SCS - Earnings call transcript Q3 2022

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Operator

Good morning. My name is Dexter, and I will be your conference operator today. At this time, I would like to welcome everyone to the Steelcase Third Quarter Fiscal 2022 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Mr. begin may your you conference. O'Meara,

Michael O'Meara

Dexter. you for you, third fiscal Good recap morning, Thank holidays. quarter results. financial happy and XXXX joining our everyone of Thank us the for

Dave Armbruster, me with and Officer; Vice Financial today and Sara Sylvester, Here our Senior our are Chief President Executive Chief Officer. President and

A earnings this crossed website. Inc. the quarter call is of webcast conference of This a replay being yesterday, production is third will to Our and webcast wires release, which webcast, is copyrighted our be accessible later ir.steelcase.com this on Steelcase posted today.

included may the to associated the our Reconciliations risks statement measures text we and Our call include discussion by earnings forward-looking comparable included Harbor details in and and financial with statements. the today into release, the GAAP in most this incorporating references conference are are of non-GAAP use the measures reference release. Safe of regarding our to statements forward-looking

analysts. from remarks, prepared and we our and our Officer, to call Chief Following now to Executive President Sara will questions turn over Armbruster. the investors I respond will

Sara Armbruster

morning, before and over Dave financial provide everyone. detail. more results to update our then my strategic I'll share time good call a third summary and Mike, Thanks, an our results in on quarter handing today, the of priorities our With discuss to

segment, by Americas significant of our supply number Our third and impacted quarter to costs results saw very in strong a continue be chain order growth, our but impacted we inflationary results. challenges which

levels our quarter, our across across of business markets. of main and our was parts order all pre-pandemic or quarter. Our exceeded third all growth last to geographic XX% all order approached segments, in broad-based in including of Similar markets several

growth congestion in growth our And third we'd materialize. raw to that in AMQ businesses fiscal experience ongoing Asia-Pacific really supply confidence are third We EMEA we issues chain not similar of look trucking last issues our are and ship levels. quarter, Smith our of all to key of These our schedules. caused quarter the have material been I'm to Unfortunately, 'XX. it's and at our be we strategies kind working teams orders of production every segment strategy. these ship we challenges, the many commitments. causing how impacting of revenue And orders region and delays to to availability Ocean times, forward. out delivery challenges. and were lead more quarter, and anticipated. higher are chain within on our have we'd other to for the were gives extended Labor proud in challenges and ship and keeping our results shortages impacting port meet are and by parts commitment this period FY X% same customer availability that in than System, adjustments and 'XX overcome our including these supply teams Specifically growth know focused industries, good going continue logistical in and to day suppliers. broader than ours challenged everything quarter the dedication did continues expected as to It's see delivering some of our in due me remained to hyper implement areas. which of to freight our These

impacting broadly. delays. not levels, And we transportation significant more locally, our overtime [against] levels these utilizing utilizing as in new actions order these numerous expedited have compensate experienced freight transitioning more our any suppliers, as to including increasing pursuing been change cancellation have or are project for teams products buffers stay inventory on schedule, to to pipeline challenges, and issues sourcing operations Our industry

recovery. in the work transitions our order best work most strong our places our do going aspiration lifetime. was that confidence revenue is by people And We work is by that bolstered expectations growth their confidence for the the one our although quarter, significant of better. supports believe creating below to in So, our our help through

And rich source a solving need at people want to and work what thrive for of remains opportunity.

our on continue with learning, I express culture, and So employees offer strategy together career work. desire in that's remains person strengthen broad inclusive to a support why as leaders, business more employees new centered assimilate they and And bring experiences. CEOs resoundingly their talk to to

they vary Steelcase. without work, for from hybrid involve plans exception while aspect we incredible return So company and believe company, of opportunities some almost to provides office to that

connections hungry with and our And supporting how people talk decision-makers strategy aren't make office. they're social the and innovate insights visit hybrid require to reequipping and translates they'll to of matter how privacy, workplace this help WorkLife our to believe rebuild help kinds no will of bring is, answer and if long-term organization's individual, for will an opportunity in new even those It designers, growth that to involve the new into We co-located. manage work. our for places that most, because in of navigating collaborate and need researchers to and for a As changing people support what Centers ways of for looking rethinking work. us all spaces together shift

and which the office time significant X changes work, make to the becomes will So further things: pandemic hybrid companies their we stimulation to as in we do demand. environments spend COVID and in believe endemic, office remain drive support employees ask optimistic in their that will recedes current

planning ahead look in X drive future, on how we As to to strategies. focused we're growth we're the overarching

