SCS - Earnings call transcript Q2 2023

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Operator

Good morning. My name is Rex and I will be your conference Operator today. At this time, I would like to welcome everyone to the Steelcase second quarter fiscal 2023 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.

to followed question on by keypad. like simply this your would star press the you ask during a time, telephone If number one

you begin your simply your Thank If Mr. conference. to one you. may star, again. question, you O’Meara, like would press withdraw

Mike O’Meara

recap results. Rex. the morning us Good quarter second you Thank you our Thank joining fiscal for everyone. for of XXXX financial

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

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

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

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

Sara Armbruster

over in morning growth good past the better earnings year. this Americas than to the everyone. quarter the and Mike order share than Thanks of were significantly delivered expected pleased I’m that industry our higher our and rest we’ve

will to are certain outlining implement planned my our experiencing, Our actions our progress results results more business. due the the I’m are industry remain the combat and our our strategy reinforcing great of a like today few our proud to weigh and we’re These in parts Dave pressure lower doing target. spending plans minutes, and inflationary pricing time spend financial in are on in of on rates things: to I’d strong is but to our two results making. our detail teams in cover the through to designed continued halfway part year work

work, the will includes that to in helping work leading our change. remains even to because work imagine people the person and believe come people achieve, on We where centered First, to committed they strategy together create and to transformation. how and to we create continue places work remain that that better continue hybrid patterns to shape and

as demonstrate leading Our innovation investments led Orangebox, our architecture in the the to to Everwall, acquisitions additions Viccarbe, product, our work such commitment Steelcase hybrid transformation. new Halcon recently have most to and like portfolio new and

from our to Zoom, services customers the our the We’re from solve own with our the and our believe teams others, seeing in early positives Microsoft, shared strategy is we investment are Partnerships working. like as Halcon sector the activity sales mix along with our professional realize for are to cost strategy hybrid We to starting and core acquisition also power. Creston and companies we’re innovations, as technology benefits purchasing help strong our responding transformation.

have companies in slowdown I to downward last so volatile likely facing, paused to they our the on a positive that Americas our in the many see trends customer we was uptick that recently Despite weigh Americas inflationary very the own their to of define U.S., office excluding their down factors. and ago, the feeling mentioned, indicate own making. workplace pressure. or acquisitions quarter they’re investments in reality environment. industry positioned the our The as strategies the their in in is are in released pressures increased in volume be have Americas our to of At impact same continue as impact address cities level interactions the same and possibility are but to actions our remain volume along profitability. time, begun We’ve contributing We’ve that primarily just many lagging others the Americas, business, the companies Supply some still to this believe order challenges, with macroeconomic slower organizations. which X% minute decision our serves leading is return segment our recession choices which a successful I show been data incoming the disruptions dealers. core recent the meaning persist our level business, significant. mentioned our we’re to share, in from and that also points taken but Aside some substantial large chain a office return an There market those order well core in

several sharing to As the past trade-offs plans. of such impacts been as been back spending mitigate quarters, on of with you these portions making over holding we’ve our headwinds, the we’ve

every increases For spending both Pacific, drive throughout our planned we’ve example, our of slowed enhance part and to region business our and profitability. to of in rate and fitness the we’ll continue Americas Asia

will volume. plan We’re investments also in growth to diversify and remaining functions. business to by for and more to our in current future reinvest This committed right-sizing us corporate at organize core position while move Americas fully more our the sustaining to our levels profitable around of revenue our

workplaces our in re-imagine regarding in they as with greater grow communicate require and in solutions current and and planned the to additional as innovate. drive will We’re need believe Even look we headcount. will hybrid do to business levels, invested spending, reduce to to we resiliency. in remain we our appropriately reductions operational companies to I the they to these invest Steelcase taking continue efficiency core their to actions also reduction expect and this unfortunately a evolve model how our future detail intend our planned in spending

element and Our continued focus more the key another appropriately opportunities to customers our diversity see serve, our and and the support on hybrid fitness investing strategy. scaling of to the growth through increasing meeting we transformation, business to our core we that’s markets work complements add

set. to of this our this AMQ customers. XX% Our already grew unique midsized and customer AMQ serve the one example is by year prior business against how the small needs focus quarter revenue executing we’re of meeting

delivery quarter, customer our past allow and through to through speed and better segment. of operational model improved the an us serve our will this experience that we’ve to Over tools new reach improved digital created enhancements

to prior business quarter, flourish. System also in more highest education this than Our had the by continues growing the history Smith quarter XX% revenue over its year.

