Steelcase Inc. (SCS) on Q1 2022 Results - Earnings Call Transcript
Operator: Good morning. My name is Patricia and I will be your conference operator today. At this time, I would like to welcome everyone to the Steelcase First Quarter Fiscal 2022 Conference Call. Mr. O’Meara, you may begin your conference. Michael O’Meara: Thank you, Patricia. Good morning, everyone. Thank you for joining us for the recap of our first quarter fiscal 2022 financial results. Here with me today are Jim Keane, our President and Chief Executive Officer; Dave Sylvester, our Senior Vice President and Chief Financial Officer; and Sara Armbruster, our Executive Vice President. Jim Keane: Thanks, Mike and good morning everyone. It’s going to be with you today. We are speaking to you from our Grand Rapids offices, which are fully open and it’s great to see people coming together again. As of this week, our employees in Michigan no longer have to wear masks and we have no distancing restrictions. So we are fully back to normal. In fact, on average over the first 2 weeks in June, our in-office attendance in Grand Rapids was at 85% of our normal levels. Customers are also visiting again and we can feel a renewed energy as they tour our campus and they interact with our people and engage with our spaces. Our EPS for the first quarter was a little better than we expected because of continued strong spending controls, especially in the Americas and EMEA. Despite several supply chain challenges, including material supply for items like steel and foam, labor challenges, logistical constraints, our first quarter revenue finished in line with our expectations. I want to thank our teams around the world for the work they did to control costs and to fulfill our customer commitments. Inflation had a modest impact on our gross margins in the first quarter and we expect the impact to increase more significantly over the next couple of quarters. We are offsetting some of the inflation through ongoing cost reduction initiatives. But when the levels of increase are this high and this broad, we have no choice, but to swiftly implement price increases, which we did in April and we recently announced an additional increase for August. It will take some time for those increases to take full effect, so we expect inflation net of price increases to be a larger headwind in the second and third quarters. There are some commodities like steel, where prices are expected to retreat from their peaks later this year and we consider that when setting our price increase levels. If these prices do not return to more normal levels, we will consider future price increases. Sara Armbruster: Thanks, Jim and good morning everyone. It’s great to be with you today and I am thrilled to have the opportunity to continue the work Jim has done over his tenure and lead Steelcase as our next CEO beginning in October. I have been intentional over the past 60 days to spend even more time listening to our customers and dealers and to start to get on the road to be in our market, which I wasn’t able to do as much during the pandemic. What I have observed is that many of our customers have a defined plan to return to the office and the physical changes needed to support that return are very clear. Their facility people are working on those changes and they are making progress toward a return to office goal. For other customers, questions remain about exactly when and how to return. And I believe this presents a great opportunity for us. But what I heard very clearly, consistent with Jim’s remarks is that most companies expect to return to the office in a meaningful way now or in the coming months and whether they plan to return in a hybrid manner or to a traditional in-person office with in-person expectations, they are asking us for help. I am excited about our ability to guide these customers in the near-term as well as to serve them over time if they aren’t ready to update their spaces right away. Jim Keane: Thanks, Sara. I think it’s terrific that Sara is taking time to listen and learn. I did exactly the same thing before I became CEO. And like Sara, I had been at Steelcase for many years. As you would expect, it confirms a lot of what you already know, but you also learned some new things, you developed some new relationships and it gives you a way of testing some of your ideas about the future of the company. She is also taking time to talk with many of you, our major investors and analysts who follow the company. I think this is a very exciting time in our industry, probably the most exciting time in my career, work is changing and workplaces are going to have to change to be more relevant. Education and healthcare are changing. And those customers are also investing for a new day ahead and Steelcase’s insights about work, worker and workplace have never been more important and of more interest to CEOs. It’s also a time for us to build new capabilities and expand our offerings, so we can respond more completely to those opportunities. Sara and I are working together and along with Steelcase leadership team during this transition period to make sure we are positioned for this next era. So, now I’ll turn it over to Dave to cover the financials. Dave Sylvester: Thank you, Jim and good morning everyone. My comments today will start with details related to our first quarter results, balance sheet and cash flow. I will also provide some highlights related to our outlook for the second quarter and our targets for the back half of fiscal 2022. Like last quarter, I will focus largely on comparisons to the estimates we provided in March and sequential changes in our results as the year-over-year comparisons were covered in the earnings release. Beginning with the comparison to our outlook, first quarter revenue of $557 million was in the middle of the range we provided and the loss of $0.24 per share was better than the top end of our range by $0.03. For revenue, we grew the top line by 9% organically compared to the prior year, which was impacted by government mandated shutdowns that negatively affected our ability to manufacture and fulfill orders. We experienced stronger than expected order intake in the Americas. However, revenue was negatively impacted by the timing of requested delivery dates, which pushed out a little further than estimated and resulted in a higher than expected backlog at the end of the quarter. Operator: Your first question comes from the line of Reuben Garner from Benchmark Group. Your line is open. Reuben Garner: Thank you. Good morning everybody. Maybe just to start, can we talk about the timing and the thought process behind the dividend reinstatement and the share repurchase announcement. I mean, is this just as simple as orders are inflecting and things are normalizing and the timing is right or is there any other I guess longer term thinking that went into the timing of it? Jim Keane: I think you have got it. It is really that we were at this level of dividend before the crisis. We had always