8-K: Steelcase Reports Strong Order Growth in First Quarter, Raises Outlook

Steelcase's first quarter results show an 8% increase in orders, driven by a 10% growth in the Americas, and an improved operating income of $10 million compared to the prior year.

Summary

• Steelcase reported first quarter fiscal year 2025 revenue of $727.3 million, a decrease of 3% compared to the prior year.
• Net income for the quarter was $10.9 million, or $0.09 per share, compared to $1.5 million, or $0.01 per share, in the prior year.
• Adjusted earnings per share were $0.16, up from $0.09 in the prior year.
• Orders grew by 8% overall, with a 10% increase in the Americas and a 2% increase internationally.
• The Americas order growth was primarily driven by large corporate and education sectors.
• Operating income improved by $10.3 million year-over-year to $17.6 million, and adjusted operating income increased by $8.5 million to $28.2 million.
• The company incurred $6.3 million in restructuring costs during the quarter.
• Gross margin improved by 180 basis points excluding restructuring costs, driven by pricing benefits.
• Trailing four-quarter adjusted EBITDA was $273.6 million, an increase of 17% compared to the prior year.
• The company repurchased 1.5 million shares of its Class A Common Stock for $18.7 million during the quarter.
• The company's backlog at the end of the quarter was approximately $764 million, 1% higher than the prior year.
• Steelcase expects second quarter revenue to be between $850 and $875 million, with earnings per share between $0.33 and $0.37 and adjusted earnings per share between $0.36 and $0.40.

Sentiment

Score: 8

Explanation: The document presents a generally positive outlook with strong order growth, improved profitability, and increased confidence in achieving full-year targets. While there are some negative aspects such as revenue decline and restructuring costs, the overall tone is optimistic.

Positives

• Order growth was strong, particularly in the Americas, driven by large corporate and education sectors.
• Operating income and adjusted operating income showed significant year-over-year improvement.
• Adjusted earnings per share increased substantially compared to the prior year.
• The company's trailing four-quarter adjusted EBITDA increased by 17% year-over-year.
• Gross margin improved due to pricing benefits.
• The company has increased confidence in achieving its full-year income targets.
• The company repurchased 1.5 million shares of its Class A Common Stock during the quarter.

Negatives

• Revenue decreased by 3% compared to the prior year, with declines in both the Americas and International segments.
• The company incurred $6.3 million in restructuring costs during the quarter.
• The Americas revenue was impacted by a lower beginning backlog compared to the prior year.
• International order growth was only 2%, with a decline in Asia Pacific.
• The company experienced a decrease in cash and cash equivalents.

Risks

• The company's performance is subject to competitive and general economic conditions.
• Fluctuations in raw material, commodity, and other input costs could impact profitability.
• Changes in customer demand could affect revenue.
• The company is exposed to risks related to acts of terrorism, war, governmental action, natural disasters, and pandemics.
• Cyberattacks pose a potential threat to the company's operations.
• Currency fluctuations could impact financial results.
• The company's performance is subject to the risks and contingencies detailed in its SEC filings.

Future Outlook

The company expects second quarter fiscal 2025 revenue to be in the range of $850 to $875 million, with earnings per share between $0.33 and $0.37 and adjusted earnings per share between $0.36 and $0.40. The company has increased confidence in achieving its full-year income targets and potentially reaching the higher end of the range.

Management Comments

• We are pleased with our first quarter results, which reflected higher than expected adjusted earnings improvement and 10% order growth in the Americas, said Sara Armbruster, president and CEO.
• Our International segment delivered nearly $7 million of year-over-year improvement in adjusted operating results despite lower revenue, driven in part by the benefits from our prior year restructuring actions, said Dave Sylvester, senior vice president and CFO.
• With the strength of our first quarter results and second quarter outlook, we have increased confidence of achieving our targets and potentially reaching the higher end of the range for our income targets assuming relatively stable macroeconomic and geopolitical environments, said Dave Sylvester.
• I'm encouraged by the number of customers from around the world we met with at the recent NeoCon trade show who are looking to us for help to energize and rejuvenate their offices, said Sara Armbruster.

Industry Context

The results indicate a positive trend in the office furniture sector, with companies investing in office space to support the transformation of work. Steelcase's strong order growth, particularly in the Americas, suggests that their solutions are resonating with customers. The company's focus on large corporate and education sectors aligns with current market trends.

Comparison to Industry Standards

• Steelcase's 8% order growth is a positive sign, especially compared to competitors who may be experiencing slower growth or declines in the current economic environment.
• The 10% order growth in the Americas is particularly strong, indicating a competitive advantage in this key market.
• The company's adjusted EBITDA of 8.7% of revenue is a solid performance, and the 17% increase year-over-year is a positive indicator of improved profitability.
• Compared to other furniture manufacturers, Steelcase's focus on large corporate and education sectors appears to be paying off, as these segments are showing strong demand.
• The company's restructuring efforts in International are also showing positive results, with improved operating results despite lower revenue.

Stakeholder Impact

• Shareholders will benefit from the increased profitability and share repurchase program.
• Employees may be impacted by restructuring efforts.
• Customers will benefit from the company's focus on innovative solutions.
• Suppliers may see increased demand due to the company's order growth.
• Creditors will be reassured by the company's improved financial performance.

Next Steps

• The company will continue to focus on large corporate and education customers.
• Steelcase will continue to manage costs and improve operational effectiveness.
• The company will continue to monitor macroeconomic and geopolitical environments.
• The company will pay a quarterly cash dividend on or before July 15, 2024.

Key Dates

Keywords

Steelcase, furniture, office, orders, revenue, earnings, operating income, EBITDA, restructuring, gross margin, backlog, share repurchase