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Kimball International Inc (NASDAQ:KBAL)
Q4 2020 Earnings Call
Aug 3, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. My name is Jonathan, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball International Fourth Quarter and Fiscal Year 2020 Earnings Conference Call.

As with prior conference calls, today's call, August 3rd, 2020, will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the forward-looking statements. Risk factors that may influence the outcome of forward-looking statements can be seen in the Kimball International Form 10-K.

During today's call, the presenters will be making references to an earnings slide deck presentation that is available on the Investor Relations section of Kimball International's website. On today's call is Kristie Juster, CEO of Kimball International; and Michelle Schroeder, Executive Vice President and Chief Financial Officer of Kimball International.

I would now like to turn the call over to Kristie Juster. Ms. Juster, you may begin.

Kristine L. Juster -- Chief Executive Officer

Good afternoon, everyone. We appreciate this opportunity to review our fourth quarter and full-year 2020 performance and discuss our business outlook. Our

Fourth quarter results demonstrated the resilience of Kimball International and its ability to execute effectively under difficult business and operating conditions. I am pleased to report that our adjusted operating income was stable with year-ago levels and our adjusted EBITDA was slightly ahead of last year's fourth quarter, despite a COVID-related decline in revenue. This performance reflects the success of our ongoing transformation plan, including Phase 1 of our restructuring plan implemented in June of 2019. Together, these initiatives have driven substantial cost savings, while streamlining our operations and enabling collaboration across our family of brands.

You may recall that at the onset of COVID-19, we curtailed our business considerably to ensure the health and safety of our workforce and to comply with all state regulations. Early in the fourth quarter, we operated from only four of our 10 manufacturing facilities, focusing production to health industry products. Our teams did an excellent job serving this key vertical by providing critical quick-ship products to facilities dealing with the health crisis and then progressively bringing the rest of the facilities back on line by early May.

In addition to the production shutdown, our fourth quarter revenues were reduced by COVID-19 impacts across our end markets as order rates slowed and customers postponed deliveries. And while we are pleased with our respectable showing given the environment in which we operate, we recognize that the business environment is likely to remain difficult in periods ahead. Therefore, we decided to accelerate the implementation of our next phase of our Kimball International Connect strategy, which we call Connect 2.0, and to move forward with Phase 2 of our restructuring plan.

Before discussing this new chapter for our Company, let's move to Slide 3 and 4, which provide a summary of our fourth quarter and full-year 2020 financials. Here on Slide 3, you can see the financial summary for the fourth quarter, which details the operating accomplishments I just referred to. As you can see, we succeeded in achieving significant margin improvement which served to offset the revenue decline thanks to cost savings driven by our transformation plan and restructuring program.

Moving to Slide 4 is a review of the same metrics for fiscal 2020, which provides an even better view of the significant operating progress we have made in only one year. Our margins expanded considerably year-over-year with gross margins up 140 basis points and adjusted EBITDA margin up 220 basis points. Total transformation plan cost savings were $26 million for the year, and there is more to come. Also, our diluted EPS was $1.11 for the year, up 5% despite lower revenues and a higher effective tax rate.

We are very proud of this performance, as it speaks to the strong foundation we have at Kimball International. Our performance in fiscal 2020 is a strong indicator that the first year of Kimball International Connect strategy has laid the foundation for continued success. As shared earlier, we believe now is the time to enter the next phase of Connect 2.0, which centers around accelerating our growth.

On Slide 5, we outlined the four pillars of our strategy that remain the constant. Inspire our people with a purpose-driven and high performance culture, build our capabilities by expanding our work on innovation, and fuel our future through our dedication to cost savings. All of this is done in service to accelerating the growth at Kimball International, which is the step change in our Connect 2.0 strategy.

Our plan is designed to enable us to effectively manage through the current economic downturn by driving market share gains for Kimbell International as well as yielding additional cost savings. Specifically through Connect 2.0, we will be able to build a deeper, more focused market expertise driving share gains, inhibiting to maximizing the opportunity that are forming as we look to a post-COVID marketplace.

Today, we are announcing a Companywide reorganization into four new market-centric business units: workplace, health, hospitality and eBusiness shown on Slide 6. This new go-to-market plan is designed to accelerate our growth in four major ways. First, it will bring vertical, product and brand expertise to the new workplace, including building a new work-from-home portfolio. Second, it will enable our build of additional expertise in health.