believed that we can see ups and downs in the business, normal kinds of recessions and recoveries and not have to adjust the dividend. We have a strong balance sheet to be able to support that. COVID clearly was not anything normal. And the fact that people were no longer working in offices was even more profound for our industry. And so we felt it was prudent at the time to reduce the dividend and we took lots of other actions, of course, too, we cut pay, we cut Board compensation, we cut hours, we had factories that were shut down for a variety of reasons. And all that’s different today. So today, we are back to normal in many ways. Our orders are growing sequentially, growing year-over-year and we see plenty of signs that – although we are not back to the levels we were at in terms of revenues and profits before COVID. We are going through, what I would characterize it as more of a normal recovery right now. And so we thought it was the right time to reinstate dividend. And repurchases are something we do opportunistically. And we have used 10b5 programs before, and we expect we will continue to use them, and this feels like a good time to have one in place. So, in doing both of them at the same time just reflects the fact that we think we are at that point where we want to return to more normal uses of our capital, including returning value to shareholders. Dave, I don’t know if you want to add anything to that? Dave Sylvester: No. Jim Keane: Thanks, Reuben. Do you have another question? Reuben Garner: Yes, I do. That kind of leads into my next question, and you sort of alluded to normalizing. I am just curious your thoughts on what the potential is that we have sort of snap back to where we were pre-pandemic. What could the timing of that look like? I know you have kind of reiterated your double-digit growth outlook for the second half. But I guess the question is kind of how quickly can we return? What are you guys seeing in terms of the types of furniture that people are ordering, is the office going to look very different or is it more likely that we just kind of return to the way business was pre-pandemic? Jim Keane: Yes. So, I think as we look out into the future, we expect it to return to the way things were pre-pandemic. And in fact, I would say there are reasons for optimism in longer view because we have never had this kind of interest before by CEOs and senior leaders in worker work place, I mean that is a very big conversation right now. And companies are rethinking how they use their offices, how can we make these offices more effective, how can they – how can the office compete better against the idea of working from home, how can you have better privacy, better concentration, better collaboration. So, there is lots of reasons to be really optimistic about the long view. In terms of the transition period between now and then, there is a lot of uncertainty about that. I think the things that would cause it to happen faster would be the things that are happening right now. So, how quickly people feel a return to normalcy in their everyday life will cause more confidence by businesses to return to offices quicker and more completely over these new few months. Secondly, how quickly customers can go to that process of welcoming people back in their office, assessing how it’s going, deciding what they want to view and then placing those orders to upgrade their offices to be able to compete. One of the things that we have seen is that our offices and for many of our customers who have made investments in recent years, who have taken more progressive approaches to their offices, who had already embraced mobility in the workplace, already embraced more flexible working arrangements with their employees. They have a little left to do and some of the ones that have not need those investments in the office really have more to do. So, there could be a movement by some of those companies to say, we have to step up and update our offices. So, that’s on the demand side. On the other side of the equation is just some of the supply things we are talking about, making sure that we have the supply chains necessary to keep up with demand. We are doing everything we can do to do that. A lot of our customers are facing challenges with their own construction projects related to labor availability that varies by market. But – and that might be something that resolves as we get into September and October. But for these next few weeks, that’s something we are still hearing about. So, some of those could be some headwinds, but our outlook considers all those factors. It’s a good question. I like the spirit of your question, too, Reuben, because our energy around here is to make sure that we are ready to respond if the recovery comes faster than we expected. Reuben Garner: Perfect. And I am going to sneak 1 more in, if I can. You mentioned small and medium-sized businesses. What about the dispersion in terms of geography? I mean, are you – we have got kind of return to office data that’s out there, and it kind of shows some cities have come back a little faster than others. Are you guys seeing a very similar cadence in markets like New York and LA and San Francisco are maybe lagging the others? And do you find that some of the other markets are, I guess, an encouraging indicator of what can come in some of those bigger cities? Jim Keane: Yes. I would say – first of all, I would say across the southern parts of the U.S., some of the Midwest regions, return to office had already begun to happen more gradually earlier this year for a variety of reasons. And the markets that were the most challenged, if we think 2 months or 3 months ago, would have been the big cities, New York, Chicago, LA, San Francisco. What’s happened over the last few weeks as we have seen cities like New York and now Chicago begin to accelerate their return to the office. And that’s happening. New York is actually showing a pretty good pace of return, and you have probably seen some of that data markets, it’s notoriously the slowest right now in San Francisco, the tech sector, a lot of those companies made choices really many months ago is not to bring people back until like well into the latter half of this year, even into next year. And so San Francisco is lagging. In some of those markets, in fact, employees have moved out of those markets. And it may be a longer period for its return normal or may not return to normal for quite some time. So San Francisco, I think is the one that I would point to is most lagging city. But again, New York, Chicago are beginning to show strong signs of return. Dave Sylvester: And yet we still see order growth in those cities. Even like Toronto or New York, San Francisco, India, parts of India, we still – orders haven’t gone to zero. It is remarkable to see how the order patterns continue to reflect orders in those markets, even though the offices are largely shutdown, which is, I think, telling to how some companies are readying themselves for the return of