to we commitment is to to area our that Finally, year, more business of versus revenue ESG. continue grew this final retail strategy increased to business investments prior growth. our key XX% significant One drive focus our and a remains allocate

encourage our targets aimed carbon packaging for consider set to parts. we This science-based quarter, sustainability continued them webinars to series global of in to the improvements educational incoming suppliers of

demonstrate ingredients also We our first of our chemical transparency. commitment published labels to and our health material products for to two declare

and the Steelcase was again the despite in In difference the In best Civic year among our I’m other we’re facing named progress, of closing, in our the one honored fronts as by industry, the in our organizations during again business addition economic women employers and targets these community-minded the environmental nation. XX list, of XX strategy. for and actions employer a as to success the graduates, a months. so aggressive making their is of of excited we’re achieve The proud We’ve and This on we we’ve pleased execute third hurdles challenges past one XX year half our their many a most be great to for am the to row I over share to that twice Civic new companies navigated on as communities. The first and taken America’s seeing Forbes best been multiple we’ve way by as recognized

results We’re and necessary more the lead that our right-size future. deeply. diversified and improved that, turn and our more to the outlook profitability review over the and adjustments investments we to growth our opportunities making believe to With I’ll to prioritize Dave it will business, in financial

David Sylvester

second Sara. everyone. will the targets we the the to Good the remainder range fiscal balance and our comments Beginning in our I June, cover My than below outlook today we morning while will quarter, color year. outlook second expected. you were cash revenue slightly provided including third to June. the around and the flow, also in provide results, for quarter earnings our sheet of comparison we outlook better provided some the for comparisons quarter with the was Thank

For revenue, growth impacted Americas double-digit our the with We prior within organically pricing benefits to revenue our year growth we the all that negatively was grew in one-half expectations approximately growth. the QX the across of segments. and estimate XX% compared represented below quarter. order

the range revenue, and In against additional to lower weaken forecasted than euro compared June. addition, the the in in our currency $X effects resulted for continued the translation our our expected U.S. exceeded of to million quarter earnings second estimates. Despite unfavorable dollar we approximately

our expenses. included Our from by favorable operating actions, pricing the a and better adjustment, higher Americas performance inventory driven some was timing and of benefits

on recorded inflation for we to an remaining year-over-year the a pricing our time sale quarters investment in million, and a addition, last aggregates unconsolidated but Inflation first fiscal exceeded $XXX over significant to continues In the be affiliate. since gain XXXX, benefits non-operating this of six the quarter.

anticipate results accumulate and actions, expectations. of inefficiencies were million our a the some below costs impacted quarters, from remain inflation, by an September project Revenue impacted continue announced EMEA our the $X.X operating incurred. but our including expect also price inflationary October. in was the we’ve to quarter, Over effective higher by the accelerating the operating In and to benefits more will EMEA increase in in offset that we and surcharge, inflationary our pricing be slippages we operations. which posted response to inflation was pressures the coming will cumulative fully loss in X%

facility, uses $XXX $XXX and adjusted which cash Halcon an $XXX with to As borrowings deployed capital. of net in $XX a cash by in the $X of $XX the quarter, second of and adjustments quarter it million balances, $XX sale deposits relates $XX cash of was million million million to in in of of We investment million the The we in flow included million was affiliate. approximately the customer and remaining sheet, net our from total quarter cash related under the the proceeds million credit unconsolidated of reduction working balance ended which our and in funded of cash for EBITDA liquidity. million, acquisition

in QX. sequential growth by Beyond Halcon, million, and capital working by the increased driven $XX revenue receivables

