Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Steelcase Fourth Quarter Fiscal 2025 Conference Call. — Operator Instructions — Thank you. Mr. O’Meara, you may begin your conference.

Thank you, Rob. Good morning, everyone. Thank you for joining us for the recap of our fourth quarter and fiscal 2025 financial results. Here with me today are Sara Armbruster, our President and Chief Executive Officer; and Dave Sylvester, our Senior Vice President and Chief Financial Officer. Our fourth quarter earnings release, which crossed the wires yesterday, is accessible on our website. This conference call is being webcast, and this webcast is a copyrighted production of Steelcase Inc. A replay of this webcast will be posted to ir.steelcase.com later today. Our discussion today may include references to non-GAAP financial measures and forwardlooking statements. Reconciliations to the most comparable GAAP measures and details regarding the risks associated with the use of forward-looking statements are included in our earnings release, and we are incorporating by reference into this conference call the text of our safe harbor statement included in the release. Following our prepared remarks, we will respond to questions from investors and analysts. 1 I will now turn the call over to our President and Chief Executive Officer, Sara Armbruster.

Thanks, Mike. Hi, everyone, and thanks for joining the call. So today, I’ll cover highlights of our financial results and offer a few remarks explaining how we continue to make progress against our strategy. And I’ll start with our results. We’re proud of our fiscal 2025 performance and the momentum we’ve been able to build. Despite our industry not growing as expected, our full year adjusted earnings per share finished at $1.12, above the top end of the targets we communicated at the beginning of the fiscal year. We delivered an adjusted operating margin of 5%, including 7% in the Americas. In Q4, we delivered our 11th consecutive quarter of year-over-year gross margin expansion, improving over 500 basis points since fiscal 2022. Our fourth quarter order growth of 9% was led by 12% growth in our Americas segment, which we believe once again outpaced our industry with 6% order growth in the Americas for the full fiscal year. This is the sixth consecutive quarter of year-over-year order growth in the Americas. That order growth was led by especially strong demand from our large corporate and government customers, and we continue to hear leaders across multiple industries requiring a higher level of in-office presence and we see some positive signals in corporate real estate. According to CBRE data, U.S. office leasing activity in Q4 increased 24% versus Q3 and 23% year-over-year, making it the highest quarter of leasing activity in 3 years. So turning now to our strategy. We continue to lead the transformation of the workplace. The demand in the Americas coming from our large corporate customers demonstrates that leaders are looking for workspaces that can achieve better outcomes and adapt to the changing needs of their employees. 2 As we’ve said throughout the year, many of our large global customers were planning key projects in fiscal ’25, and those decisions really came to fruition in Q4. We saw customer activity levels tick up first in financial services and now across multiple industries, including technology, manufacturing and professional services. And we’re winning. Our win rates remain strong during fiscal ’25, which led to market share gains in the Americas. And we’ve seen strengthening from our global client collaboration or GCC customers, with strong global order growth from those customers in 3 of the last 4 months of fiscal 2025. And we see opportunities to capture more demand. As one example, we’re adopting technology in new ways to benefit our dealers and customers with better experiences that lead to stronger loyalty. For example, over the past 3 years, we have worked actively with our dealer community to gather and analyze more than 5 million workplace applications using AI-driven analytics. Our data set is growing every week, and we continuously are uncovering emerging trends, giving us insights that help us remain relevant and responsive to evolving workplace needs. Our second strategic pillar is to expand our reach within markets. On a year-to-date basis, all our customer segments in the Americas have posted year-over-year order growth, with the exception of our consumer business. In education, we saw solid growth in fiscal ’25, partially driven from school districts issuing bonds for new construction or modernization efforts. Our value proposition is resonating with those customers, and we believe our growth outpaced the education furniture market this year. In healthcare, we supported several healthcare systems to modernize facilities or consolidated organizations following the pandemic, and we were able to leverage our op- erational scale to execute some large projects on short lead times. And we believe the 3 healthcare industry is poised for continued growth, largely driven by an aging U.S. demographic that is requiring more healthcare services. In the small and midsized business segment, our AMQ brand grew at a strong double-digit percentage in fiscal ’25. Small business growth has been a significant driver of economic activity in the United States and is a strong focus for our future growth and investment. Finally, turning to the profitability pillar of our strategy, I want to build on my opening remarks. In fiscal ’25, we delivered 100 basis points of gross margin improvement over the prior year, which included benefits from operational cost reductions. These operations initiatives included installing new technologies and moving production lines to increase efficiencies, in-sourcing select product lines and closing select distribution centers to optimize our network. In our International segment, our results improved through the first half of the year, in part driven by the cost reductions we’ve implemented. Midway through the year, we were anticipating an improving demand environment that would deliver profitability in the second half. Although we still see positive demand signals from some of our large and national accounts and international, our small to midsized business declined, and so we’re considering additional actions to further lower our cost structure. Our balance sheet continued to strengthen as we drove $100 million of free cash flow, and we returned $84 million to shareholders. I’m proud of the work of our teams to deliver these results. As you know, we’re in the midst of developing and implementing a new ERP system in the Americas with the goal of simplifying our processes and enhancing our capabilities to strengthen our competitive advantage. We’re now also facing new tariffs and global trade uncertainty, which requires us to respond with pricing actions, inventory purchases 4 and supply chain shifts. Given the dynamic nature of the environment we’re in and to ensure our ERP system is fully ready, we have chosen to be agile and target the go-live for our ERP system in calendar year 2026. In closing, we’re proud of our fiscal ’25 results, in which our adjusted earnings per share finished above our targeted range, and we remain positive about the progress we continue to make against our strategy. We are navigating a dynamic environment of evolving tariffs and trade policies. And I’ll now turn it over to Dave, who also is leading our tariff response efforts, to review the financial results and our outlook in more detail.

