Steelcase(US:SCS)2025-03-27 21:30Financial Data and Key Metrics Changes - The full year adjusted earnings per share finished at $1.12, exceeding the top end of the targets communicated at the beginning of the fiscal year [8] - Adjusted operating margin was 5%, with 7% in the Americas [9] - Fourth quarter revenue was $788 million, in the upper end of the estimated range provided in December [22] - Adjusted earnings of $0.26 per share included $0.11 related to favorable tax items [23] - Organic revenue declined by 5% year-over-year, with a 3% decline in the Americas and a 10% decline in International [24] Business Line Data and Key Metrics Changes - The Americas segment saw a 12% order growth in Q4, marking the sixth consecutive quarter of year-over-year order growth [9][28] - The International segment experienced a 1% growth in orders, driven by strong growth in India and Spain, offset by weakness in Germany and the UK [28] - The small and midsize business segment, particularly the AMQ brand, grew at a strong double-digit percentage in fiscal '25 [16] Market Data and Key Metrics Changes - US office leasing activity in Q4 increased by 24% versus Q3 and 23% year-over-year, marking the highest quarter of leasing activity in three years [10] - Average weekly order levels through the first three weeks in March were 7% higher than the Q4 weekly average [30] Company Strategy and Development Direction - The company aims to lead the transformation of the workplace, focusing on creating workspaces that adapt to changing employee needs [11] - The strategy includes expanding reach within markets, with year-over-year order growth across all customer segments in the Americas, except for the consumer business [14] - The company is developing a new ERP system to simplify processes and enhance capabilities, targeting a go-live in calendar year 2026 [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the fiscal '25 results and the progress made against the strategy, despite facing challenges from tariffs and global trade uncertainty [20][36] - The company anticipates organic revenue growth of 5% to 9% for the first quarter of fiscal '26, with adjusted earnings expected between $0.13 and $0.17 per share [31] - Management acknowledged the cyclical nature of the industry and the potential impact of macroeconomic uncertainty on demand patterns [82] Other Important Information - The company returned $84 million to shareholders and generated $100 million of free cash flow [18] - A tariff recovery charge was announced, which is tied to inflationary pressures and could be adjusted based on the evolving tariff landscape [89] Q&A Session Summary Question: Can you run through the commentary around the order pacing through the fourth quarter? - Management noted that orders followed normal seasonal patterns, with strong growth in February and expectations for continued strength due to the tariff recovery charge [41][42] Question: What actions are being taken to improve profitability in the International segment? - Management indicated that growth is expected in the International business, but cost structure adjustments are necessary due to past performance [44][45] Question: Can you clarify the variable compensation and tax items in the fourth quarter? - The tax items were driven by a regulation change and strategic tax planning, while variable compensation adjustments are tied to these tax changes [53][55] Question: What is the sentiment regarding buybacks in the current environment? - The company targeted buybacks to offset dilution and plans to continue this strategy in fiscal '26 [61] Question: How is the West Coast recovery impacting demand? - Management observed improvement in the West Coast, particularly in the tech sector, contributing positively to Q4 orders [68] Question: How much of the order strength was driven by new projects versus continuing activity? - Growth was noted across all categories, with the strongest growth in projects, followed by continuing business [74] Question: What is the outlook for the industry given the current macroeconomic uncertainty? - Management remains cautiously optimistic, noting that while uncertainty exists, the fundamentals for demand are still strong [82][84]