$XX capital million, of also expenditures dividends semi-annual million. $XX We interest of bond and our of funded million, $XX

and million for We are $XX to expenditures capital between year. full expecting $XX now total the million

driven growth orders, by growth, estimated flat to which volume decline pricing order also activity approximately all quarter and experienced X% combination more creation in higher was except Americas, the Recent in versus which near growth prior Americas was which decline our order the Pacific, other drove year. The and driven from to XX% also increase In pricing weakness the the X% category, driven X% X% saw most remains markets EMEA, in we volume opportunity the EMEA. an leaders as In X%. with prior and Moving sentiment India. by across Presales volume, was year. of sales growth of pricing which offset compared markets a in to second as of term year, than by dealers. compared prior many approximately being was in positive, does general of was Asia

win compared to the BIFMA quarters, strong and the Americas for quarter orders reflect are however, of were core second end and to business almost several this with through softening booked year; July. last Our in data consistent demand our Americas Rapids the customer published industry patterns calendar as seemed June in by to the and Grand latest the rates in appears the in QX fully visits in

are XX% slow addition, approximately impact. orders Decision our also prior confidence possible U.S. could the and have In possible that pressuring CEO outlook of impacting sector. declined lot lot slowdown--sorry, impacting near to first return are industry, having by disruptions the makers and to trend our fronts, supply every year. at reduced with September unrest in are an for uncertainty. versus capital the possible be term a during the facing geopolitical GDP productivity is the impacting office It’s three in it’s also weeks spending interest rates the It’s Inflation remains on labor the have and of rising many concerning. deal almost chain they’re a growth, challenges the moment,

of implement of in approximately level are annualized reduction further As actions a the to will million quarter additional the up expected pre-pandemic workforce we business levels reduction and to include of XXX XX%. which X% positions of Americas third bring and to These salaried actions These salaried related reductions ’XX functions. and elimination are the target our of to to spending. target the planned planning spending core cumulative across in $XX the compared approximately approximate corporate fiscal result,

the be adjusted and million. in most to along and resources implemented event reductions and our in our in of will term result help protection the re-prioritization strategic light uncertainty third higher also longer invested restructuring strengthen of these our support strategy. a quarter environment. impact expect in we in of liquidity quarter demand the These initiatives our $X of of to capital remaining We actions, us some trends, provide remain order during of these continued approximately important additional in our on profile dividend this allocation our business some reinvestments pursuit of will In costs and most with

than the of and beyond the expected higher the second was Moving million percentage of higher of continued ship consolidated the prior to next year quarter XX% end $XXX a to backlog outlook, normal quarter. orders include to than approximately at

we As represents result, the of to to within range million expect XX% driven million, of revenue XX% organic XX% year-over-year $XXX a to growth report by pricing. and $XXX includes which

and per of share amortization between intangible $X.XX purchased third costs adjusted to expect restructuring for $X.XX report assets, the of quarter. earnings we to Excluding

of projected addition following the the range reflects estimate the revenue, earnings In to projections.

to to of between lower production unfavorable gross expect quarter. inflation the to of the when approximately margin Smith third System, of in million efficiency by We benefits the summer pricing of business driven decreased and compared manufacturing to XX.X% due $XX volumes mix sequentially year, due strength prior XX.X% net

corporate employees. land, million as expenses investments which continued in some expense of product assets operating intangible and $XXX to amortization an includes of and spending gain of million, and million in an under-utilized prioritized expected $XXX to adjacent purchased expect in few $X investments as million development, sale higher our also $X We the related a well marketing on facility functions, and

effective items expect approximately we are of and other interest XX%. in projecting to tax $X approximately expense Lastly, we net an non-operating expense of to million rate

to the fourth depending on sequentially $XXX we and expenses improved the benefits our of quarter, expect $XXX million from accumulating million. due between to margin For of level volume, pricing actions operating gross

work Question-and-Answer the chain able following I’ll extraordinary but inflation targets the can that’s our demand ’XX an doing managing it we’re and fiscal We an In not invest drive but of in everything targets, we for towards challenge, gaining there, in and year our has continue protecting summary, our ’XX initial the important given saying of a provide turn at ’XX, in questions. our in uncertainty strategy. longer supply and continuing share we’re Fiscal environment, strategic lot through we profitability update to the full to impact our most time. achievability to to in regarding From are and initiatives. accelerating of been the this while term it beginning fiscal pandemic disruptions over Session the while we’re investments

Operator

Garner. line first question from Your of Reuben the instructions] [Operator comes

is line open. Your

Reuben Garner

Good morning you. Thank everybody.

