Knoll (KNL) 27 Apr 202020 Q1 Earnings call transcript

Good afternoon everyone, and welcome to the Knoll Incorporated First Quarter 2020 Question-and-Answer session. This call is being recorded. This call is also being webcast.

In addition, this call may offer statements that are forward-looking statements including without limitation, statements regarding Knoll's long-term revenue and profitability growth goals, future outlook for the industry and economy, ability to integrate acquired businesses and expectations with respect to future leverage. These forward-looking statements are based largely on the Company's current expectations and are subject to a number of risks and uncertainties, certain of which are beyond the Company's control.

Report materially factors, forward-looking risks the including described Knoll's differ result as identified Securities may and in many XX-K of the Annual and results Exchange from filings statements the a and its Commission. Actual other Form with on factors and environment uncertainty. cautionary These current are pandemic COVID-XX relevant particularly the statements has the in where created significant

that today our be considered of forward-looking context statements should uncertainty. of All the within

these measures The the financial of call today. today measures. financial GAAP references also earnings earlier in the non-GAAP to to measures may include released included comparable most Reconciliations are letter

I Knoll, turn call for Cogan, Andrew of will remarks. now over Chairman to opening CEO the and the

and I this afternoon you of well. good Thank safe finds hope and you everyone, all call on this

commentary April earnings it our down to are In few release, start call enhanced Understandably, addition make approximately would compared comments prior with the condition. orders thought brief business this year. a to sense to tracking XX% current I on in

side, able showrooms as reopen HH our are would these On the plants the well dealers, two shops most Italian May and these are to closed, expect with our will of residential June, improve. We Knoll shut businesses trends declines largely our two to as own and start greater. many including in that Europe, and

to back their weeks ahead. placing safe enhancements partitions other same the larger and clients the workplace in employees and orders cases at canceled, some On planning in into the prepared reassessed new workplace orders needs. for they're our particular side, we've screens, and continued some But in to even months of pushed as on of are see offices a opportunities greater out, as number and their emerging clients time, bring

of our seeing the on in weekly to leg XXX% as a ever we strategies. is is in XX% we seen. of work-from-home overall our as our believe There will in are spot which initiatives we our much bright demand, front I've growing e-commerce what to take noted and release, as accelerating advantage e-commerce volatility increases clients other been business, be workplace fully here activity has A

to too April. from conclusions So many longer draw it's hard term

the We to 'XX-'XX, heading to XX% do in bubble not demand industry the have of period contributed the where that or know that buildup approximately crisis up declined overhang we the that financial dot.com/X/XX into compared did however multi-year those crashes. the XXXX in

in clearly play We've significant a terms time could spent variety scenarios how looking out. this at of of

between mix adjusted segments will negative expect the and XX% we've line we given flow to cash any of scenarios, quarter and EBITDA XX% to benefit margin In in on line. on the the actions office that taken, lifestyle gross on the the these remain to With depending positive. XX% we deleveraging we XX% think again approximately between experience

with of credit there we Obviously, today, elevating the to but our respect out, all under economy beyond a lot don't leverage is is allowed and plays what how uncertainty facility. this see

our ability given especially lending a our through hindering with with and their ongoing in different business. create to have waivers cases grow We invest worked behavior wouldn't We support some our or group current recessions, the previous expect environment our business. and year of lenders, in enjoyed XX-plus the relationship to without have

particularly facility into did don't a we that liquidity given XXXX. runs getting our if well some be credit that problem, So need would relief, ample we think and

lines questions. for the your open us let Now

and Company. Instructions] [Operator Sidoti

is better or currently if maybe what on what a wondering us you manufacturing just way are open are at online? operations, an facilities of was it might I your look what to still give be, closed, update percent can your capacity

we America. start - now, right general, why in in don't North with So

as all are all main Michigan, our those one to one Pennsylvania Toronto, for and in operational. Spinneybeck, from warehouses in completely in two So include our and operational everything are four KnollTextiles, America, which North Edelman and plants Fully in to open

