Steelcase(SCS) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported second quarter revenue of $897 million, which was above the estimated range due to stronger than expected orders from large corporate customers and favorable shipment timing in the Americas segment [9] - Adjusted earnings per share were $0.45, exceeding estimates driven by higher revenue and favorable gross margins [9] - Organic revenue growth was 4% year-over-year, with 3% growth in the Americas and 8% growth internationally [10] Business Line Data and Key Metrics Changes - The Americas segment achieved an adjusted operating margin of 11%, remaining flat compared to the prior year [10] - The international segment improved adjusted operating results by $5 million compared to the prior year, driven by cost reduction actions [4][5] - Orders grew by 6% in the second quarter, with an 8% increase in the Americas, primarily from large corporate customers [11] Market Data and Key Metrics Changes - The international segment posted 13% revenue growth, including 8% organic growth, with strong results from India [4] - In the Americas, order growth was driven by the financial services and technology sectors, while education customers experienced a decline [11] - The international order decline was primarily due to weaknesses in Germany and France, offset by growth in India and Japan [11] Company Strategy and Development Direction - The company is focused on transforming workplace environments to support new ways of working as employees return to the office [6][47] - The proposed merger with HNI Corporation is expected to expand market reach and combine industry-leading brands [7] - The company is aligning resources to focus on the best opportunities in markets facing macroeconomic challenges [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in large corporate demand, noting it is occurring at a higher level than anticipated [15] - The company is encouraged by the momentum sustained into the second quarter, particularly from large corporate customers [12] - Management highlighted the need for customers to redesign their spaces to attract talent and support new working styles [42] Other Important Information - The company incurred $10 million in restructuring costs in the international segment, primarily related to the exit of salaried employees in EMEA [10] - Total liquidity at the end of the quarter was $427 million, with total debt at $447 million [12] Q&A Session Summary Question: What was the breakdown of volume versus price increases in the outperformance? - Management indicated that the 8% order growth in the Americas was primarily driven by volume rather than price increases, which contributed only a couple of percent [15] Question: Are there plans for additional price increases? - Management refrained from commenting on future pricing actions but noted that they were able to offset year-over-year inflation and tariff costs with earlier pricing actions [16] Question: How do current end markets compare to earlier expectations? - Management stated that the end markets are more favorable than previously anticipated, with strong demand from large corporate customers [17] Question: What is the demand profile in the Americas? - Management noted that clients are rethinking their office spaces, focusing on outcomes and redesigning spaces to support collaboration and connection [24] Question: How did profitability improve in the international segment? - Management highlighted improvements in both Asia-Pacific and EMEA, with Asia-Pacific showing demand improvement and EMEA benefiting from revenue growth and cost reductions [27][28]