KBAL - Earnings call transcript Q4 2022 | Kimball International, Inc.

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Operator

Good afternoon, ladies and gentlemen. My name is Abby, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball International Fourth Quarter and Full Year Fiscal 2022 Earnings Conference Call.

As with prior conference calls, today's call, August 4, 2022, will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the forward-looking statements. influence the of Kimball may be statements that in seen International factors the forward-looking outcome can Risk Form XX-K.

to the would deck and Executive Chief available Juster, Chief call, to an T.J. website. On section Wolfe, today's presenters Officer now over are making International's Officer. turn be Kristie Financial During Kristie call references of earnings today's Kimball slide and the of presentation Vice Ms. on is Executive like President today's that call I Investor Relations will to Juster. Kimball International;

may you begin. Juster,

Kristie Juster

Good afternoon, everyone, and thank you for joining today's call.

report International's year our fiscal outlook to pleased are year and continued fiscal for finish XXXX. XXXX, We in our QX Kimball strong in to growth accomplishments

improvement in Our profitability. revenue quarter fourth reflected substantial both results strong a growth and

and in several priorities. products exhibit of for accommodating of demonstrate with to clearly last the year secondary that our the International. workplace and that flexible work accelerated growth Sales and represented open, evolving continued ancillary we've strategic perfectly ancillary fit align XX% focused combination the for products quarters, sales in and set demand full of today's trends environment. The expertise market business products Kimball provides choices markets our our of Over

rapid high-end health our in of environment hotel aligned for needs, a back In well Miami, Nashville, product more to Atlanta, attracting growth return addition, beautiful which with feel offices, customer residential a population fiscal custom Austin to or Kimball are our portfolio care incredibly is a International's over pace providing XX% to properties. whether offering secondary design of in workers a shipments and and were office. XXXX markets like experiencing substantial

geographies. targeting the markets end right have fastest-growing the We products and

XX% closer both fourth up Workplace this continues during look office new adoption key secondary adoption We into XX% continued in with commercial Miami, Dallas International our sales months. markets, Austin, existing double-digit and growth in At see to with summer The led markets. by especially build markets, XX% the Workplace the for across return time, moderated and with has education. business across all to leading and more Kimball leading reflecting growth year-over-year, orders momentum to were all adjusted that EBITDA. positive our at performance, Taking up a XXXX. for gains. year-on-year pace verticals, end dynamic and in a our same increased we growth strength key strong of and cost sales to were the marketplace. profitability to This focused of in period the markets share a navigation results fourth XX% quarter increased increase of our ongoing also substantial of mitigated gain strong our and today's Workplace company's inflationary demonstrate year-over-year contributor sales initiatives, into year-over-year our indication We partially which significant Sales accounting translated total quarter, quarter XXXX. recover which of and Hospitality, the was exception XX% a increasing chain consecutive in to Health end for of the in fiscal quarter, larger the Our approach. with Pricing achieved and metropolitan fourth indicators, Poppin the sequentially. in our this expect supply achieved disruptions trend second savings, the pressures, of with XX% higher showrooms effective network all way. a consistently market-wide of and this Atlanta reflecting Poppin,

Workplace and approach new model proving last designers volume of privacy flexible selling were a need harmonized productivity industry five June conversations. multi-branded both levels product enhancements implementation gathering that showroom of adopted a back in quarter our Jovalie exhibited such and accommodate new the by and organization for more The and increased energizing for In that and XX% resonated of to our our selling and market individual this PoppinPods. productive welcome of an gain. Kimball and a Lounge, nine share multi-branded in our was our NeoCon move. a our for pre-pandemic Seating, as XXXX. into floor in screens was overarching than brand Paradolia teams. new to dealers, and Karid QX, dealers plans International were all new key our group be and attendance for XX% our these Executive fiscal introductions driver Health Open trend Privacy certainly sales since with Additionally, all in Overall, highly NeoCon including the is brands, at XX% and accounted Workplace innovative Collaboration through well of as products new enhancements as

growth As we have made brand was significant sales shared, Poppin Poppin's business Kimball this business value-added International. to the Poppin's important direct ramp reflected quarter. the role contributor core in of model, drivers. fourth and Alongside new plays the digital business a our at strong progress

activated. Atlanta, fully with are all markets, and digital gained real quickly Poppin's in model us development firms Austin supplementing Secondary connecting traction with by leads the early opened in commercial markets Miami showrooms In are estate business actionable three newly and process.