now, workstation as solutions to digital and and Orangebox. remains our very move how also technology of wall, of into as modes. optimally enhanced excited our We're We've leading how leverage innovation spaces more such as through collaborating positioned pod build quickly presence hybrid about process priority. more support new the physical and also believe we customers. about each about work hybrid plus products and are customers. to our part innovation other's to Personal home that product recent introductions and business as is to other We and solutions people work digital to top investments a us products, of drive new Flex Flex us our insights companies and experiences and increased the in allows to drive our a with Microsoft our working value work Zoom as to such from industry deliver from we lead plan advise to First, capabilities insights best transformation, work mixed with delivery. for on work this I We're are speed our Partnering increased integrate leaders such mentioned,

in we a second to opportunities which also by our can Steelcase is but Many believe we enterprise the of that depth simplicity. speed our value presence key see the adjacencies, solutions deepening serve grow customers we service provide, for also and and and priority. We customers desire

our acquired its great in to part AMQ seeing delivery in business, due are growth which capability. quick we We

broader from to and we're Smith successful APAC presence leveraging Elm, working customer deepen a expanding significantly more of in businesses. drive that example, our Pacific, and and education Asia. we relationships. System to business and to also built So in medium momentum towards And growth Asia education and geographically. like largest to And on India. we use China Americas will business new base, believe outsized brands. In our geared those with business retail applying learnings markets learnings continue West our AMQ success continued build small our to to we'd expand relationships grow has serve other our on We're also for efforts on even We've to our the in of broadly the we're

products today creating value our we attract never facilities customers, continue Preserving are. work our to a how integrity than manufacture using we priority how And force XX% values met become We've and to Our we empowering by they with owned continuing more business ethics with are and our carbon reduction as we're and running XXXX, our and by those to our toward who of verified to employees. third the for goal business do third-party engage from planet, targets. our controlled a is how integrated emissions good. we design core Steelcase into have neutral using in been and our goal science-based and and people business are

Lastly, we've challenges. seen and trajectory. response several current implemented We've pricing growth the actions on operating recent order our focused keenly to in we profitability expenses, are supply controlled strong accelerating work chain our inflationary we overcome while headwinds. We've to

to have to We think outsized and the reallocate longstanding and as to investments expand achieve which we structure, our well as priorities of capacity to our we cost organizational a our to vigorously focus as plan organizational highest continue capacity relative to results resources towards results. on deliver fitness,

as they the hybrid the interest [world], strong seeing both and needs redesign equip offices the demanded organizations condition We around are their new from to work. by tackle

are committed organization the there that challenges move talented, still intense interest and on us focus lie this growth, gives new our into our in So we optimism combined as the ahead, with while of work, financials over QX. the to optimism. for like to and turn We're it Dave long-term now year. outlook I'd pulse will reflect and believe change feeling our results cover our to our

Dave Sylvester

our our the sequential and sheet pandemic. will some quarter to My XXXX in balance cover I comparisons outlook results the Sara, today we quarter. and good notable September, the will comparison second before cover in cash comparisons for to the you, and flow the comments third morning, fiscal outlook Thank everyone. and provided quarter to the fourth also

highlight in were fiscal our levels posted said, I'll fiscal few a want year next good Pacific And included orders feel our Asia other about growth the over in that exceeding growth areas But XX%. strong to about growth our year. more chain Sara by over control, about these business in and we EMEA We within with negatively XX% and the every with of impacted market. first, year-over-year that with was order levels levels business. growth we our by performance of remain region's talk optimistic in XX% in few As minutes. prospects supply more areas quarter and performance directly disruptions, in of the region, overall, Americas XX% in which I a QX, of order XXX% third exceptional XXXX our organic quarter XXXX as nearing growth our regional quite

new Our customers. with resonating products are research and

strategy Pacific the with in and turnaround pleased included acquisitions, of off. our is achieving EMEA paying our growth in are benefiting our are investments We Asia objectives recent also from growth the

segment improve over margin EMEA X% its fiscal exceeded working. XXXX, income quarter, in operating profitability that that nearly strategies of of our in quarter third level in to which highest confirmation $X the achieved are and a segment operating its Our million and

of levels adoption yield that increasing from beginning see in Our pricing XXXX. their actions, and yield negotiate sales which will offset to price working of current our are our recent contractual to efforts, inflation diligently belief is the organization supports fiscal we