their employees. They are trying to get out in advance of the return of employees or they are accelerating the finishing of projects that may have started either before or during the pandemic. Jim Keane: We see similar things in Europe by the way. So, some countries have been ahead of others in terms of vaccinations and managing COVID rates. And so you see variances. It’s nice to see the UK, for example, beginning to come back stronger now as the vaccination rates have climbed and their COVID rates have fallen. Reuben Garner: Great. I said – I want to sneak 1 more in. I apologize, but I got a quick follow-up. Jim, you mentioned capacity constraints. I think was the word you used. Are you guys seeing increased lead times or the constraints on your end or are you just talking about – are they – is it labor, is it the supply chain, is it – what exactly are you referring to there? Jim Keane: Well, I would refer to it as supply chain constraints within capacity. So, it’s not really capacity meaning like our factories and our ability to perform. It can be the entire supply chain, and it can be kind of any piece of the supply chain. So, you could have 1 supplier who maybe has the COVID outbreak somewhere in the world and that can cause a challenge for us in the products to those parts go into. We have been dealing with freight. We have had some freight delays, as we have talked about with you guys over the last several months. Those have gotten a little bit better. They are not quite as, I would say, acute as they were maybe 3 months ago, but they are still there, and we see still deal with them from time to time. We had a factory in Malaysia that was shut down for a while and then partially reopen. We have a factory in Pune, India. So, we have some places around the world where we are still dealing with COVID. And then the steel sector, the foam, those commodities are – have price challenges, but can also have supply chain challenges. So, I don’t want to overstate it, but it’s something that we are watching and considering, and of course, managing to make sure that we minimize the effect. We have seen some increases in lead times on some products that are directly affected by that, but I wouldn’t say those lead times are up across the board. Reuben Garner: Thanks guys. Congrats and good luck. Jim Keane: Thanks. Operator: Your next question comes from the line of Steve Ramsey from Thompson Research Group. Your line is open. Steven Ramsey, your line is open. Jim Keane: Maybe we go to the next person in the queue and see if we can get. Operator: Your next question comes from the line of Budd Bugatch from Water Tower Research. Your line is open. Budd Bugatch: Thank you. Good morning. First, Jim, congratulations on your announced retirement and I know we will be talking to you before that happens. But just congratulations to Sara, congratulations on your appointment and best wishes. And I guess my first question, Sara, is to you because now that you are getting into the hot seat. Talk a little bit about your conversations, if you would, with executives? And what did you – what surprised you? And what – maybe you can give us a kernel or 2 of what you learned? Sara Armbruster: Sure. Thanks Budd. So yes, it’s been a great round of conversations and being able to reengage with customers and design partners and our dealers to understand what’s on their minds and what they are seeing and hearing. And I think consistent theme across all of those conversations has been changed, changed in the workplace and people are thinking about how they can engage employees, allow them to work in new ways and be effective and bring them back to the office. And I think that that change is something that’s always good for our industry. And when we see CEOs and business leaders really engaged in thinking about work and thinking about workspace, I think that that tends to be a good opportunity for Steelcase. So, people are asking questions about how to bring people back effectively. As Jim said, some organizations may not have had the most up-to-date workspaces before the pandemic. So, I think they are now asking questions about how they need to catch up and what the future looks like. We are definitely hearing interest in specific kinds of solutions. So for example, how organizations that may have had a very open office floor plan before the pandemic. How they are now thinking about the best way to reintroduce different levels of privacy across their office space to accommodate different kinds of needs. People are asking questions about hybrid collaboration and helping to integrate technologies for communications with physical space to enable people who are in the office to effectively work and collaborate with people who might be in another location. So, I think all of these kinds of questions show a really deep reflection on the part of our customers about how to support their employees and how to reengage their people. And I believe that, that’s going to create tremendous opportunity for Steelcase. Budd Bugatch: It does sound exciting, and I am sure none of us wanted to get to this level of strategic thought about use of space quite this way, but we didn’t have any choice. So, it really does sound like it’s going to be a very new normal. I do have a few other questions on – David for you, inflation price, you talk about the $14 million in the second quarter, I am not sure you sized it for the third, if you can add your crystal ball now that do you think it peaks in the third quarter and then goes down and there is a price cost get positive in the fourth quarter, or we are not quite there? Dave Sylvester: I would, based on current estimates, which are coming from external indices that we are using. My comments were that net effect in Q3 would be similar to Q2. So, let me break that down. I think we will see higher inflation. We are projecting higher inflation in Q3 compared to Q2. But we are also projecting higher pricing benefits in Q3 versus Q2, in part because of the April adjustment will be more fully in place, but also the August adjustment that we just announced earlier this month, will be kicking in as well. And by the fourth quarter, again, based on current external indices and projections, we would expect to offset more of the inflationary pressures. So, not – let’s call that an approximate push, plus or minus on either side. Budd Bugatch: Got it. And I am going to sneak one more if we did. You talked about school and a little bit about healthcare, but school, are we going to see the normal seasonality for Smith? I mean, we have got, and I am not sure we know normal anymore. But is the second quarter where we peak or is it what do we do for school with issue with so much money coming into that from the Federal government? Jim Keane: Yes. So, we are definitely going to see the same seasonality in the second quarter, in terms of just the summer surge, that’s really a factor of orders that we have already received and are executing against. And so we believe that’s true. And