Third, it will give us the ability to expand our hospitality business in the broader direct commercial sales environment. And fourth, it establishes a new dedicated eBusiness unit, which will be responsible for developing e-commerce across our brands and end markets. Our eBusiness unit is a clear signal of our commitment to make e-commerce a meaningful revenue contributor over the next several years.

I am also pleased to share the new business unit leadership roles on our executive team. President of Workplace is Kourtney Smith. President of Health is Phyllis Goetz. President of Hospitality is Kathy Sigler, and President of eBusiness and Chief Strategy and Innovation Officer is Koorosh Sharghi. Each leader brings a proven track record in their respective area of expertise.

We issued our release this afternoon that announces the new organization and provides background information on each of these leaders. The four business units will be supported by the agility and efficiency of global operations and the streamlined center-led structure that we implemented in year one of our strategy. And together, we will unlock a new level of market share gain for our brands and our businesses.

In alignment with Connect 2.0, we are also announcing we will move forward with Phase 2 of our restructuring program, which will result in a total restructuring charge of between $17 million and $18 million. We expect the workforce reductions and facility optimization that comprise this program together with our ongoing operational excellence initiatives to drive cost savings of approximately $20 million in fiscal 2021.

At this point, I'd like to turn the call over to our CFO, Michelle Schroeder, for a more detailed review of our fourth quarter and fiscal year 2020 results. Michelle?

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Thanks, Kristie, and good afternoon, everyone. Turning to Slide 7, I will give you a more detailed overview of our fourth quarter fiscal 2020 financial performance as well as share some color around our strong liquidity position.

Net sales this quarter decreased 20% to $156.1 million, reflecting the difficult business environment caused by the COVID-19 health crisis. Given the launch of our Connect 2.0 strategy, we thought it would be helpful to break down our revenue performance by the new business unit designations, which you can see on Slide 8.

Workplace revenues, comprised of the commercial, financial, education and government verticals, declined 22% year-over-year and accounted for approximately 58% of our total revenues. Health revenue declined 25% and represented 14% of our total sales. Our third market, hospitality, saw a 12% revenue decline and represented the remaining 28% of total sales. We had an unusually high hospitality backlog at the end of the third quarter, which is why our fourth quarter hospitality revenue was only down 12%.

Given how hard this market has been hit by COVID-19 and the current lower order rates, revenue from hospitality will decline further in future periods. That said, we import approximately 75% of the hospitality volume we sell. And therefore, our fixed costs for this product category are relatively low compared to our other two markets.

Despite the loss of leverage of the revenue decline, gross margin actually expanded by 70 basis points year-over-year to 35%, driven by ongoing cost savings from our transformation plan as well as higher pricing on selected product lines. We also saw lower healthcare costs during the quarter as employees delayed medical appointments and elective procedures. We are very pleased to note that this is the seventh quarter of consecutive year-over-year gross margin improvement.

Our transformation plan savings, together with an aggressive focus on reduced spending and lower healthcare and incentive compensation costs, resulted in an $11.3 million reduction in selling and administrative costs to $41.6 million, which represented a 20 basis point decline in SG&A as a percentage of sales to 26.8%. On an adjusted basis, excluding CEO transition costs and the impact of our Supplemental Employee Retirement Plan, selling and administrative expenses decreased 130 basis points to 25.5% or by $12.5 million to $39.9 million.

Our effective tax rate in the fourth quarter of fiscal 2020 was 27.6% compared to only 21.6% in last year's quarter, primarily due to the deductibility of stock and other compensation. This variation was equivalent to $0.02 per share. We estimate our effective tax rate will average approximately 25% to 26% in fiscal year 2021.

Net income decreased 17% to $9.2 million, or $0.25 per diluted share compared to $0.30 per diluted share in the fourth quarter of fiscal 2019. Excluding restructuring charges and CEO transition costs, adjusted EPS decreased 9% to $0.29 compared to $0.32 a year ago. Please note that the current year fourth quarter net earnings had a positive benefit of approximately $3.1 million pre-tax or $2.3 million after tax and one-time favorable adjustments to year-to-date annual incentive compensation accrual, which increased adjusted earnings per share by $0.06.

In addition, as mentioned earlier, this year's fourth quarter was favorably impacted by lower incentive compensation costs, delayed spending across the Company, and reduced employee healthcare costs, much of which was related to the COVID-19 pandemic. In light of the difficult business environment, we are very pleased with the 1% increase in our adjusted EBITDA to $19.1 million and EBITDA margin expanding 260 basis points to 12.2% compared to a year ago quarter.