Our operations at seem environment. every the rate. customer and teams long challenge in implemented have this resolved, new for challenges. challenges response remain remained meet commitments actions they've to supply of summarized face chain mounting a of in resilient continue to Sara dynamic a resilient they high yet list and arise to But

rates at isn't the low in kept quarter, industry our manage expect, quite year increased to Pacific, customers hear multiyear start further solutions which in and customers again reductions continue below We our we're Our pandemic, the rate strong large overall, [validate] than we closely with relatively won better approximated several the contracts despite during spending of win and And prior and levels. since suppliers. new performing lastly, estimates this products compared to the We expenses of quarter. quarter the that in in and the consistent our EMEA our need. we introduced Asia pre-pandemic the performance operating and visits other level we which the dealers spending Americas remain third or significant customer but and from award-winning several

included were and addition, an research executives in interested are our who senior the and percentage hybrid visits increasing In of experiences. in model person

areas, significant third pleased While both and expectations. strong in our than on our quarter the performance we're higher in impact of challenges these the with our was performance supply chain

times, lead least disruptions $XX to For shipments which caused the the extended quarter at to supply million the fourth delivery chain the adjustments we into third estimate Americas shipments and of revenue, ship delayed from quarter. in caused schedules,

delays which cover address I third of those growth order of when quarter, the detail backlog quarter, end more As stronger increased significantly outlook. the result in the our by I'll our the a in and

shipments disruption into in by margins at quarter in the rest You'll disruption leading at Americas Smith business of in evenly Other split while business estimated and the earnings to And chain inflation we least of the higher second the primarily in in shifted we beginning million the $XX in strong $XX prior we our in disruptions our Americas the in and the lower-than-expected That freight shifts approximately inefficiencies this caught year. was those the have higher associated third negatively Americas. approximately higher lower million shipments revenue remember, increased Americas. forecasted costs, were approximately rest the the favorable higher category, backlog operating range favorable the impact net in EMEA business expenses the supply impacted the margin expected shift for sequentially of by supply inflation to and quarter. and quarter, been third $XX within inflation was with System of of between net that from and would our a the million we Smith fairly largely third segments the our the not and that and costs and revenue, million. more delays quarter Americas gross and of for incurred driven up of Despite lower-than-expected least by If to estimate net mix. supply due earnings $XX the Gross higher-than-expected the chain quarter, chain compared pricing at estimate in costs. shipment year-over-year than the We revenue Xx September

business in of million in Operating $XX a quarter results the $XX the sequential of the Moving the the generated driven second combined a decrease which approximately with a Other quarter million comparison stronger represented results to category $X on gross quarter. Other million, an $XX third chain by quarter by decline in the income third Americas $X driven higher sale $XX $XX sequential supply by System, of approximately favorable and trends decrease revenue decrease by to reflected in of versus of income and operating inflation million net operational related recorded performance pricing most in category, Smith strong and labor the in mix of offset small disruptions the typical of increase million, to a across The in favorable in leading was associated A EMEA seasonality the inefficiencies gains the partially of driven million. land Americas, million. at in and improving performance second freight demand EMEA and and benefits margins. markets, investment. costs and The increase

quarter, were million working ended capital, a our a under to As in customer liquidity. higher Act, balance reflected it the total and flow first of week the X.X quarter this $XX Under activities cash XXth. million program, the $X.XXX repurchased $XXX million in quarter. payment capital the million of the and we included million shares, Investing of to November remainder program, increase shares the the quarterly shareholders and during on and fourth prior cash million year through share quarter, third cash relates flow of the of repurchase Operating FICA acquisition deposits. million $XX the per in $XX expenditures. in second QX taxes and in the a a deferred dividend that we additional X.X under sheet, million XXbX-X and million returned with CARES $XXX our was $XX X.X in We completed Viccarbe, which

of the to within for to approximately X% a X% revenue report Moving fourth basis benefited range in XX approximates the higher the million, the than million reported $XXX fourth to revenue which $XXX to we of shipments outlook the X% prior expect quarter, quarter. third approximately is operations global which the to we've to quarter, year, which and pushed on temporary organic an shutdown into compared you'll growth from XX% the remember million

the and factors. following sequential additional year-over-year to be the in revenue impacted expect by increases We

First, similar quarter, quarter prior quarter, an was end backlog our historical on after million at the third the higher basis. scheduled the patterns. than which the was million, higher of XX% our $XX backlog approximately end quarter of the and than approximately third XX% higher $XXX which ship than second fourth end or more organic while the Also, of consolidated is year of at to the is the XX% to than

On uncertain. in return-to-office decline percentage typical year-over-year fourth growth orders expected with double-digit we order patterns sequential seasonal Second, basis, to the expect as consistent are remain quarter. a projections

chain expect similar the third quarter. to to continued disruptions fulfillment impact supply our patterns we global negatively Third, order

to We the which EMEA XX.X% projected Americas our the is expect net of range of earnings the of in year fully includes approximately compared to margin offset to including through approximate expectations million breakeven, $XX by actions. pricing projected inflation pricing driven benefits inflation prior gross to and XX%, of

in similar of experienced unfavorable inventory business the Continued cost and seasonality our chain mix significant are projected supply disruption quarter, and expense, of to quarter, a lower net to QX, finished to interest other the to shifts goods third intangible supply production of and $X the end or And of at level asset absorption million Viccarbe continued in to costs related the third acquisition the expect to chain of $XXX effects in expenses some to level similar related fall compared -- recent due million, the fixed the disruptions challenges income range than higher and higher including in and million approximate income amortization. $XXX within total. QX. investment we our Operating

