JASPER — On May 3, Kimball International Inc. announced results for the third quarter ended March 31.
Selected financial highlights for the period:
- Net sales of $180.9 million, up 30% year-over-year
- Gross margin expanded 180 basis points to 30.5%
- Net income of $6.3 million; Adjusted net income of $7.6 million
- Diluted EPS of $0.17; Adjusted diluted EPS was $0.21
- Adjusted EBITDA of $11.5 million
- Backlog of $178.5 million
Management commentary
CEO Kristie Juster commented, “We were very pleased to report strong third quarter results, which reflected robust demand across our product portfolio and our increasing ability to effectively navigate industry-wide headwinds. Sales in our workplace and health end markets increased 41%, and accounted for 81% of third quarter sales, driving significantly improved profitability.”
She said Kimball International continues to compete successfully in the evolving domestic commercial furniture marketplace, and one of the reasons she credits is how the company’s ancillary product lines and key secondary geographies are well aligned with the new-forming workplace.
“Ancillary products, which accounted for 86% of our trailing 12 months sales, are perfectly suited for employers prioritizing collaboration and engagement in both hybrid and in-person settings,” she said.
Shipments to smaller metropolitan areas, which have benefited from significant population growth in recent years, represented 77% of the firm’s trailing 12 months sales.
“These differentiators continue to result in substantial sales growth in our workplace and health markets, supporting our confidence that Kimball International is gaining share, and our Poppin acquisition significantly increased the size of our addressable market. In addition to our strong product line-up, we believe that our performance reflects customer recognition of our operational excellence, demonstrated by reduced delivery times, quality assurance and customization capabilities,” Juster related. “While inflationary pressures and supply chain disruptions continued to increase production costs, higher volumes and early pricing benefits together with our ongoing cost-out initiatives enabled us to post another quarter of industry-leading gross margin.”
Third quarter fiscal 2022 results
Consolidated net sales increased 30% to $180.9 million from the year ago quarter, driven by continued strength in the workplace and health end markets and 94% growth at Poppin. Gross margin increased 180 basis points year-over-year to 30.5%, reflecting price increases and ongoing cost savings programs offsetting continued pressure by raw material inflation, higher freight and labor costs. Selling and administrative expenses (S&A) of $48.8 million declined year-over-year as a percentage of total revenue by 550 basis points to 26.9% in the third quarter of 2022. Adjusted S&A was $48.1 million, or 26.6% of net sales, compared to $42.6 million, or 30.8% of net sales, in last year’s third quarter. Net income was $6.3 million, or $0.17 per diluted share, reflecting a significant increase from net loss of $4.5 million or $(0.12) per diluted share in the year ago quarter. Adjusted net income was $7.6 million, or $0.21 per diluted share, up from net loss of $1.0 million, or $(0.03) per diluted share in the third quarter of fiscal 2021. Adjusted EBITDA was $11.5 million compared to $1.9 million in the year ago quarter.
Summary and outlook
“Third quarter results and order rates firmly position us to achieve our revenue guidance for 2022 with a significant improvement in profitability,” Juster said. “We expect positive demand trends to continue into fiscal 2023, given the relevance of our product designs to collaboration and culture-building. With a portfolio tailored to the growing workplace and health end markets, our increased traction in eCommerce and our presence in expanding geographies, Kimball International is positioned for continued long-term growth.”
She said the firm’s leaders believe they’ve reached an “inflection point” at the end of the third quarter and expect fourth quarter benefits from higher volumes and pricing to outpace inflationary pressures, resulting in considerable sequential expansion in gross margin. She noted S&A spending will continue to reflect investments in future growth but is expected to decline further as a percentage of sales in fiscal 2023.
About Kimball International
Kimball International is a leading omnichannel commercial furnishings company with deep expertise in the workplace, health and hospitality markets. The Kimball family of brands includes Kimball, National, Etc., Interwoven, Kimball Hospitality, D’style and Poppin.
Kimball International is based in Jasper and trades under the NASDAQ symbol KBAL.