Knoll (KNL) 18 Feb 202019 Q4 Earnings call transcript

Good afternoon everyone and welcome to the Knoll Inc. Fourth Quarter Question-and-Answer Session. I am Charles Rayfield, Knoll's, SVP and CFO. And joining me on this call is Andrew Cogan, our Chairman and CEO. This call is being recorded. being also is call webcast. This

for company's respect of the call risks In beyond businesses, forward-looking, profitability and certain which statements and with and largely leverage. to the forward-looking economy, outlook are to are offer future uncertainties, not addition, growth to statements limitation, acquired expectations future are and this company's based including subject revenue statements are that long-term and may regarding integrate industry the These on goals, expectations ability number control. a of Knoll's

a call differ of and Actual from in Form with results may non-GAAP references materially The earlier letter and measures its identified factors, also and today. measures GAAP forward-looking these of Knoll's factors statements the earnings Exchange and as financial Reconciliations report on filings XX-K result the included today including to most to comparable released are annual described many financial other risks the Commission. include may the measures. in Securities

noted comments community we factors on than commentary so the reading better to that results. investment the our in can scripted shareholders in shareholders understand call, included expanded and have rather shaping earnings today's As earnings our release release,

open up now the We will for questions. call

[Operator Instructions]

question And from from comes our Sidoti first Burns Greg & Company.

now is open. line Your

was a maybe Good what And point helpful? At the second give particular you in half? bit the afternoon. to on saw about that would of and any be the you in slowdown maybe of medium, additional color decelerate? segment the market, us Thanks. you second can little in you larger the small Can orders, saw any half talk the activity slowdown you see there started complexion

is Andrew. This Greg. afternoon. Sure, Good

kind data, I to you order to began year, really the in to a June, would where of around the March over to I starting saw BIFMA really the roll say, slowdown, May XX-month numbers the think, I start the a around of you peak point timeframe. all middle would from the see we trailing

incoming orders in saw just rebound a in So, and in in no little in bit little November. August June, of decline growth you then you saw another a X%, then X%, about rebound BIFMA bit under declined -- September, October orders a declined saw July,

So, we slow from November the really started industry that is the down where I'd saw to timeframe. say, June,

think One is definitely saw saw I some couple we activity. things. decrease been had to that demand by a had in led it was something been extent, of a That that co-working driving slowdown. that we

and some slowdown Middle where a Eastern continue more those primarily business. are international the our see We we to And of categories, in saw decline. the

slowest out activity the of see JLL also this point in that of market over and period I absorption May also the in first years. year-over-year kind you in to a the correlated data. decline while quarter that X about of kind with, negative a of I'd November leasing And think, quarter can

we and I together demand think, think, tariffs, weren't sector of economic factors it came slowdowns I to service clearly, growth, employment immune that. kind overall simply depressed uncertainty, in all and So, was whether those industry

to number grown has over tracking, dollars prior and in year, of three seen have of actually opportunities months. we've of Year, New orders each which, couple since both the growth. a the nice have into we're in in December, and this, And side flip say, December the as December, up last Now, the into the that moved next we I pickup we've of was of business is seen, funnel months, double-digits

over December. So, over January was December up was up the and January, which February over funnel was up

pick rate, think recovery terms V orders in fourth a and have of kind the the saying quarter here, not months. couple we nice but to definitely of of I'm in the incoming last here I seem bottomed up we're So, a seeing there's in

that's Now, Michigan, heard I earnings move remarks, we little our fourth quarter. and backlog and quarter, think And talked really capacity reduce we from think as prepared out. then as first which to is will extended the ship in plant the of others, a release in the I in in have not going our the challenge you

really of don't quarter. So, we to that expect backlog the ship to to second some more

validated of this So, strong trends seen funnel. the orders outlook. we again, than or think I our by business fundamental kind is it issue the degradation we've it's, and is more a improving in timing think, And a the

That Thanks. great. helpful. Okay, very was

pieces And some terms margins. the Now thanks you of numbers for margin you seems gave all gross the the next rates of there around expansion -- in expected, growth explicit year and kind but for color terms margin the in of making, on to and investments be on have consolidation the a side, moving so lot positive you revenues. lot you're -- some the these issues of of of a timing maybe manufacturing

next year leverage the back and of just the us kind how half maybe could it's get of through margin cadence you or EBITDA loaded, to think So, throughout or should feels you walk building more we the for be operating Thanks. about year throughout year? expansion It any that. maybe like margin might going but

Yes Greg--

Charles, ahead, you go why don't Charles.

great. Yes, Thanks.

