Q1 2025 Steelcase Inc Earnings Call
Operator: Good morning. My name is Sara, and I will be your conference operator today. At this time, I would like to welcome everyone to the Steelcase first quarter fiscal 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session, and if you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Mr. O'Meara, you may begin your conference.
Good morning, My name is Sarah and I will be your conference operator today at this time I would like to welcome everyone to the Steelcase first quarter fiscal 'twenty 'twenty five 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 and if you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question simply press Star one again.
Speaker Change: Mr. <unk> you may begin your conference.
Mike O'Meara: Thank you, Sara. And good morning, everyone.
Speaker Change: Thank you Sarah and good morning, everyone. Thank you for joining us for the recap of our fiscal first quarter of fiscal 2025 financial results here with me today are Sarah Armbruster, our President and Chief Executive Officer, and Dave Sylvester, Our senior Vice President and Chief Financial Officer.
Mike O'Meara: Thank you for joining us for the recap of our fiscal, our first quarter fiscal 2025 financial results. Here with me today are Sara Armbruster, our President and Chief Executive Officer, and Dave Sylvester, our Senior Vice President and Chief Financial Officer. Our first quarter earnings release, which crossed the wires earlier today, is accessible on our website. This conference call is being webcast, and this webcast is a copyrighted production of Steelcase Inc. A replay of this webcast will be posted to ir.steelcase.com later today.
Speaker Change: Our first quarter earnings release, which crossed the wires earlier today is accessible on our website.
Speaker Change: This conference call is being webcast and this webcast is a copywriter production of Steelcase, Inc. A replay of this webcast will be posted to IR steelcase com later today.
Mike O'Meara: Our discussion today may include references to non-GAAP financial measures and forward-looking statements. Reconciliations to the most comparable gap measures and details regarding the risks associated with the use of forward-looking statements are included in our earnings release, and we are incorporating by reference into this conference call the text of our Safe Harbor statement included in the release. Following our prepared remarks, we will respond to questions from investors and analysts. I will now turn the call over to our President and Chief Executive Officer, Sara Armbruster.
Speaker Change: Our discussion today may include references to non-GAAP financial measures and forward looking statements reconciliations to the most comparable GAAP measures and details regarding the risks associated with the use of forward looking statements are included in our earnings release, and we are incorporating by reference into this conference call. The text of our Safe Harbor statement included in the release following.
Speaker Change: Our prepared remarks, we will respond to questions from investors and analysts I will now turn the call over to our President and Chief Executive Officer, Sarah Armbruster.
Sara E. Armbruster: Thanks, Mike, and hi, everyone, and thanks for joining our call today. It's been about a year since we hosted our Investor Day, where we shared an update on our strategy to lead the transformation of the workplace, diversify the customer and market segments we serve, improve our profitability, and use our business as a force for good. And today, I'm excited to share additional areas of progress from the last quarter. We continue to help people do their best work by creating places that work better.
Sara E. Armbruster: Thanks, Mike and hi, everyone and thanks for joining our call today.
Sara E. Armbruster: It's been about a year since we hosted our Investor day, where we shared an update on our strategy to lead the transformation of the workplace diversify the customer end market segments, we serve improve our profitability and use our business as a force for good and today I'm excited to share additional areas of progress from the last quarter.
Sara E. Armbruster: We continue to help people do their best work by creating places that work better we are focused on leading our industry in the transformation of the workplace and growing our market share.
Sara E. Armbruster: We are focused on leading our industry in the transformation of the workplace and growing our market share. And as we meet with customers, they continue to describe their efforts to bring people together and to support their company culture. And our innovation and our solutions fit what those customers need. I recently spoke, for example, with an executive leading a company that is in the middle of building a new global headquarters.
Sara E. Armbruster: And as we meet with customers. They continue to describe their efforts to bring people together and to support their company culture.
Sara E. Armbruster: And our innovation and our solution fit what those customers need.
Sara E. Armbruster: I recently spoke for example, with an executive leading the company that is in the middle of building a new global headquarters. This organization establish its vision for the building to engage employees and drive high performance. They are interested in solutions that integrate with technology experiences that drive employee wellness and partners to support.
