Knoll, Inc. (NYSE:KNL) Q3 2018 Earnings Conference Call Transcript

Oct 30, 2018 • 10:00 am ET

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Knoll, Inc. (NYSE:KNL) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, everyone, and welcome to Knoll Incorporated Third Quarter 2018 Conference Call. This call is being recorded. This call is being webcast. Presentation slides accompany the webcast.

(Forward-Looking Cautionary Statements)

The call today is also included references on the non-GAAP financial Securities and Exchange Commission. A reconciliations of these measures to the most comparable GAAP financial measures are included in the presentation slides that will be accompanied to the webcast.

Now, I will turn the call over to Andrew Cogan, the Chairperson and CEO of Knoll. Thank you.

Executive
Andrew Cogan

Thank you, and good morning, everybody, and welcome to our third quarter earnings call. I'm very pleased to report that the bold actions that we've taken in the past year from the acquisition of Muuto, the launch of new platforms like Rockwell Unscripted and the reorganization and expansion of our selling capacity has enabled us to respond to changing design trends and allocation of space within the workplace, penetrate faster-growing ancillary categories and continue to drive top line growth. Coupled with concurrent initiatives to increase the share of revenue we derive from our high-design, high-margin, global lifestyle businesses, which now represent approximately 40% of our revenues, we're building a unique constellation of design-driven brands with durable competitive advantages and superior profitability.

This quarter, the benefit of these initiatives, combined with favorable price realization and efforts by our supply chain team to offset continued inflationary pressures led to 100 basis points of adjusted EBITDA margin expansion from 13.4% to 14.4% and adjusted EPS growth of 20% from $0.40 to $0.48. Excluding the favorable accretion and margin mix benefit of Muuto on our adjusted EPS and adjusted EBITDA margins, these metrics showed organic improvement too as did our adjusted growth in operating margin. We continue to target 15% EBITDA margin as our mid-term goal over the next couple of years.

Growth in the quarter remains better across both of our business segments. As reported, sales grew a strong 12.5% over prior year as we continue to benefit from the acquisition of Muuto and the acceleration of our overall Lifestyle segment or just under 5% organically as we began to lapse some stronger revenue comps in our Office segment.

Lifestyle growth of 31% or just under 9% organically compared favorably to the 25% total and 5% organic growth we reported in Q2. And as anticipated, adjusted EBITDA margins expanded by 80 basis points from 20.4% in Q3 of 2017 to 21.2% in Q3 2018, our best levels of the year.

Muuto saw an acceleration of its growth and momentum in the quarter commensurate with the increased exposure in North America that benefits them from being part of the Knoll constellation. Its sales in the quarter grew over 30%, growth set on their own, they simply would not have been able to realize. Now with the NeoCon Muuto introduction in the rearview mirror, and showroom and dealer displays across North America shipping, Muuto's breadth and depth of engagements, both at the day-to-day dealer level and on