Steelcase(SCS) - 2024 Q4 - Annual Results

Financial & Operational Highlights Steelcase reported improved profitability in Q4 and full-year fiscal 2024, driven by gross margin expansion and strong order growth in the Americas, while strengthening its financial position Q4 Fiscal 2024 Performance Q4 FY2024 saw a 3% revenue decline to $775.2 million, yet net income increased to $21.3 million, driven by a 140 basis point gross margin improvement and 8% order growth in the Americas Q4 FY2024 Key Financial Metrics | Metric | Q4 FY2024 | Q4 FY2023 | | :--- | :--- | :--- | | Revenue | $775.2M | $801.7M | | Net Income | $21.3M | $15.7M | | EPS (Diluted) | $0.18 | $0.13 | | Adjusted EPS | $0.23 | $0.19 | Q4 2024 Revenue and Order Growth vs. Q4 2023 | Region | Revenue Growth (Decline) | Organic Revenue Growth (Decline) | Order Growth (Decline) | | :--- | :--- | :--- | :--- | | Americas | (2%) | 0% | 8% | | International | (6%) | (6%) | (6%) | | Steelcase Inc. | (3%) | (1%) | 4% | - The 8% order growth in the Americas was primarily driven by large corporate customers investing in their workplaces[3][4] - Gross margin improved by 140 basis points to 31.2% compared to the prior year, driven by higher pricing benefits and operational improvements[7] Full-Year Fiscal 2024 Performance Full-year fiscal 2024 revenue was $3.2 billion (2% decline), but net income more than doubled to $81.1 million, driven by a 360 basis point gross margin expansion Fiscal 2024 vs. Fiscal 2023 Key Financials | Metric | Fiscal 2024 | Fiscal 2023 | | :--- | :--- | :--- | | Revenue | $3.2B | $3.2B | | Net Income | $81.1M | $35.3M | | EPS (Diluted) | $0.68 | $0.30 | | Adjusted EPS | $0.93 | $0.56 | - Net income more than doubled, and earnings per share increased by 127% compared to fiscal 2023[4][5] - Gross margin for the full year improved by 360 basis points, reflecting efforts to recover from prior inflationary pressures[5][17] - Adjusted operating income for FY2024 increased by $50.0 million to $157.5 million, driven by pricing benefits and operational improvements, which offset lower volume and higher operating expenses[16] Financial Position and Shareholder Returns Steelcase significantly strengthened its fiscal 2024 financial position, increasing total liquidity by $238 million to $485.5 million, and declared a $0.10 per share quarterly dividend - Total liquidity, comprising cash and cash equivalents and COLI, increased by $238 million during fiscal 2024, reaching $485.5 million at year-end[5][11][12] - The company amended its credit agreement, extending the expiration to 2029 and increasing capacity from $250 million to $300 million[12] - A quarterly cash dividend of $0.10 per share was declared by the Board of Directors[12] Business Segment Performance The Americas segment showed strong order growth despite a slight revenue decline, while the International segment faced revenue declines but improved profitability, with organic revenue declining overall Americas Segment The Americas segment reported a 2% Q4 revenue decline to $581.6 million, but achieved strong 8% order growth, with full-year operating income surging to $143.8 million Americas Segment Financials (in millions) | Metric | Q4 FY2024 | Q4 FY2023 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $581.6 | $595.6 | $2,419.8 | $2,436.2 | | Operating Income | $26.8 | $33.2 | $143.8 | $77.4 | | Adjusted Operating Income | $31.3 | $41.9 | $159.6 | $114.8 | - Order growth in the Americas was 8% in Q4, driven by large corporate customers[3] - The decrease in Q4 operating income was primarily due to the prior year including $9.2 million of gains on the sales of fixed assets[6] International Segment The International segment's Q4 revenue declined 6% to $193.6 million, with orders down 6%, yet Q4 adjusted operating income improved to a positive $3.1 million despite macroeconomic headwinds International Segment Financials (in millions) | Metric | Q4 FY2024 | Q4 FY2023 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $193.6 | $206.1 | $739.8 | $796.4 | | Operating Income (Loss) | $(1.1) | $(4.5) | $(26.0) | $(11.9) | | Adjusted Operating Income (Loss) | $3.1 | $(3.3) | $(2.1) | $(7.3) | - The International segment delivered improved profitability, with Q4 adjusted operating results increasing by more than $6 million versus the prior year despite lower revenue[7] - The Q4 order decline was driven by a 12% drop in EMEA, which was partially offset by 24% growth in Asia Pacific[3] Organic Revenue Growth Analysis Consolidated organic revenue declined 1% in Q4 and 2% for FY2024, with Americas flat and International experiencing a 6% Q4 and 8% full-year organic decline Q4 