model see continued disruptions operating and XXXX, closing, pleased business [evidence] to order benefits predict In across gross for fiscal chain leverage. we And I'll which return quarter. it And demand and supply to improved we coming in we potential office supply segment, fitness inflation recovery significant our the year price return our actions costs cost gross aimed at commodity our in chain significant margin remain the over disruptions. revenue for remain strategy, will could challenges [rates], which commodity improvements broader recent the it's our chains to prospects difficult supply plan as our focused impacted expect while performance extent prospects by for broader spending and investments to our the performance moderate in third to to remain to increases be our and in forward could of for from Looking expense working. our and some while with provides driven include industry the fiscal from next EMEA in ease, and a and pricing confident tightly when improvement margin on supply to our chain improving level [increase] our office and and months, the and our manage of there, pricing negatively From to actions, improvement the earnings. are improvements questions. potential significant XXXX We the in strategies strong in ability we turn a of

Operator

[Operator Instructions].

from of with Garner question first line Reuben Your comes Company. the Benchmark

Reuben Garner

So I to missed the of apologies, I the X on. know, don't getting first, I X had call, minutes trouble

question. So you've supply But cited? out? customer-delayed the apologies. of what talked One, this it issues chain looks this, office? is construction, if then Or more delay in are And two, a two-part goods that deliveries were got pushing you because about return like the the number inventory. -- reasons the it it Is to finished

So did have for you you're way customers obviously so for -- kind of adjust that you is it any moving something out, Or guys you maybe to guys labor so guess, customers available and predict is forward materials, on adapt definitely to this limited can, can't that to? those be focus ready? there you push that like will efforts that limited this I the that

Dave Sylvester

were start delays let Well, question that part of first with around the your by me customers. driven the

of factors, a rate what customers, to driven from And supply the want products. back, our long-distance in and sites related to that, refer port seeing revenue of the That intel be larger that coming installation by just or piece was to bigger that is that challenges it isn't because returned both things. be backlog that we number a they because accept It be of smaller to to been that we or the experiencing just I challenges. and The we're for linked those have to the they of it all chains, But is, level, well. addition it's right the chain them challenges, and of office. is driving higher was as also construction our where say part have rescheduled. driven have or behind the chains what answer by we readiness the the now congestion the We they pushed don't by was was That question? supply But believe as could the would driver. of don't because complete was piece. it first supply project which could First, to And factor Does biggest driven internally higher what's that a is delayed domestic your out. fully it. could push gets complete

Reuben Garner

does, I Dave. you the it answer. let first I but it based I well, Yes, And go got on think ahead, I'll -- part, second the

Dave Sylvester

clarify you'd more part. maybe like the what second Well, to hear in

Reuben Garner

is curious I way backlog the you an chain mean -- just have to orders even but there's I'm hand. you've supply on than faster issue, is -- inventory your if rising and any

So is you already way focus? improve of, your on I happen guess, customers to these in to are where there's of to focus efforts? this kind any going kind you things environment, no confirm just before way Or guys there

Dave Sylvester

capacity. trying of the they're capacity We of But with do of the pull say, exists much tremendous lower our forward. pandemic, even extensively things inside yes, And day, and as in and to have operations build ready. fulfillment level and of more ahead that order our volume have our we teams we've they're also distribution confirm for a can every regional where would as some looking Well, do don't trying They're experienced I addition customers that are opportunity course, to from possible. that we working that teams any amount centers.

some if cushion build return can can can grow build demand us that our ahead, to chain to and we provide we suppliers and if can continues -- as and office. with support So a supply thing be ahead good

it. doing there try it's operations us the the confident customer not make efficiencies, are possible an possible only ahead and quite demand that base ready to only stuff fulfillment I'm drive industry, broader side our uncertain affecting and today, to pull But of ready and our to is certainly and manufacturing for as model, that where but and delivery everything customers well. accept industries environment out business So our

Reuben Garner

can be that then would? that Or at inputs? And you I the otherwise point on guess, backlog Perfect. rolls of guess in And product the a conversely, if then late? does inflation, over, I that backlog, do too you many about that transportation take guys profitability you other if see that there impacted have guess, profitability further you and where talk Okay. the what backlog steel might be how And we or If gets I we in rollover have? would don't orders that as would it too big put maybe see your you as is risk? a improve

Dave Sylvester

same the in much I as would think do get, I'll I the everyone else and take can company as thing. backlog

of relatively Now short shifts of or supply profitability could it we asked Remember, the chains. by you be the not whether time the But about can fast. period backlog the relatively deliver backlog. in challenged

This what see. is days. XX of We scheduled quarter, have of for XX% about bit similar quarter, that higher typically backlog we a last have delivery that, than the beyond XX% is always little but to we