Thank you, Sara, and good morning, everyone. My comments today will start with the highlights related to our fourth quarter results, balance sheet and cash flow, and then I’ll cover the outlook for the first quarter and our targets for fiscal 2026. Our fourth quarter revenue of $788 million was in the upper end of the estimated range we provided in December, benefiting from stronger-than-expected order growth in the Americas. Our adjusted earnings of $0.26 per share finished above our range and included $0.11 related to favorable tax items net of related variable compensation expense. Setting these items aside, adjusted earnings fell below our estimated range, driven by shortfalls in both the Americas and International segments. For the Americas, we had a higher mix of business from large corporate and government customers, which tend to have lower gross margins. Our project spending at the end of the year was higher than anticipated, and we recorded some year-end inventory-related adjustments. For International, we also experienced some unfavorable business mix, and we had higher 5 manufacturing costs and higher operating expenses, including a bad debt provision and some severance costs. Compared to the prior year, we posted an organic revenue decline of 5%, including a 3% decline in the Americas and a 10% decline in International. The organic decline adjusts for the additional week in the fourth quarter of this year, which provided marginal earnings benefit. The Americas fourth quarter revenue decline was impacted by a lower beginning backlog of orders scheduled to ship in the quarter. The International decline was driven by Germany, France and India, which posted a current quarter decline compared to 40% growth in the prior year. Our adjusted EPS increased $0.03 and our adjusted operating income declined $20 million. Our prior year adjusted EPS benefited by approximately $0.02 from net favorable adjustments, which were related to our unconsolidated affiliates and were reflected in other income. Our adjusted operating income in the current year was impacted by $11 million of variable compensation expense related to the tax benefits. The remainder of the year-over-year decrease was primarily driven by lower revenue in the International segment and higher operating expenses adjusted for the additional week. As it relates to cash flow and the balance sheet, cash and short-term investments decreased $18 million from Q3 as Q4 adjusted EBITDA of $40 million was largely consumed by capital expenditures and capitalization of cloud computing costs related to our new ERP, our annual – our semiannual interest payment and dividends. Our trailing 4-quarter adjusted EBITDA of $262 million was 8.3% of revenue. Our total liquidity, which includes the cash surrender value of COLI, aggregated to $558 million at 6 the end of the quarter, which exceeded our total debt of $447 million. Shifting to orders. Our Q4 orders grew 9% compared to the prior year, driven by 12% growth in the Americas and 1% growth in International. In the Americas, Q4 marks the sixth consecutive quarter of year-over-year order growth, and the 12% growth rate in the current quarter was on top of 8% growth in Q4 of the prior year. The order growth was driven by large corporate, government, small and midsized business and healthcare customers. We drove strong growth in both our project and contin- uing business, and we continue to believe the growth in our project business is reflective of how we are leading the transformation of the workplace as evidenced by our strong win rates and estimated market share gains over the last year in the Americas. For International, the 1% growth in orders was driven by continued strong growth in India and Spain and was largely offset by weakness in Germany and the U.K. Turning to our outlook for the first quarter. Our overall backlog at the end of the fourth quarter was up 11% compared to the prior year. Average weekly order levels through the first 3 weeks in March are 7% higher than the Q4 weekly average and seem to be following typical seasonal patterns of order levels, building from January through March. On a year-over-year basis, they declined 1% compared to the same period in fiscal 2025, which reflected 10% growth compared to the same 3-week period in fiscal 2024. Accordingly, we expect to report revenue within a range of $760 million to $785 million, which represents organic growth of between 5% to 9% compared to the prior year. As it relates to earnings, we expect to report adjusted earnings of between $0.13 and $0.17 per share, which compares to $0.16 in the prior year. In addition to the projected range of revenue, the adjusted earnings estimate includes gross margin of approximately 33%, which includes an assumption of $9 million of higher tariff costs as compared to 7 the prior year, and operating expenses of between $230 million to $235 million, which includes $4.3 million of amortization related to purchased intangible assets. Lastly, we expect interest expense and other nonoperating items to net to approximately $2 million of expense, and we’re projecting an effective tax rate of approximately 27%. For fiscal 2026, we are targeting additional progress toward our midterm financial targets, including mid-single-digit organic revenue growth and a modest improvement in our adjusted operating margin. Our revenue target reflects our strong beginning backlog and assumes the macro environment remains stable, return to office sentiment continues to strengthen and the overall positive sentiment we’re hearing from our large corporate customers, dealers and sales organization in the Americas is not significantly disrupted by the shifts in U.S. trade policy and related uncertainty about tariffs. Regarding adjusted operating income in fiscal 2026, we are targeting to offset higher tariff and related inflationary costs with appropriate pricing actions, and we expect additional benefits from our gross margin improvement initiatives. In March, we announced the June list price increase in the Americas for the first time in 3 years in response to inflationary costs over that horizon. And we also announced a tariff recovery charge in the Americas that takes effect on orders received after today. Our ability to offset tariff costs with pricing actions could be impacted by a number of factors such as the speed and pace of changes in the tariffs and available exemptions such as USMCA as well as the macroeconomic environment and competitive factors. Additionally, for your fiscal 2026 modeling, in our International segment, we’re targeting breakeven adjusted operating income for the full fiscal year, with losses likely in the first 8 half of the year, offset by profitability in the second half. We expect gross margin expansion in fiscal 2026 to be mostly driven by the benefits of projected volume growth. And our operating expense leverage, adjusting for the impacts of the land sale in fiscal 2025, is expected to be relatively flat year-over-year, in part due to approximately $10 million of higher expense associated with our new ERP. Lastly, we are targeting capital expenditures and capitalized cloud computing costs of between $70 million to $80 million for fiscal 2026. In closing, we’re encouraged by the order growth and earnings momentum we achieved in fiscal 2025. Our beginning backlog is up 11% heading into fiscal 2026. Our large corporate customers are beginning to invest more significantly in their workplaces, and we’re gaining market share in the Americas. And we have a strong balance sheet, and we’re implementing necessary actions to address the tariff and inflationary environment, and we’re targeting additional progress toward our midterm financial targets in fiscal 2026. From there, we’ll turn it back to the operator for questions.