Turning to Slide 9, showing our cash flow performance and our liquidity. We generated $29.8 million in cash from operations in fiscal year 2020. Capital expenditures for the year were $21.1 million. Most of which were related to manufacturing equipment and upgrades to increased automation, the headquarters renovation, which serves as a working showroom for our products and technology.

For the year, we returned $15.9 million of capital to shareholders in the form of dividends and share repurchases. Our return on invested capital for the year was 37.5%. We finished the year in a strong financial position with $97.1 million in cash and cash equivalent as well as an additional $73.4 million in available credit, giving us the resources to not only weather the current economic downturn, but also to make the investments necessary to resume our growth once the crisis abates.

Kristie mentioned Phase 2 of our restructuring program. We estimate a total pre-tax restructuring charge of approximately $17 million to $18 million with $14 million to $15 million expected to be incurred in fiscal year 2021. The remainder will be incurred in fiscal 2022. Together with savings from our ongoing operating efficiencies, we expect total fiscal 2021 cost savings of approximately $20 million. These savings will be split between gross margin savings and a reduction in our selling and admin costs. As we navigate through the pandemic, we will reinvest some of the savings back into the business to move our growth initiatives forward and take advantage of opportunities during and coming out of the crisis.

I will now turn back the call to Kristie to provide further insight on our path forward. Kristie?

Kristine L. Juster -- Chief Executive Officer

Thanks, Michelle. Please move to Slide 10, which shows our business status within today's COVID-19 environment. I am pleased to report that all 10 of our U.S. plants are operating, with a reduced workforce scaled [Phonetic] to the lower volume levels. Order rates were soft in Q4, down 42% year-over-year, led by a 64% decline in our hospitality vertical.

These trends, together with the resurgence of COVID-19 in certain parts of the country, caused us to expect that Kimball International will experience lower year-over-year revenue comparisons over the next several quarters. The good news is that there is a reasonable level of quoting activity in the market. And we had a backlog of $151 million at the end of fiscal 2020. Based on this visibility, we expect first quarter 2021 revenues to be slightly below fourth quarter 2020 levels.

Lastly, on Slide 11 are some key takeaways we consider relevant. Kimball International is moving forward in this challenging environment with a strong financial position and an improving cost structure. Much of our business is in small and mid-sized commercial markets where employees are beginning to return to the workplace. Our targeted verticals provide multiple opportunities for long-term share gains and our Connect 2.0 strategy will enable us to capture new market opportunities.

We are a design-thinking organization, and are developing solutions for professional and personal workspaces that meet the need of standardization and social distancing requirements. Our Company is culturally aligned to excel in the time of change and it's proven our ability to execute effectively for our stakeholders. We are inspired by the opportunities we see ahead for Kimball International.

Operator, now I'd like to open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Greg Burns from Sidoti & Company. Your question please.

Greg Burns -- Sidoti & Company -- Analyst

Good afternoon. So I just had a question regarding your ability to address the growing work-from-home trend. I think it's going to require the right set of products and also the strong digital e-commerce presence and maybe that -- some of that's what you're trying to address with the new organizational structure. But could you maybe talk about where you stand -- where you think you stand in terms of the product set to address work from home as well as maybe give us some background on your current e-commerce capabilities and what you're hoping to develop with the new operating structure? Thank you.

Kristine L. Juster -- Chief Executive Officer

Sure. Greg, thanks for the question. So let me start by saying we have been working on the Etc. brand that is a different spec than the business spec furniture that we traditionally bring to the commercial environment. With that Etc. brand, we have been working on a work-from-home assortment that Phase 1 will actually launch at the end of August. And then, we'll be having a Phase 2 assortment that will be coming out before year-end. And what actually been transpiring and it plays out in our structure is that some of the resources that we have had on our hospitality product development has actually been working on that product portfolio. So, we're excited about the progress that we're making. The work-from-home portfolio is going to be designed specifically for e-commerce and we've been working on that for a bit of time, and I'm pleased with the acceleration that we've seen lately.

We really when we think about our e-commerce strategy, it really is geared to do three things. One, it is going to extend our reach within our workplace and provide a broader market for us. It is going to service, as I just said that work-from-home portfolio. And then, we're also looking toward the direct selling arm for both our hospitality and our new business development efforts.

So, e-comm and [Phonetic] the eBusiness unit will play an important role for us. We are at the beginning of that journey. But I would say that over the last six months or so, we've been gearing up for the structural change that we just announced today. We do have some incremental resources that -- an experience that we've added to that and we believe that that business is going to grow through our relationship with dot-com resellers and also a B2B environment. So, very pleased to have that be an important part of our portfolio going forward.