Sara Armbruster

Good morning.

Reuben Garner

start both elaborating with remains the of as the--you’ve corporate was process those driven that through as there to trends slowdown, late if pricing a the the up summer, sounds some how able on the your a handle ramp Maybe Is are want pull some signals, will decision some take be reason? if those by like or the us temporary maybe mixed dividend. to mid, order for some actions? came any pipeline more is headcount, make back to and risk walk on to of but this you you where you actions the whatever demand with weakness forward thought cuts got Can It them not you be. robust to we well recently of activity could

David Sylvester

questions lot single Reuben, it to you’ve a got in so let Well, me that try there, question of break down.

been on year and If played to linked dark we improvement see the are and return office we it’s a we’ve that was improved What we to economy growth has improvement to action. It tracking originally planned. communicated right no of it’s is - increased fiscal out. secret horizon underlying patterns, - take the in that other was hybrid we the were that demand, the not at March targets to refer believed back that’s that uncertainty when increased order and and mean, be pursuing, our continued clouds you the work, I transformation level therefore but improving now support to our it in the revenue an overall for to prudent would seen and demand and there some we assumption felt continuing factors, related we

and action balancing will towards because tell adjust, continuing had to we but to we continue time so Now, returning and the to it of wasn’t office market do making we investments, we should a to the given not spent planned. we share, want gaining of level playing clients our you lot it initially to ability we take gain jeopardize market are did see felt share I as out that we to move appropriate that

Reuben Garner

the slowdown of of in half competitive the gross that do risk? put then margin pricing inflation, if pricing bids of volume front to kind trajectory what and of a to still of see, but you’ve my where I’ll Then from up in the about know, price-cost you relative you that the remainder talk are the Okay. how far levels next catching be and volume--or for kind risk is bit more tailwinds behind is kind year, some pre-pandemic of you - back that through risk continues the question, this stands if you at try the year, to on concise, price-cost there got there little what today could can this

David Sylvester

first on second can the and part. handle comment part I’ll Mike the Maybe

Mike O’Meara

of on now has last the as so million this when so we any signs started six to extraordinary, over quantified far which relief the and is we’ve inflationary all Sure, ramp $XXX of inflationary been sure. there’s really cumulatively experienced front, obviously no of costs inflation Reuben, really quarters, up.

become quite a pricing the Our we’re still time in and in obviously but hole. take implemented, to so to dent make that we’ve bit actions a started

need expect of Over improvement, even is we few to--we couple we’ll the hole which so estimate good this we’ll to quarters, because next to behind offset fully; quarters, start best the inflation we’ll should, more at start of even benefits our to tailwind but the levels, in would another up sort for point, of we in make cumulatively, assuming to that a to kind timing we’re year-over-year though in, be still basis. even order going year-over-year actions pricing post continue some we’re the see start some though on to

David Sylvester

yet and part today. I a question pre-pandemic remind fact, competitive The are the would volume has lower levels that we’re the Reuben, of you of scenario, industry the volume industry a not recovered volume; of Yes significantly remained, in overall, still and lower I to your in we scenario the on second related dynamics would say, in dynamics behind, competitiveness reasonable. just have to

largely But often remained that’s competitive imagine pressure environment. it an unreasonably content, the think what - the feeling everyone driven that but same we’re fact not working the like happens is are it’s and we’ll past material all future. levels our a feeling and see products so of that We in same dealing we’re same has I so inflationary environment, the have pressures. competitive far, in the by I same with suppliers the with the

Reuben Garner

a Sara, wondering mean you what on in me, the is kind that mentions comment might was of forward. that if from there’s elaborate talk release going one could Last you unchanged, I but your diversification. thanks. strategy about Okay,