— Operator Instructions — And your first question comes from the line of Greg Burns from Sidoti.

Dave, could you just run through the commentary around the order pacing maybe through the fourth quarter and what you’re seeing in the early part of May, the May quarter?

Yes. As I said in my scripted remarks, orders seem to follow normal seasonal patterns 9 January through last week, kind of building as they normally would seasonally. I think our growth rate in February was pretty good. I don’t recall January. December was strong. You might remember on our call in December, through the first 3 weeks, we had very strong double-digit growth. So December was pretty good. January might have been softer year-over-year. But to be honest, I don’t remember what the prior year comps were month by month. But what I – what we feel good about is that the order patterns are continuing to seem to follow this normal seasonal flow of improving through at least the end of last week. This week, they’ll likely be quite strong because our tariff recovery charge goes into effect tomorrow on orders that come in after today.

And then when – with the outlook for breakeven internationally and I guess the expectation for that to be profitable in the second half, what actions are you taking there? Is that just the volume expectations? Or are you taking specific actions to improve the profitability of that segment?

Well, we’re expecting some growth out of the International business next year. There are several parts of the business that have been doing well and are expected to continue to do well. The question is whether or not the macro environment will settle down or improve a little bit and allow some of the other areas of our business to also show some growth or less decline, which should help enable modest growth. So we’re definitely counting on growth for next year. But it’s also clear that with the performance we had in the back half of fiscal 2025, we need to continue to look at our cost structure, and that’s what we’re doing.

10 Your next question comes from the line of Joe Gomes from NOBLE Capital.

Just real quick on the variable comp and the tax items that were took in the fourth quarter. Was that just kind of like a true up for the year? Or why in the fourth quarter, I guess?

