Steelcase, Inc. Q4 FY2025 earnings call

• Fiscal 2025 performance: Adjusted earnings per share finished at $1.12 above the top end of targets, with an adjusted operating margin of 5% (7% in Americas). Delivered 11th consecutive quarter of gross margin expansion, improving over 500 basis points since fiscal 2022.
• Strategy: Leading workplace transformation, with Americas segment order growth led by large corporate and government customers. Strong win rates led to market share gains in the Americas. Adopted technology with AI-driven analytics to benefit dealers and customers. Expanded reach in markets, with education, healthcare, and small and midsize business segments showing growth.
• Profitability: Delivered 100 basis points of gross margin improvement in fiscal '25 through operational cost reductions (e.g., installing new tech, in-sourcing product lines, closing distribution centers). ERP system implementation in the Americas delayed to calendar year 2026. Balance sheet strengthened with $100M free cash flow and $84M returned to shareholders.

In fiscal 2025, Steelcase's Americas segment had 12% growth in Q4 orders, with 6% full-year order growth, and an adjusted operating margin of 7%. The International segment's results improved in the first half but saw small to midsize business decline. Education segment had solid growth in fiscal '25, outpacing the education furniture market. Healthcare segment supported healthcare systems and is poised for growth due to an aging demographic. The AMQ brand in the small and midsize business segment grew strongly in fiscal '25.

• First quarter 2026: Projected revenue range $760M-$785M, adjusted EPS $0.13-$0.17, effective tax rate ~27%.
• Fiscal 2026: Target mid-single-digit organic revenue growth and modest improvement in adjusted operating margin. Aim to offset tariff costs with pricing actions. International segment targets breakeven adjusted operating income with losses in first half and profits in second half. Announced a June list price increase in the Americas in response to inflationary costs and a tariff recovery charge on orders received after the call.

• New tariffs and global trade uncertainty requiring pricing actions, inventory purchases, and supply chain shifts. Dynamic environment may impact ERP system go-live. Potential impact of tariff changes and macroeconomic factors on ability to offset tariff costs with pricing actions.

Q: Greg Burns asked about order pacing, International segment breakeven.

A: David Sylvester responded on order seasonal patterns and International segment actions related to cost structure and growth expectations.

Q: Joseph Gomes inquired about variable comp and tax items in Q4.

A: David Sylvester explained tax items were due to regulation change and tax strategies, variable comp tied to overall company compensation.

Q: Steven Ramsey asked about West Coast recovery, large customer demand, order strength.

A: David Sylvester and Mike O'Meara discussed vertical market growth, including large company and government demand, and order growth across project, continuing, and marketing programs.

Q: Reuben Garner questioned tariff recovery charge flexibility and small business cost structure.

A: David Sylvester and Sara Armbruster discussed tariff recovery charge tied to tariffs and inflation, and small business performance differences between Americas and International segments