we've are Holly which The have news really Chicago we only workrooms DatesWeiser in facilities and and Buffalo then the Hunt the is good America, the in there where North Texas. In closed Holly DatesWeiser we product produce that learned it is this looks by the just DatesWeiser in to be Hunt that able will in so middle we're space the encouraged like that. of as will month open Buffalo, Texas in

in a opening two will in this Europe, however, plants In are both then in be the North. South, the week, little shuttered, our first they more Italy and

the So of work open and Chicago, end end everything we the another basically that May. in but of on be opens middle by Hunt May, have upholstery this side, that, the end hope by by where will the Holly we - of of everything except

fundamentally say and around really Greg. capacity, terms So usual of XX% operational, of I'd XX% or staffing running we're in our capacity, we're

Okay.

in is Which about line right demand now. with

for beyond order I the of about decisions, buying And gave that, I guess in Okay. hearing just getting are V-shape pushed much you in look you could incremental takes this orders just guess patterns out, much maybe that from what your we recovery, don't color to know feel some maybe past but customers, you normal - we a I and general, think kind of if April. it's bring you time you do industry? positives it to caused looking space your you or this hear in delays longer are from maybe some like back because as get a there like but more longer them has a term back, seeing office the you recover what their customers they sounds do get maybe are of slowdown at is again customers do

are of are shops all to shut, I initially think Knoll folks I all dealers those about this, our think, hard can't judgment working and a got on we Well, will residential furlough, We've say Europe you've is much of when buildings. piece Holly pretty the too residential I into showrooms harder been understandable above, I decorators make and/or really closed. go weeks across has are from. that's think I'd a three Hunt month What think shut, the hit Greg. our got Again, remotely are say, the

operational, way even dealers dealers then Knoll Muuto fully So, necessarily by if for residential the was shut. and but even the Europe open, similarly, are - the there, and aren't

think I residential declined thing the most. of the and really the fastest kind shut has hardest So

that things they businesses that pick start reopen on see in end, would think fact, ship, to gradually but good are I we and up, as up, those backlog activity to expect many to of that the struggling have product. just and with went they a with solid into the everything. can't of can't to that their just backlog the receive fact clients lot very Holly ship product a this and clients

that's the on side. residential think kind So picture the I of

think, to trying handle their side, what's On I people again, on the just are workplace get on. going

they've some made real to this forward. are clients think estate others underway, frankly I had are they moving work a using complete commitment where

more be deemed Now starting in in or is allowed ability allow to ship construction that may they product. us to their accept delayed as that to some be and will clearly that know states you of

holding are product we and usual more everything. than So

clients the of furniture. all And mean of frankly and a with of in screens to we every immediate our often going for And were what safe period change and help the of clients on. like, come our teams terms beyond workplace as ourselves a ways demand back and really looking - partitions in time way. it what are those lot what workplace look does that will up know, different planning, look there this Clearly, you everything, ends how future of works and we creating kind be a are healthy time our what materials. spending and or the And do looking aggressively at is disruption, we things

We're out our and of over incremental more clients facilities. lot largest doing co-creating result some spread with some a of in that may as particularly demand clients could

clients there are some will opportunity conserving and capital a mean discretionary postponing also more this all is they is investment. a reality you demand. think that I Listen - lot So clients of it. have cash know that the They're clearly conserving to where I lead disruption our

a out of determine think those that would more how seen cancellations linger. long I will I on a how handful seen this say So depending plays postponements lot and we've postponements we've

the that the to absorption [ph] and the up at have leases fill signed Looking in was positive today part quarter people the to in I those space. data these in going first absorption means they're first quarter see

it that's causing fill up think believe people kind and finish a predict. And how of we do beyond will pause they that some up much what with you’ve hard fill ahead Now they facilities orders lease I different. if be those we're going to and it in may signed now. Greg really you're building it's the out of But to up go right seeing

or expect need to $XX million Fully and the? then you're to make inclusive Okay, the Muuto of on maybe what you investments and business. And thanks back - then $XX with is it. the you're making Are side is And the save touch the some I to for you an timeframe investment the wanted making that that the million reinvesting around now, of e-commerce I incremental color, just do Muuto. the there of on investments into appreciate that

Yes.

the at Growing side residential of that business.