what is unclear right now is what exactly will happen with all this money that’s flowing. We are right now seeing very strong demand signals. And some of that is converted already into orders. So, there are some states that have moved that money from the Federal government to their systems, into the hands of people who can make buying decisions, and some of the orders we are seeing already in some parts of the country are related to that. In other parts of the country, that it’s going more slowly. So, it has to move through various approval levels. It’s possible, we don’t know for sure, but it’s possible that we could see an extension of the demand curve into the second half of the year more than we would normally see. Because once that money is there, people are going to I think want to spend it. But it’s a little too early to know for sure, that’s what we are imagining. Good news is, of course, we have the capacity to handle our summer spike. And so if the demand continues, should be in good shape. Budd Bugatch: Okay. Well, I know I am an old guy, but I got a little choked up when I heard everybody was back in the office. I mean, its, normal is good. Now we are all looking forward to a lifetime of normal from the whole point. So, congratulations to you for navigating this Jim and to your team across the globe. Thank you very much. Jim Keane: Thanks, Budd. And we welcome you back here anytime you want to come for a visit. It’s been a fun week here in Grand Rapids. Yesterday, we had an ice cream social outside the window where we are meeting, our employees gathered for that a couple days earlier. We had the first gathering of people we have hired since before the pandemic. These are people that were all hired during the pandemic and they had not been together really face to face. So, we are able to bring those new employees together with members of our leadership team and be outside and talk with each other and meet each other. And it’s really, I am an old guy too. But and I would tell you, I feel a new energy when I am together with some of these people who just joined our company or just people we haven’t seen for a while. So, thanks for your comments. Budd Bugatch: Well, the Icon is going to be in October this year. So, I am curious to see what happens. They say they are going to revert back to the June dates, but October not a bad time to do this, I think? Jim Keane: So, we will see… Budd Bugatch: I am sorry. Jim Keane: We are looking forward to the Icon and October is, as you say, different than normal, but I will take it, I will take being able to be together again with people from the design community and our dealers and our customers. Budd Bugatch: Well, good talking to you. Thank you. Jim Keane: Thanks. Operator: Your next question comes from the line of Rudy Yang from Berenberg Capital. Your line is open. Rudy Yang: Hey, guys. Good morning. Thanks for taking my questions. Jim Keane: Hi, Rudy. Rudy Yang: So, with hybrid workplaces that of course creates a need for new products that kind of accommodate to the new type of office model. Yes, can you talk about what kind of products you are currently focusing on in order to kind of cater to this new space and how you are thinking of R&D expenses throughout the year? Jim Keane: Yes. So I will give you a few examples. First of all, we think privacy is going to be a big deal for a lot of people depending on what their office was like before, when they went home to work for a while, they saw the benefit that come from kind of unbroken concentration to begin the ability to work without interruption. And we have heard a lot of that from users that they want to come back to the office, but they don’t want to lose that ability to concentrate. And in some offices that haven’t been updated for a long time might not offer enough of that. They might have high density benching applications, for example that can really be challenging for people who are trying to concentrate for long periods of time. So, we think that there could be a return to the kinds of products that we offer that might include private offices, which would involve wood furniture and architectural walls, could be more enclaves that are more on demand that people might just use when they need it. And again, that’s something that architectural walls can respond to and also products like RoomWizard that are there for room booking. And also in Open Plan, products that can provide visual privacy and some acoustic privacy and we have a number of products already in our portfolio, like Brody, but we also have other products that are in development of response to those needs. So, that’s on privacy. The second theme I will talk about is collaboration. So, as Sara mentioned, when people come back to their offices, meetings aren’t going to be the way they were before, because it’s likely that whereas in the past a meeting of 6, 7, 8 people or everybody would be in the room, now you find more and more than one or two people might be working from home that day. So, almost every meeting is going to be a hybrid collaboration meeting. And even people who choose to be in the office everyday are going to be working in a new way, because some of their colleagues might be working from home. And that puts challenges on existing conference rooms. They really aren’t setup for that. How do you make sure that those people that are working remote are fully represented in the meeting? And we have solutions already in our portfolio that have been there for many years, like media:scape, we also have our partnership with Microsoft that has provided products that we can offer to customers that help meet some of those needs. And then the finally, ancillary spaces, spaces that use furniture that’s more informal, people are continuing to be interested in those kinds of products, but they are really interested in how those products can support real work, the real work of people meeting with each other solving problems together, brainstorming together and making decisions together. So, we believe it’s going to be more focused on the real work side of ancillary versus the kind of social side of ancillary. So, those are three examples. And there is many more, but those are some of the ones that have emerged early and through our own experiences. Rudy Yang: Great. It’s really helpful. And then you had talked about small and medium businesses kind of driving orders this quarter, I guess what’s kind of the timeline and expectations for once some of the larger orders from the bigger firms to start coming in? Dave Sylvester: I think that’s tied to city’s opening and those companies getting back to the office. So I would imagine it’s going to be a more meaningful part of our back half of the year and into the following year. Rudy Yang: Got it. And then last one for me, you kind of mentioned project spending as well didn’t increase at the rate you expected this quarter, I believe. Can you talk a bit more about kind of the spend rates you are seeing and if you expect them to be