addressing category Our X,XXX turnaround turnkey Poppin's furnishings accounted office and to offices revenue flexible dealer to affordable, demand year-over-year, in our a us days XX of to delivered and for PoppinPro XX% portfolio refreshing product From our business workspace needs customers. second for workstations in of the of and XX-seat employees' ready-to-ship satellite new quick in-stock, XXXX. the Poppin environment. sales channel to fiscal its quickly existing tripled respond office allows new to in directly model half ever-evolving the work the homes, hybrid of accommodate is Poppin pod

are continue We in it as engine full in an long-term to important and growth to further contribution provides excited overall Poppin's growth unleash our company. invest will its

industry of market. to the caused year-over-year Sales variant. Health by the despite Moving XX% prevalence challenges our were in fourth COVID quarter up

in and the secondary health to to experiencing and larger short-term in and market on emerging caregiver behavior in levels it markets. telehealth, labor is and in areas due lag especially impact well-being. But Health care potential to of faster markets. clearly shortages, metropolitan The direct outpatient continue spikes believe as COVID health We such the of facilities, remain growth, significant is focused pre-pandemic growing

One of the market key of Veterans service leveraging have in the health we end sales XX% grown our almost is Administration, and focus of expertise fiscal areas government our federal XXXX. to year

long-term. Interwoven our of partner enables us translate Additionally, times in XX swiftly is industry, while we Health shown our offering Care and the day-to-day to and international and and supply it ship and Interwoven navigate to and chain to over Quickship progress. efficiently pressures become well large But are continue Hospitality Hospitality business business expansion. have will anticipate leisure issues. product travels large travel available clients and a line days below market, In scale convention allows our health in by level, wage to the to headwinds for contributions caused labor five in to the care pre-pandemic The still meaningful trusted steady product transition sales into shortages, group clients

our expect is second XXXX. providers of the lounge In driving turnaround and we efficiency in seating clearly strength our pleased the of one focus product of which in supporting hospitality a the half the to mix marketplaces. with fourth exceptional emerging performance, custom the product industry, sum casegoods, As and portfolio we products to ancillary its were in continued of To demonstrated market service. growing today's and begin business, largest and will quarter fiscal up, our our our engaging the for with benefit relevance to meantime, key and we which partners, trends very from

and are profitability optimistic progress ahead, will challenges we there of that still fiscal as While gains are we choices strategic focused significant set to through revenue XXXX. our lead

I'll discussion the turn XXXX. of our year quarter, T.J.? our for over a Now T.J. of financials fourth and outlook for our a to call full Wolfe, CFO, review fiscal

T.J. Wolfe

Thanks, fiscal performance good our details excited afternoon, share to XXXX. guidance Kristie, everyone. and and financial more for our about strong I'm

to revenue the over led well by net million, During past increased Workplace Workplace sales pandemic the the Leading growth months XX%, system. $XX.X care year-over-year to growth. work sales was Workplace, Poppin across double-digit the continue volumes. XX Health sales through Sales achieving unit which the health XX% in pricing driven to end XX% our customers verticals both million strong all demand line. increased in actions within as and the increased Health with by markets, contributing as quarter, higher top $XXX.X challenges the XX%, increased as

end year-over-year inflationary pricing as actions utilization soft, revenue remains in pressures compared market year decreasing ago with volume. profit expected, supply from chain from XXX costs to higher As the well the improved basis benefited margin Gross XX.X%, sales representing offset Hospitality rebounded our improvement. Gross to to as XX% demand quarter. and a point

a volumes lower-than-anticipated benefited quarter's a from This to Hospitality profit favorable also in expense. LIFO and lower mix gross due

