Southern Indiana Business Report
JASPER — Jasper-based Kimball International Inc. (NASDAQ: KBAL) announced results Feb. 3 for the second quarter ended Dec. 31. Highlights include 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 earnings per share (EPS) of $(0.58), adjusted diluted EPS of $(0.16), adjusted EBITDA of $4 million, and 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.”
Juster noted ancillary products, which she called “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 the firm’s 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,” Juster said. “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.”
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 S&A of $48.5 million, or 32% of net sales, declined $100,000 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 revised assumptions about the near-term operating performance, however, Kimball expressed continued belief in the value of both Poppin’s core business model as well as the 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 million compared to $9.1 million in the year ago quarter.
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,” Juster commented. “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.”
Dividend announced
On Feb. 7, Kimball International Inc. announced that its board of directors declared a quarterly cash dividend of nine cents per share for all outstanding shares of common stock payable April 15 to shareholders of record on March 25.