Well, the tax items – there were 2 items – 2 buckets of items that drove the tax items. One was a regulation change that happened in December. So you might see other 1231 companies that had to take the same kind of adjustment. It could have went the other way. Ours was positive. Some companies might have been negative. And then we drove a couple of pretty important tax strategies that really – our advisers came to us with their proven strategies that have worked at other organizations, and we worked through them late in our fiscal year and agreed to move forward and made the appropriate elections to do so. And so they were recorded in the fourth quarter. On the variable comp piece, we’re kind of an all-in company. We adjust very few things out of compensation. And so when we have tax adjustments, positive or negative, they often go against or for the variable comp that we pay to all of our employees.

And on the ’26 guide, I know you touched about it. Could you give a little more kind of guidance on what your economic assumptions are for the guidance, especially given all the uncertainty we’ve seen so far this year?

Yes, I mean it’s – we definitely throttled our expectation a little bit for what’s happening currently. I mean it’s no secret that there is negative sentiment in Canada, as an example, about buying product – buying things from the U.S. So that we took into consideration. 11 What the federal government is doing through DOGE and how that might impact our government business, we also took that into consideration. But when we look at where our backlog stands and where our presales activities are playing out, and we look at the sentiment across our field sales and dealer organization and even broadly in the industry – one of the analysts does a channel check on a monthly basis, and that has shown expectations for improved demand for the last several months. I think more recently, it’s tempered because of the uncertainty that’s out there. But taking all of that into consideration, we feel pretty good about being able to target growth that’s consistent with our midterm expectations of 4% to 6%. Now could that come apart? Sure. But it hasn’t come apart yet. And so we’re planning for growth accordingly.

And then one last one. On the buyback, did you guys repurchase any shares in the quarter? And kind of what’s the sentiment for that in the current environment of doing addi- tional buybacks?

We’ve targeted buybacks to minimally offset dilution in fiscal 2025. We offset dilution and then some. I think we bought in between 2 million and 3 million shares throughout the year. And we will very likely look to be doing the same thing in fiscal 2026.

Your next question comes from the line of Steven Ramsey from Thompson Research Group.

I wanted to kind of stay focused on the demand that you’re seeing. Maybe first, you 12 guys have talked about in prior quarters on the West Coast, seeing some recovery in that geography. Curious kind of where the West Coast recovery is in light of the broad-based strength you’re seeing in most verticals. Maybe how that helped Q4 orders and how that is embedded in the outlook?

It’s a good question, Steven. We have seen it in – and in that channel check that I just referenced, there’s a geographic breakdown of what dealers are expecting in the midterm from a demand perspective. And it has shown improvement in the West Coast or expected improvement in the West Coast, and we’re seeing some of that as well. I sit actu- ally on the Board of one of our largest dealers who has Northern California and Seattle, and they are seeing increased activity among their clients, which is mostly in the tech sector, as you can imagine, and are expecting nice growth next fiscal year, and we expect to participate in that as well.

And then thinking about large customers and their contribution to the strength in Q4 orders, maybe on a spectrum relative to the 12% Americas growth, kind of where did large customer demand land within that 12% number? And then thinking about the 2025 order outlook, where large customers need to come in to reach those targets?

I don’t remember exact numbers, but I tend to remember that there were 3 vertical market areas that had strong double-digit growth in the quarter. And large company was one of them. Mike, I don’t remember the other 2. But all vertical markets grew in the quarter, except retail.

Government was also very strong. 13

Yes, government was strong.

And then maybe to parse order strength, how much was driven by new projects? And then where did continuing activity land?

Yes. We had growth across all 3 buckets, project continuing and our marketing programs for customers who don’t operate with contracts with us. The growth was strongest across projects and – but it was still double digit, right, Mike...

Yes.

In continuing business. And then marketing programs was kind of mid- to low-single digit.

And then last thing for me. Just zooming out, you’ve been stating that the industry is on a recovery trajectory. In the recent past, you saw continuing orders improve. And then the typical transition that we’re now into, projects showing growth. Basically, do you feel that we are solidly in this new stage of recovery where projects can stay resilient even with this choppy macro? Do you feel that if the macro got a little less choppy, that, that would be an incremental boost to demand?