So first quickly. going all, pretty shift of to it's

I November, the whether see which affect of of moderated that profitability enough fast of So I to steel moderation the don't in don't first whether for we'll months know prices, any our many time benefits backlog. know the in

make quoted about have The the backlog, of quarters other in finally are projects ago. projects these is in X comment though, some were that been backlog that I'll ordered were that

X bit guided we the to as that part is in to And business why margins reasons -- profitability fourth gross in level why we and the that have which a attributable we shift backlog. a little is the of profitability yes, in mix the lower, so is of did quarter

Reuben Garner

reported, a heard an you last in to industry players And wanted for months. and We in last We have the industry a about implemented and a talked couple that bit guys on typical. surcharge contract X just recent price Great. effect lot that a it different of way works I update a Since it? folks? philosophy. the there's get I pricing the the been guess, way in moves, than made X me. And Can are? why the little works about reasons faster you're you you I addressing a just are the remind putting to How guys little approaching and then another is takes talk how that flows out increase through, think, it your you

Dave Sylvester

Reuben, let Hey, Mike one. that I'll take

You'll contracts Relations. Investor years ran before and for several remember, us for he pricing

than So he is I familiar with that am. more

Michael O'Meara

Yes.

not contracts you. the to it thank point, the Reuben, surcharges. The customers. price with So differently traditional in in We announced something now, list are It kind the process do about do whether the works think should done we this at through we the of way any structured we we've surcharge decided do should more different right different to like tactics which implement and pricing, of or we've surcharge, a past. haven't whether

customers. that work with the through established. And We have long try relationships the we've terms contracts and we to

that between when most when through cost implement we increase which price the far, is we've difference timing does. we can and with what more the a industry customers. there's means to experiencing chosen pricing of kind so But the that are Sometimes, do of route, it the traditional

industry. the across actions similar seen have We

whether we'll far, It's additional as so need though And at many. about increases, look implemented to as to even we we're the as we've normal working far I'm feel good pretty sure, do price So, so pace, converting the at we continue the changes. strategy. inflation

Reuben Garner

just X if a more follow-up. in, And guys, could I sneak

so about from price neutral, But want to to ask cost cost was and think I'm I differences sure is EMEA the and mentioned price a between one. going leave Americas You I'll profitability the that standpoint? EMEA someone the there,

Dave Sylvester

not Yes. the That's and the Europe the would primary Americas. level We've have say, in contracts long-dated we have in don't that customer that And driver. seen level at or the in experiencing we Americas. but significant I same inflation long in EMEA, significant we're the of,

bit inflation we've level little at while more efficient as We to Americas. have of to date, those as has the for through contracts same the it's but work we've or the again, pervasive Europe. And or seen level experienced us a not been that a lot, in easier significant, in

Operator

next & line from Company. Your the from Greg Burns of question comes Sidoti

Greg Burns

you're an wanted the current of recent Like your look Has and outlook more on Just what's any any anyway recent some with the get seeing maybe weeks? it customers, variants that Are having are seeing changed of of softening conversations you? headlines the indicators? in given to increasing? in like the for cases around you your update leading

Sara Armbruster

Yes.

speak I'll that about because we've CEOs as decision the mean, they're thinking to conversations return to that's a variety how whether and throughout the Greg, pretty situation them pandemic, I I other approaches office with changing schedule take then to evolves. I plans, have customers the think So And setting makers. seen of and regular

actually and Some they've who way. certainly the started bring never people back. customers to meaningful them some and We in implemented have any have set left have do dates really office

recent heard my the developments. quite say that the And So based shift conversations dramatic in would new variant in a specifically with customers, or we've I I a recent yet throughout on variety seen pandemic. haven't plans,

do know those sort hybrid working of their they're consistently customers to that part on do together thinking they're think still want accustomed hybrid variations generally whether different and more together COVID, least that that time leaders about say become believe that for of as still better they're I of when the I with on have society and -- office plans, of think hybrid. working and types continually plans. living return to they their at and to science But people various people they we are work that's

variant new point, dramatic are and this in we've I relatively what customers contemplating. news at wouldn't say is new, the heard shift still a So

Greg Burns

set the at then home, Okay. push work And in you because saw giving same on approaching terms us can that just Omicron, to employees out, of the the from update you're some $X,XXX environment. they're but older of their market time, we go, up the with work headlines Apple how

to are that that? kind on how businesses terms how approaching what's work and So from market evolving your is strategy of of capitalize home in

Sara Armbruster

Sure.