Sara Armbruster

to. happy Sure,

remember to correct but a strategy, as not You’re our of we had communicated, have our strategy, it. we’ve - couple components has shifted

work is so is typical to the is successful. to those continue core your on us, this with been customer business leading to of certainly and corporate big focus One our transformation, so hybrid which important we’ve

are investing nice diversification that continue nice seen got typical continue work to traction be fact we gaining believe allow that corporate and to opportunities to invest really sure share, to allow the but these growth to of really those and to transformation been continuing will we’ve some market we’re so kinds the we we’ve take acknowledgment is or both, would and for and make core continue because we also to mentioned, will a doing be on around make solutions business market the healthcare, Dave in that our hybrid in parts and I AMQ us balanced that and in As see we we’ve markets or that successful. market, win that more also Those sure rates, that we to that will consumer approach that say customers. we’re we we want in to grow, are think corporate an customers But have healthcare. to focus our invest of supporting whether and set both opportunities, mid-market us make a invest diversified great the nice that investing other we sure whether like be the can to want retail to other we’re in and I building continue model we continue to explicitly we grow, or areas business total that and potential really of things of bring we serve. will

Reuben Garner

organic that I How is quickly also know follow-up, M&A potential areas? investments? are question, I of I resources you are in doing these Sara, the could said for reallocating cuts those you’re with but last some And this are you mean, I if it? or making,

Sara Armbruster

at, nice that, seen used look in to right it’s again that is I be there when in right might market where areas opportunities drive, those acquisition segments, big of we of of a you’re tailwinds those reallocation working we of Well, so are areas, mention growth, that you strategy, some in in the in what as things speaking we think initiatives to opportunity said that market like that some cases, resources, fits shift System and acquisitions, where some or like opportunity, the future. think know, opportunities business, really certainly we’ve core we accelerate that you’ve business certainly our investment our education But so other may so to see think those see our of increase terms part ability Smith where have lot it we pursuing the resources the we where also always in expand to have of of we’re see help relatively I been well. the M&A be to those other historically we’ve

Reuben Garner

forward. guys. Good going thanks Great, luck

David Sylvester

Thanks Reuben.

Operator

Your next of question from the comes line Bugatch. Bud

Your line open. is

Bud Bugatch

us know the how Accept in morning. activity? I disappointing, activity modestly - three to done last Good profitability year of and it fully managing David, that you for maybe the had, congratulations for seeing call you terms for these bit on I to of what want or of that color give sequentially, first of, though, feel the maybe is I’m visits at know terms I several the my to - that Grand other little you’re used you’ve that work sales during more quarters can weeks quarter. give on you phrase Rapids. back that the least order times. the on the this of are compares in very do visits us year a a booked challenging curious, balance some activity go to the

David Sylvester

levels. or actually It’s at above FYXX

accommodate not wanted and activity requests we to bump customer us. high. the the and were to would would FYXX level end come the full lot somebody--before come have we’re we a pretty see at Rapids, fully now, seeing to We cancellation, and or the the bump but either of if booked, Grand that, essentially level so calendar to in are--I of full, we trips quite either squeezing we we’re to somebody are a mean, you of Right end to just hope even for shorter entirely have not of day a remains interest lot and year,

Bud Bugatch

few XXXXs? terms of Can these to are Fortune in customers, us serve? to color a the in seeing? some kind Are Do they that ago give language and of written customer the trying Steelcase the you’re Sara diversification markets traditional reflect the as they effort moments highlighted you’re you

Sara Armbruster

our that Yes, criteria been kinds the who well see our we’ve actually should threshold that diversity really visit, the changed think so have or have the terms of exciting really we we’ve customers to some in to exciting of able really, pleased welcome I with guests I and come as opportunities. mention not been as want organization, really of clients we with to to

but Steelcase say, the as and or so clients aren’t in We’ve show help pandemic past, what’s support customers yet, are in we’re really I with a mid-market the XXXX to were day, it’s clients, on of invested K-XX here as, of for seeing a their of tools group and we to of maybe possibilities, who seeing But be kinds a had time mix. new a excited them been make differently haven’t asking questions customers able We and and about them to they a and lot since have to activity. new thinking actually worked choose visits are mix if that want well recently Just campus where learning the haven’t past that maybe quite seen help visit. do, some the think some customers school Many possible of mid-market we in explore terrific showroom more we’re a talk pretty a they to those parochial but so that customers, across don’t, who with their kinds make to Fortune those to looking also transform customer would who spent big a they other big and diverse group. district was a the represented investments of number facilities, we workspaces. to I