slower in the second quarter as well? Dave Sylvester: Well, we provided guidance of $190 million to $195 million net of land gain, right. So the net was $180 million to $185 million. And last quarter, we also gave an indication of what we were targeting for the full fiscal year that we were in the kind of that same range of spending, obviously excluding the land gain, that we didn’t see operating expenses in the back half of year tracking above $200 million. So I think they tracked a little bit slower than we are expected because we were operating in a cautious way and we saw a pandemic surge in India and Europe has remained locked down for much of the – of our first quarter. So our spending paced a little bit cautiously. But as we – as our confidence continues to grow about the recovery, I think you’re going to see our spending increase to the level that we’re projecting in Q2 before the land gain and then likely be at or around that same level, plus or minus, let’s say, single-digit millions into the back half of the year. Jim Keane: Rudy, was your question about our spending? Or is it about our customers’ project spending? Rudy Yang: I’m sorry. Yes, it was more focused on the customer spending asset. Jim Keane: Yes. From a customer perspective, this is where those leading indicators are so important. So customer visits, RFPs, mockups. These are all the kinds of activities that are more connected with large customer activity, and we consider all of that to be a good sign. It’s a little hard for us to know exactly when those are going to turn into orders because it’s like we’re restarting the engine right now. If this is a normal part of the cycle, we would know exactly what that time period is from those kinds of activities to orders. But right now, we can’t be positive. So – but we’re encouraged by the kind of sequential growth we’re seeing in that kind of activity. Rudy Yang: Thanks. It’s really helpful. Thanks a lot, guys. Jim Keane: Yes. Operator: Your next question is from Kathryn Thompson from TRG. Your line is open. Kathryn Thompson: Hi, thank you for taking my questions today. One follow-up on the EMEA growth, could you clarify that what end markets are driving demand. Now in the U.S., you talked about school and health care and improving overall, but are there notable particular end markets that are driving demand in Europe? Dave Sylvester: Not that come to my mind. I’m looking across the table as well. I mean it was pretty broad-based geographically and across the end markets, led by the UK, Germany and France. Jim Keane: And led by the UK, in part because the UK was digging out a pretty deep hole. They had a really rough time with COVID. They were in a pretty aggressive shutdown that really affected demand. And now that has improved significantly, and we’ve seen a nice returnable recovery there in the UK. But as Dave said, we’re seeing it across really all the markets with only maybe a couple of exceptions. Dave Sylvester: Yes. I mean, to Jim’s point, if you recall last year, how COVID moved across the world, starting in Asia, moving to Europe and then to the U.S. For Europe, we were in the pandemic for much of our first quarter. So our order rates were depressed, but still 44% growth was pretty resiliently impressive. Kathryn Thompson: Yes, yes. And just to – could you clarify what was your order growth in Europe? Dave Sylvester: Year-over-year, the growth in orders was 44% – in orders. Kathryn Thompson: Okay, perfect. Alright. Then when looking at just as more of a supply chain question, we look at a wide variety of companies on the building products and which is just the construction value chain. And what we are hearing is a consistent theme is just you’re having key supplies or components and moving solely better delaying deliveries. Is this happening for you? And does this contribute to your second half sales guide? Jim Keane: Yes, we’re seeing those kinds of factors ourselves. So we see it through upstream suppliers in the U.S., but also kind of around the world. We see it through the challenges in moving product through the freight systems, containers over the water, but also land freight. Everything is just maxed out, it has been maxed out for a while. So we use those supply chains, and we are doing our best to manage through it, but we have seen interruptions and some lead time increases because of it. And as we think about our outlook for Q2, we’ve considered some of that. And so our growth is hedged to – in consideration of supply chain challenges. We’re hopeful that, that will continue to resolve. And some of it is also downstream, which may be a little different that the installation of furniture. It’s the project – the construction projects themselves that have to be complete for us to be able to deliver furniture because customers don’t want the furniture until the – at that point of the construction cycle. So if they are facing labor challenges on the job site, then that can slow down our shipments and slowdown orders. I am hopeful in the U.S., though that as we get into September and some of the forces related to unemployment begin to dissipate we will see people returning to the workplace in larger numbers and some of those factors will begin to normalize. And also, as COVID improves, hopefully, every week, every month in the U.S., in the rest of the Americas and around the world. A lot of those supply challenges should also start to be resolved. So I’m hopeful that as we get past the second quarter into the third quarter, we start seeing some improvement. Kathryn Thompson: Okay. And last question on the supply chain. One of the things we’re also seeing is that things are solely getting a little bit better. However, with shipping containers, now you’re going to have to compete against the Christmas rush the shipping? And you’re seeing all sorts of companies like Home Depot, getting down ships and then others relegation rates in order to just have space on ships. What if any impact would that holiday peak season impact your ability to ship? Or – and what other factors have you done to mitigate this risk? Jim Keane: Yes. So I’d say, first of all, compared to lots of those other companies, our supply chains are largely regionalized, meaning the customers we serve in the United States are primarily served by products that are made in the Americas. The customers we serve in Asia are primarily served by products we make in Asia and the same for EMEA. So that’s the first thing. Like if we don’t have to ship as much over the water, that’s good. And then we have many components and products that are made in multiple places around the world, so that gives us some flexibility. So we’re probably less vulnerable to that compared to other companies you might be thinking about. That said, we still have some, and we faced our own challenges and it can be a part or a mechanism that may be made in one part of the world. One of the challenges we faced this year was the containers were coming over from Asia, and we had products to export