Sara E. Armbruster: This organization established its vision for the building to engage employees and drive high performance. They're interested in solutions that integrate with technology, experiences that drive employee wellness, and partners to support their sustainability objectives. The Steelcase offerings deliver on those needs, which gives me confidence that we're providing what customers need to transform the ways their organizations work. As we think about our diversification efforts, we're making progress in expanding our offering to reach new customers and markets. Earlier this month, we participated in Neacon, where we showcased several new solutions to foster better connections, increase privacy, and high-performance ancillary spaces.
Speaker Change: Fourth our sustainability objectives.
Speaker Change: The steelcase offerings deliver on those needs, which gives me confidence that we're providing what customers need to transform the way their organizations work.
Speaker Change: As we think about our diversification efforts, we're making progress in expanding our offerings to reach new customers and markets earlier. This month, we participated in neocon, where we showcased several new solutions to foster better connections increased privacy and high performance ancillary spaces.
Sara E. Armbruster: So, let me highlight three solutions that we launched this quarter. First, we expanded the Ocular Collection, which offers a range of products designed to create experiences that are more engaging, equitable, and empowering in the hybrid workplace. Our newest product, called Ocular View, was co-developed by Steelcase and Logitech. It's an immersive, realistic, and personal meeting experience that brings together digital and physical elements to achieve increased social connection and privacy, which are top priorities for employees.
Speaker Change: So let me highlight three solutions that we launched this quarter.
Speaker Change: First we expanded the ocular collection, which offers a range of products designed to create experiences that are more engaging equitable and empowering in the hybrid workplace.
Our newest product called ocular view was co developed by Steelcase and Logitech, it's an immersive realistic and personal meeting experience that brings together a digital and physical elements to achieve increased social connection and privacy, which are top priorities for employees.
Sara E. Armbruster: Second, is our Campers and Dens solution from our Orange Box brand, which is a great example of innovation that can be adapted to a broad range of customer and geographic market needs. It was inspired by the intuitive way people socialize and interact in a campground. And this system of interior architecture, campers, cabins, and awnings can be configured in a wide range of ways to create enclosed or semi-enclosed and open spaces within the office environment, supporting the many ways people connect in the workplace.
Speaker Change: Second is our campers and dense solution from our Orange box brand, which is a great example of innovation that can be adapted to a broad range of customer and geographic market needs. It.
Speaker Change: It was inspired by the intuitive way people socialize and interact in a campground and this system of interior architecture campers cabins and <unk> can be configured in a wide range of ways to create a closed or semi enclosed and open spaces within the office environment supporting.
Speaker Change: Of the many ways people connect in the workplace.
Sara E. Armbruster: And finally, we're excited to unveil a new chapter in our creative collaboration with the Frank Lloyd Wright Foundation, an ongoing project to reintroduce, reinterpret, and reimagine Wright's celebrated design. The Rockford and Galesburg collections, which are new interpretations of fine modern furniture for the home and workplace, draw upon a later era in Wright's work and are rooted in his unmistakable design principles
Speaker Change: And finally, we're excited to unveil a new chapter in our creative collaboration with the Frank Lloyd Wright Foundation, an ongoing project to reintroduce reinterpret and re imagine right celebrated designs.
Speaker Change: Rockford in Galesburg collections, which are new interpretations of find modern furniture for the home and workplace draw. Upon a later era and rights work and are rooted in his unmistakable design principles.
Sara E. Armbruster: This partnership helps us strengthen our brand and create interest among new customers. Now, turning to profitability, our first quarter results reflect strong earnings growth, despite revenue being slightly below the prior year, as we continue to make progress on our profit improvement initiatives. Our adjusted earnings per share of $0.16 was an increase of 78% versus last year. Additionally, for the eighth consecutive quarter, we drove year-over-year gross margin improvements. Our sales teams continued to capture the necessary price increases to offset the inflationary costs we've absorbed over the past two years.
Speaker Change: This partnership helps us strengthen our brand and create interest among new customers.
Speaker Change: Now turning to profitability, our first quarter results reflect strong earnings growth despite revenue being slightly below prior year as we continue to make progress on our profit improvement initiatives.