Greg. question, good So,

to there us some the probably OpEx more So, would I the a we the noted drive year. bit letter, release, factors think as in have in little in are earlier earnings that

OpEx might weighting we part as back earlier might year. more a through go little a spend bit a out bit have even perspective, more of the from year. the So, the little in you It

I that around had more So, be expect would weighted. expansion we goals the half probably would EBITDA that back

lot happen more will back will that of weighted for out, think the have of be a but activities the more will of And towards lot the expansion the do that I'd I the probably of be first And around of but and so the of a look restructured driver. Grand during move months growth we the Rapids six of half. costs most year, be to sort probably

Okay.

like the EBITDA like you-- you to know, want Maybe, like, do expansion? do put like, a a you on, on foresee, maybe XX points. to you do don't I range number, what margin XX basis So, -- do what

I'd a of couple Andrew. things. Greg, this say is Well,

all, of think, we I this driven points out plant the that. as about there's another primarily EBITDA year, talking margin get basis XX beyond XX XX probably to by to of last then, points of benefit expansion. margin year I XXXX, basis as I we're of margin think, over to improvement look full first And think, the we restructuring, improvement XX

to remains XX% get margin. So, EBITDA our goal to

think shy we're in still I themselves an a that investment out proven have much kind XXXX. One high And in better And of would of we've things. ramp-up mid very in leveraging is debts I point or XX%s just get then XXXX. XX%s in mode, of effective. we made couple

And I'll an as Muuto example. take

XX% grew top growth year on think, So, before. last Muuto year the of, is XX% Muuto I up.

have national showrooms. the to that up charged So, products from career decision marketplace. a ancillary, we're initiative. ever to my really made whole decision could week made go re-up win left -- as to area and in meeting Market and accelerating heated that the armed adjustable feeling to We I've have and highly to as to Muuto Fulton seen price listened. Chicago We up decided they're points into we ancillary broader We out around tables, in the at everything with really them Knoll, roll a last a more sales to intensity

not XXXX distracted and could but get expenses going seeing growth felt we And a XX for In good any of were hurt a these operating couple about the to because it's we encouraged slower saw that that, bit pull initiatives. market what -- we slowed some continue we're should year, data we of before, basis just doing down just into out, given of to incremental of the growth. and months lean little we're we by

XXXX. much it and here into as we for game we mid-XX%s better very convinced move playing So, we're the much or very can long get the through

significant got Holly we the of they're plant Holly that like investments get reconfiguration some long-term. initiative. a behind making then businesses, for beginning We've seen the haven't we're things And from in just Hunt to benefit right because yet. ramp And like, up. that, that's us, any and is lifestyle that the We'll

added the live dealer we've added that managers, in people brand we've So, development salespeople, dealer dealers.

share dealers. basis of we Last our points gained year, XXX within

or million $XX million. that's So, $XX

of we hope into those share people XXXX. the number and gains to almost make further doubled So

focused get range more this to So, mid-XX% to of in invest we've points little year, down next It to at like that's initiatives basis I this in in. margin got very XX bit gross margin of basis that on top helpful? you means the improvement probably Take a how be XXX XX, EBITDA Is least year. elevated this the XX think points tick XX year, year. year, will operating to XXXX and expenses next XX XX improvement,

had since for this of additional Thanks manufacturing in perfect. covering initiatives, continuous your the all and more improvement been I've you've maybe was consolidation, a No, Yes. And first the then that structural company, change. always the color. terms the is

So, do at manufacturing -- cost for the there is more footprint structural is beyond see changes this when for consolidation, structure? you opportunity other you initial to your look there room -- more

Well, of manufacturing talked of think, this as takes XX% I biggest about one I we out, here. the think square our this footage. is opportunities mean I

shipping So, efficiencies, fewer there's some things really from from particularly significant plants.

there we're move, I we logistics rationalization doing we're are mixing think whole be frankly, big approach, where next opportunities of and where there. our geographically, meaningful will think some the products that,

We center. there's consolidation our and opportunities costs. transportation mixing Muuto had of both think logistics its improving own ways and

off our gross we're was margin So, year. the focus. chunk But improvement improvement has kaizen next of lean, delivered margin. the backing of that's kind which at the of gross plants, XXXX. I'd Look not continuous we meaningful say big a work big in generated probably in the margin this That

the to the logistics and footprint thing next reset. we get probably continue, I'd transportation, activities those So, are big tackle once say,

in you. the I'll Thank hop Great. back queue.