level XXX normalized points we expect year. XX% $XX.X to administrative to Selling million previous LIFO as this in were expense basis more the fiscal quarters and net of Going observed a sales, down expenses return or year-over-year. forward,

from $X.X Excluding SERP year ago. amortization Poppin of million the acquisition XX.X% S&A compared adjustments, or $XX.X was XX.X% to as a sales million million adjusted well net totaling or $XX.X as

these future fourth full we million, funds Throughout our year to year, support growth. Our transformational our to $XX.X cost reinvested the to the in bringing projections. $X.X savings quarter amounted savings ahead million, our of

introductions product Jasper For in substantially warehouse example, at showcased we our regional as opened a and NeoCon. development, as completed hub We the three of Miami showrooms we construction in in Austin new in nine Atlanta. Atlanta, as such invested Poppin collaboration well new new and

This We quarter. GAAP income XXXX diluted net the $X.X million year charges. per customer million capabilities, and GAAP service $X.X in inclusive force. also share, $X.XX our of further or Fourth out spend $X.XX diluted to expanded sales or increased our was per in $X.X quarter ago income promotional compares and share share built our marketing restructuring of $X.XX net or per million

in charges, Adjusted invest improvement growth. Adjusted $X.X ago was EBITDA per sales and in from $X $X.XX volume million adjusted share margin or diluted leverage restructuring million to the fiscal fiscal up an higher in XXXX Adjusted loss long-term the improved of or quarter of $X.X bolster EBITDA strategic initiatives million the $X.XX $XX.X to Excluding per in to EBITDA quarter. from was share, significant fourth was the as margin year net diluted fourth from on compared operating X% X.X%, benefit we even XXXX. continued million adjusted net a income quarter.

XX% year. anticipate to business in in double-digit our improvement declined led travel particular Kristie Health rates order Workplace, large short delayed an activity, return our X% we trends. pause the activity in a current term in orders which market the in as be start fiscal new X% demand, to pre-pandemic levels. and remained improving to already commercial, Hospitality declined reflect in Orders as with another growth metropolitan markets. verticals. reflecting year-over-year, end order education strength the But below order of to finance alluded the by We do office and in quarter Moving to, experienced

Our fourth $XXX.X total backlog $XXX.X was compared quarter in million to end fiscal XXXX. million at of the quarter

drive X.Xx fiscal $XX sheet we covenant CapEx balance The of well expenditures unused $XX.X of ratio of cash liquidity cash expectations. year programs to was available total $XX.X shareowners credit million, flow in in ended operating million, and proceeds sales majority new In fiscal our and repurchases. invested below operational million capital portion $X.X fiscal side, warehouse of showrooms, capital cash share new million from new in our XXXX, the net of ago. the $XX.X particularly Full cash debt-to-EBITDA warehouse the due and At aforementioned expanded. to our of million and to and XXXX equipment $XX year of with sale our in from form the working fiscal facility. used In operations our technology. flow returned of line On million the automation to manufacturing as we Jasper, net of our $XX a This with activities dividends capital in our year-end, compares the provided by of XXXX, levels. needs, year was representing inventory, million excellence were from we

Now looking at our XXXX guidance.

realization $XX actions the million million, full midpoint. at to representing And to expect adjusted cadence current We the EBITDA With operational the forecast expect range of in reduction growth range $XXX somewhat $XXX This million account during the from we to approximately at second our guidance midpoint. taken year, the respect growth with EBITDA $XX fourth improved half the half and XXXX, and from we adjusted fiscal XX% million, into quarter strongest. representing July, the through to revenue by to backlog the XX% trends price being already towards driven the weighted be year performance. a year-over-year order of year from of approximately to revenue second takes additional XXXX XXXX

