Steelcase Inc. (SCS) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company reported strong financial performance with a 5% revenue increase and adjusted earnings above estimates. The international segment showed significant growth, and cost reduction efforts improved margins. Despite some challenges, such as declines in the education segment and macroeconomic issues in Europe, the overall outlook is positive. The Q&A highlighted strong demand in the Americas and ongoing profitability improvements. The pending merger and restructuring costs pose risks, but the positive financial results and optimistic guidance suggest a likely positive stock price movement.
Key Financial Performance
Revenue $897 million, a 5% increase year-over-year. Growth was driven by strong orders from large corporate customers in the Americas and favorable shipment timing.
Adjusted Earnings $0.45 per share, above the estimated range. Improvement driven by higher revenue and favorable gross margins due to shifts in business mix.
International Segment Revenue Growth 13% growth, including 8% organic growth. Strong results from India, partially offset by declines in Germany and France due to macroeconomic challenges.
Americas Segment Adjusted Operating Margin 11%, approximately flat year-over-year. Supported by strong cost controls and revenue growth.
International Segment Adjusted Operating Results Improved by $5 million year-over-year. Improvement driven by cost reduction actions implemented over the past couple of years.
Orders 6% growth year-over-year, including 8% growth in the Americas and a 1% decline in International. Growth driven by large corporate customers, especially in financial services and technology sectors.
Adjusted Operating Margin 8.4%, a 40 basis point improvement year-over-year. Improvement driven by revenue growth and cost reduction efforts in the International segment.
Restructuring Costs $10 million in the International segment, primarily related to the exit of salaried employees in EMEA as part of restructuring activities.
Cash and Short-term Investments Increased by $32 million from Q1, driven by $100 million of adjusted EBITDA, offset by $28 million seasonal increase in accounts receivable, $18 million capital expenditures, and $12 million dividend payment.
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Operating Highlights
Revenue Growth: Revenue increased by 5%, marking the highest quarterly results in 5 years. Growth was led by large corporate customers in the Americas and strong performance in India.
Order Growth: Orders grew by 6% in Q2, including 8% growth in the Americas, driven by financial services and technology sectors.
International Expansion: International segment posted 13% revenue growth, with strong results in India and other markets, though offset by declines in Germany and France.
HNI Merger: Proposed transaction with HNI is expected to expand market reach and bring together leading industry brands.
Cost Controls: Improved adjusted earnings supported by strong cost controls and revenue growth.
Restructuring Costs: $10 million restructuring costs in International segment related to salaried employee exits in EMEA, part of ongoing restructuring to be completed by FY 2027.
Workplace Transformation: Customers are transforming spaces to support new ways of working, with Steelcase positioned to capitalize on this trend.
HNI Combination Benefits: Combination with HNI expected to bring significant benefits to stakeholders, including shareholders, customers, dealers, and employees.
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Risk or Challenges
Macroeconomic Challenges in Germany and France: Continued weakness in these markets due to macroeconomic challenges is impacting order growth and revenue. The company is focusing on aligning resources to capture available business opportunities.
Restructuring Costs in EMEA: The company incurred $10 million in restructuring costs related to the exit of salaried employees in EMEA. These restructuring activities are expected to continue until fiscal year 2027.
Decline in Education Customer Orders: Orders from education customers in the Americas have declined due to changes in federal funding policies, which had previously driven strong growth.
Pending Merger with HNI: The pending merger introduces uncertainty and operational challenges during the transition period, as the company works to integrate operations and align strategies.
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Guidance & Outlook
Pending merger with HNI: The merger is expected to be completed by the end of calendar year 2025. The combination is anticipated to expand market reach and bring significant benefits to shareholders, customers, dealers, and employees.
Restructuring activities in International segment: Restructuring activities, including the exit of salaried employees in EMEA, are expected to be completed in fiscal year 2027.
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Shareholder Return Plan
Quarterly Dividend Payment: $12 million was paid as a quarterly dividend in the second quarter.
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Key Q&A
Q:Can you break out the outperformance in terms of volume versus price increases?
A:The 8% order growth in the Americas was driven more by volume than price, with price benefits contributing only a couple of percent.
Q:Do you have plans for additional price increases?
A:Management did not comment on planned or contemplated pricing actions but mentioned that earlier pricing actions offset year-over-year inflation and tariff costs.
Q:Are end markets more or less favorable than anticipated earlier in the year?