Speaker Change: Our adjusted earnings per share of <unk> 16, with an increase of 78% versus last year and for the eighth consecutive quarter, we drove year over year gross margin improvement.
Speaker Change: Our sales teams continue to capture the necessary price increases to offset the inflationary cost we've absorbed over the past few years.
Sara E. Armbruster: Our operations leaders have continued to implement additional cost-reduction initiatives, such as distribution center closures and optimizing our production line. And our employees continue to find efficiencies to support our fitness efforts and optimize our spending. So all of these things are helping improve our overall profitability, and these profit improvement efforts are also helping enable our investment to support growth initiatives and business transformation work. As we look at our segment performance, the Americas had another good quarter due to growth margin improvement. Our international segment posted adjusted operating income of $2 million, which was a $7 million improvement versus the prior year.
Speaker Change: Our operations leaders have continued to implement additional cost reduction initiatives such as distribution center closures.
Speaker Change: And optimizing our production lines.
Speaker Change: And our employees continue to find efficiencies to support our fitness efforts and optimize our spending so all of these things are helping improve our overall profitability.
Speaker Change: These profit improvement efforts are also helping enable our investment to support growth initiatives and business transformation work.
Speaker Change: As we look at our segment performance the Americas had another good quarter due to gross margin improvements our international segment posted adjusted operating income of $2 million, which was a 7 million dollar improvement versus the prior year.
Sara E. Armbruster: This international improvement continued to build on the strong momentum we saw during the second half of fiscal 2024 when we focused on reducing our cost structure to support improved earnings and to enhance our competitive position. Our overall order growth remained strong for the third consecutive quarter as we drove eight percent order growth in Q1, with the Americas up 10%. Similar to the previous two quarters, strong growth from large companies helped drive America's improvement, but orders also grew across all our other customer segments, including notable growth in our education business at the start of the peak education season. Our win rates remain strong as our solutions continue to resonate with companies investing in their offices.
Speaker Change: This international improvement continue to build on the strong momentum we saw during the second half of fiscal 2024, when we focused on reducing our cost structure to support improved earnings and to enhance our competitiveness.
Speaker Change: Our overall order growth remained strong for the third consecutive quarter as we drove 8% order growth in Q1 with the Americas up 10%.
Speaker Change: Similar to the previous two quarters strong growth from large companies helped drive the Americas improvement, but orders also grew across all our other customer segments, including notable growth in our education business at the start of the peak education season.
Speaker Change: Our win rates remain strong as our solutions continue to resonate with companies investing in their offices.
Sara E. Armbruster: Finally, as we think about our efforts to use our business as a force for good and design better futures for people on the planet, we're excited to share that Steelcase recently announced a commitment to reach net zero by 2050. This means cutting carbon emissions by over 90% by 2050 throughout our entire value chain. We worked with the Signed Space Targets Initiative to validate our near-term and new net zero targets, and we are proud to be the first in our industry to publish a transition plan outlining our path to net zero.
Steelcase representative: Finally, as we think about our efforts to use our business as a force for good and design better futures for people of the planet. We're excited to share that Steelcase recently announced a commitment to reach net zero by 2050.
Steelcase representative: This means cutting carbon emissions over 90% by 2050 throughout our entire value chain.
Steelcase representative: We worked with the science based targets initiative to validate our near term and new net zero targets and we are proud to be the first in our industry to publish a transition plan outlining our path to net zero.
Sara E. Armbruster: We believe this new commitment will create a competitive advantage by helping our customers reach their own sustainability goals and, as a result, generate more opportunities to grow our business. Many of our customers already have made net zero commitments, and we expect more will follow.
Steelcase representative: We believe this new commitment will create a competitive advantage by helping our customers reach their own sustainability goals and as a result generate more opportunities to grow our business. Many of our customers already have made net zero commitment and we expect more will follow.
Sara E. Armbruster: So, in closing, our first quarter results were a great start to fiscal 2025, and we believe that momentum will continue into the second quarter. Dave will discuss our outlook in more detail, but we feel great about where we're projected to be halfway through the year. We feel positive about the balanced progress we continue to make against our strategy to lead the transformation of the workplace, diversify the customer and market segments we serve, improve our profitability, and use our business as a force for good. I'll now turn it over to Dave to review the financial results and our outlook.