Additionally, with we than anticipate LIFO higher to costs EBITDA similar slightly the fiscal due XXXX, the fourth and labor first logistics fourth quarter in adjusted revenue that to quarter lower of quarter higher will be expense. and fiscal

of expect to approximately range in million are effective We be capital planning to year and $XX rate expenditures for XX%. our of tax the full XX%

business activity we uncertainty. favor, strong our are in current our trends While macroeconomic remains and recognize secular the

year XXXX, XXXX, continue environment. have ever-changing year And fiscal our operations During to ability and our consistent the will market external conditions we we to adapt demonstrated in fiscal deliver with both in call results improvements remain I execution back remarks. for performance her and the on operational in the Kristie will as focused to and success financial closing we now marketplace. turn

Kristie Juster

T.J. you, Thank

effectively leverage of change XXXX. have very reported This step a fiscal through to industry-wide the substantial and ability headwinds. operating profitability to We are our our second pleased in demonstrated manage half in achieve

positive our the in continuing to momentum fiscal forward looking into are XXXX. business We

reflects, year guidance our expect of we another robust growth. As

the Most portfolio and our gain to of end XX% account ability and the products is Health our see Kimball Workplace to people we confidence our biggest of the the International. our the confidence boost markets leverage scale are with markets Our for product our profit. fast-growing supported emphasis importantly, of ancillary secondary horizon that by the on on almost many opportunities share to and relevance to revenues, and

delivering We more every we at high-quality day bring to responsibility; company. stakeholders the strong would open for learn our our our call our I and we and the dialing the environmental website thank We International to socially the to in sustainable today's of questions. about be and have to call. you like center to responsible a diversity, customer inclusion everything belonging; well-designed, of corporate equity, citizenship. dedicated all commitments made We and do. want visit And to are encourage to Kimball strives to Operator? to to now recognitions for products

Operator

Burns question the first line comes Your of from Sidoti. Instructions] [Operator Greg from

Your line is open.

Greg Burns

afternoon. Good

seen in In or terms Workplace deteriorating the of you given any have slowdown the order more segment, trends on the the recently environment? – macro change

T.J. Wolfe

July, have, we Greg, Hey see data we we current look finished we from July. through if QX the change noticeable didn't through where through any

that return secondary over – reflected I where large that metropolitan in the would trend. did, Kristie did see current we lining was stayed comments where markets, and just we see rates. I in some, But I the think to order would really I as and her and in up I We is flat of we kind that saw change the the quarter large say markets. mentioned point continued did our office just I flat a would levels. kind the lined say, the it the think is were in metropolitan highlight, see one That it at of markets

Greg Burns

not end slowdown versus size, just SMB larger by of business? you customer Are Any shorter kind more Okay. there any seeing maybe between contract of geographies side cycle difference the like market? the but the the of

T.J. Wolfe

Yes.

as still is, projects flight about large a large in know, those horizon, have that continuing. many seen we when what have think of you think are I you

I to think of those look is, capital, tech look people at you at smaller have of particular sector as of or we as if and look certain such have – investments those somewhat what conserve office and slowed outfittings a cash. areas venture of some kind projects their noticed

slowdown a in some the place the noticed where we – So months. that's have recent

Greg Burns

The this very gross margins quarter strong. Okay. were

that LIFO. of gross was into your LIFO are the How much guidance? the should kind benefiting this You think quarter? mentioned about adjustment more lower we baked how favorable of how much And – margins

T.J. Wolfe

Sure, Yes. Greg.

a at this So just passed I look quarter moment. for think let's

we a the first say had was level, inflation. price offset at this achieved quarter largely high we I where that would quarter think

you those think two relatively in things up quarter. the if matched about So

the And so what priority to I'll led order in for expansion of you. – put these

mix. delivered Our would in that a operational gain. be of excellence would was, the contribution. degree, programs and line operating a two bulk say, next leverage, those And that To similar I lesser

this mix and so Health. and And between be business would unit Hospitality Workplace the

there to XX down contributed of LIFO a Hospitality was LIFO. quarter-over-quarter expansion. coming on year-over-year points And basis, basis then And percent a So would in mix. margin as gross be fourth

And is to revert fiscal least one quarter of would and back so be at see levels we more the in revert coming year – historical we would that that to a headwind expect back QX XXXX. in

Greg Burns

Thanks. great. Okay,

queue. if I’ll back But the else, keep there in Okay, I’ll hop going. no is one on

T.J. Wolfe

I a few the is think people there queue, extra on Greg.

