Steelcase(US:SCS)2025-06-27 14:26Part I: Financial Information Item 1. Financial Statements (Unaudited) The company reported increased Q1 FY2026 revenue and net income, with total assets slightly decreasing and negative operating cash flow Q1 FY2026 vs Q1 FY2025 Income Statement Highlights (in millions, except per share data) | Metric | Q1 2026 (ended May 30, 2025) | Q1 2025 (ended May 24, 2024) | Change | | :--- | :--- | :--- | :--- | | Revenue | $779.0 | $727.3 | +7.1% | | Gross Profit | $263.8 | $234.4 | +12.5% | | Operating Income | $25.5 | $17.6 | +44.9% | | Net Income | $13.6 | $10.9 | +24.8% | | Diluted EPS | $0.11 | $0.09 | +22.2% | | Dividends per share | $0.100 | $0.100 | No Change | Balance Sheet Highlights (in millions) | Asset/Liability | May 30, 2025 | February 28, 2025 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $183.9 | $346.3 | -$162.4 | | Inventories, net | $286.6 | $245.7 | +$40.9 | | Total current assets | $938.7 | $1,029.0 | -$90.3 | | Total assets | $2,255.4 | $2,330.4 | -$75.0 | | Total current liabilities | $568.5 | $669.1 | -$100.6 | | Long-term debt | $447.3 | $447.1 | +$0.2 | | Total liabilities | $1,272.7 | $1,378.7 | -$106.0 | | Total shareholders' equity | $982.7 | $951.7 | +$31.0 | Q1 FY2026 vs Q1 FY2025 Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2026 (ended May 30, 2025) | Q1 2025 (ended May 24, 2024) | | :--- | :--- | :--- | | Net cash used in operating activities | $(141.1) | $(59.1) | | Net cash used in investing activities | $(5.9) | $(46.6) | | Net cash used in financing activities | $(17.2) | $(40.0) | | Net decrease in cash | $(163.3) | $(145.6) | - The significant use of cash in operating activities was primarily due to a $111.0 million outflow for employee compensation liabilities and a $37.3 million increase in inventories21 Q1 FY2026 Disaggregated Revenue (in millions) | Segment/Product | Q1 2026 Revenue | Q1 2025 Revenue | | :--- | :--- | :--- | | Americas | | | | Desking, benching, systems and storage | $294.6 | $255.5 | | Seating | $159.1 | $144.6 | | International | | | | Desking, benching, systems and storage | $57.1 | $56.8 | | Seating | $68.5 | $64.5 | | Total Revenue | $779.0 | $727.3 | - In Q1 2026, the company initiated restructuring actions in the Americas, expecting to incur $10 to $12 million in costs related to the termination of approximately 85 salaried employees to prioritize strategic initiatives. $9.1 million of these costs were incurred in the quarter70 Q1 FY2026 Segment Performance (in millions) | Segment | Revenue | Operating Income (Loss) | | :--- | :--- | :--- | | Americas | $603.6 | $28.0 | | International | $175.4 | $(2.5) | | Consolidated | $779.0 | $25.5 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 FY2026 revenue growth to higher order backlog, improved operating income, and restructuring for savings, while maintaining strong liquidity Overview and Results of Operations - Q1 2026 performance was driven by an 11% higher year-over-year order backlog, leading to increased revenue and operating income. However, orders in the quarter declined modestly, impacted by reduced demand from education and government customers in the Americas and macroeconomic weakness in France and Germany79 Q1 FY2026 vs Q1 FY2025 Key Metrics | Metric | Q1 2026 | Q1 2025 | | :--- | :--- | :--- | | Revenue | $779.0M | $727.3M | | Organic Revenue Growth | 7% | - | | Operating Income | $25.5M | $17.6M | | Adjusted Operating Income | $39.0M | $28.2M | | Diluted EPS | $0.11 | $0.09 | | Adjusted Diluted EPS | $0.20 | $0.16 | - Gross profit margin improved by 170 basis points to 33.9%, while cost of sales as a percentage of revenue improved by 80 basis points, driven by higher volume and cost reduction initiatives in the Americas7783 - The company initiated restructuring in the Americas targeting $20 million in annualized savings and is also taking actions in Europe to reduce costs in response to weak demand in Germany and France80 Americas Segment Performance - Q1 FY2026 vs Q1 FY2025 (in millions) | Metric | Q1 2026 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Revenue | $603.6 | $554.4 | +9.0% | | Organic Revenue Growth | 9% | - | - | | Operating Income | $28.0 | $18.5 | +51.4% | | Adjusted Operating Income | $40.2 | $25.9 | +55.2% | - The Americas segment's revenue growth was driven by a 13% higher beginning order backlog and strong growth from large corporate, government, and healthcare customers. Gross margin improved by 170 basis points due to higher volume and cost initiatives, which offset about $7 million in higher tariff costs9293 International Segment Performance - Q1 FY2026 vs Q1 FY2025 (in millions) | Metric | Q1 2026 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Revenue | $175.4 | $172.9 | +1.4% | | Organic Revenue Growth | -1% | - | - | | Operating Loss | $(2.5) | $(0.9) | Increased Loss | | Adjusted Operating (Loss)/Income | $(1.2) | $2.3 | Declined | - The International segment's revenue was flat on an organic basis, with growth in India, the UK, and China offset by declines in Germany and France. The operating loss widened due to higher operating expenses and a 40 basis point increase in cost of sales as a percentage of revenue9798 Liquidity Sources as of May 30, 2025 (in millions) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $183.9 | | Short-term investments | $42.1 | | Company-owned life insurance (COLI) | $165.5 | | Availability under credit facilities | $322.9 | | Total liquidity sources available | $714.4 | - Net cash used in operating activities was $141.1 million, a significant increase from $59.1 million in the prior year, primarily due to annual payments for accrued variable compensation and retirement plan contributions totaling $156.1 million106107 - The company has a $300.0 million global committed bank facility with no borrowings outstanding as of May 30, 2025. Total debt was $447.3 million, consisting of term notes due in 2029112114 - The company announced a quarterly dividend of $0.10 per share, totaling approximately $11.5 million, to be paid in Q2 2026117 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risks, including foreign exchange, interest rate, commodity, and equity price risks, since the last Annual Report on Form 10-K - As of May 30, 2025, there were no material changes to the company's market risks from foreign currency exchange, interest rates, commodity prices, and fixed income/equity prices compared to the fiscal year ended February 28, 2025122 Item 4. Controls and Procedures CEO and CFO concluded disclosure controls were effective as of May 30, 2025, with no material changes to internal controls over financial reporting - The CEO and CFO concluded that as of May 30, 2025, the company's disclosure controls and procedures were effective127 - There were no changes in internal control over financial reporting during the first fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls128 Part II: Other Information Item 1A. Risk Factors The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - There have been no material changes to the risk factors set forth in the company's Annual Report on Form 10-K for the fiscal year ended February 28, 2025130 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 FY2026, the company repurchased 431,717 shares for equity award tax withholding, with $79.9 million remaining in the repurchase program - During Q1 2026, the company repurchased 431,717 shares, all of which were to satisfy tax withholding obligations for equity awards132133 - As of May 30, 2025, approximately $79.9 million remained available for repurchase under the board-approved program111132 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The report includes required CEO and CFO certifications and Inline XBRL data files as exhibits134 Signatures The report is duly signed on June 27, 2025, by Nicole C. McGrath, Vice President, Corporate Controller & Chief Accounting Officer - The Form 10-Q was signed and authorized on June 27, 2025136138