Steelcase(US:SCS)2024-12-19 17:40Financial Data and Key Metrics Changes - In Q3, the company achieved 3% organic revenue growth and adjusted earnings of $0.30 per share, exceeding initial targets for the fiscal year [8][28] - The Americas segment reported 7% organic revenue growth and an adjusted operating margin of 8.1%, marking the fifth consecutive quarter of year-over-year order growth [9][35] - The International segment experienced an 8% decline in revenue, attributed to lower volume and competitive discounting [28][30] Business Line Data and Key Metrics Changes - The Americas segment's strong performance was driven by favorable shipment timing and backlog, while the International segment faced challenges due to soft orders and project shipment delays [28][30] - The healthcare business within the Americas showed strong revenue growth, supported by increasing demand for healthcare services [19][20] Market Data and Key Metrics Changes - The company noted improved order trends from large corporate customers towards the end of Q3, with a strong continuation into early December [10][36] - In the International segment, there was year-over-year order growth in China and nearly 20% sequential growth in total Asia-Pacific orders compared to the previous quarter [37] Company Strategy and Development Direction - The company is focusing on transformation by adapting to changes in workplace dynamics, including increased reliance on technology and AI [13][15] - The strategy includes community-based design to create flexible workspaces that cater to diverse employee needs [17] - The company is also emphasizing sustainability through initiatives like Circular by Steelcase, which supports customers in meeting carbon reduction goals [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the fiscal 2025 adjusted earnings per share finishing above the targeted range, despite industry growth being slower than expected [26][41] - The company anticipates continued demand growth from large corporate customers, particularly in the financial services and technology sectors [42][44] Other Important Information - The company is implementing additional restructuring actions in the International segment to address ongoing challenges and is targeting approximately $5 million in annualized cost savings by early fiscal 2026 [30] - The company is facing supply chain disruptions due to a laminate supplier affected by Hurricane Helene, which may impact operations into fiscal 2026 [39][40] Q&A Session Summary Question: Clarification on ERP implementation costs - Management clarified that the projected $20 million impact is related to implementation costs and does not include inefficiencies associated with the go-live process [51][56] Question: Trends in continuing business - Management noted a decline in continuing business orders compared to the previous year but expects improvement as more employees return to the office [70][72] Question: Competitive discounting in International markets - Management indicated that competitive discounting pressures are broad-based, particularly in Western Europe, and are strategically targeting volume growth in specific markets [76][78] Question: Exposure to potential tariffs - Management is evaluating contingency plans regarding potential tariffs and is taking actions such as building additional inventory to mitigate risks [86][90] Question: Confidence in International segment recovery - Management expressed that macroeconomic factors and targeted account strategies are crucial for driving revenue growth in the International segment [108][110]