Greg Burns

Great, thanks.

T.J. Wolfe

Thanks Greg.

Operator

Benchmark comes Company. Your from next question The from Reuben of line Gardner the

is line Your open.

Reuben Gardner

Maybe Thank – everybody. see. let's you. evening, Good

coming there. this I for guidance the appreciate of are through assumptions year. wanted I walk your to what fiscal So kind

expectations the get your kind midpoint if market pricing how start to guess, If could have of break end And with out you I revenue outlook. much volume, of could you that of top at of you then is versus line, kind the of what level growth? that

T.J. Wolfe

Sure, Reuben.

at And what to year So and be going in to that when that is our at expect think if I percentage part think I business. the Poppin, end somewhat we fastest-growing the this be of said a first, markets terms, would look you delayed look we would is we similar occur year recovery. to Hospitality, next

of And year, to really and Health so similar that be seeing the of at kind would Workplace fiscal we levels. expect the at begin growth end and that

look composition that our And pricing the the towards skews and would actions a and growth we've of that growth, mixed pricing announced unit already year. would kind And marketplace. say of of at that the slightly between in but as those price when actions, so a for plan you it's we be coming result taken

we'd doesn't that actions, take given environment. needed inflationary as although new any the contemplate and So them it monitor

Reuben Gardner

mean, that kind share I gains price, are? to where – So that get you office I industry, those a do Or some but mid-single-digit mean, if need oversimplify to kind to you and workplace than or the you of it, industry to some gets sense? do better of would to to just makes is with this not low forecast,

T.J. Wolfe

digit, to talking So low you in growth, say Workplace? when are Reuben, mid-single you about unit

Reuben Gardner

Yes. Yes, units.

T.J. Wolfe

Yes.

think is in price, we're think our the of a that, do return see to you're see I is you're level seeing if in to implied with we of office return point we the if answer need and to is combined getting at change – to what's trends the no. of need the a step volume I continuation or would plan. be growth, kind that learning, What

So significant hasn't return that happened yet. or change it office step not does movement in to some contemplate

Kristie Juster

would of I one of our we that of volume in secondary unique predicting really is intersection and go add ancillary and XX% as being XXXX. we're in products. Reuben, And in is seen us. of that products ancillary that's our also consistent the XX% over certainly, about for that what things are business secondary it is – we've markets And markets, very we

Reuben Gardner

do And outlook? meet need front, overseas, you even freight? line Perfect. margin your embedded on have don't in shipping of see the then what's terms you ton but guidance of What of a material coming costs ocean know to the questioning. in kind similar and maybe from to I and

T.J. Wolfe

Sure, Reuben.

while inflationary is think is there key I we we in assume So environment. the say that pullback one significant that would of don't the assumptions that any

all assume don't those everything we off. normalizes that So come and costs

and able maintain we'll see these extent, to we the that, assume so we'll catch-up what able excellence, the that some that course improvements we'll maintain think that be we I over and did that mix with QX, in leverage, to and of operational to in year. of price/cost is kind be

pace in it to that So with inflation us, actions. but pricing inflation. with assume pullback our no stays we're through keep just able significant We

Reuben Gardner

think bear I And here. – me Okay. with the

if EBITDA points I of in range, punched think Excel kind midpoint to the that I that in margin right. the X%

to is of now revenue a assumption. your good levels, back pre-COVID So kind

a bit pre-XXXX? you kind think think few longer of I in next about over you need do the double guess, what's have, were Just maybe peak the the kind horizon kind get were of or than in What what margins. do the – you low at of thinking little do to returning What your bigger margins just what's I see term, EBITDA time guess, years you I delta? to to there? aspirations digits

T.J. Wolfe

Yes. Sure, Reuben.