Bud Bugatch

diversification an sales the how extended finish serve, particular issue, that at I some cycles there I that? think wind markets, know these it’s you are but look markets I various If on just could the cycle for you that of new for sales it’s efforts do know could those and up orders question, how in but of and in one important shipments. to wind to idea sales an a of fuzzy up diversification we get some I maybe soon expect

Sara Armbruster

Well, maybe on and that, maybe chime I’ll add or Dave a Mike in with can more. start thought and

that one understanding we’ve we’ve of markets as have are. things to an I clearly really these the is different what acknowledge we think tried of make markets sure to in of the invested those dynamics and nature the

that cycle our be that average at XX to a have say a is deliberative drive the sales kinds type in are who been them for and can so want of company and typically our what support cycle quickly, for we kind to look, we might and construction, faster as to who XX naturally we’re of significant customer we’re be conscious much more of well, customers so a of customer and who can more project or and might of to to kind a chairs is might differences where take process and design sure than move just driven in can investments of customer the very lot know want with for For A and how make need course is simple, customers we’re we different call to likewise the you doing dynamic process are who really new mid-market how trying that that, them. in respond quick who those say, planning them XXXX I we longer, the the investments support much Fortune wants weeks, that desks I way. two this example, right, AMQ, a faster different of very and operating sales so on pursuing see and

Bud Bugatch

Okay.

issue, lot you disparities? is quarter, weeks three people of is a first one issue can of conversation any confusing the I you’re comparison, subject of at it of media, geographical lot in give and that the the order that is there On and us? weakness the as color more there know RTO written all what the that’s these the a reflect but looking Does ink when source days return-to-office this might color of be? to

Sara Armbruster

a with as to qualitative that start Maybe answer maybe some comment I’ll then that we and answer well. data can try quantitative with

as of in reconnect interesting really here the to opportunities, push all plus every of of etc. say of on was I You so between week, the or It Rapids region the on how that America, really to a Grand team weeks, poke kind and would these that that together to question country about the we the last kind our from opportunities, week overall American I dealers sentiment person had new solve dealers this anecdotally Latin over as that come from know, work particular ask it’s U.S. positive. to to and in new two try that particular Canada, all a products, part on hard because talk of we’ve you expressed different. sentiment to really talk a Americas, I part quite was quite and dealers our was

a those in day-to-day lot Certainly weeks you potential recession, the we the few in face, all there see to in conversations. of geographic last but a spent that was than with America, rural you difference I at questions a positivity. questions some of geographically different we challenges discern about hard it certainly about big cities While might dynamics, qualitatively perhaps, know dealers, least our as was

David Sylvester

Yes, price linger, with down we Americas the in but patterns in a because tell; that’s in and hesitant there longer time, it’s period the felt could effect three But and a to patterns total increase to at any XX% short it’s put following was is and be into surcharge really significant continuing conclusions to that to and - just it pretty volume middle our was important it unit of you. order in hard I’m core QX we of saw weeks the of business, tail order information we it’s some the of decline that still--you our from draw July. because it end always impact know, share in

Bud Bugatch

we million price and of can you what of benefit terms the price realization? that. guided in understand, incremental cost, be you for inflation you thank The $XX and over would pieces incremental I of that give us think

Mike O’Meara

of year-over-year year. Yes Bud, versus and pricing last million inflation a third it’s quarter of about about $XX $XX basis million on the

Bud Bugatch

X% the that effective surcharge, we So is Because in that’s effect million surcharge, saw right? than that right? better $XX the of second quarter, the includes

Mike O’Meara

July the fully more correct, increase implemented the That’s It’s price and becoming yes. surcharge.