Greg Burns -- Sidoti & Company -- Analyst

Okay. So just to understand the e-commerce strategy, is it more -- is it going to be like Kimball branded e-commerce properties, or is it going to be more through like a -- wholesale like through Wayfair or Amazon? What is the exact strategy in terms of how you're going to address e-commerce?

Kristine L. Juster -- Chief Executive Officer

Sure. The eBusiness unit will support all of our brands. And each of those brands will have a strategy of how they go to market. The Etc. brand, which is our newest brand, is going to be geared toward the work-from-home portfolio that will be mainly in the e-commerce environment. So, that's kind of the initial charge that we're working on right now. And then, we will be -- that capability and expertise that we are building will actually be servicing all of our brands, and we do see an opportunity for those brands in a B2B relationship.

Greg Burns -- Sidoti & Company -- Analyst

Okay. So -- OK, so it's kind of leveraging more digital tools to enable your traditional channel to interact with the brands.

Kristine L. Juster -- Chief Executive Officer

Yeah, and reseller.com.

Greg Burns -- Sidoti & Company -- Analyst

Okay. And then, what are your thoughts -- I know you have a lot of cash on the balance sheet. What are your thoughts on maybe buy versus build, like going on buying maybe digital native brand or some digital e-commerce capabilities in the market rather than developing them internally?

Kristine L. Juster -- Chief Executive Officer

We believe that we will go after e-comm both organically and through acquisition, and we've been working on that. And I think that will be an important step forward for us. So, we definitely will be embarking on that in the future.

Greg Burns -- Sidoti & Company -- Analyst

Okay. And then, maybe turning to the next phase of the cost savings. You mentioned you are going to be reinvesting some of the business. So reinvest some back in the business and you have a lot of growth initiatives. So of that $20 million, what do you expect to net? And how should we think about that $20 million from a modeling perspective, more back-end loaded, or ratably across the year? How should we model those savings?

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Yeah. Hi, Greg. This is Michelle. So, we are going to see a little bit lower savings in the initial part of the year because the savings is really two different things. It's partly due to the restructuring actions that we're taking and then partly due to just the normal operational excellence savings that we look at every year. So as we work on the restructuring actions and get those executed, the savings related to that will be a little bit here in the first quarter, but it will ramp as we go through the year. So the first quarter, the savings will not be as heavy as what we see in the back half of the year.

Greg Burns -- Sidoti & Company -- Analyst

Okay. And then, maybe you could help us because the fourth quarter seem to have had some one-time items and maybe some greater cost savings due to COVID that some of that the savings might be coming back in terms of variable comp and maybe some other items, employees that were furloughed coming back online. So if we look at SG&A in the fourth quarter, how should we thinking about that going into the first quarter or maybe for fiscal '21? What's a good level to kind of base these $20 million of savings you're projecting off of?

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Yeah. That's a good question, because our SG&A in the fourth quarter were -- was unusually low. We did have the $3.1 million of accrual adjustments that we pointed out in the press release. Obviously, those will not go forward. With COVID hitting in our last quarter, we had already accrued for nine months worth of incentives through the end of March. So, we had a fairly large adjustment we had to make in the fourth quarter to reduce those accruals down to our actual year-end incentive. So that will not happen again.

And we aggressively put some actions in to delay spending in the fourth quarter as we tried to see what the impact of COVID was going to be. So as we said, we are going to plan to pick up spending on growth initiatives as we go through the year. Now we will gate that spending. As we see revenues play out through the year, we'll gate that investment with the level of revenue that we have. So I would say that SG&A is not going to be as low as it was in Q4, but it's not going to be as high as it was obviously pre-COVID with the lower volumes going forward.

Greg Burns -- Sidoti & Company -- Analyst

Okay. Maybe help us think about it. Can you maybe directionally or give us a range of an idea of maybe what the decremental -- like based on your projected cost savings and investments you think you're going to make like a range of maybe decremental operating margins that you might expect this year?

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Yeah. We talked about that a little in our quarter call last -- for the third quarter and we had said 30% decremental on the marginal profit line. We ended up about 28% in Q4, but our EBITDA was actually up compared to EBITDA of last year. So, we actually didn't have a decrement on the EBITDA line in Q4. Now going forward, looking at again marginal profit, probably around that 25% to 30% is what we would anticipate going forward.