from the U.S. to customers in Asia. So it finished goods made in the U.S., shipping to Asia. And normally, you would think that there’d be no problem finding those containers because ships were choosing to go back empty rather than waiting to reload. There was actually a shortage of outbound containers from the U.S. to Asia. So I don’t think we’re going to see that again. I think this was a very unusual situation. It was driven by the stimulus money as well as lots of other factors. So I think when we get through this, we may face challenges, but I think there’ll probably be different challenges. And again, I don’t think we’re as vulnerable to a lot of other companies when it comes to this. Kathryn Thompson: Okay. And then finally, just – you touched on this a little bit in the prepared commentary and in the Q&A. But when you’re having conversations with your clients in terms of the new office – What are the big differences for the past? Is it still an open format? Then also, when you think about the types of products sold, you were selling a lot of chairs and the lockdown in the wake of that. What is the margin profile of the types of products have been demanded now? How does that differ from what we saw in the height of the pandemic? Thank you. Jim Keane: Yes. So I think the big difference is in – as people are thinking about offices is, first of all, over the last several years, leading up to pandemic, there was a segment of customers who are always trying to find a way to make their offices the most efficient from a real estate perspective, which means higher and higher levels of density from smaller offices, more open benches. And I think as we’ve come through this pandemic, even with people largely vaccinated and with COVID in remission, we still have a new sensibility about density in the workplace. So I think people – I think users going to be more reluctant to sit in the kind of highly dense environments that they maybe were asked to sit in before. And so that’s one difference we’re seeing. I don’t want to exaggerate that because I don’t think it’s going to go dramatically in the other direction. But I think some of the people that are pushing that to an extreme have some work to do to pull back on density. I also think, as I said before, the privacy is going to be a bigger factor. I think collaboration is going to be in the forefront of what a lot of people are talking about because what we’ve learned is that there is certain kind of work that you can do from home, a day a week, a couple of days a week. As the part that’s tougher to do – and by the way, meetings themselves, you can also do from home. So it was straight up meetings for people are just kind of reporting on giving updates on their projects or whatever that kind of work can be done from home, but two collaboration where people are trying to bring some, use design thinking, develop new products. These require a different level of activity and as people are thinking about collaborative spaces, they are not just thinking about meeting rooms in the classic sense. They are thinking about spaces that are for more active meetings. I mean our product like our Flex product is really designed for that kind of work. So maybe those couple of examples. In terms of the mix of products sold, if there is a shift away from high-density benches, I wouldn’t say those were the most profitable products before. They were largely commoditized products. It’s hard to differentiate some of the products that are in demand like some of these technology products that Sara mentioned, products that support use of technology in the office, products like Flex. These are all quite relevant. Seating remains relevant, so we haven’t really seen a shift in seating. In fact, you could say, if anything, to work from home surge, which will continue going forward and still be interested in working from home, causes people to value high-performance seating to a greater degree because there is no chair you sit in as much as the chair you sit in at home, if you’re working from home all day long. I mean it’s 8 hours a day of sitting in that same chair, that’s really unusual in an office. So people are beginning to understand the value of high-performance ergonomic chairs. And that we think will also be true, will continue to be true in the office. So I don’t see a major shift in mix from a profitability perspective. And if there is any at all, I’m actually enthusiastic about that potential. Kathryn Thompson: And do you – one of the things also point a string on. Could you theologically see more of your products are being bought simply because with an open format, you don’t have dividers, you don’t have these things. Is a possibility of, okay, will the margins could be similar, but you could be buying more things in the new offices? Is that – what is your thought from that assumption? Jim Keane: Well, I think our biggest competitor is the longevity of our existing products. So in offices don’t change. Customers own products that they bought last year, 5 years ago or 10 years ago, and they work just fine. They don’t wear out. They are very high-quality products that can be used for many, many years. So I think the way to think about that is change is good. When our customers are going to change, when they are realizing that it’s time for them to step up and make investments because the nature of work has changed, expectations for the workplace have changed, challenges in attracting and retaining workers which you know probably from the articles you’ve seen that there is a lot of talk about employees looking to change employers. And so there is going to be a battle for talent in this coming year, I believe. All of those things are demand drivers for us, much more than what people sometimes think of, which is office vacancies or what’s happening in the commercial office space sector. Those are important, but it’s changed within the existing real estate footprint. That is the primary driver. So that’s where I think the buying more products part will come that as customers look at their spaces, if they decide as I believe that there is – that they need to update those spaces, that’s a really important demand driver for us. Kathryn Thompson: Okay, great. Thank you very much. Jim Keane: Yes. Operator: There are no further questions at this time. Mr. Keane, I turn the call back over to you. Jim Keane: Thank you. So we wish you all a safe and enjoyable summer as we all continue to return to normal. Thank you all for joining the call today. Operator: This concludes today’s conference call. You may now disconnect.
Steelcase Inc. (NYSE: SCS) Surpasses Earnings and Revenue Estimates
- Steelcase Inc. (NYSE:SCS) reported an earnings per share (EPS) of $0.20, surpassing the estimated $0.12.
- The company's revenue for the quarter was $779 million, exceeding expectations and marking a 7% year-over-year increase.
- Steelcase demonstrated improved operational efficiency with a gross margin of 33.9% and a 45% increase in operating income.