Thompson [Operator our from Instructions] Research. you. comes question Ramsey from Thank And Steven next

now Your line open. is

Is QX new for I end guess has up out to guys. sales co-working just co-working in afternoon your specific sales that on the Good that, to market, jump call is of that like particular. quarter? the built meaningful on or kind segment industry now format. in percentage a the a of I

Steven, Well, I it's -- think Andrew.

glad there I'm you appreciate expedited get out to format. more a more First, to information trying basis. on the everybody We're

half half Co-working, in for of front tailwind So, was of this much XXXX say, hope a XXXX. and would meaningful helpful. I terms back is I the of the of growth

So, helping the definitely, growth. that was

of meaningful, a In overall business, points. percentage our less percent terms few particularly than not a of

headwind helpful a total I over five-quarter that or So, was from I the certainly like that. don't co-working, is of activity said, leased four only out there. basis. That But X% it expect big enduring think,

pales business seen strong year. last in So, to performance compared very strong where tech, was government we've it

hotel of We're education, We was and is pictures this presented which. care. And that well co-working lobbies, making which health cafes our offices centers hospitality and really, and student And even really in as as identify of people good [Indiscernible]. sales to all progress spaces. part team couldn't

Muuto our that So, overall why well really trend. on is to so strength. blending so and is doing playing It's

So, so the in see years I think think -- that opportunity co-working many and has aesthetic categories. us permeated plenty And of frankly, for I ahead. that, I

but a year-over-year challenging. comp, -- quarter headwind So next and a it a think the quarter in I will or that's it for more fourth the of in do so, headwind was be terms

any Hunt? do Great. Is the the side capacity now? I really to or and this Holly And side, on on-- or sales know, wait? switching that focus on the manufacturing Muuto guys more it to what from you you don't people going Why keep barriers resi after are marketing, color on opportunity need

No, no.

where very I Muuto the And terms terms relationships side. really the that's channels product was on We business invested Muuto. sales development. and and plan the we've frankly, it's in our a really with that's that we've been designers, based the double with of invested our That's XXX% corporate three-year resources. to we we've really leveraging out through where laid contract on and where And focus. of in think architects -- methodical

make as lot for XXX%. in been of an to example, Muuto. to mean dealers America, easier in orders our There's North with up Muuto our work I a it were January, business do

channel. on inventory. work had that the into on to we're to business. supply had focused chain. the really So, do to leaning make Muuto We've had work We've on easier to We've

electronic those our tools, One the and all all the in now tools configured things, now on XXX% now of you'll see you're tools. if Muuto is specification

with Knoll specification brought and other can now organization the tools you're plan Muuto planning the that same service you products. We've together. customer KnollStudio So,

working you're managing a now you're Knoll same if orders. your your So, dealer, person Muuto orders, the with manage is

get So, blocking tackling a of, there's work. been lot to like, and that to really

again, effectively XX% will dealers that, And of really of doing the business. one we I year the volume. the so Muuto surface. And there's Muuto which think think, we're of have scratching XX% leaning are our more doubled into just

We blow out more much that have bigger nationally. to a opportunity

leadership want we're I just some to get a get America, EBITDA just to a But then look good we based XX% from And talking e-commerce business. all out the to at Muuto and at of separate to achieving it's but -- distraction here in separate been for North Muuto it a will so just about with to has it business is would direct-to-consumer have on, it now Fully. that talked that about a things build operating work that the happen of it's starting we're margin. -- to in was we and XXXX, that, from infrastructure, kind and plus We'll learn Muuto, which it's

sense. Makes Right.

in you're looking much -- have? get it the metrics Where already progress go? the you are can you're it with are how What Fully Knoll products in all far Fully looking brands guess, that you you it, how Muuto -- I to Okay. your your too, merging asset and story? on we're And How and at? there. make since key with with

B Well, Yes. really Well, as a digitally to -- doing. thank wonderful got values, corp. things it's know leverage I mean to Fully it's we're native platform and start you is online great you.

Fully done improve with tops vendors work the has what help things first So, and them is structure, strategy which surface, their to that. been and like cost sharing we've

levels profitability, working we're at one. today, like clearly So, number their improving not Knoll on

different some average project reach Knoll. and The $X,XXX. products, Knoll mean Muuto take they to totally the at a Fully base Fully when do select, transaction $X,XXX. very trying select are we about because again, a and two, client number than targets Fully workplace is average Then under is we I

with of don't business. Our want to that dealers deal kind

very Muuto very a very that select the and think Knoll different products we So, we move office seating it's select of market segment can through.

use to with in lighting. opportunity also particularly to Fully's R&D cost chain some We and ergonomic and supply products, tables and adjustable an see lower provide us height accessories

two-way of much a goal nice years. mobile-friendly the website, they're next the our make more a out Fully's our of to with offering, broadening product end, and million a over process in there's to invest just revamping But street the a three is Fully it to engine line So their business million in kind and $XXX five there. $XX building take goal is front now online

profitable And so engine. quite -- then and a

online can that's learn way kind of Knoll that our can, Fully So with brands for other kind shared and Fully learning using vision as a and to about that be doing of, business businesses.