we implies with think to start double I of math EBITDA your in back question if the the prior first So say we To range – pandemic. from get the low directionally and were XX%. in something Pre-COVID, is this digits, the correct. so X%

again, the are, get that to think happen gross I expansion. margin things two to need there, further

get our year So where year back we this the two leverage the the line And prior full to to is needs margin expand, points. gross say, back to then it let's also was pandemic. where to SG&A top need to

addition with said it settle we higher slightly going of Poppin, the it to was. Now was than

continued of investing And that we're there phase I for showrooms growth is just we're so right where the the innovation. business the accelerated to the of get in and down. looking are which now, Poppin think But its growth, the still what leverage at we're

grow. time, just are the So I business leverage think then margin in we those that two over gross will see expansion line as but and come to want the us of gaining things: you'd the further

Reuben Gardner

Okay. in I'm one going on to sneak Poppin. more

something you get I do about in to two-part is more it? those soft leverage benefits Is a then that see over there investment the we How the growth through continue other from a and investments are question. the year it these here or you'll And eventually to patch next ongoing? the and investments? So invest guess, side secondarily, downturn if think

Kristie Juster

with Yes. ahead, we three Reuben, opportunities the pleased we of you one let for and second. about then, with that have T.J., Poppin. first Poppin focus been areas we think take me incremental We've are the have I'll the When take investing. the kind really

– business have PoppinPro And is market exciting new showroom XX% So of gen our which category an is opened the the to we is of today. then but pods, that for of showrooms for have PoppinPro, also we've number We're Direct, the brand-new channel. activity, which we've category dealer those ramping, for told Poppin one the how you with the Poppin how visits. Then in are showrooms lead secondary our we responding very is markets. the pleased

us a lot those within portfolio. diversification of all more Poppin things the give So

core have we with initiatives. those relying growth only on direct but on and beyond. starting of opportunity market, So more new not now to we're the for work see we're the these do showroom we that And XXXX frankly,

T.J. Wolfe

the think, of kind of Reuben, as I leverage And investments, and as those. far the

made-to-order Just when business product, a we gross model. our business, at which – a that reminder, that domestic that grows, margin are really that's gain traditional source Poppin, is leverage the line.

so the And level we leverage the we leverage showroom begin like digital really these that, our gain investments like S&A our to and at when lead gen.

So I think really to that's that where you'll perform. see begin

Kristie Juster

just And one more comment.

like portfolio Some actually Pro to Pod that of investments or those category the for Kimball Poppin in dealer Kimball initiatives Those the International just actually across investments brand traditional network. the those Poppin that business. International aren't expand into and go opportunity

sweet acquisition see to of that's of the what with business. starting So the we're that spot

Reuben Gardner

progress you, on and luck. good Thank Great. guys. the Congrats

T.J. Wolfe

Thanks, Reuben.

Kristie Juster

Thanks, Reuben.

Operator

Your the comes Instructions] line question Bugatch [Operator from next of from Tower Research. Budd Water

is line open. Your

Budd Bugatch

okay? me your you hear Kristie afternoon, on Congratulations T.J. Can Good progress. and

T.J. Wolfe

We can, Thank you. Budd.

Kristie Juster

Budd. you, Thank

Budd Bugatch

PoppinPods. a on that how that the Yes. questions A getting for new distributed. that customer Talk of on overall on of bit is in – terms about the what that's you're seeing and on the little couple environment Poppin, customers and who

Kristie Juster

starting private short-term spaces. and in some There's leases open in we're and did fits kind with we really the creating had with started just really pod they Sure. had Poppin setting well category see launched just category that, very up of kind the no the the category that of pod Actually, ready-to-ship, pandemic, environments traction. January they were speed good in Well, before doubt in-stock, into when one, to acquisition. –

But done So it's well Poppin very very direct Pro. Poppin been certainly, that's important the channel. in part a of

of traditional on And business. floor to dealer putting be quickly. that very we've taking in lot category. our we acquisition of the in see There's community and category, category. do that that so lead we're a line going great more It's that Kimball kind projects that us layouts of and in the very more pleased and product open side that in to allowed that innovation that's International is the longer time seen And a plans on

Budd Bugatch

to? below And you you How pricing competition, that in of that do market? are find – that significantly how versus seating equivalent your or does

