- Strong results compared to prior year including:
- Revenue growth of 2% driven by 5% growth in the Americas
- Gross margin improvement of 100 basis points
- Total liquidity strengthened by $152 million
- Americas posted order growth of 2% compared to prior year
- Outlook for fiscal 2025 adjusted earnings per share exceeds company targets
Revenue and order growth (decline) compared to the prior year were as follows:
| Q3 2025 vs. Q3 2024 | ||||||||
| Revenue
Growth (Decline) | Organic Revenue Growth (Decline) | Organic Order Growth (Decline) | ||||||
| Americas | 5 | % | 7 | % | 2 | % | ||
| International | (6)% | (8)% | (8)% | |||||
| Steelcase Inc. | 2 | % | 3 | % | (1)% | |||
Revenue grew 2 percent in the third quarter compared to the prior year, with 5 percent growth in the Americas and a 6 percent decline in International. On an organic basis, revenue grew 3 percent, with 7 percent growth in the Americas and an 8 percent decline in International. The Americas growth benefited from a higher percentage of the beginning backlog shipping during the quarter compared to the prior year and included higher revenue from government, large corporate, healthcare and education customers, while the International decline was driven by most markets in Asia Pacific, except India, and France.
Orders (adjusted for the impact of a divestiture and currency translation effects) declined modestly in the third quarter compared to the prior year, and included 2 percent growth in the Americas and an 8 percent decline in International. The order growth in the Americas was driven by government customers. Orders from large corporate customers strengthened in the last month of the quarter, but modestly declined overall in the third quarter compared to the prior year. The order decline in International was driven by most markets in Asia Pacific and France, net of growth in Germany and some smaller markets in EMEA.
"Our Americas business posted 7% organic revenue growth this quarter driven by growth across many of our customer segments, and we delivered higher than expected adjusted earnings per share," said Sara Armbruster, president and CEO. "As we continue to focus on serving our customers and supporting their workplace strategies, we posted another quarter of order growth in the Americas, and we are pleased with the improved trends we saw from our large corporate customers near the end of the quarter and into December."
Operating income (loss) and adjusted operating income (loss) were as follows:
| Operating income (loss) | Adjusted operating income (loss) | ||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||
| Three months ended | Three months ended | ||||||||||||
| November 22,
2024 | November 24,
2023 | November 22,
2024 | November 24, 2023 | ||||||||||
| Americas | $ | 46.5 | $ | 37.2 | $ | 49.7 | $ | 39.9 | |||||
| International | (5.5 | ) | 6.6 | (2.4 | ) | 9.4 | |||||||
| $ | 41.0 | $ | 43.8 | $ | 47.3 | $ | 49.3 | ||||||
Operating income of $41.0 million in the third quarter represented a decrease of $2.8 million compared to the prior year. The prior year included a $9.5 million benefit from a decrease in the valuation of an acquisition earnout liability and $5.4 million of gains on the sale of fixed assets, including land, in the Americas. The current year included the benefits of higher revenue and gross margin in the Americas compared to the prior year. Adjusted operating income of $47.3 million in the third quarter represented a decrease of $2.0 million compared to the prior year.
"Our International results in the third quarter were below our expectations and were impacted by demand and some customer-driven shipment delays," said Dave Sylvester, senior vice president and CFO. "We implemented additional restructuring actions and other cost reduction measures during the third quarter, which together are projected to drive approximately $5 million of annualized cost savings by the start of fiscal 2026. Also, we are encouraged by higher project activity levels from some of our global customers in our international markets and recent wins related to large opportunities with national accounts in France, Germany and the Middle East."
Gross margin of 33.4 percent in the third quarter represented an improvement of 100 basis points compared to the prior year driven by the benefits of revenue growth in the Americas and cost reduction initiatives, including savings from our previously announced restructuring actions.
Operating expenses of $223.8 million in the third quarter represented an increase of $17.3 million compared to the prior year. The prior year included favorable impacts of a $9.5 million decrease in the valuation of an acquisition earnout liability and $5.4 million of gains on the sale of fixed assets, including land. The remaining increase was driven by $6.0 million of higher employee costs, partially offset by a $4.4 million decrease from a divestiture.
Other expense, net of $12.6 million in the third quarter included a $15.2 million non-cash charge related to the annuitization of a pension plan.
Total liquidity, which is comprised of cash and cash equivalents, short-term investments and the cash surrender value of company-owned life insurance, aggregated to $576.6 million at the end of the third quarter and represented an increase of $152.0 million compared to the prior year. Total debt was $446.9 million. Trailing four quarter adjusted EBITDA of $283.6 million (or 9.0 percent of revenue) represented an increase of 9 percent compared to the prior year.
