Knoll (KNL) 11 Feb 212020 Q4 Earnings call transcript

Good afternoon everyone and welcome to the Knoll Inc Fourth 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, 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, but are subject to a number of risks and uncertainties, certain of which are beyond the Company's control. on materially including statements identified Securities the in annual differ of a and and may its Knoll's factors, and many factors Report Exchange results Commission. from with as forward-looking result described other Actual filings XX-K the Form and risks These are within uncertainty. statements forward-looking today in be considered particularly the the that environment, where our cautionary pandemic all has of context statements the of COVID-XX created relevant current significant uncertainty, should to references non-GAAP measures. The call include today also financial may Reconciliations earlier of most GAAP these measures to comparable the financial the in included earnings measures today. are letter released I will for the opening call to Knoll Chairman Andrew now Cogan, turn the remarks. of and CEO over

everybody. challenge the way you, not and as a occasion design finds community hope of year this yours and be our our all prouder rose fellow by XXXX architecture team with Thank Knoll to afternoon warehouses dealers, clients were and to you person our digitally showrooms associates community, operational of design I find reopen know Across all we plants allowed support constellation kept was connect and clients, we operator, could unimaginable our We this and the to safe good them our successfully and and great regulation and and innovative residential for and and in well. new ways to the commercial consumers. want the government associates. Knoll thank work. the

end levels total record in $X.XXX.X sectors, of over on XX% up off acquisition, helped brands workplace of in prior year represented well XX%, fluid diversifying workplace increased has third from billion, down our sales sales, for a a sales fifth term strategy ago. versus of between revenue, in million dependence from offset just $XXX revenues a our fourth to year. both Sales the exceedingly resulted can a and and Our decline from sources XXXX commercial to pivot to XX.X% paid XX% that full of XXXX. to a $XXX residential this This over away in long quarter, and prior year users revenue, million, organically a year. year sole our These increased through the commercial total with

mid-XXXX, as and and the and and for product deliver well discretionary double the sales between variable margins to million declined workplace, year shift by in pending the Rapids structure of a consolidation million our of XX.X% Grand sales. our favorable quarter, manufacturing to $XX as incentive us warehouse reduced travel cost year of workplace full the development of protect our annually locations decline actions, both adjusted our closing American other reductions, million took the For in expense $XXX.X digit prior and important with XXXX. of combined protecting our entertainment, were approximately core headcount, while driven costs, versus $XX XX% and have North mix site We These residential by which approximately EBITDA expenses reset steps allowed with manufacturing digital terms operating initiatives. including in profitability

to year quarter, the full X.X% XX.X%. For margin Adjusted compared EBITDA was a

since monthly data returning to office the start way and Habitat design respite with has office second We progress be like report industry to market might of profound dramatic and the are leadership XX% hires important Board likely for is the over responsibility social folks the standards; wave diversity senior the and Global been both including a Directors all hit the disruption XX% to initiatives, demand looked work. when of pandemic. North from more Google quarter. across In summer Black to see We according term we a has has it short term mobility our impact a office to prepared the In that plunged Europe. brief and particularly of After a the has the been our not on America and and between team. demand both diversity surprising the live and new council all students; context, this back decline but and and the on had partnership term our long CovidXX short track, the to in data the in robust confirm proud business we workplace this it's Humanity a swept made work pandemic our that in setback. of on to for barometers scholarship inclusion corporate sustainability fourth accordance continue Reporting again with

all While data remotely, the XX-XX% case be not will shows this of happening today office is work forever.

over our While our factors we that off to plans the work the decline clients being return their a When are falling returns half of clients suggest survey demand will a first to hold to more we rebound while of see fourth business XXXX. vaccines return normalized several believe we as and heartened XXXX later third office en are to on work continue by disseminated, in and on in masse of quarter levels XXXX. we most

is now prospect companies plans been and of indicator quarters distribution, demand out. firm of on of think hold. to funnel double-digit is start has that a Our return will up where of clarity of on three vaccine projects out signs heading, good more to once quarters which and their We growth activate workplace demand stabilization there shows activity, the four work

people momentum for will interaction line miss that the are different out than of and we're open to us versus With crave. in-person to Our travel happy returning Once is we strong. return QX outlook and also to the up bookings work that travel of for in more most office, people operator. questions, start QX particularly where the now, in to create know your industry not the additional impetus the