Steelcase representative: So in closing our first quarter results were a great start to fiscal 2025, and we believe that momentum will continue into the second quarter.
Steelcase representative: Jay will discuss our outlook in more detail, but we feel great about where we're projecting to be halfway through the year.
Steelcase representative: We feel positive about the balanced progress we continue to make against our strategy to lead the transformation of the workplace diversify the customer and market segments, we serve improve our profitability and use our business as a force for good.
Speaker Change: I'll now turn it over to Dave to review the financial results and our outlook. Thank.
David C. Sylvester: Thank you, Sara, and good morning, everyone. My comments today will start with the highlights related to our first quarter results, balance sheet, and cash flow. I will then share a few summary remarks about the strength of our outlook for the second quarter and our increased confidence in achieving our fiscal 2025 financial target. Our first quarter adjusted earnings of $0.16 per share were above the top end of the estimated range we provided in March, and our revenue of $727 million was at the midpoint of our range.
David C. Sylvester: Thank you Sarah and good morning, everyone. My comments today will start with the highlights related to our first quarter results balance sheet and cash flow I will then share a few summary remarks about the strength of our outlook for the second quarter.
David C. Sylvester: Our increased confidence of achieving our fiscal 2025 financial targets.
David C. Sylvester: Our first quarter adjusted earnings of <unk> 16 per share were above the top end of the estimated range. We provided in March and our revenue of $727 million was at the midpoint of our range.
David C. Sylvester: The Americas drove earnings favorability on strong gross margins, which was driven by higher pricing benefits, lower inflation, and improved operational performance. International results were also better than we expected, as favorable gross margins and lower spending more than offset a small shortfall in revenue.
David C. Sylvester: The Americas drove the earnings favorability on strong gross margin, which was driven by higher pricing benefits lower inflation and improved operational performance.
David C. Sylvester: International results were also better than we expected as favorable gross margins and lower spending more than offset the small shortfall in revenue.
David C. Sylvester: Compared to the prior year, our adjusted operating income was $9 million higher, including a $7 million improvement in our international segment, which reflected benefits from the restructuring actions we implemented last year. As it relates to cash flow on the balance sheet, we consumed $59 million of cash from operating activities in the first quarter as our seasonal disbursements related to fiscal 2024 variable compensation and retirement plan contributions were higher than our $61 million of adjusted EBITDA in the first quarter of fiscal 2025.
David C. Sylvester: Impaired to the prior year, our adjusted operating income was $9 million higher including a $7 million improvement in our international segment, which reflected benefits from the restructuring actions, we implemented last year.
Speaker Change: As it relates to cash flow and the balance sheet, we consumed $59 million of cash from operating activities in the first quarter is our seasonal disbursements related to fiscal 2020 for variable compensation and retirement plan contributions were higher than our $61 million of adjusted EBIT.
Speaker Change: In the first quarter of fiscal 2025.
David C. Sylvester: We also repurchased 1.5 million shares under our repurchase authorization this quarter at a total cost of $19 million, or at an average price of $12.48 per share. Our liquidity totaled $378 million at the end of this quarter, which is $178 million higher than the prior year, in part due to a significant reduction in working capital, which was elevated in the prior year due to supply chain disruption. Total debt aggregated to $447 million.
Speaker Change: We also repurchased $1 5 million.
Speaker Change: A $1 5 million shares under our repurchase authorization this quarter at a total cost of $19 million or at an average price of $12 48 per share.
Speaker Change: Our liquidity totaled $378 million at the end of this quarter, which is $178 million higher than the prior year in part due to a significant reduction in working capital, which was elevated in the prior year due to supply chain for options.
Total debt aggregated to $447 million, our trailing four quarter adjusted EBITDA is $274 million or eight 7% of revenue.
David C. Sylvester: Our trailing four-quarter adjusted EBITDA is $274 million, or 8.7% of revenue, which is 150 basis points higher than the same time frame last year. Orders in the quarter grew 8% compared to the prior year, including 10% growth in the Americas and 2% growth in international. The growth in the Americas was broad-based across all of our customer vertical markets but was led by strong project business with large corporate customers, as well as strong growth from the government sector and in our education business, including K to 12, at Smith System.