Bud Bugatch

you than it recover inflation, will How rest more XXX cumulative XXX that and year, be the that think long it? the or of out take the cover you how will do the breaks the for by to time then,

Mike O’Meara

will view volume, We we’ll the quarter. it on long more the depending XXX, fourth fourth but the as to of recover so have a a things will become be Yes, implemented. could don’t full us quarter on continue because little those behind higher how be take end still the of

David Sylvester

Yes, next it’s year. into likely

Bud Bugatch

an you’re positions million that annual that cutting, phrase, The savings, used David? is the that spending You spending. to to reflects going $XX up be XXX Okay. the

David Sylvester

include million, eliminated. annual that It’s $XX XXX of savings targeted salaried could a up are to positions which

Bud Bugatch

salaried two? positions And How Americas? that those between core and out does break those are between

David Sylvester

mean it’s the It’s the large of of corporate Smith not not I ecommerce, core business company, by so city Americas and-- Steelcase, System, AMQ, kind kind business functions, core large core and business of not

Bud Bugatch

corporate And versus corporate, how function does break that out, Americas?

David Sylvester

the of that corporate of finance, of I includes the Americas the HR, facilities, it allocated as breakdown. that as operations, don’t A but I large IT, know have is part corporate all etc. far functions anyway, to functions, corporate

Bud Bugatch

that said you Sara with pleased are Okay. Halcon. all

owned You’ve versus How financially? early expectations your is that it June. since performing

David Sylvester

feeling amount - far, So with the out excitement are we’ve so excited of about through is acquisition chain - sales dealing gate working of and a of what that well, about the our about A&D organization good very good the we’re Steelcase tremendous family acquired. feedback good. Halcon. the feels enthusiasm positive dealing significant we There it, from a so dealers and They’re they’re supply them as and we’re disruption inflation, backlog joining it, about received with

Bud Bugatch

XXX for - heard is said quarter, the to if operating and as the I XXX? it might wrong. have same is you is fourth expectation for the expense heard quarter I you that the Okay, that third correct right,

David Sylvester

don’t--I on Yes, a We have gain think don’t right. projected I another quarter. for that’s just fourth the sale facility

Bud Bugatch

the will amortization million-- that So $X include the of

David Sylvester

Yes.

Bud Bugatch

should effect? the --so the right, on from of expense, reduction it restructuring the include what--and operating some

David Sylvester

Yes.

Bud Bugatch

to I’m So additional--[indiscernible] what cost. as additional curious just

David Sylvester

QX gain we’re Essentially with the associated replacing we’re in QX, with in that land benefits we have replacing--the the reductions.

Bud Bugatch

Okay, because the the and What’s Halcon, of is for all that your right. debt as The adjusted debt what to is of debt EBITDA? higher metric trailing acquisition up coverage?

David Sylvester

and X Xx. between in It’s

by is $XXX we Halcon, response a million range have the million, in to Our of amount trailing to in facility back $XXX remains our about continue chain we is than now. to earnings and our of in inventory we but see the credit inventory or trajectory a see the acquisition also because more to will $XXX debt off significant I to team what able metric continue second then right better operations levels chain and trailing level, have, our that fund million, pull our relatively disruption in incremental you’ll the the the four-quarter We that adjusted the consistent that quarter, to end EBITDA, if of supply be and total we so and year. that supply disruptions paid borrowed improvement I hope we that borrowed will did happens think

Bud Bugatch

was the the of end of kind That’s is the That’s year? going. goal, where I

Your impact, in metric, Is does that, [indiscernible] is that--? reducing that include the debt, net [indiscernible] yes?

David Sylvester

smaller. would debt be Actually, Net obviously I including wasn’t [indiscernible].

Bud Bugatch

Okay.

things or how you a you the down. going raised issue talk sure I’m about it get to does major the philosophy what back you think--you were better conversation of that? board, thought faster, brought What’s now, because so the Finally it from was the me, dividend issue view board for the

David Sylvester

relatively on-balance and sheet the run operate to think liquidity business, to longstanding continues and dividend. our board under capital policy paying we team a healthy with I Well, the earnings to management allocate conservatively of operating the

some board With acquisitions, with we some the ago on level at, the it’s the would other of the that The appropriate the in the to back beginning that so not of six we communicated raised and investments we we board of the earnings because are inventory felt end were targets was of high before of depletion it to our like, that and our it hit don’t we to where we factors, nor of the to reduced year, it projected at know, consider was I quarters an $X.XXX. adjustment. liquidity

