1,140)0 (1,140)0 
Adjusted Selling and Administrative Expense$48,491 $40,662 $97,133 $81,450 
Adjusted Selling and Administrative Expense %32.0 %29.9 %31.5 %28.7 %


Adjusted Operating Income (Loss)
Three Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Operating Income (Loss), as reported$(18,095)$(2,034)$(25,222)$4,395 
Add: Pre-tax Restructuring Expense1,010 1,616 2,465 5,856 
Add: Pre-tax Goodwill Impairment34,118 0 34,118 0 
Add: Pre-tax Expense Adjustment to SERP Liability680 1,381 587 2,139 
Add: Pre-tax CEO Transition Costs0 141 0 282 
Add: Pre-tax Acquisition-related Amortization1,610 395 3,220 395 
Add: Pre-tax Acquisition-related Inventory Valuation Adjustment62 42 205 42 
Add: Pre-tax Costs of Acquisition0 3,388 0 3,388 
Add: Pre-tax Contingent Earn-Out (Gain) Loss(22,510)0 (17,900)0 
Add: Pre-tax COVID vaccine incentive2,709 0 2,709 0 
Adjusted Operating Income (Loss)$(416)$4,929 $182 $16,497 
Adjusted Operating Income (Loss) %(0.3 %)3.6 %0.1 %5.8 %
Adjusted Net Income (Loss)
Three Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Net Income (Loss), as reported$(21,314)$(838)$(26,363)$4,548 
Pre-tax Restructuring Expense1,010 1,616 2,465 5,856 
Tax on Restructuring Expense(259)(416)(634)(1,508)
Add: After-tax Restructuring Expense751 1,200 1,831 4,348 
Pre-tax Goodwill Impairment34,118 0 34,118 0 
Tax on Goodwill Impairment0 0 0 0 
Add: After-tax Goodwill Impairment34,118 0 34,118 0 
Pre-tax CEO Transition Costs0 141 0 282 
Tax on CEO Transition Costs0 (36)0 (72)
Add: After-tax CEO Transition Costs0 105 0 210 
Pre-tax Acquisition-related Amortization1,610 395 3,220 395 
Tax on Acquisition-related Amortization(414)(102)(829)(102)
Add: After-tax Acquisition-related Amortization1,196 293 2,391 293 
Pre-tax Acquisition-related Inventory Valuation Adjustment62 42 205 42 
Tax on Acquisition-related Inventory Valuation Adjustment(16)(11)(53)(11)
Add: After-tax Acquisition-related Inventory Adjustment46 31 152 31 
Pre-tax Costs of Acquisition0 3,388 0 3,388 
Tax on Costs of Acquisition0 (872)0 (872)
Add: After-tax Costs of Acquisition0 2,516 0 2,516 
Pre-tax Contingent Earn-Out (Gain) Loss(22,510)0 (17,900)0 
Tax on Contingent Earn-Out (Gain) Loss0 0 0 0 
Add: After-tax Contingent Earn-Out (Gain) Loss(22,510)0 (17,900)0 
Pre-tax COVID Vaccine Incentive2,709 0 2,709 0 
Tax on COVID Vaccine Incentive(697)0 (697)0 
Add: After-tax COVID Vaccine Incentive2,012 0 2,012 0 
Adjusted Net Income (Loss)$(5,701)$3,307 $(3,759)$11,946 


Adjusted Diluted Earnings (Loss) Per Share
Three Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Diluted Earnings (Loss) Per Share, as reported$(0.58)$(0.02)$(0.72)$0.12 
Add: After-tax Restructuring Expense0.02 0.03 0.05 0.12 
Add: After-tax Goodwill Impairment0.93 0.00 0.93 0.00 
Add: After-tax Acquisition-related Amortization0.03 0.01 0.07 0.01 
Add: After-tax Acquisition-related Inventory Valuation Adjustment0.00 0.00 0.01 0.00 
Add: After-tax Costs of Acquisition0.00 0.07 0.00 0.07 
Add: After-tax Contingent Earn-Out (Gain) Loss(0.61)0.00 (0.49)0.00 
Add: After-tax COVID Vaccine Incentive0.05 0.00 0.05 0.00 
Adjusted Diluted Earnings (Loss) Per Share$(0.16)$0.09 $(0.10)$0.32 
    

Adjusted EBITDA
Three Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Net Income (Loss)$(21,314)$(838)$(26,363)$4,548 
Provision for Income Taxes3,696 213 1,184 2,073 
Income (Loss) Before Taxes on Income(17,618)(625)(25,179)6,621 
Interest Expense275 58 532 86 
Interest Income(43)(87)(52)(189)
Depreciation3,623 3,536 7,185 7,128 
Amortization2,415 1,049 4,854 1,702 
Pre-tax Restructuring Expense1,010 1,616 2,465 5,856 
Pre-tax Goodwill Impairment34,118 0 34,118 0 
Pre-tax CEO Transition Costs0 141 0 282 
Pre-tax Acquisition-related Inventory Valuation Adjustment62 42 205 42 
Pre-tax Costs of Acquisition0 3,388 0 3,388 
Pre-tax Contingent Earn-Out (Gain) Loss(22,510)0 (17,900)0 
Pre-tax COVID Vaccine Incentive2,709 0 2,709 0 
Adjusted EBITDA$4,041 $9,118 $8,937 $24,916 
Adjusted EBITDA %2.7 %6.7 %2.9 %8.8 %

Supplementary Information
Components of Other Income, netThree Months EndedSix Months Ended
(Unaudited)December 31,December 31,
(Amounts in Thousands)2021202020212020
Interest Income$43 $87 $52 $189 
Interest Expense(275)(58)(532)(86)
Gain on Supplemental Employee Retirement Plan Investments680 1,381 587 2,139 
Other Non-Operating Income (Expense)29 (1)(64)(16)
Other Income, net$477 $1,409 $43 $2,226