Steelcase, Inc. Q3 FY2025 earnings call

• Strategy: Continues to observe trends like reliance on screens, AI adoption, and workplace evolution for sustainability. Introducing community-based design. • Diversification: Healthcare business saw strong revenue growth, supporting health organizations. • Profitability: Executing business transformation, developing new ERP system targeting Q2 2026 go-live. • Circularity: Circular by Steelcase remade services launching in US and expanding in Europe to help customers meet sustainability goals.

In the third quarter, the Americas segment delivered 7% organic revenue growth and an adjusted operating margin of 8.1%, driving earnings. It also saw fifth consecutive quarter of year-over-year order growth and increased market share. The International segment had lower-than-expected results with 8% decline in revenue due to soft orders and project shipment delays. Americas contributed significantly to earnings, while International was a drag.

• Fiscal 2025 adjusted EPS expected above targeted range. • Fourth quarter revenue expected in range of $770 million to $795 million, organic decline of 4%-7%. • ERP go-live shifted to Q2 2026 for more development and testing. • Fiscal 2026 targeting low to mid-single digit organic revenue growth, expecting gross margin expansion from volume growth and some benefits from ERP, but operating expense leverage likely flat.

• Supply chain disruption from laminate supplier impacted by Hurricane Helene, could affect fourth quarter results. • Competitor discounting pressures in International segment, particularly in some geographies. • Potential tariff impacts, with evaluation of contingency plans and inventory building underway.

Q: Clarify on ERP related $20 million, including inefficiencies and one-time costs.

A: $20 million related to capitalizing costs this year and expensing next year; inefficiencies from go-live ramp down/up, estimate $10 million one-time.

Q: Discuss three-week order trend, year ago comparison.

A: Last year first three weeks had 7% growth, this year 15% on top, timing of large corporate orders playing out differently.

Q: Continuing business trends, decline magnitude and FY '26 outlook.

A: Decline against prior year double-digit growth, expected improvement with tech sector increasing in-office presence.

Q: International competitor discounting, persistence into 2025.

A: Relatively broad-based, competitive in Western Europe, strategic discounting to target business.

Q: Americas share gains, shift in winning incremental business.

A: Continue targeting share gains, kept sales force strong with large global accounts.

Q: Tariff exposure and impact on 2026 guidance.

A: Evaluating contingency plans, buying inventory, exposure in supply chain, unique markets, and Mexico.

Q: International green shoots, needs for sustainable upswing.

A: Macro factors, return to office in Western Europe, actions targeting accounts, signs in China.

Q: Impact of new administration on business.

A: Potential impact on government occupancy, workforce reduction possibility.

Q: Laminate supplier issue impact on fourth quarter and 2026.

A: Supplier back up, but not sure impact fully resolved by end of fourth quarter