people supporting we've ways. approaching on the at different focused So couple that start been in working the since a we've home been of of pandemic. quite And

some with shop customers to certainly, to we've to different also to help of at as nice employees types from seen same people provide whom employees home. At our working choose that catalogs home, we've direct using and stipend opportunity their essentially with Steelcase store at growth working been themselves programs that the either So can to implement X those a customers, in we're major or sales time, support through business. support with of

different us allow will also with support the available continue excited people my arrangements and our have that we've comments, make like are pursue fortunate we're of Elm and to way, retail-oriented to we're I opportunities work home through and we a to of mentioned really to as continuing from ways those things So opportunities. of continue looking homes. really different in on outfit products channel. the been drive course, for our promote we, to about working who number products to retail to people believe some And in And growth their to that West in customers to those then partners

So we've from taking been pretty a to and to work continue home, approach to pursue that. comprehensive intend we

Greg Burns

the the home the view or market? big size a like your evolves add? could have from your view you how it market or be on detract home on view in is work hybrid terms of Like here kind given work? on what Do a the from overall office how of Does

Dave Sylvester

tools. I demand home overall height for they at industry in office appropriate world want days. days, that could I we're and desk an setup other in adjustable they ergonomic the work-from-home more in through work some imagine home think order frankly, similar to some the you from it the potentially hybrid And a what that, with the on a chair, can have work people be think could that beneficial may patterns more And the business. do of seeing the that's because

Sara that where better just quarter programs putting growth companies are driven this referenced, the support of Some the in employees order was at home. their to together BXBXC by

driven channels a in not it's that the right been for also investing has by story of it our us end. she we growing out. it, think nicely. some of the and the now, We're in but positive And pointed biggest was other it business It's part

some in to our dollars continue going of we're funnel investment to So strategic that direction.

Greg Burns

of drivers what target? -- drive main middle gap of would next expect And you versus what timing the happen hitting And be price Great. it is of then what timing to or rather lastly, year, might sooner to cost terms the Like would on that closing make than year the when the more that Okay. the neutral? in do maybe the get the towards maybe the end? beginning

Dave Sylvester

that crystal pressure ball There to the it and up. expected labor a go last help. rates would like. get And happened quarter. since to said Well, push costs is increasing non-steel on is by to the continued commodity what's second quarter we I

have put pricing be we on a saw what quarter. beneficial it that could turn. is let's [that] that So could finally moving steel pressure -- say, may out, But

saw in be less than November, we steel pricing October Finally, pricing.

somewhere and pulled that So again but pattern to a again in I cost that if think to on we And back pricing if have overall imagining. realm in of into inflation push it's we're of December offset structure, it then see that that. we in our January, continues possibilities taking that QX maybe

you kind that want don't to take. we to I -- pricing pricing what of -- I So limited additional wouldn't can it. are have we're putting in we offset of we history think a we inflation, If have in

Operator

from from Rudy Yang Berenberg. question a have We

Rudy Yang

more in you kind order to still I seen do develop So think I to of any sizes similar there been and Have obviously, China strong Smith offices seeing there? yet -- can Americas? this have I mean are trends order I in APAC you And But seen growth you sales color was meaningful just to been guess, has you've those quarter. you've more in that on provide many there? guess, System India region the reopening? the of commit

Dave Sylvester

when at relative There in few still mean, kind [aviation] project across would to say, question, a There Americas the million quarter, summarize, I a mean, the we there I the good we in business the looked significant X I spread the Asia in patterns Rudy. across good like there were Americas. a Asia order that at have the a second And the think projects, every picked across It's unusual, normal, levels in I that the single ahead say, were X I single or of way mean sizable of when sizable the sector. orders, leads order quarter year look APAC was way large was in were market region. midsized it's when would there order there, was, last the markets, we large. like highly in had EMEA, entire we were of like FY just what I but quite that we that. had up nothing were $XX the projects different I recurring, 'XX. few, X every a nothing lot a I of would say, them, not

do was the to the getting leadership and international sales not in the us the like. to people though. while of much like locked in at But pretty world. were index of ahead Americas, countries of tells X of last frankly, everywhere. as week wasn't to it down return continue notable which it area. of the were because of particular to that than region, in office What and grow parts it soft increased variant it they they does And and and office feels rest have to we not getting back at is get much XXX% back feel activity that remarkable. our EMEA remarkable. out China in look over look week, though better the the where to So It's after travel far the and of week have mean the as It India I grew XXX%, more better occupancy doesn't COVID, the still is week, other it's city. was the as behind pace normal continuing seeing India the ones, get threat and major ones. but was we're that but They at of year they the you largest have quite quite world. and office, country after it's far in capital that the -- business

Rudy Yang

And you customers then just that helpful. comment you mentioned really I what just can main into been space? I products have pretty and type That's products well? the resonating new guess to XXXX of recently. well appreciate with to that. your hybrid maybe And heading a your timeline talk catering been generally on have for little just received your bit products focus new about developing releasing

Sara Armbruster

Sure.