T.J. Wolfe

Yes.

when different the think at quite products is there I is as say, the enhancements. offer range what for Budd, what look a you far – as we pod can would category,

And So I do, We're we fit amenities be. want we think that we're the market. competitively think are think what we offered where priced to trying price for in the the we to point. in

wide pods of nicely again, of of the portfolio, basic level. within pricing how entry you I think Poppin. a positioned total there's the range the very from So fits Poppin kind kind it to more at level when within But are and higher look rest the with of architecture

Budd Bugatch

Is And right? Okay. Did about said you you improve by that to I correctly, XX%. you're get points. XXXX, heard I that if looking right? T.J., margins That XXX XX%, get that basis fiscal gross in would make it to close

T.J. Wolfe

We to would we about asked that when he an thinking what – was I longer back the to term, question, get say any to need XX% aspire to, margin. do guidance didn't give No. Reuben EBITDA what

far guided the question as were time, for I've kind margin business. gross was, as Reuben we over what was what historically XX% So answer of to his

about of from And our in the in in guidance, so back EBITDA X% and to hundred to need XX% line similar get expense implied a SG&A you gross what's at basis margin the leverage. couple improvement points

specific We we we as necessarily indicated XXXX full with But where give quarters. think what expect any this for margin think year. over point the be the I four year fiscal to would is out, guidance. the gross I we want it didn't finish won't LIFO, year, I expansion over certainly for linear

just manage we'll through still the market volatility thinking year, full that. how the about in for improvement certainly, So and the

Kristie Juster

just work. would with I that Budd, margin, And around pleased gross the that and is we're – continue will team's we add that very work

sure are we're making One we quickly, delivering kind expectations. that that moving the backlog is against and our our our customers' of reliability through areas accelerating of

And pleased with so been that we've we've the gross progress margin. made on

You'll to And in back lead think servicing, focus times that's starting really I to on us. our backlog, see moving line. exciting us really getting for

on the to we the secondary the in, products that markets a you focused will very I think we about delivering be in and piece that that believe talk we're with and future.

Budd Bugatch

Now are What cost cost they price however price/costs were would the the was want balance you in dollars to it? characterize fourth for year? or minus you quarter. basis either or – gap it in for in the Where year? points What price

T.J. Wolfe

Yes, in know of I interestingly, kind some talks terms. our industry Budd. of And those

haven't price talked price/cost We cap gap year. in throughout the about really dollar the – terms

roughly, historically, pre-pandemic. we again, I think what towards pointed margin XX% was gross is, people

XX% Over in the past range. three quarters, we saw the low the XXs,

you you would is, the LIFO. benefit operating two up, before led what those said, that excellence, and And elements I to first as I and which to degree, from the this some quarter, time matched mentioned mentioned, leverage so I tell we've as mix,

Budd Bugatch

has Well, energy been in accelerate unpleasant. have to Certainly, fourth costs the continued cost quarter.

I wrong would have to yet fiscal for reading I Am pricing think you XXXX. get So in that?

T.J. Wolfe

Budd. No,

about I you effect point. that's the fair this delayed is pricing as have think a I – we a backlog. say would of our the and think cadence how, is take what to know, What you of actions

to So of we in benefit previously year-over-year have from quarter actions still year fiscal this realize additional first taken. the pricing

year price of incremental the from the at look be first actions half in taken. comps, this realizing we already you when fiscal So will

more benefit. deliver will those yes, So

Budd Bugatch

think. So in to No? positive price I minus kind be costs unless would quarter, just [indiscernible], for weren't would of be they accelerate. surprised you, upon continue could first the costs if I based

T.J. Wolfe

Yes.

part last important to of thinking accelerate. think Budd, question think yes, just cost continue last of – I about will your the comment, the is I one, part your –

what progress in we we forward. margin it think to continue on had in environment hope inflationary holds and certainly, I gross gains to hold our So QX, the that but make going depends

Budd Bugatch

Okay.

more Just a for few me.