2024 vs. Q4 2023 Organic Revenue Growth | Region | Organic Growth (Decline) % | | :--- | :--- | | Americas | 0% | | International | (6%) | | Steelcase Inc. | (1%) | FY2024 vs. FY2023 Organic Revenue Growth | Region | Organic Growth (Decline) % | | :--- | :--- | | Americas | 0% | | International | (8%) | | Steelcase Inc. | (2%) | Fiscal 2025 Outlook Steelcase provides Q1 and full-year fiscal 2025 guidance, projecting organic revenue growth and improved profitability, supported by strategic investments Q1 Fiscal 2025 Guidance Steelcase projects Q1 FY2025 revenue between $715 million and $740 million (0-3% organic decline), with diluted EPS of $0.05-$0.09, supported by 10% order growth early in the quarter Q1 Fiscal 2025 Guidance | Metric | Q1 FY2025 Projection | Q1 FY2024 Actual | | :--- | :--- | :--- | | Revenue | $715M - $740M | $751.9M | | Organic Revenue | (3%) - 0% decline | N/A | | EPS | $0.05 - $0.09 | $0.01 | | Adjusted EPS | $0.08 - $0.12 | $0.09 | - The company's backlog at the end of Q4 was $625 million, 8% lower than the prior year; however, orders in the first three weeks of Q1 FY2025 grew 10% YoY[18] Full-Year Fiscal 2025 Targets For full-year fiscal 2025, Steelcase targets 1% to 5% organic revenue growth, adjusted operating income of $150 million to $175 million, and adjusted EPS of $0.85 to $1.00 Full-Year Fiscal 2025 Targets | Metric | FY2025 Target | | :--- | :--- | | Organic Revenue Growth | 1% to 5% | | Adjusted Operating Income | $150M - $175M | | Adjusted EPS | $0.85 - $1.00 | - The company expects mid-single digit order growth in fiscal 2025[20] - Key financial assumptions for FY2025 include gross margin between 32.5% and 33.5% and an effective tax rate of 27%[22] Consolidated Financial Statements The consolidated financial statements show improved profitability in FY2024, driven by higher gross profit and operating income, alongside a strengthened balance sheet with increased cash and positive operating cash flow Condensed Consolidated Statements of Income FY2024 revenue was $3.16 billion, with gross profit increasing to $1.01 billion (32.0% margin) and net income significantly rising to $81.1 million, or $0.68 per diluted share Fiscal Year Income Statement Highlights (in millions) | Account | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Revenue | $3,159.6 | $3,232.6 | | Gross Profit | $1,012.4 | $919.4 | | Operating Income | $117.8 | $65.5 | | Net Income | $81.1 | $35.3 | | Diluted EPS | $0.68 | $0.30 | Condensed Consolidated Balance Sheets As of February 23, 2024, total assets were $2.24 billion, with cash and cash equivalents significantly increasing to $318.6 million and total shareholders' equity rising to $887.1 million Balance Sheet Highlights (in millions) | Account | Feb 23, 2024 | Feb 24, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $318.6 | $90.4 | | Total current assets | $959.4 | $884.0 | | Total assets | $2,236.7 | $2,202.8 | | Total current liabilities | $607.1 | $603.3 | | Total liabilities | $1,349.6 | $1,376.6 | | Total shareholders' equity | $887.1 | $826.2 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly improved to $308.7 million in FY2024, driven by higher net income and working capital changes, resulting in a $228.7 million net increase in cash Statement of Cash Flows Highlights (in millions) | Activity | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $308.7 | $89.4 | | Net cash provided by (used in) investing activities | $6.1 | $(134.8) | | Net cash used in financing activities | $(85.9) | $(62.9) | | Net increase (decrease) in cash | $228.7 | $(109.8) | Non-GAAP Financial Measures The company uses non-GAAP financial measures like Organic Revenue Growth, Adjusted Operating Income, Adjusted EPS, and Adjusted EBITDA to provide a clearer view of core performance by excluding specific non-recurring or non-operational items Definition of Non-GAAP Measures The company uses non-GAAP measures like Organic Revenue Growth, Adjusted Operating Income, Adjusted EPS, and Adjusted EBITDA to provide a consistent performance comparison by excluding specific non-operational items - Organic Revenue Growth is used to provide a more consistent comparison of revenue by excluding the impact of acquisitions, divestitures, and foreign currency translation effects[44] - Adjusted Operating Income and Adjusted EPS exclude amortization of purchased intangible assets and restructuring costs to better reflect core operating performance[45] - Adjusted EBITDA is defined as EBITDA further adjusted to exclude share-based compensation and restructuring costs, providing a view of operating profitability used by management, lenders, and rating agencies[48]