Greg Burns -- Sidoti & Company -- Analyst

Okay. Great, thanks. Is there anyone else in the queue. I can hop back in the queue. But if no one's queued up, I'll keep on going.

Kristine L. Juster -- Chief Executive Officer

We do have one person waiting.

Greg Burns -- Sidoti & Company -- Analyst

Okay. All right. I'll hop back in the queue. Thanks.

Kristine L. Juster -- Chief Executive Officer

Okay.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Thomas Forte from D.A. Davidson. Your question please.

Thomas Forte -- D.A. Davidson -- Analyst

Great. Thanks for taking my questions. So the first question I had is, how should investors think about the margins for your e-commerce and work-from-home efforts relative to the other parts of your business?

Kristine L. Juster -- Chief Executive Officer

Tom, thanks for the question. It's Kristie. So when we think ramping our e-commerce business, there is no doubt that we will certainly be looking at those margin from a decretive basis as we start, but that will not be the long-term strategy. Ultimately, we're really excited about what that portfolio can prove out for us in the different channels that we've talked about. And so, we can see that in our start is making some incremental investments and working on our innovation and our cost initiatives and all those things, but I feel very good about the long-term perspective.

Thomas Forte -- D.A. Davidson -- Analyst

And then work-from-home versus the rest of the portfolio?

Kristine L. Juster -- Chief Executive Officer

That's correct.

Thomas Forte -- D.A. Davidson -- Analyst

Same comments apply, I guess, sorry.

Kristine L. Juster -- Chief Executive Officer

Sorry, Tom. Say that again. I couldn't hear you.

Thomas Forte -- D.A. Davidson -- Analyst

The same comments apply on the relative margin. My initial thought would be that for your work-from-home products, they may have lower price points than some of your legacy products. So would the margin profile be the same for your work-from-home products even if the price points are potentially lower?

Kristine L. Juster -- Chief Executive Officer

We are working through that now. That is the objective that we would be in the same area, although I do think we will have some initial start-up costs associated with lower volumes and other items as you start a product portfolio like that. But from a strategic standpoint, I don't see there being a reason that we can't get to the margins of our fleets within Kimball International.

Thomas Forte -- D.A. Davidson -- Analyst

Great. And then I had one more question. So can you talk about geographical trends in parts of the U.S. that have reopened versus others? And then on the geographical trends, can you also talk about your thoughts on maybe kind of the near-term office landscape for major cities outside of maybe the real major cities like New York?

Kristine L. Juster -- Chief Executive Officer

Sure. So, we do track geographies in all of our brands and how they progress. The -- our portfolio in our business is definitely geared toward secondary markets. That has always been kind of the strength of Kimball International. We do see that those markets are making progress, and especially as we see those markets coming back online and entering back into the offices. So, we continue to believe that the secondary markets are key focus of ours and we're continuing to grow that area and reinforce our resources.

There is no doubt that the trend of work from home is -- it's here to stay. But certainly as we're in conversations with our customers, we have seen increased amount of activity. We're very pleased with how the funnel is starting to be filled. And we measure our year-over-year projects in quoting, and we're seeing increased number year-over-year in the project activity. So, we can feel those markets starting to form at a faster rate than we've seen since the crisis.

Thomas Forte -- D.A. Davidson -- Analyst

Great. So, Kristie and Michelle, thanks for taking my questions. Stay well and congrats to your new business leaders. Thank you.

Kristine L. Juster -- Chief Executive Officer

Great, thanks.

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Thank you, Tom.

Operator

Thank you. Our next question is a follow-up from the line of Greg Burns at Sidoti & Company. Your question please.

Greg Burns -- Sidoti & Company -- Analyst

Hi. Just sort of a follow-up in terms of the order patterns. Can you just talk about how they evolved throughout the quarter and maybe what you're seeing here in the early part of the first quarter through July? Thank you.

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Okay, great. So I'll take that one. So, we saw our orders, probably the lowest point was May. As the COVID hit April, there was still some activity going on. That activity continued, but then we saw a drop in orders in May as people tried to understand what the impact of this was going to be. And then, we did start to see a pickup in orders in June. And the rate of June really carried over into July. So, we're still seeing that orders depressed, but we're seeing orders higher in June and July than what we did in May.

Greg Burns -- Sidoti & Company -- Analyst

Okay. So, June and July declines are lower than the consolidated declines from the whole quarter or...

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Yeah.

Greg Burns -- Sidoti & Company -- Analyst

Or maybe it was good enough for it?

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Yeah.