Greg, been I point appreciate on a you've long question. time your consistent for so the Yes, Muuto

weekly. of running seen business to the demand Fully decided everything. to for we've going don't from the from model incremental to really to and they do, ergonomic we've be with in trying terms work up designed days tremendous. products, a one to success just we're and And is XX% days the going home ship work be In again I investment, Fully home with What all XXX% it's well which to think that I - mean and keep terrific products, up two

Fully said, for learn business. from that own well can how we implement we So our and

we knollshop.com, do a Knoll knoll.com. a - small have So

e-commerce own know our anywhere products in not from available, offering are our certainly e-commerce as home. in North have there our relatively but limited really work on And basis you We shop, a America site. the no in own is Muuto

have. XX gave challenge have, to already in the the the have we we teams you [ph] inventory we days a So leverage platforms

incremental the stand investment. meeting And in we're that challenge been hard the them So we America office couple couple in a our And weeks teams days. it, week. work scope Denmark that with gave in have from up ago going of of both broaden own North there's a really XX very and and home products times and little

a holidays. and from let's that in is it XX technology July that what Xth window service they've after And we I'm it would standpoint. call excited the super both out up which stand hope figured day right my And a be with

home. And really so, addition about be we're could clients way that's nice and a the it are are working from what to it doing our and teams super the supplement excited

furnishings to employees point that their who had with our offices. I home of how I get The some office I have and was out support Fully in for didn't these to other three - clients able we're later I do Fully corporate business. also listen thing our I would home very I is mean that said order I quickly up stand in days and an a put get

for their we're home. So with they working Fully clients can their also employees at access as so well

in I'd not challenge Greg the June. that's say So early July it’s

[Operator Thompson question Instructions] next Steven is Ramsey Research. with from Our

to were and Fully margins for over talk guess grow the year with base the time, I thoughts, the where growth just and maybe you to and Fully maybe term? invest maybe fixed can this where you can you have acquisition continue prior think even them you longer to do on on as broadly

leverage EBITDA upper mean them my of work single-digit the top we've the over kind And the a on basis. in cost off And double-digit able some some wasn’t I additional. margin think that stuff head, running I of everything, to been EBITDA they of adjusted help of back hope margins. in I Yes, some kind time sourcing, think their of and lot I obviously of kind were we consistently our are of would value office the

be Fully our bit in EBITDA and office lower would line even adjusted little be segment any our better. - that So goal of and kind than shouldn't maybe worst a certainly margin hopefully

and to time that direct for you How over customers breakout but much for product a from to dealers. question goes there Fully Fully’s And through intention an is much elementary that Great. of of change. consumer maybe goes how more

don't ongoing projects relationship. add value business. both our and to Yes, is really service someone is very individual in the that’s at an then more of they how for where are really home waste their dealers furniture time their I home. larger a set there's a selling complex Fully I mean I of mean trying up [ph] independent about an the want mean on lot very desk channel. listen dealers phenomenal three to it Fully at bulk our contract And office their much

What a workplace market clients. offices, extended we but done do really corporate than They XX%, our different to of of Fully have do XX% Fully of have for they'll XX%, our it's some dealers. some extended kind projects segment where these where the XX%, is support we offers

We are off doing laying of part that that to with our dealers.

where they participation and have really you should these very it in distinct they a different So - the problems. have relationship. very solving think corporate channels is about But

the CapEx, towards million be what warrant that? a the reduced could on color Great I would that then, And $XX CapEx this to also geared conditions certain better, understand certain did and CapEx segment, category. guess reduced further reduction

do ahead. go Charles, to you want

Yes great, thanks, Steven.

