Knoll, Inc. Monday announced financial results for the third quarter ended September 30, 2020.
Net Sales decreased 13.2% to $309.4M
Gross Margin decreased 280 bps to 36.6%
GAAP Operating Expenses decreased $9.6M to $94.1M or 30.4% of net sales
Adjusted Operating Expenses decreased $12.2M to $88.5M or 28.6% of net sales
GAAP Net Earnings decreased $10.5M to $7.0 or 2.2% of net sales
Adjusted EBITDA decreased $15.1M to $37.3M or 12.1% of net sales
GAAP Diluted EPS decreased $0.24 to $0.11
Adjusted Diluted EPS decreased $0.32 to $0.23
Knoll, Inc. sales of $309.4 million declined 13.2% in the third quarter, driven primarily by a decline in Office sales of approximately 25%. Total shipments during the quarter benefited from elevated backlog levels heading into the period. The company saw a sequential improvement in incoming order activity from the very depressed levels experienced in the second quarter. Nonetheless, orders are still tracking below current shipment levels. With the false starts and delayed return to the workplace for most of their corporate clients, Knoll continues to see a significant number of new office projects being delayed, even in cases where the buildings have been completed and they've been awarded the furnishings. In addition, demand for short term planning enhancements, including screens and other products for social distancing, has been modest.
Knoll reported that their e-commerce business grew 434% in the third quarter compared to the prior year, and higher margin residential sales, comprising approximately a third of our business - up from a fifth a year ago, grew a total of 39%.
"In the foreseeable future, we expect corporate office demand to be meaningfully depressed. Our sober assessment is that we are looking at a BIFMA market post-Covid that is approximately 20% smaller than pre-pandemic conditions as companies make do with fewer workers and work from home settles in as a more permanent piece of the workplace pie. Based on some of the commercial real estate data we have seen, we do not believe that demand for office space will improve meaningfully until late 2022, and we expect demand to fall as much as 30-40% in the interim as clients remain hesitant to return to the workplace until they are confident that they can keep their employees safe; that seems to translate to the introduction of a vaccine along with other measures like wearing masks and social distancing.
"Through increased digital marketing investments, web site improvements and expanded product offerings targeting the home office market, we expect that we can build an over $200 million e-commerce business at margins well in excess of our corporate workplace business."