customers resonating. the So all COVID. and that of are we've throughout I number we've that's think we to is conducting research have are this on from been a that that really talking based things launched And about developed innovation insights the

have been for different keeping we safety there for previously, are it's solution working you flavor their types that, And that so at and customers relates conferencing just other needs where from kinds hybrid give are that of really more offices, to of that people privacy are privacy are customers know any whether they things There reassessing that and are maybe privacy. in and acoustical a kind support we're reasons like the of separated would lots privacy. of than in quite on times video but of others reasons also engaged things to to

things spans even really of like needs do perform looks that Orangebox individual rethinking and an great like office some solutions. solutions what pods So out everything lightweight workstation to the business, launched and to we've the space like to private of from to things division

So ways. social spaces. we're that that working and whole on across variety Maybe is other support interest different on range been some X really seeing product I'll touch in of have privacy solutions a

in well is and with being to One of the many are reasons, as employees interested believe ability biggest because in colleagues. the of office as reconnect interact customers the I

people, reconnect, rebuild that things So to to people the many about people there social and to that, cases all tremendous about of trust us are to bringing together benefits value in their connections customers many work those experience. their articulate that and reenergize sort

the excited important. that's settings So are about opportunity add different that quite we kinds people still that things to acquire ancillary and social spaces, reasons that like performance, solutions to in certainly, together work their come our are And one but the of allow way Viccarbe of portfolio. and high to are

resonate with those with along them talk things to examples of distributed customers collaboration. are and So as work-from-home definitely X that we solutions

we ideas to a pipeline. conversations product there with we timeline, healthy this our to Certainly, change and for development as and customers that we see hybrid. in help in far growth continue much have it's As stay order to think quite new important so I customers, we have observe these invested as is solve our mean, We industry. strong

our be to expect bringing continuing new particularly that pretty hybrid continue continuing the efforts on customers basis to and over continual market to time. invest. we We're we're to important navigate a be to innovation as we focus will innovation areas So work, think on these

Rudy Yang

has opportunity talked just in the your Great. -- provide what of X evolved? opportunity some evolved And then And for your Smith lot market? last on can for me. a in you the System already, trends order We've the how how offices just maybe an and/or about education but updated education vertical have view

Dave Sylvester

is we tracking levels. Sure. System, I as above Smith order at mean, 'XX FY already said, back levels

and amount being I having higher. -- visit customer think significantly They're we a year. terrific commented both the of a in-person traffic, the quarters virtual about number few ago,

they're by and disruption. inflation impacted supply chain course, Of

we're So be about targeting excited and finishing turning But challenges. better Steelcase. for a acquisition perspective, out and a even line to where a terrific they're didn't about perspective bottom on talking they probably this year year. on for next it It's be those they're top would line if have

Operator

Next with Thompson question Research is from Steven Ramsey Group.

Steven Ramsey

with and normalized reduced that to remind those to they in normalized are broadly And couple orders add expect that at Maybe and the already will minute for you're profitability delays of at expenses operating quarters? seeing maybe orders next levels kind affect EMEA discussed COVID? start in ago, a do levels remain segment of still going that EMEA of are forward? Or us, to to on, you but

Dave Sylvester

reduced COVID. from extent some to they're I Well, certainly still think

Our discretionary still spending low. is quite

the traveling EMEA, we at are that We not in again around but and level were.

they've back I some I And come not of say our been the in costs So spending also discretionary development come likely not have levels, levels. quarters. pre-pandemic or pulled to back coming back level would to pre-pandemic think product will entirely

situation. this but So somewhat coming intentionally they're low, low because they are out we're of

your can at restate patterns? you On question question beginning patterns, the order order your -- around the

Steven Ramsey

Are Sure. Americas, seem delays that to more shipments be is that in pronounced in of happening EMEA? the

Dave Sylvester

have out, and challenged it to They They been -- a even not the the extent have are much inside but is inflation. didn't a environment. happening, calling challenges, more our in why supply smaller press so they really about earlier. experiencing or in far, release They're we they worth manageable quarters. which talk They're but remarks have and/or chain contained

Steven Ramsey

lower delayed And quarter, Did discipline? Helpful. than to that in the with expense is talked shipments the operating third has was the then broad any that just Okay. guidance. about? you do Or of that

Dave Sylvester

No, There little Yes. a expenses. variable bit, of course. overall are operating some in items

would But part spending. of that. say, incremental was be, we to And controlling I it continue so

our but time ideas of lots line we investments have of make strategy, with to least and lots are improvement in to top in the timing line. bottom want we them them. We trying at that We're and

back when the So delays effects, some pulling the discretionary we’re growing the increasing spending. the pressures, the and of saw non-steel [disruptive] inflationary on we commodity extent to possible shipment