XX% and possible, then, maybe so our our has - some split our So I or but you reduced probably XX% XX%, IT-related investment that some would of about investment, say XX% for of still and CapEx a maintenance. been know

broad So take quite more CapEx across if sort the little yes, further investment in we unilaterally a can down needed. the bit And a of bit area.

I moving we bit it appropriate quite purposes, couple to needed. with but reduce think a can it but investment we can projects activities, there's we - if the forward want a yes maintenance some keep reduce of for more obviously

question of deferred obviously pondering, I second where last the work under a then catch-up again thousand there's half the just And on. from But that guess economy then year. happen. scenarios open that and playing the in Excellent you the me. a you're have is could scenario

to pulled handle but the scenario? How back sort the get you that able natural you’ve of would of you be reopened So, operations. on lift also economy,

kind we're Well, openness, is we've some better either will the list through getting snapback backlog that our ability help, work it’s on our still I of everyone's bit not expecting I that day got to product. see that. good frozen each that will right it will although, quarter in then here. not And mean, XX limited top But our now. capacity need I clients a worries by right which and/or my now help don't a constraint, and accept second a think a to being again by of be

Our Value from Vulcan Colin comes Partners. next with question Casey

for flow on I take What the decline would appreciate of it the and you flow. revenue cash be for level margins year? commentary neutral to cash free

Charles, do you want to?

you for thank kind theoretical the of and Well, question, it’s a question.

the positive. year, think expect I as we think forward as cash on, earlier to look Andrew be I mentioned we flow to

order but very currently a that's think I in expect to hitting still start negative significant be flow free revenue flow cash we decline to cash positive.

a certainly scenario? revenue a I yes, I out And exercise. Okay. theoretical year, I cash appreciate negative it. XX% It number say or free on you be positive, were decline flow is mean the neutral that would theoretical threw to if for

- are managing not we significant can of those said I into those and a positive track got is lots flow declines get we're through we've you think hypothetical's think declines - XX% got Knoll and I All XX%, there models, also were there worked scenarios. and good two all in or our I are cash hypothetically just zillion a to all going that. We've this sudden of zillion as record - models in and really have we've scenarios. very say

I have this the I seasoned which - we importantly kind team through through knows do on how done is other more So, here. and out a we've come a think would to to this we'll time that stronger this and side, again manage every manage of Knoll Knoll which imagine

Okay. cash That just is to be flow, free clear? cash flow that

flow. Free cash Yes.

through, to What the margins. margin? I the EBITDA Okay. detrimental And XX% you margin may - XX% EBITDA was I said missed flow I think gross

impact or mix has using here. because And XX% those ranges XX%. again, We tremendous I’m a said

not back I'm the remarks. any call I’ll to for And further sir, Andrew questions. final give his showing

to Great. thank on reasons everyone you are and In want unprecedented leave times, us for Well, joining you challenging call. well these with optimism too. for today's closing, I

offices creating the with sales right, our and We're past, are teams of hard this today continued Knoll of channels, I expand best panels. good working business. is mentioned the CNBC in their is more working home Our future e-commerce, office growth work office is new across for safe help If teams that to and seeing the to practices clients our furnishing that's screens in implement news offerings here. our for work from cubicle then them demand the and for as are

our measures and work orders at our into Like we too own we're construction warehouses, people allowing are clients, and states begun resume. to we planning of preventative back and and with beginning plants have in precautions and bring into manufacturing our countries to office many same ease and run here stay-at-home to are encouraged home the that many put short

this hard how think demonstrating and their own everyone and we'll soon. no their home, to about want them all yours, they're associates to all Knoll client commitment you I and are thank the offices. around our homes everybody. and investing doing. home service. Across best to working, for clock at appreciate time you constellation, Talk clients doubt truly Stay Finally, all teamwork leave appreciate - our and at safe to is I Knoll to in

And thank with you and program. that, And ladies gentlemen, now participating for today’s may disconnect. in you we