Greg Burns -- Sidoti & Company -- Analyst

Okay. [Speech Overlap] And then...

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Go ahead.

Greg Burns -- Sidoti & Company -- Analyst

Was the dynamic similar across the different business units that you're now reporting or was there any one that maybe stay weak like hospitality? Or is there any business unit specific order trends that you might want to point out?

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Yeah. So, our hospitality was down let's see 40% [Phonetic] -- no, 64% for the quarter. We did see that biggest decline in hospitality earlier in the quarter. And so, we did see a little bit of improvement in hospitality as we went into June and into July.

Greg Burns -- Sidoti & Company -- Analyst

Okay. So it sounds like we're seeing some sequential monthly improvement in the order patterns, but still at depressed levels. Is that a fair assessment?

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Yes. That's correct.

Greg Burns -- Sidoti & Company -- Analyst

And then in terms of the backlog, I guess this quarter you noted you had a large hospitality project backlog that maybe benefited this quarter. Is there anything specific within the backlog that's -- whether it's more heavily weighted to any one business unit or another that you might want to point out?

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

No, there is not -- our backlog was down compared to last year, but the unusual nature that we had at the end of Q3, we don't have that at the end of Q4. It's pretty normal.

Greg Burns -- Sidoti & Company -- Analyst

Okay. And then maybe one last one in terms of hospitality. I know if we went back six months to nine months, you were talking about a lot of large projects in the hospitality vertical that you were expecting at the end of the year. Have those been canceled, delayed? Like what is the -- maybe the outlook here for the hospitality business in general, and maybe as it pertains to some of those large projects that you had talked about previously?

Kristine L. Juster -- Chief Executive Officer

Yeah. Greg, it's Kristie. I'll go ahead and take a couple of comments. One, we have not seen cancellation in the hospitality business, but we have seen some push out of that hospitality business. And as we've talked about before, that business will be slower to ramp than both our office business -- workplace business and our health business. I will say, we're starting to see some more activity through the leisure side of that business. And we have confidence in the hospitality business in the long term, especially the domestic hospitality business, but we're going to have to go through a slow ramp and we're working very closely with our partners and working [Phonetic] order by order as where some of those orders are delayed further out in the year.

Greg Burns -- Sidoti & Company -- Analyst

Just one more. I think you mentioned that your -- in your prepared remarks about leveraging your capabilities from the hospitality industry into other commercial direct sales markets. What exactly does that mean, or what are you referencing there in terms of the market opportunity you think you could expand that hospitality capabilities?

Kristine L. Juster -- Chief Executive Officer

Sure. So, our hospitality has been -- business has been mainly geared toward hotels. And that is a direct sale. It happens in conjunction with designers and specified products that we create for the designer and the brand or end market. There are other end markets that operate that exact same way, senior living operates that way, multi-family housing operates that way, luxury student housing operates that way and we've been on the fringes of those end markets before. And now, we're actually dedicating resources through we're calling a new business development that will be forming those new markets for us in the near term. So, we've just started and just put incremental resources through this new structure announcement on those end markets.

Greg Burns -- Sidoti & Company -- Analyst

Okay. Would you be able to maybe size the incremental addressable market opportunity, or is that too early to kind of...

Kristine L. Juster -- Chief Executive Officer

We are just in the beginning stages of formally doing our resource research and market sizing and insights. So, we'll be happy to share with that as -- share that with you as we kind of formulate our opinion.

Greg Burns -- Sidoti & Company -- Analyst

Okay. Great. Thank you.

Kristine L. Juster -- Chief Executive Officer

Thanks, Greg. Appreciate it.

Operator

Thank you. [Operator Instructions] And I'm not showing any further questions in the queue at this time. I'd like to hand the program back to Kristie Juster for any further remarks.

Kristine L. Juster -- Chief Executive Officer

Great, Jonathan. Thank you very much. First of all, we appreciate everybody joining the call today on behalf of Kimball International. We are very proud of our progress in fiscal 2020. And we came into the crisis with a lot of momentum. We're pleased with how we've managed through the crisis. We're taking very decisive action in our announcement of Connect 2.0 and the Phase 2 of restructuring. And we certainly have a lot of confidence in our decision ahead for Kimball International. So, thank you so much for joining us today and look forward to staying connected with everybody. Be safe.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Kristine L. Juster -- Chief Executive Officer

Michelle R. Schroeder -- Executive Vice President and Chief Financial Officer

Greg Burns -- Sidoti & Company -- Analyst

Thomas Forte -- D.A. Davidson -- Analyst

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