you them where could. were want that sheet, want balance a the was the of Inventories look Where at range. in – are turn, to up, that's they quality And They and problem Are they that the to they're I X, maybe like be? somewhere what's fact the do you not Xx been year. to just up be? the obviously Going earlier inventory? in inventories if notably

T.J. Wolfe

Yes. right, No, that's Budd.

deliberately our increase. materials. on business Number There's two two about but few one obviously I think raw for it safety specifically is a points stocks increasing there's So does, this. things things that as

to operational As performance our liability. Kristie want mentioned, and we improve

traditionally where out. then above Poppin, inventory So significant that's I a guess, of kind been to would, in build. are things balance safety stocks say, they be And

As we're Kristie new in category. mentioned, Pod the

making that were So just as in of we the year, building you out mentioned, inventory earlier so making category there. sure and that for stock up is sure, inventory

are we about stocks the those made-to-order like inventory say larger-than-normal that would on to So work we two we things element say build. I are of would we that are is One – finished goods. want carrying we

are our a in we are these that them to we're because up holding still waiting for shipment. – match warehouse are So complete for products made-to-order

ship that's And supply did so make the disruption, chain out in to really would that is balances of decrease like the the we'd we it one see because something we it area coming have significant But inventory over not traditionally any door. quarters. to because

Budd Bugatch

And or year somewhat I saying. full the bit target in confused either Where next will the everybody lots reasons. for extended end understand half that year? year at is is by – where a industry I'm of for of backlog the be inventories

inventory. – with So you're I'm alone that

T.J. Wolfe

yes, but I we from have target, we we today. don't are although specific sheet, from it's say want to where a improve we would think where terms So – the elements some working in would say the would would want capital We improve I want sit today not balance would they across I higher to and think inventory. stand just of I deliberate, we say, efficiency that to

Budd Bugatch

I million million, $XX [indiscernible] it $XX Okay. right Because calculate inventory about like would now. looks as

that high well. So as And level? are to you've at got Or... stay going payables they

T.J. Wolfe

No, of change any receivable, accounts payable, no yes. I when terms in on we look side accounts the there. our where think significant haven't – No, – at had either you area kind to look we

So I where you think one to the the most balance sheet would put place could be that cash release into the reinvest. inventory. and from look place the And that's we'd work

Budd Bugatch

mix? had And year, going to next kind negative we cash. free so have terms By of this what are we of in year,

T.J. Wolfe

Yes.

working – you free full look that far biggest invested was at and the majority for think cash the up, by consumption. was year, if capital. the the I So in That flow of

I this number was $XX was It of slightly look net versus we capital of up at think what when million. year, roughly that disposals year. next the million. $XX said expenditures That's you

plus year, CapEx but business cash So next the I see investment capital, improved then slightly would performance. in higher just from think working we relief

flow didn't we again, year. cash free provide certainly cash next So but free guidance, flow-positive

Budd Bugatch

guess. or will From will CFO, million, $XX I not exceed

T.J. Wolfe

of Yes. trying kind to No, I'm fair. guidance I given and – stick with we've the I know. know.

Budd Bugatch

to free It's cash next trying if positive see have I'm year. we okay.

T.J. Wolfe

Understood. Yes, yes.

Budd Bugatch

$X.X are on the liability. There's anything on taken, nothing company million Where only have left the left about That's right? or Okay. That's earn-outs? That's fair. enough. all You else? we fair

T.J. Wolfe

correct, Budd. That's

Budd Bugatch

Okay. – And right. all

fine. that's So

you taking my you. Okay. thank very the on Great. we forward Congratulations and to and progress, monitoring question. progress. the much Thank thank continuing look you Well, for

Kristie Juster

Budd. you, Thank

Operator

call I this you. There are back at Ms. to questions time. over the no Juster, Kristie turn further

Kristie Juster

Right. evening, progress to to you. everyone, joining in look we keeping and you this XXXX. in you forward fiscal and up so Well, Thank for date our our good evening, much thank call really

Operator

This concludes today's conference call.

may You now disconnect.

Kimball International (KBAL) 7 Aug 222022 Q4 Earnings call transcript