Kimball International : 2021 Annual Report

2021

ANNUAL REPORT

Kristie Juster

Chief Executive Officer,

Kimball International

"Our Company is well-positioned to drive sustaining share growth through our distinct portfolio of brands and deep market expertise."

Letter from the CEO

Our commitment in fiscal 2021, even with the unprecedented challenges we faced, was to lead our employees, our communities, and our company to an exciting future for Kimball International. I am pleased to report we were able to make significant progress on our strategic agenda and we ended the year on a high note. We made tremendous progress, building growth initiatives in our end markets, brands, and products, while streamlining our operations and successfully integrating the Poppin acquisition. We ended the year well-positioned to drive sustaining share growth through our distinct portfolio of brands and deep market expertise. Our purpose guided us every step of the way, seizing opportunities to continue to transform ourselves and meet the needs of those we serve.

2021 Performance

In fiscal 2021, our revenue finished out at $569 million, below fiscal 2020 levels as the pandemic impacted our industry and our end markets. In the second half of the fiscal year, however, orders from our Workplace and Health markets began to pick up. This trend accelerated in the fourth quarter, as Workplace and Health revenues increased 5% year-on- year and accounted for 80% of the period's revenues. In the fourth quarter, orders from these two markets increased 33% and their combined backlog was approximately 7% ahead of pre-pandemic levels, setting the stage for improved performance heading into fiscal 2022. Aligned with our Connect 2.0 strategy, our facility optimization efforts together with our ongoing operational excellence initiatives drove cost savings of approximately $22.3 million in fiscal 2021, ahead of our projections of $20 million.

We ended fiscal 2021 in a strong financial position, giving us the resources to make the investments

to accelerate our growth and to return capital to shareholders in the form of dividends and share repurchases, which amounted to $16.8 million in fiscal 2021.

Clear Path to

Growth Ahead

In August of 2020, we announced a company-wide reorganization into four new market-centric business units: Workplace, Health, Hospitality and eBusiness. This new strategy was designed to accelerate our growth in several ways: to bring vertical product and brand expertise to the new workplace, including building

a work-from-home portfolio; to accelerate our addition of expertise in Health; and to expand our Hospitality business into other commercial direct sales markets. We also established a new dedicated eBusiness unit, responsible for developing our digital and direct capabilities across our brands and end markets.

In December 2020, we acquired Poppin, which brought us deep expertise in digital marketing,

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direct sales, and industrial design. With this transaction we are exceptionally well positioned to meet the needs of the quickly forming new workplace and to drive future market share gains as a leading omnichannel commercial furnishings company.

Together with Poppin, the Work- place end market represents the largest portion of our business.

Towards the end of fiscal 2021 we saw firm indications that a market recovery is underway. As the new workplace is forming, it is evident the hybrid model will be the center of the workplace strategy. Although unique to each company, the principles of attracting and retaining talent through flexibility and highly collaborative space is coming to life in a centralized hub enabling teamwork, community and culture. We believe the ancillary category will play a key role as companies and institutions adjust layouts to foster collaboration, safety and wellness, and amenity -rich spaces. Approximately 85% of our Workplace products are in the ancillary category. We also continue to focus our selling expertise in secondary markets where our brands and relationships have delivered over 80% of our Workplace business. Our Workplace strategy continues to focus on both the ancillary product portfolio and secondary geographies that are leading and accelerating the office re-entry trends in the future of work.

Last year we also officially launched our new Health brand, Interwoven, which has brought together a dedicated team of

professionals with extensive industry knowledge and experi- ence, enabling us to engage in key strategies within targeted health organizations. Throughout the year, we made investments in expanding our expertise with strategic hires and launching new clinical products. We continue to see Health ramping out of the pandemic more quickly than our other end markets.

And finally, to put our customers at the center of all we do, we announced a new customer-centricgo-to-market strategy that will provide our customers access to the Company's full portfolio of Workplace, Education, and Health brands including Kimball, National, Etc., Interwoven, and select products from Poppin. This growth strategy will allow each brand to continue to play a distinct and valuable role while creating a more customized approach to the market with an elevated customer experience.

ESG

We also are very proud to have launched our inaugural ESG summary report in June of this year. It reflects Kimball International's commitment to being responsible stewards of the environment, maintaining a diverse and caring culture, and having strong corporate governance practices. As part of our journey, we reaffirmed our commitment to a more sustainable future and making a difference in the communities we serve. Our ESG strategy features five interconnected marquee areas that focus our resources on areas we believe have the

most social and environmental impact. Kimball International has proudly led the way in protecting the safety and well-being of our employees, working to improve the quality of life in our communities, and promoting the responsible use and preservation of our natural resources. Corporate responsibility has always been embedded in Kimball International's purpose and how we do business. We encourage our stakeholders to read our inaugural ESG Summary Report, which can be found on our website.

Outlook

We are looking ahead to better business conditions and significantly improved financial performance for Kimball International in fiscal 2022. Based on the solid indicators of our business, the backlog and order rates, we were pleased to institute full year guidance for revenue growth of 15% to 20% in fiscal 2022, with a progressive increase in both revenue and gross margin throughout the year.

While fiscal 2021 was a challenging year, it was also one of significant accomplishments for Kimball International. We thank all of our employees for the incredible work done this year and are incredibly confident in our plans ahead as we emerge as an even stronger company in 2022.

We look forward to sharing our progress with you.

Kristine L. Juster,

Chief Executive Officer

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OUR PATH FORWARD

Kimball International products support work and life wherever it happens. From HQ to home office, hotel lobby to hospital lounge, we have our customers covered.

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