Steelcase(SCS) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a revenue increase of 5% year-over-year, reaching $897 million, marking the highest quarterly results in the past five years [4][9] - Adjusted earnings per share were $0.45, exceeding expectations due to higher revenue and favorable gross margins [9] - The adjusted operating margin improved to 8.4%, a 40 basis point increase compared to the prior year [10] Business Line Data and Key Metrics Changes - The Americas segment achieved an adjusted operating margin of 11%, remaining flat compared to the previous year [10] - The international segment saw a revenue growth of 13%, with 8% organic growth, driven by strong performance in India [4][10] - Orders grew by 6% in the second quarter, with an 8% increase in the Americas, primarily from large corporate customers [5][11] Market Data and Key Metrics Changes - Strong order growth was noted in the financial services and technology sectors, while the education sector experienced a decline due to changes in federal funding policies [6][11] - The international segment's growth was offset by declines in Germany and France, which faced macroeconomic challenges [5][10] Company Strategy and Development Direction - The company is focused on transforming workplace environments to support new ways of working, capitalizing on the ongoing trend of redesigning office spaces [6][7] - The proposed merger with HNI Corporation is expected to enhance market reach and combine industry-leading brands [7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in large corporate demand, which is stronger than anticipated [18] - The company is not providing forward-looking guidance due to the pending merger with HNI Corporation [9] 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: Can you break out the outperformance in terms of volume versus price increases? - 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 [16] 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 [17] Question: How do current end markets compare to earlier expectations? - Management stated that current end markets are more favorable than previously anticipated, with strong demand from large corporate customers [18] 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 [25] Question: Can you discuss profitability improvements 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 [28][29] Question: What is the cadence of order patterns in the Americas? - Management reported that order patterns were steady throughout the quarter, with no unusual fluctuations [39] Question: How are customers rethinking office spaces post-COVID? - Management observed that customers are increasingly focused on redesigning spaces to attract talent and support new working styles, incorporating privacy and collaboration solutions [42]