Speaker Change: Which is a 150 basis points higher than the same timeframe last year.
Speaker Change: Orders in the quarter grew 8% compared to the prior year, including 10% growth in the Americas and 2% growth in international.
Speaker Change: The growth in the Americas was broad based across all of our customer vertical markets, but was led by strong project business with large corporate customers as well as strong growth from the government sector and in our education business, including K 12 at Smith system.
David C. Sylvester: Continuing business or day-to-day orders from large corporate customers declined modestly in Q1 compared to the prior year after growing year-over-year in each of the previous four quarters. However, Q1 marks the third consecutive quarter of year-over-year order growth, which has been driven by both pricing and volume, and we believe the growth in our project business is reflective of our strong win rates in fiscal 2024 as we continue to support our customers' workplace strategy
Speaker Change: Continuing business or day to day orders from large corporate customers declined modestly in Q1 compared to the prior year after growing year over year in each of the previous four quarters.
Speaker Change: Q1 marks the third consecutive quarter of year over year order growth, which has been driven by both pricing and volume and we believe the growth in our project business is reflective of our strong win rates in fiscal 2024, as we continue to support our customers' workplace strategies.
David C. Sylvester: The order growth in International was driven by 4% growth in EMEA, which reflected growth in several markets and a decline in Germany, while Asia-Pacific declined 3% as declines in most markets were partially offset by strong growth in India.
Speaker Change: The order growth in international was driven by 4% growth in EMEA, which reflected growth in several markets and a decline in Germany, while Asia Pacific declined 3% as declines in most markets were partially offset by strong growth in India.
David C. Sylvester: Turning to our outlook for the second quarter, we expect to report revenue within a range of $850 to $875 million, which would reflect 1% to 4% organic growth year over year. As I mentioned, our first quarter orders grew 8% versus the prior year, and our backlog was up 1%. Orders during the first three weeks of the second quarter declined by 2%, reflecting growth in the Americas and a decline in international orders compared to the same period last year, which included some larger projects in the international segment.
Speaker Change: Turning to our outlook for the second quarter, we expect to report revenue within a range of $850 million to $875 million, which would reflect 1% to 4% organic organic growth year over year.
Speaker Change: As I mentioned, our first quarter orders grew 8% versus the prior year and our backlog was up 1%.
Orders during the first three weeks of the second quarter declined by 2% reflecting growth in the Americas and a decline in international compared to the same period last year, which included some larger projects in the international segment.
David C. Sylvester: As it relates to earnings, we expect to report adjusted earnings per share of between 36 and 40 cents, which compares to 31 cents in the prior year. In addition to the projected range of revenue, the adjusted earnings estimate includes estimated gross margin of approximately 35% and operating expenses of between $240 to $245 million, which includes $4.3 million of amortization related to purchased intangible assets. And lastly, we expect interest expense and other non-operating items to net to approximately $3 million of expense, and we're projecting an effective tax rate of approximately 27%.
Speaker Change: As it relates to earnings we expect to report adjusted earnings per share of between <unk> 36, and <unk> 40.
Speaker Change: Which compares to 31.
Speaker Change: In the prior year.
Speaker Change: In addition to the projected range of revenue. The adjusted earnings estimate includes estimated gross margin of approximately 35%.
Speaker Change: Operating expenses of between $240 million to $245 million, which includes $4 3 million of amortization related to purchased intangible assets.
Speaker Change: Lastly, we expect interest expense and other non operating items to net to approximately $3 million of expense and we are projecting an effective tax rate of approximately 27%.
David C. Sylvester: In March, we outlined our fiscal 2025 full-year financial targets, which included organic revenue growth of one to five percent and adjusted earnings per share of 85 cents to one dollar. Based on the strength of our first quarter results and our second quarter outlook, we have increased confidence in achieving our targets and potentially reaching the higher end of the range for our income targets, assuming relatively stable macroeconomic and geopolitical environments. In summary, we feel great about our first quarter financial results and our outlook for the second quarter. And, as Sara said, we believe our strategy is working, and we're continuing to make progress on our most important initiatives. From there, we'll turn it back to the operator for questions. Thank you.