Steelcase Inc. (NYSE: SCS), a leading name in the office furniture industry, continues to impress with its innovative designs and solutions. Competing within the Zacks Business - Office Products industry, the company has shown remarkable financial performance, underscoring its strong market position and operational efficiency.
On June 25, 2025, Steelcase reported an earnings per share (EPS) of $0.20, significantly beating the estimated $0.12. This 66.67% earnings surprise, as highlighted by Zacks, marks the company's consistent ability to outperform consensus EPS estimates over the past four quarters.
The company's revenue for the quarter ending May 2025 was $779 million, surpassing the Zacks Consensus Estimate by 3.05%. This achievement represents a 7% increase from the previous year's revenue of $727.3 million, driven mainly by a 9% increase in the Americas. This growth reflects strong demand from large corporate customers, despite challenges in the government and education sectors.
Steelcase's financial health is further evidenced by its improved gross margin of 33.9%, up by 170 basis points. Additionally, operating income saw a 45% rise compared to the previous year, indicating enhanced operational efficiency. The company's valuation metrics, including a price-to-earnings (P/E) ratio of 10.35 and a price-to-sales ratio of 0.39, suggest a relatively low market valuation compared to its revenue. Moreover, a debt-to-equity ratio of 0.63 indicates a moderate level of debt, while a current ratio of 1.54 reflects its ability to cover short-term liabilities.
Steelcase Inc. Quarterly Earnings Preview
- Steelcase Inc. is set to announce its quarterly earnings with an EPS estimate of $0.1 and expected revenue of $729.12 million.
- The company has launched Ocular™ View in partnership with Logitech, aiming to enhance virtual meetings through extended reality experiences.
- Steelcase is committed to achieving a net-zero future by 2050, with plans to reduce carbon emissions across its value chain by over 90%.
Steelcase Inc. (NYSE:SCS) is gearing up to share its quarterly earnings report on Wednesday, June 19, 2024, after the market closes, with Wall Street setting the earnings per share (EPS) estimate at $0.1. The company, a global leader in office furniture, design, and spatial solutions, is also expected to report revenue of approximately $729.12 million for the quarter. This anticipation comes at a time when Steelcase is making significant strides in innovation and sustainability, aiming to redefine the workspace and its environmental impact.
Recently, Steelcase announced a partnership with Logitech to launch Ocular™ View, an extended reality experience designed to enhance virtual meetings. This collaboration leverages Steelcase's expertise in hybrid collaboration and Logitech's advanced video technology, aiming to make remote interactions feel as real as face-to-face meetings. By integrating with platforms like Microsoft Teams and Zoom, Ocular View seeks to improve personal wellbeing, foster social connections, and ensure user privacy. This innovative step reflects Steelcase's commitment to adapting to the evolving needs of the modern workplace, potentially impacting its financial performance positively.
In addition to technological advancements, Steelcase has committed to achieving a net-zero future by 2050, with a detailed plan to reduce carbon emissions across its value chain by over 90%. This initiative, titled "Power of Possibility: A Net-Zero Future Needs Us All," outlines a comprehensive strategy for minimizing the environmental impact of Steelcase's operations, products, and transportation methods. By encouraging collaboration among employees, dealers, suppliers, customers, and industry peers, Steelcase is positioning itself as a leader in sustainability within the office furniture industry. This commitment to environmental responsibility could enhance the company's reputation and appeal to investors and customers alike, potentially influencing its financial metrics.
Financially, Steelcase exhibits a price-to-earnings (P/E) ratio of approximately 18.18, indicating investor confidence in its earnings potential. The company's price-to-sales (P/S) ratio of about 0.45 and an enterprise value-to-sales (EV/Sales) ratio of roughly 0.55 suggest a market valuation that is relatively low compared to its sales, possibly offering an attractive entry point for investors. Furthermore, with an enterprise value to operating cash flow (EV/OCF) ratio of approximately 7.27 and an earnings yield of around 5.50%, Steelcase appears to be valued favorably in terms of its operating cash flow and potential return on investment. The company's debt-to-equity (D/E) ratio of about 0.55 and a current ratio of approximately 1.58 indicate a balanced approach to financing and a healthy financial position, ensuring stability and resilience in its operations.
As Steelcase prepares to release its quarterly earnings, the combination of its innovative partnerships, commitment to sustainability, and solid financial ratios positions the company as a noteworthy player in the office furniture and design industry. Investors and analysts will be keenly watching the upcoming earnings report to gauge how these strategic initiatives are translating into financial performance and market valuation.
Steelcase Inc: A Compelling Investment Opportunity in Undervalued Stocks
Steelcase Inc: A Compelling Investment Opportunity
Steelcase Inc (NYSE:SCS) stands out as a compelling investment opportunity, especially for those looking to diversify their portfolio with undervalued stocks priced under $20. As noted by InvestorPlace, the company's remarkable 50% stock price increase over the past year is a testament to its growing appeal among investors. This surge is backed by a solid foundation of high-end office furniture manufacturing, catering to both enterprise clients and the burgeoning remote work sector. With a market capitalization just shy of $1.5 billion and a forward dividend yield of 3.06%, Steelcase not only promises significant returns but also positions itself as a resilient player in the market.