So, an that segment leverage we market of can grow. theory behind Fully. the help and think that's underserved the It's we

margin is guess, is is the the channel, as with dealer it's a that's better Or then it? channel? it's of be traditional Knoll, it And the than mid-single-digit structure -- percentage And, current level? sales Great. revenue. And online whole driving What a Is that total of base more that questions. can certain for where customer there I going? this a two

the Well, and KnollStudio current and Yes. own that's then Fully digits, is is all, of mid-single shop, level Knoll.com classic. first primarily our which primarily

those -- are the want I I you tell So, to base. again, clear, areas. client it's can a two really be separate just

size So, complex the our very again, distinct. different, dealers clients are the than It's them. -- of very that

Knoll.com line the is our business can EBITDA with margin. Lifestyle you In of profitability, I terms tell right in

can And EBITDA we segment, Fully, are now again, see to to ramped in Office no we margins what the expect. than expect double-digit would our have range. So, scale, worse those that's it I up get as would you

today. look how at that's would So, it I

Excellent.

the-- I existing business sales the ultimately, have you with don't cannibalize so online And guess,

clients reach they just we today. don't because them. don't are just get We No,

$XXX. do do think Our segmenting to it's kind do a is They dealers okay, in? of looking do don't put $X,XXX. not and transactions under participate efforts going lot certainly of I transactions How of We channel. And the underserved kind marketing XXX this of, grow. we've think at, an we market, in

lot okay And nice grows fast Fully as online looked make grow this we've in makes and a money. and things know, at can frankly, of money. many area. no And you things

And so money them think grow we we we time. think help can help make faster we and more them can over

Excellent.

a profitable e-commerce on channel. run And

Right.

then last for Okay. question And me.

dealer contributing Muuto? is basis mostly of gain XXX traditional of gain the the that mentioned is points, brands? is or that And On lean share other that Or office are you because that products? what more then share ancillary to some

Thank you.

We I ancillary. gain all, there. our the where of believe is that's office share mean, product it's First coming. is very XXX% held really constant

business. XX% have workstation their We of

of dealer maybe there the where DatesWeiser, sales. half so been has share, I'd been been those It's share the its And in the say then to our lot areas. a gain. not of gain, going. of even the dealers lot other success more, about have and getting not Muuto there's KnollStudio a more we've share had half of And really

get did spending what We've what the size expanded of And continues all not products. large dealer with XXXX see we're see great projects new not there, where table we're in how the And Muuto. gain. to DatesWeiser these to average we're we gaining order reasons in meeting broaden degradation though, clients share we're their capturing portfolio year. are it's that one we're even then that's more data there validated many the is And seeing, not that's any our midyear really out KnollStudio of last because ancillary seeing dealer seeing as to share. We'll are our share and next more line.

data, lag, a about it's but we get it's encouraging. very so that six-month So,

for Great. the color. Thanks

Great.

Thank Instructions] you. [Operator

a have Sidoti Company. with from Greg we follow-up question & And Burns

what meaningful maybe from China sourced prepared could But supply risk know disruption are seeing or what's of the your you chain COGS the in percentage in that Thanks. going what let in impact at mentioned any you're on Hi, maybe China? yet. on is potentially just I from for remarks you've China us know not

Yes, sure, Greg.

this So, I'll take one.

you was Asian as those, have, of reducing last quite impact a neighboring tariffs countries, bit the States. know, of the and work introduced which that the with back were around we United things to So, things effort did pushing we moving year, to

So, we've XXXX. amount course of over of exposure significantly the there reduced the

the the point, adjustable a and China our in use lot of this some seating our height of At we tables from come region. and Chinese materials

there, general. monitoring perspective. sales at in but this happening minimal limited we So, we're what's a of exposure a certainly the direct from relatively still point, impact have And

chain a mostly supply perspective. it's So,

We've some of the materials out out in of news gotten and getting good region of terms country. moving

So, while risk is doesn't there. this at at point, seem this monitoring, and we've some reduced the significant exposure, to there it be we're point. But still

Okay. Thank you.

Thank over the further Rayfield, to And back turn Knoll's no showing I I'm now closing CFO you. call would questions. remarks. for to like Charles

you Well, prosperous We're you. certainly thank looking joining. for forward successful Thank to all a very XXXX. and

you Thank Ladies this participating. today's call. and concludes gentlemen, for conference

You may disconnect. now