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

any of or do the your business, how levels sort the, couple next side saw We seeing office them talk about to quarter, just the improvement in expect throughout same the start first order those of you're of patterns, stay the you quarters? at trended if you for the the

and orders sequential initially like we the were over but enough a QX. think flat Well, on fourth on head relatively as basis, know second, into third you I I a think sequential quarter

I probably the to normal in of this and is both to have challenge that business. additional work, think the the a we're going top the we'll of the seasonality return delayed and via we seasonality think line incrementally office pressure, combination

of we as On into side, strong residential know, e-commerce the they end XXXX, flip year. stay as the you and the seeing we're the at were as move

by pipeline. know And mentioned I the the So that. work, encouraged frankly in as by quite you trends we're we're encouraged

firms. about we and future within an see with at inquiries data ABI to look from regional when high know, the the hearing more we activity return jives to You larger of one have talking work and of I today she our said team that had day we managers we was we're day to design uptick activity than every our what before. in me

all So I indications. of look at you as those know kind

will as to the but more and third, pandemic, You going that through to but of with fourth the be the take we the believe move of things see lower to are know office clients and it's year, see that half loaded, trends. projects by part consumer or the build, the it highest worst to strong at quarter offset back confidence the really be since us I probably will momentum rent, next probably on to side, very advantage before nicely, even starting that CEO we been me those and I you it's up say all all again starting worst we come residential see more know in

side you Are product here can heavily gas marketing on constraints anything then terms forward. maybe is availability I have promoting And drive the it you side the just there around do as it of and going were around you're you any or obviously the some and those on as of in momentum that brands. more now of and very earlier the constraints there around hard to business, you're, or press are investing like know, you, the seems like growth in business of residential year, strong kind that.

mean referring the fully Yes, know, latter we're think inventory the stock I you're Greg, and I at well I to. marketing, clearly in

on the pleased I we and we're run had great already quarter One, - a did market in five we in run, impact that campaign the it we section, since add search with tremendously website, the on that five six is or spot. Bowl find we've add page, video. with were super see fun ad, we a was second the marketing a to it's with tremendous and views I fourth can reaction. think you didn't had impressed positive Youtube million workflow huge saw national but the a ran of the a fourth think obviously would local just was a address which - traffic Super that a, quarter in on great, we brand we ramp urge And fully up ran Two, you the performance. spot fully YouTube do it a can XX something fully over I you're in your

from business So own really efforts across in good really, the growth strong hitting really our Holly chain the and across stride. is country inventory a knoll.com we're double-digit there seeing KnollStudio shape they're are and other really well really supply

Muuto is very we're really residential growing So our is encouraged. Europe, doing residentially. and also well Europe

and chains as leaning supply we no hard there as hard based, broad into are we we pretty it's incrementally as can. So an

structural think And next back or the about you've in some you cost also that may be then other some when permanent permanent come structure things as the made may talked and year. may not about we savings to P&L

quarter? year in So move the about structure relative we the next ended we as to the expense you maybe talk where just fourth year into

Absolutely, Charles, do to? you want

take Yes, I Hi, Greg. can that one.

of don't So the took we a quickly, why XXXX. recap quick we actions really in of some do just that it's

the million XXXk we addition a million did spending to suspended that in the which had had we, freeze, of wage and other second full-time from which workforce we we XXX positions, closure two about in discretionary did is eliminated of to $XX reductions is Grand the expected So workforce yield the quarter. in about of $XX we savings XX% about about that end Rapids furloughs, annualized savings and contributions, reductions

COGS have in we the mentioned savings by his and down of it some breaking OpEx, Andrew Just opening remarks. earlier

facility XXXX. those $XX that $X warehouse in move XXXX. hit distribution the of the closure, in later We workforce some Grand with the up in that XXXX quarter was We plan XXXX. million about completed the actions role we've closed have COGS and to for expect get we reduction Rapids is expect $X in to associated we of million residual there million of took which and actions savings of the forward count head and would our of to fourth consolidation Out June in from got $XX

the transportation XX government and of are higher to headwinds has commodities to have commodity about Some government related we expect XXXX wage plan the offset do to We see up end impact price million we subsidies a and Since the the back able Inc to the will reduced that Certainly of subsidies increase we about bit. in some revenue. market are of that of total expect half we each some late to which costs first we the to mainly year-end effect have XXXX. would the the X% year in in at reduce do it a and steel of bit. April. are in be a in And forward transportation expected purchases, into the, the part that Metals of prices then to of of impact increases year continue to Knoll of the summer less to go that's about risk the quite realize some obviously increased stay also XXXX. were the first

to COGS of savings XXXX. the actions be $XX a from expect we in down And about So wash. might then million maybe in head for count it similarly moving over sort carry OpEx,

breakdown to incentive Certainly go of that we investments in that focus by compared volume-based $XX of the to on be discipline, spending what So XXXX get to will on return the will $XX you other would I continue businesses offset XXXX. to OpEx in in cost. a million as And digital $XX out think XXXX expect but in of and million about workplace likely of $XX would of million that's compensation. expect we especially kind to