It’s the big question that we ask ourselves all the time, and, unfortunately, we don’t have a crystal ball. So I would tell you before the tariff activity started, which I think has created some uncertainty across the macro environment – I mean it’s in the media all the time 14 and you hear CEOs on different – and different interviews commenting across different industries about that uncertainty. So before that played out, we felt very good about this upcoming fiscal year. In fact, I mentioned a few minutes ago that we downgraded our outlook for this fiscal year based on some concerns for like markets like Canada or the government and in general, and yet we’re still targeting 4% to 6%. So I don’t know what’s going to play out. We’re operating as if it’s going to – we’re going to get through this period of uncertainty and remain on track and have a good fiscal year. But I have other meetings where we, of course, are preparing contingency plans to navigate the other side if – for example, if this doesn’t go away and does stay highly uncertain and somehow impacts our demand patterns. What I feel good about, Steven, is that it’s been since really calendar 2019 that there’s been any kind of new demand level generated in our industry. And there are a lot of companies bringing their employees back into the offices. And the offices were designed pre-pandemic really around density more than anything and we were in a privacy crisis at that time. And now with everyone coming back and be living on video, even though they’re back, they need more privacy even in the open plan at the individual desks. And the conference rooms – Allan Smith in our organization references a number now and then, that there are 90 million conference rooms in the U.S. I don’t know where that data point comes from, but I’ve heard it several different times. Even if it’s half of that, they need to modernize. So we feel good about the fundamentals behind why demand should be relatively good, but we also recognize, too, that we’re a cyclical industry and we are relatively discretionary. So if things remain highly uncertain and that causes the C-suite to pull back on capital spending, we could feel that. What I don’t imagine is that we will feel like a catastrophic decline like we felt in the finan15 cial crisis or with the pandemic because we were at more of a peak before those declines, and we are nowhere near a peak right now. The volume levels are still dramatically off what they were pre-pandemic. So I think there are reasons to believe that even if the economy stays uncertain, our industry could be okay. It may not grow as much as we otherwise would, but it could still grow. But I also recognize, too, that we are discretionary. So we’re managing the business accordingly.

Your next question comes from the line of Reuben Garner from Benchmark.

Dave, just a clarification on your tariff recovery charge, I think is what you guys called it. How flexible is that? In other words, is it a stated flat percentage? Is it tied to specific countries or tariffs? You mentioned USMCA exemptions. I’m no expert in any of this, but I know that there’s a lot of moving pieces and things changing by the day. Can you just kind of talk to us about the risks from any changes to what’s been stated?

Well, it is stated as a percentage of list price, and it begins on orders that start to come in tomorrow. And in our communications, we said that it’s tied to the tariffs and the related inflationary pressures that we’re feeling that frankly come from the air cover of tariffs. And we also said that it has just as much chance of going up as it does down depending on how the tariff landscape continues to develop. I mean April 2nd is kind of a pretty big date that I think much of corporate America is waiting to see what’s going to happen and how it’s going to impact their businesses, and we’re kind of in that same boat waiting to see, and we’re really not able to get much 16 insight out of Washington through our relationships to understand what’s coming. So if we have to take it up, we will consider that. And if we need to take it down, we’ll be the first to move quickly to adjust it down. But we cannot absorb costs, and I don’t think companies across the industry are going to absorb the cost. I mean we leverage a lot of the same suppliers around the world and, therefore, are exposed to these tariffs.

And then the last couple of years, you guys have ramped up your investments in a few kind of growthier parts of your industry. You mentioned one of them. The small business side showing some signs of weakness lately and adjusting your cost structure. I was wondering if you could just update us on all those – how much of a positive boost that’s been to your growth rates and outperformance of the industry over the last year? And what specifically are you seeing on the small business side that’s leading to you to kind of make a cost structure adjustment?

Reuben, this is Sara. So maybe I’ll clarify the comment, I think, that I made about some softness in small and medium business, was really specific to our business in Europe. So there we’ve seen, I think, some nice strengthening from kind of large multinationals as well as large kind of national – like European national companies, but we’ve seen softness in small and medium business there. But I would say in the Americas, it’s a different story. We’ve seen order growth from that segment for the full year. We continue to make investments that we feel are paying off really nicely in terms of what we’re seeing in the small and medium – small and midsized segment within the Americas. So we plan to continue to invest to grow as we’re seeing the results benefit the overall results.

Yes. Within our small to mid, AMQ had a terrific year. And the vertical market in total 17 grew compared to prior year. Now it didn’t hit our plan, but our overall revenue didn’t hit our plan either. And so I do think there was some macro impact. But what I did note in the fourth quarter is our dealer-led smaller business was up over prior year. And I think last quarter, it was flat to down. So I don’t know. It might be too early to call that an improving trend, but I certainly appreciate it and I can give a nice shout out to our dealers for focusing on it for us.

Congrats on the strong results in a tough environment, guys, and good luck going forward.

And there are no further questions at this time. Ms. Armbruster, I turn the call back over to you.

So thanks for joining us this morning, and we appreciate your interest in Steelcase.

This concludes today’s conference call. You may now disconnect. Copyright © 2025, S&P Global Market Intelligence. All rights reserved 18