Speaker Change: In March we outlined our fiscal 2025 full year financial targets, which included organic revenue growth of 1% to 5% and adjusted earnings per share of <unk> 85 to $1 <unk>.
Speaker Change: Based on the strength of our first quarter results and our second quarter outlook.
Speaker Change: We have increased confidence of achieving our targets.
Speaker Change: Potentially reaching the higher end of the range for our income targets, assuming relatively stable macroeconomic and geopolitical environments.
Speaker Change: In summary, we feel great about our first quarter financial results and our outlook for the second quarter and as Sarah said, we believe our strategy is working and we're continuing to make progress on our most important initiatives from there we will turn it back to the operator for questions.
Operator: Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Reuben Garner with Benchmark. Your line is open.
Speaker Change: Thank you at this time I would like to remind everyone in order to ask a question Thats Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Reuben Garner with benchmark. Your line is open.
Reuben Garner: Thank you. Good morning, everybody. Congratulations on the strong start to the year. I guess, Dave, can you start?
Speaker Change: Thank you good morning, everybody.
Reuben Garner: Good morning.
Speaker Change: Congrats on the strong start to the year I guess, David can you start.
David C. Sylvester: The gross margin performance, in particular, in the first quarter was very strong, and outlook for the second quarter looks to point to similar year-over-year improvements despite the fact that your kind of revenue growth from the recent order strength hasn't started to kick in yet. Can you talk about what drove the improvements on a year-over-year basis and maybe how to think about that gross margin line as the year progresses?
Speaker Change: The gross margin performance in particular in the first quarter was very strong outlook for the second quarter looks to be a similar year over year improvements. Despite the fact that your kind of revenue growth from the recent order strength Hasnt started to kick in yet can you talk about what drove the improvements.
Speaker Change: On a year over year basis, and maybe how to think about that gross margin line as the year progresses.
David C. Sylvester: Yes, like I said a second ago, a number of factors, including remaining pricing benefits from actions that we took last year that are posting some year-over-year benefits. A strong operational performance, as well, was a contributing factor, and really across many fronts in the plans. I think we also might have had a tad of favorable business mix in the quarter, but everything was moving in the right direction for us in the first quarter.
Speaker Change: Yes, like I said, a second ago, a number of factors.
Speaker Change: Including.
Speaker Change: Remaining pricing benefits from actions that we took last year that are posting some year over year benefits.
Speaker Change: Strong operational performance as well was a contributing factor.
Speaker Change: And really across many fronts in the plant I think we also might've had a tad a favorable business mix in the quarter.
Speaker Change: But everything was moving in the right direction in the first quarter for us and with the second quarter.
David C. Sylvester: And with the second quarter and the strength of our education business, we get such a terrific absorption of our overhead and fixed costs because we ship so much product in that short three-month period that we expect our gross margins and the strength year-over-year to continue into the second quarter.
Speaker Change: The strength of our education business.
Speaker Change: We get such a terrific absorption.
Speaker Change: All of our overhead and fixed costs.
Speaker Change: Because we ship so much product in the short three months period.
Speaker Change: We expect our gross margins and.
Speaker Change: And the strength year over year to continue into the second quarter.
David C. Sylvester: And that business mix, what kind of items are driving the growth in this environment that's leading to business making profits.
Speaker Change: And that business mix, what what kind of items.
Speaker Change: Sure.
Speaker Change: The growth in this environment leading.
Speaker Change: Bleeding to business mix benefit.
David C. Sylvester: You know, I don't know all the details, but oftentimes we see product mix shifts that are a little bit favorable to us. We see customer mix shifts, too, that can be favorable. We see quote-type mixed shifts, so I don't know the details of what drove the favorable mix year over year. We might have had a large project last year that was more significantly discounted, for example. I just, I don't know all the details.
Speaker Change: Uh huh.
Speaker Change: I don't know all the details, but oftentimes, we see product mix shifts that are a little bit favorable to us.
Speaker Change: Thus, we see customer mix shifts.
Speaker Change: That can be favorable we see quote type mix shifts. So I don't know the details of what drove the favorable mix year over year, we might've had a large project in last year that was more significantly discounted for an example, I just I don't know all the details.