Charles Thanks, detail color and lot thanks. there. Okay, a of

exited good So could the just to a you where quarter, run that a off just we off is it rate build so of frame maybe of assuming. like fourth

$XX COGS, then that know basis rate. I and but benefit if a obviously, if that wash a full million for OpEx take I headcount of full run and And I Yes, offset million year I would to we're a reductions would I - you the $XX then take for for the and good $XX on by as full year think, as the think baseline. probably year the based that's you, use QX

And question Research. Thompson from with Steven Ramsey next of our comes the line

Maybe customers just the pipeline, a consistent on in pipeline there projects to reflect commercial expanding the previously what looks that start is us future feel resi detail and with not these at more to it space office coming the - coming of looking these reflect projects, the do character so are on the like. character does demand the they we're just in clients any hold projects maybe detail

Sure.

hold on of well, getting we're put most into to is think that or seeing plans right things our what chunk our know definitely you We're is starting get activity to that the are starting people kind that's are now are are put return were fall. there of a saying, folks big the, summer I this workplace reactivated, vaccinated. which that

we on both seeing workplace had work right reactivating is going, are pipeline that's that kind they're to are workplace. be and with based so to training those so clients are kind what been introduced some that are we have We're the our of our of back in team is our again and have this to to what We're There have and that productive those the I'd further virtual and safe make, we notion back things to in conversations. which plans also physical going now of want the in are work. a going on things need and of folks and seeing thriving ancillary environments is and we're a this that need company And is take that immediate clients off out fact more now to there, adjust that workplace the idea in coming get to to they lift, the And allow and going healthy say old them the mix that then in the interaction. come workplace that to and the work. make heavy to,

things So for smaller opposed we're dedicate out, from think more benefiting a collaboration. people, on is some area we're so that larger giving for focus I areas there as benefiting to densification focus areas less spacing collaboration

we things So re-engineer those in people that going change planning to are the back. well, kind What saying, kind we're are look be okay, of to have is the like. of workplace

has good So same the thing. this industry. And that change been expect always for I would

Here and everything.

of stabilizes the to that or next in think wanted little for to in worse it little demand, so a demand sales expected think well. this is you kind in in QX stable in stable coming range a then XXX the years quarters, of low uptick more range before the of you million I on through do workplace do dig this trying similar relation QX guess better And kind the ballpark the that see to three

getting know all the Yes, I without into specifics. I appreciate kind you, of

In around So these backlog very as going lot that strong through into backlog a move I the basically general, pandemic, carried had we think XXXX. us so things days. a

that's And level backlog would aligns year that that the the that kind deals so of fact the a imagine at - with that a we out, see and seen higher year now that's how And kind pipeline. you at lower right a you the the backlog bottoming level. it end the we've I start with of

been back that is the half BIFMA pipeline seeing half that. is Sorry, of the the data the in the the down first pipeline in trend inverse you've and continuing in the

of be the the going half with halves in in think So and kind first subpar, run of tale I to it's really a sub back two rate rate half. above-run

then... And Great.

on and of be we're line. Residential trough kind both levels just generating of with that story to margin is obviously, our with quarter expect bottom office growth I a dealing and top Well, where strong business. those very would the profitability the different of and

growth more on there the know second though, first to double-digit segment? be is of kind is it's stronger to on And expectation, or a any even I kind bracketing residential any in Andrew that, there half if and is of dynamics in we wanted Great. yes, definitely dig residential, that going half

well. Yes,

I the to think in are first the going half, easiest. comps be the

slightly in So run the half. more front rate in workplace post-COVID was be belief pre-COVID. to then, to should different the going I rate into is than in people run you'll going is, that the be back this been think comps But think get be the the is the we've working, seeing back are challenging half, half. ecosystem probably I And it our