Steven Ramsey

naturally this that quarters? wanted to the do And me. or capital, for it do I look inventories net Okay. cash Is at this maybe that cash year-to-date. -- how for see cash usage coming Does working more X purchasing? evolving reflect you does Helpful. unfinished products? how or And you and last in and appears then up inflation taking unshipped [bind]

Dave Sylvester

good a question. it's Yes,

to $XXX AMQ And in that's customers. always made But do we're see you delivered level businesses disruptions. when we of million our and the Smith chain to made-to-stock with do million we others. some file to We have largely some lot. know order. finished goods And have System, is Q be waiting But at it the are now. right finished inventories -- on goods has $XXX to supply a that and our You'll that with Monday

our complete. not orders Some of are

complete. customers and dealers our So until them want they're don't

sites entirely the of ready. aren't Some

of to waiting So sitting and delivered. them inventories be we're some for on those

quarters. the mean our nothing in trying every component build growth concern Q to there's get linked with supply from buffer some higher, persist into will that inventory are the intentional. our receivables in anything month. credit try really for are and in higher, chain of I the else. there. that increased Receivables business our the in supply factories are And see our quite our more also experiencing at higher, we've Where that's also much disruptions Steven, base it's we are look than we coming but I and You'll and to to been also expect our controller raw can, people as that materials to while

Operator

[Operator Instructions].

from a Water question from have Research. We Linde Tower Stuart

Stuart Linde

Water to I'm everyone for taking Bugatch, Thank much. and wish calling for very oru I questions want holidays. Budd in Tower. Thanks you happy

CEO. as you. First, congratulate Congratulations to to to we'd like taking Sara over

Sara Armbruster

you. Thank

Stuart Linde

You're welcome.

Secondly, of is we any thank And the behalf to benefit you beyond? from variant, the or most and question, there its about I is felt associates? the return office. where XXXX Steelcase Budd. businesses comments most, questions for you you're X what which vaccinations of you a for on Sara, comments one, product detailed know lot business that had the wondering given a given call. there's about been are quick if has was we're Omicron hearing And on But the second mandated would excited then

Sara Armbruster

Sure.

with So the start question. let second me

contracts enjoy government. U.S. We number contractor. the support Federal to a are a We of

weeks and guidelines -- but vaccines. right are don't ago disruption And guidelines where in guidelines courts forward working this as on to So not or we point, to or those we’re and would very are a several toward compliance. go we to say I various that that the our not. relating the we have well pleased our And Federal been contractors have allowed significant way paused at whether far I'm few now with courts, any Those were introduced been temporarily the as vaccination compliance. to by Federal expect following workforce,

and traditional as to of and in your how think support and looking from terms really where that, than invested workforce believe talked whether most and that collaboration be And well privacy, integration support space a work in earlier, work-from-home and believe it's to programs, physical solutions answer going moved into tremendous positioned matter organizations workforce we but of continue I I As our our navigate we And social I'm will their hybrid no invest over few to have whether think for, really work distributed past do need focus I currently know forward. going insights excited -- and do far that partnered to we'll are the I strategy I I'm about their changes to first a that's a have maybe to offerings the support the week which the in you portfolio help with our we direction I comprehensive leading they organizations those give research the that as the their very they going of to change of this innovation us on customers, and heavily as question help the fuel those it's something globally X-day on future? years, about broader and to continue also edge forward. really office in model customers a spaces, keep technology to to different. you're

and do excited So things our we about the for I support opportunities we me, see the there can that think I'm customers. to

Stuart Linde

your out 'XX, the knowledge something going get when to comments But unequivocally, I'll and interesting model term see memories, business for they with where is the of wonder social conversations if your for people about you and 'XX, will long agree it headed, from that. industry? this the or your and really short is I interactions secular have It's hybrid to be

Sara Armbruster

all flexibility norm a a And even already site. terms in things. of believe great time Steelcase. as years have good something there in that third able research all of that great interesting of suggests question, like a a be for some it's at feel maybe your of years, there of hearing us the mix some a after anyway that discuss to with or that people from would home people, our here the it's some a and new your say, some into do maybe in what as anecdotally, what it's hybrid well your like much too dog, some feet, time from collectively settle being office that will will home is fatigue to I'm who combination thing. It's I'm are own work X time that customers and we seemed e-mail and X Certainly, may co-working I it's at after starts hearing X at of and is But place

the where combination. broader our that supporting continue I what work So point home is anecdotal. at needs we're is to at again, continues certainly -- strategy and that so ends believe that, center, some be But would on work, in office, guess, people I to up hearing think or is And being we're to this I going think mixed. whether I that to work focus the we

Operator

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

Sara Armbruster

you safe holiday Steelcase. wrap in everyone like a season. to And for thank happy you. just your and I'd interest thank Well, by wishing up

Operator

concludes This participating. for today's call. conference Thank you

You may now disconnect.

Steelcase (SCS) 17 Dec 212022 Q3 Earnings call transcript