The financial health of Steelcase is further underscored by its impressive financial metrics. The company's price-to-earnings (P/E) ratio of approximately 17.78 reflects investor confidence, showing a willingness to pay nearly 18 times earnings. This is complemented by a price-to-sales (P/S) ratio of about 0.44, indicating the market's undervaluation of the company's sales. Moreover, the enterprise value to sales (EV/Sales) ratio of roughly 0.54 and the enterprise value to operating cash flow (EV/OCF) ratio of approximately 7.14 further highlight Steelcase's attractive valuation in relation to its sales and operating cash flow, respectively.
Steelcase's financial stability is evident through its debt-to-equity (D/E) ratio of about 0.55, showcasing a balanced approach to leveraging debt financing against its equity. This prudent financial management is crucial for sustaining growth and navigating economic uncertainties. Additionally, the current ratio of approximately 1.58 indicates a healthy balance between the company's assets and liabilities, ensuring that Steelcase is well-positioned to meet its short-term obligations.
The company's promising fiscal year 2025 outlook, with a projected 1% – 5% revenue growth and an EPS ranging between 85 cents and $1.00, further bolsters investor confidence. This optimistic forecast is supported by a 10% sales increase in the initial weeks of the fiscal year, signaling strong momentum. With a year-end EPS of 68 cents, the guidance provided by Steelcase's management underscores the company's potential for continued financial growth and its status as an undervalued stock under $20.
In conclusion, Steelcase Inc (NYSE:SCS) presents a compelling case for investors seeking undervalued opportunities. The combination of a strong dividend yield, consistent revenue growth, and a favorable fiscal outlook, coupled with solid financial ratios, positions Steelcase as a robust investment choice. The company's strategic focus on both enterprise and remote work markets, alongside its financial health and stability, make it an attractive option for those looking to capitalize on undervalued stocks.
Steelcase Shares Gain 10% After Q3 Results
Steelcase (NYSE:SCS) released its third-quarter earnings report, which led to a more than 10% share price gain intra-day today.
The company posted revenue of $777.9 million for the quarter, a 5.9% decline from the same period last year and short of the consensus estimate of $796.5 million. On a brighter note, Steelcase's adjusted earnings per share (EPS) for Q3 were better than anticipated, coming in at 30 cents versus the expected 22 cents.
Steelcase attributed its 16% year-over-year growth in the Americas primarily to significant purchases by large corporate customers. The company interprets this trend as a sign of the strength of its offerings, as businesses invest in their workplaces to accommodate new working styles.
Looking ahead to the fourth quarter, Steelcase expects its adjusted EPS to be between 19 cents and 23 cents, compared to the Street estimate of 20 cents. The projected revenue for the quarter is forecasted to be between $765 million and $790 million, compared to the Street estimate of $789.3 million.
Steelcase Beats Q1 EPS & Revenue Estimates
Steelcase (NYSE:SCS) released its Q1 earnings report yesterday, surpassing expectations. The company reported an EPS of $0.09, above the Street estimate of $0.01. Revenue also exceeded expectations, growing 2% year-over-year to $751.9 million, compared to the Street estimate of $719.23 million.
The gross margin for the quarter was 31.2%, showing a significant increase of 530 basis points compared to the previous year. This growth was driven by favorable pricing and operational efficiencies.
Looking ahead to Q2/24, Steelcase anticipates an EPS range of $0.19 to $0.23, compared to the Street estimate of $0.21. The company expects revenue in the range of $815 million to $840 million, compared to the Street estimate of $841 million.
CEO Sara Armbruster expressed optimism about the company's performance, stating that they are on track to achieve their fiscal 2024 financial targets, partly due to better-than-expected results from their large corporate customers.
Steelcase Beats Q1 EPS & Revenue Estimates
Steelcase (NYSE:SCS) released its Q1 earnings report yesterday, surpassing expectations. The company reported an EPS of $0.09, above the Street estimate of $0.01. Revenue also exceeded expectations, growing 2% year-over-year to $751.9 million, compared to the Street estimate of $719.23 million.
The gross margin for the quarter was 31.2%, showing a significant increase of 530 basis points compared to the previous year. This growth was driven by favorable pricing and operational efficiencies.
Looking ahead to Q2/24, Steelcase anticipates an EPS range of $0.19 to $0.23, compared to the Street estimate of $0.21. The company expects revenue in the range of $815 million to $840 million, compared to the Street estimate of $841 million.
CEO Sara Armbruster expressed optimism about the company's performance, stating that they are on track to achieve their fiscal 2024 financial targets, partly due to better-than-expected results from their large corporate customers.
Steelcase Beats Q1 EPS & Revenue Estimates
Steelcase (NYSE:SCS) released its Q1 earnings report yesterday, surpassing expectations. The company reported an EPS of $0.09, above the Street estimate of $0.01. Revenue also exceeded expectations, growing 2% year-over-year to $751.9 million, compared to the Street estimate of $719.23 million.
The gross margin for the quarter was 31.2%, showing a significant increase of 530 basis points compared to the previous year. This growth was driven by favorable pricing and operational efficiencies.
Looking ahead to Q2/24, Steelcase anticipates an EPS range of $0.19 to $0.23, compared to the Street estimate of $0.21. The company expects revenue in the range of $815 million to $840 million, compared to the Street estimate of $841 million.
CEO Sara Armbruster expressed optimism about the company's performance, stating that they are on track to achieve their fiscal 2024 financial targets, partly due to better-than-expected results from their large corporate customers.