there we're take positioned to to this so And really that think I be work-from-home going of. is advantage well permanent element

the I hear we're know, to seeing our more intimate time, opportunity transformed in and think you clients and digital there's been or, or e-commerce you great whether digital has the think business we that fully it's clearly business our and accelerated, wholly great way. a every in in that engage opportunity, all

really work there. exciting So

So and going I we're traveling think not even much. return work, to I still so to think we be as when

the however, of and we This just out Facebook understand, to the that all This I be and just think background. will algorithms is home all we're that the in important in digital keep And surface got comes a scratching investing residential a tremendous of our place of people a side commerce. really work. of new area, it and EVP potential brought so on the going digital and

be. We have what work, going our really data we're to much mine, that customer to opportunity that's by so excited

from in drive. jumping Clients we're will their think to the I just start the half. back accelerating double-digit regional think again conversations benefit to saying mean companies at in work. one the me plan, bit to to to comps work, I And growth I embolden hope there return everything. successful know, return think first benefit. that have starting I clients going their floodgates the ready half, I had easy And has continue you are that for thing, and get the would mean so I for then, rollout will are think I to manager to I in vaccine with planning to to So QX. open the were trigger Those we

going third like I not second. a or off not to here. of you're kind think And the Probably, fourth, the it's it's whether the in Now, to the first. then be races 'XX

to know have ancillary going to you You something the more so we've appealing to asked got to come to habit going to people good that's to the home, and the it's are make is Knoll things change make drive have. of working we at that into, going think drive been I all for workplace and people investment,

encouraged So now. I'm about quite

what You 'XX I here office know back, to half to of recovery sometime like a in get and we'll look have I residential good to business the expect can really big continue in and going get 'XX. latter momentum would because 'XX going the think we're we're

for guess decremental one demand excess interim trying in I slower me period year capacity and the full last think to have how the about guys then for incremental to And of that ramping think 'XX. up will you margins about the sales of

we've were margins historic know Well, the a generated maintain If to, office say bit you quite to deeper. just a cut we we've cut, cut trying I that we you we've decision made more. would not business, the conscious in

So it's XX% deeper I where XX% than at. magnitude. something that whether of it's But we're don't or know

one. the we've think that just made I call

of terms capacity in We do is great pressure in for sheet to manufacturing capacity under in position balance to both sales in shape, of of turn. we're no Our the product terms terms want anything. be

plants ready, are ready. are dealers Our our

going the business, So accepting lower to office of year. be we're first margins we half in what's the could then in consciously the generate

a So full I think as over you look it basis. at year

think on but stuff and You mid-teens enterprise deliver residential I continue our the basis drop. we to goal the to margins, remains know mid-teens, double-digit margins, but EBITDA could going

not 'XX in know, then the margin conscious hope decision. 'XX a see and that is of over another think upper couple first we're to build and year, the course really half that that of right I continuing margins double-digit the the long weakest. EBITDA going a decision know pretty single-digit short-term and worth quickly sacrificing returning you And of term. our of I EBITDA is shareholders And margin into for that you it's demand for when the diverse points to EBITDA in it's You range to potential XXX know enterprise in be the basis

Thank questions. you. And showing further no I'm

and So closing I'll over call Andrew the Cogan for Chairman any that, CEO, remarks. the back turn to with

thank for joining Great, you thank today's call. and you on everybody us

will including business dealers as flexibility for it and e-commerce will those winners about where one complex and that distribution be as you to direct traditional office and the in work-from-home believe the workplace shops balance I've enterprise been to have in to ecosystem continue combined small future to the Digital omni-channel capabilities channels. is call on landscape. and mid with that showrooms If post-COVID bricks-and-mortar and build. to of the works, do we talked consumer with work size the residential the is and about we Knoll Certainly, when clients, this portfolios all residential and be capabilities, trade

our meaningfully of of the and double-digit the our value businesses demonstrated Our benchmarks continue to and XXXX this generate profitability. outperformed EBITDA of diversification adjusted strength work-from-home residential we as levels office results on

a robust of reality pendulum office and the balance a all swings with of work-from-home. enabling vaccine to work on work a back Now as to work-from-home the return work more from horizon more in

the We our side business will see office recover. of

their into from a where balance more to how we elevated homes. of levels continue work and consumers globally we permanent investments While and of that benefit put

all months. we Good a well, safe everybody, to that, talk in again stay bye best of and wish and you with we'll the So you couple

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