A:End markets are more favorable than anticipated, with strong recovery in large corporate demand. However, declines in the education business due to federal funding policy offset some of the growth.
Q:What is driving the strong order growth in the Americas?
A:Order growth is driven by companies rethinking office spaces, including moving to new spaces, renovating existing spaces, and focusing on outcomes like creativity, collaboration, and connection. Project orders grew faster than continuing business.
Q:Was continuing business positive compared to project orders?
A:Yes, continuing business was positive, but project orders were more positive.
Q:Can you provide details on profitability improvement in International, particularly in Asia Pacific and Europe?
A:Both Asia Pacific and Europe showed profitability improvement. Asia Pacific benefited from cost reductions and demand improvement, especially in China. Europe saw improvements due to revenue growth and cost reductions, with strong performance in the U.K., Spain, Middle East, and Africa, while France and Germany faced macroeconomic challenges.
Q:Have pricing actions fully offset inflation and tariff costs?
A:In Q2, pricing actions offset year-over-year inflation and tariff costs and started to recover margins. However, on a cumulative basis, the company is still catching up and expects it to take a few more quarters to fully recover.
Q:What was the cadence of order patterns in the Americas during the quarter?
A:Order patterns were steady and evenly spread across the quarter. The first three weeks of the following quarter were roughly flat compared to the prior year.
Q:What changes are being observed in office space design and mix?
A:Customers are redesigning spaces to support strategic goals, focusing on privacy, collaboration, and technology integration. This reflects a shift from pre-COVID norms to new ways of working.
Q:Review of Unclear Management Responses
A:Management avoided directly answering the question about future pricing actions, providing no specific details or commitments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Americas Orders
Americas segment
Analysis recap
HNI benefit
HNI closing
HNI industry
HNI question
HNI reach
HNI transaction
India improvement
International segment
Officer Senior
Officer hi
Orders client
Steelcase industry
Steelcase trend
Steelcase work
action couple
addition cost
analyst merger
approval HNI
basis result
benefit dealer
brand reason
calendar Steelcase
challenge market
choice HNI
closing HNI
collaboration need
combination win
commitment transition
conference Director
connection creativity
control profitability
cost control
creativity Steelcase
dealer employee
dedication passion
end calendar
evidence transformation
space
SCS Transcript
Steelcase Inc. (SCS) Q2 2026 Earnings Call Transcript
Positive9-25
The company reported strong financial performance with a 5% revenue increase and adjusted earnings above estimates. The international segment showed significant growth, and cost reduction efforts improved margins. Despite some challenges, such as declines in the education segment and macroeconomic issues in Europe, the overall outlook is positive. The Q&A highlighted strong demand in the Americas and ongoing profitability improvements. The pending merger and restructuring costs pose risks, but the positive financial results and optimistic guidance suggest a likely positive stock price movement.
Steelcase Inc. (SCS) Q1 2026 Earnings Call Transcript
Unknown6-26
The earnings call summary reveals a mixed financial performance: strong EPS and order growth, but challenges in education and international sectors. The Q&A highlights resilience in corporate demand and optimistic guidance but notes uncertainties like tariffs and restructuring. The company's market cap suggests moderate sensitivity to these factors. Overall, the sentiment is balanced, with both positive and negative elements leading to a neutral prediction for stock price movement.
Steelcase Inc. (SCS) Q4 2025 Earnings Call Transcript
Unknown3-27
The earnings call presents a mixed picture: strong EPS and margin improvements are offset by revenue declines and increased costs. The Q&A indicates uncertainty in international growth and macroeconomic impacts, but also highlights strong order growth and positive guidance for fiscal 2026. The lack of a buyback program and supply chain challenges further add to the mixed sentiment. Given the market cap, the stock is likely to experience neutral movement, falling between -2% to 2% over the next two weeks.
Steelcase Inc. (SCS) Q4 2025 Earnings Call Transcript
Unknown3-27
The earnings call presents mixed signals. Strong EPS and margin improvements are offset by revenue decline and international challenges. Positive order growth and strong liquidity are promising, but higher operating costs and ERP expenses are concerns. The Q&A reveals management's optimism but also highlights uncertainties, especially internationally. The lack of share buybacks and unclear strategies for international recovery further contribute to a neutral outlook. Given the company's mid-sized market cap, these mixed factors suggest a moderate stock price movement within a neutral range (-2% to 2%).
SCS Slides
SCS Report
Frequently Asked Questions
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