Bud Bugatch

congratulations again okay. of aspect year you. it, on and balance for of and Yes, Thank Well, profitability this best on after. the the wishes years the managing

David Sylvester

Bud. Thanks

Sara Armbruster

Bud. Thanks

Operator

you press the star to Again question, ask would telephone if keypad. number like a your on one then

of line Steven from comes the question Ramsey. next Your

Your line open. is

Steven Ramsey

so Wanted to start lower sales than Good morning. backlog. guidance being the the $XXX with million approximately or

You also would be the point, in the months? light this beyond of is would change shipping at drivers that few next are you QX. dates this any tunnel there the later and shipping said What more in

David Sylvester

not our not either, by mostly but also customer some still backlog. the quarters. had extended in significantly dates case and It’s of advance categories the disruptions. had have it’s the we place, and delivery that number worse price of in in influenced product we but the mostly are chain pull driving days. backlog influenced XX Those scheduled supply But increase lead increases last of has getting price beyond I’d large times, We customers the it. that’s they’re been but we’ve That times. better out it’s have getting of that’s a we extended are scheduling so requested some driving cases course, orders across not all lead put of of say the surcharge, for couple so forward by

Steven Ramsey

about you bit being more, declining, little the Okay, driving positive orders, effect and out orders couple down, a can and in weigh reversal those yet sentiment to but a orders you months? some then but orders of on sentiment you expect maybe positive just drive being talked the the next forward if of better coming the that pull

David Sylvester

customer tied the I of the parts almost to relatively Well, to that is and the activities world sentiment have fact and presales think office lagging. in that around improve other activity, good, other continues city the U.S. the been return visit being every to

right order now, pull the right things economy or horizon better, be dark it’s on that and could possible or I the decent the in clouds the back at having think everybody’s months, to The okay could have so related that sort the will It’s so be high. on but and also impact is uncertainty level it quarters people extended get very rate hard patterns a concerned, to forward feeling of effect it’s now. that just growing and some come. to weeks possible tell to

Sara Armbruster

them are a something is may try just customers can’t the will is those so are things, clients which renovation level of to now for for water smaller pilot pilots clients be lot a starting to I that quantify that, won’t is from scale activities dip their proceeding scale active thing and lead But to on and that to hope tremendous momentum of other think becoming same will within the full then another move actual while to to surface or much transformation scale those on or those like test and of again are or our certainly unfortunately you, presales activity who on that means there see add we successful that there certainly test and starting the the level to projects we’re their right larger looks the the volume really a generate is which that who space, so seeing the activity pilot be sentiment and that orders I’d admittedly toe now, that a or influencing sentiment, we disconnect would. order positive Maybe something and project that in a a dynamic what is of between now.

Steven Ramsey

would from a one units, in Smith for to opportunity full get driver about strong is results you and then Smith again. System, total on the be me education compare major Okay, acquiring Smith and enough that, if education to the Can sales you the you levels, seasonally bigger vertical, QX in do vertical? to in capturing think clearly pre-pandemic or longer the particularly helpful. margins and Then last term versus open

David Sylvester

you in a tracking acquisition, value we that like we put tell they nicely. to stop short creation on providing System, that a but plans I’ll together that when I business relative of are made will the specific detail lot Smith

team year. overweight terrific a summer, is renovated strong that be quarters. to nice too other actually for done want very in the the period, the an they has thing classrooms a note have in balance are time of that’s to It’s closed still job largely strong business obvious during driving they but while reasons that three The very period exceptionally do schools the to other business important summer summer, - do and

growth the position about second support gained your is they’ve so very, and about perform well great made it we as be far it continue declare has question I continue necessary another being also very in or I wouldn’t Whether would to that successful. to the nice to right in that they’ve but been As I enough, do they acquisition, the share. to wouldn’t out, it’s rule say for not us industry, decisions absolutely

Steven Ramsey

you. helpful. Okay, Thank

Operator

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

Sara Armbruster

just want a to appreciate We day. great you and I all have in hope Steelcase well Great, thank joining interest you for today. your us

Operator

This today’s concludes call. conference

You may now disconnect.

Steelcase (SCS) 22 Sep 222023 Q2 Earnings call transcript