The Board of Directors has declared a quarterly cash dividend of $0.10 per share, to be paid on or before January 13, 2025, to shareholders of record as of December 30, 2024.
Outlook
At the end of the third quarter, the company's backlog was approximately $664 million, which was 5 percent lower than the prior year. Orders in the first three weeks of the fourth quarter grew 15 percent compared to the prior year and included a number of large projects scheduled to ship beyond the end of the quarter. The company expects fourth quarter fiscal 2025 revenue, which contains an additional week compared to the prior year, to be in the range of $770 to $795 million. The company reported revenue of $775.2 million in the fourth quarter of fiscal 2024. The projected revenue range translates to a decline of 1 percent to growth of 3 percent compared to the prior year, or a decline of 4 to 7 percent on an organic basis.
The company expects to report earnings per share of between $0.17 to $0.21 for the fourth quarter of fiscal 2025 and adjusted earnings per share of between $0.20 to $0.24. The company reported earnings per share of $0.18 and adjusted earnings per share of $0.23 in the fourth quarter of fiscal 2024.
The fourth quarter estimates include:
- gross margin of approximately 33.5 percent,
- projected operating expenses of between $230 to $235 million, which includes $4.3 million of amortization of purchased intangible assets,
- projected interest expense, net of investment income and other income, net, of approximately $1 million and
- a projected effective tax rate of approximately 27 percent.
| Business Segment Results | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| November 22, 2024 | November 24, 2023 | % Change | November 22, 2024 | November 24, 2023 | % Change | |||||||||||||||||
| Revenue | ||||||||||||||||||||||
| Americas (1) | $ | 614.7 | $ | 586.1 | 5 | % | $ | 1,857.1 | $ | 1,838.2 | 1 | % | ||||||||||
| International (2) | 180.2 | 191.8 | (6 | )% | 520.9 | 546.2 | (5 | )% | ||||||||||||||
| $ | 794.9 | $ | 777.9 | 2 | % | $ | 2,378.0 | $ | 2,384.4 | - | % | |||||||||||
| Revenue mix | |||||||||||||||||
| Americas | 77.3 | % | 75.3 | % | 78.1 | % | 77.1 | % | |||||||||
| International | 22.7 | % | 24.7 | % | 21.9 | % | 22.9 | % | |||||||||
| Operating income (loss) | |||||||||||||||||||||
| Americas | $ | 46.5 | $ | 37.2 | $ | 167.0 | $ | 117.0 | |||||||||||||
| International | (5.5 | ) | 6.6 | (18.4 | ) | (24.9 | ) | ||||||||||||||
| $ | 41.0 | $ | 43.8 | $ | 148.6 | $ | 92.1 | ||||||||||||||
| Operating margin | 5.2 | % | 5.6 | % | 6.2 | % | 3.9 | % | |||||||||||||
- The Americas segment serves customers in the U.S., Canada, the Caribbean Islands and Latin America with a comprehensive portfolio of furniture, architectural, textile and surface imaging products that are marketed to corporate, government, healthcare, education and retail customers primarily through the Steelcase, AMQ, Coalesse, Designtex, HALCON, Orangebox, Smith System and Viccarbe brands.
- The International segment serves customers in EMEA and Asia Pacific with a comprehensive portfolio of furniture and architectural products that are marketed to corporate, government, healthcare, education and retail customers primarily through the Steelcase, Coalesse, Orangebox, Smith System and Viccarbe brands.
| QUARTER OVER QUARTER ORGANIC REVENUE GROWTH (DECLINE) BY SEGMENT | ||||||||||||
| Q3 2025 vs. Q3 2024 | ||||||||||||
| (Unaudited) | ||||||||||||
| Steelcase Inc. | Americas | International | ||||||||||
| Q3 2024 revenue | $ | 777.9 | $ | 586.1 | $ | 191.8 | ||||||
| Divestiture | (10.6 | ) | (10.6 | ) | - | |||||||
| Currency translation effects | 4.7 | (0.1 | ) | 4.8 | ||||||||
| Q3 2024 revenue, adjusted | $ | 772.0 | $ | 575.4 | $ | 196.6 | ||||||
| Q3 2025 revenue | $ | 794.9 | $ | 614.7 | $ | 180.2 | ||||||
| Organic growth (decline) $ | $ | 22.9 | $ | 39.3 | $ | (16.4 | ) | |||||
| Organic growth (decline) % | 3 | % | 7 | % | (8 | )% | ||||||
| ADJUSTED EARNINGS PER SHARE | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| November 22, 2024 | November 24, 2023 | November 22, 2024 | November 24, 2023 | |||||||||||||
| Diluted earnings per share | $ | 0.16 | $ | 0.26 | $ | 0.78 | $ | 0.50 | ||||||||
| Amortization of purchased intangible assets, p
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