Sara E. Armbruster: Okay, and then Sara, you just mentioned NEACON. I'm sure you got a chance to talk to some of your customers there. Any consistent feedback? Does it feel like there's a kind of a turning point here in terms of the return to the office and the need to get folks back in and, therefore, kind of investing more in the office? Or did it kind of just feel very similar to a year ago from your standpoint?
Okay, and then Eric you just mentioned Neocon I'm sure you've had a chance to talk to.
Speaker Change: Some of your customers there.
Speaker Change: Any any consistent feedback and does it feel like there is a kind of a.
Speaker Change: Turning point here in terms of the return to the office and the need to get folks.
Speaker Change: And therefore kind of put more investment in the office.
Or does it kind of just feel very similar to a year ago from your standpoint.
Sara E. Armbruster: Well, maybe I'd break that question into a couple parts. So in terms of feeling a need to get people back to the office, I think we've seen very consistently, you know, strong desires from CEOs and decision makers and executive teams for some time to do that. So I think the desire has always been there. The distinction has been, you know, who's making or taking action and when.
Speaker Change: Well, maybe I'd break that question into a couple parts. So in terms of feeling a need to get people back to the office I think we've seen very consistently stir.
Speaker Change: A strong desire from Ceos and decision makers and executive teams for some time.
Speaker Change: To do that so I think the desire is always been there. That's the distinction is that true and who's making or taking action and win.
Sara E. Armbruster: And I think we definitely saw high-quality visits at Neocon. We saw a lot of customers, a lot of customers and architecture design firms that had projects that were actively working on things versus window shopping. So that was good to see. I think we also saw a really healthy diversity of clients. So, as you would imagine, lots of domestic or North American based clients, including a pretty strong contingent from the West Coast, which was nice to see.
Speaker Change: And I think we definitely saw high quality visits at Neocon, we saw a lot of customers a lot of customers in architectural design firms that had projects that we're actively working on things versus window shopping.
Speaker Change: So that was good to see I think we also saw really help.
Speaker Change: Healthy diversity of clients. So as you would imagine losses lots of domestic or north American based clients, including a pretty strong contingent from the west coast, which was nice to see but we also had quite a bit of traffic and visits from from clients or potential clients from from Europe as well as Asia. So do I think.
Sara E. Armbruster: But we also had quite a bit of traffic and visits from clients or potential clients from Europe as well as Asia. So I think that all felt like, you know, positive momentum, continuing to support some of the things that Dave was talking about in terms of our outlook.
Speaker Change: That all felt like.
Speaker Change: Positive momentum continuing to support some of the things that that Dave was talking about in terms of our outlook.
Sara E. Armbruster: Okay, great. I'm going to sneak one more in on your growth initiatives outside of kind of the core corporate office. Can you know, you mentioned education being pretty strong. This is obviously an important season for that business. Any other color on any of the other initiatives? Any, any, anything new to report in terms of growth efforts there?
Okay, great I'm going to sneak one more in your growth initiatives outside of kind of the core.
Speaker Change: Corporate office, you mentioned education being pretty strong. This is obviously an important season for that business.
Speaker Change: Any other color on any of the other initiatives any any.
Speaker Change: Anything new to report in terms of.
Speaker Change: Both efforts there.
David C. Sylvester: Yeah, you know, as I said, all of the customer vertical markets that we're focused on grew versus the prior year. They also were at or above, you know, our plan or our expectations for the first quarter. So we feel really good about the breadth of the strength in Q1. You know, large project activity from our enterprise or large corporate customer segment really was very strong in the quarter, but when we look at education, they had strong growth and were where we wanted them to be.
Speaker Change: Yes, as I said all of the customer vertical markets that we're focused on grew versus prior year. They also were.
Speaker Change: At or above our <unk>.
Speaker Change: Plan or our expectations for the first quarter. So we feel really good about.
Speaker Change: The breadth of the strength in Q1.
Speaker Change: <unk> project activity from our enterprise or large corporate customer segment.
Speaker Change: It really was very strong in the quarter, but when we look at education.
Speaker Change: They had strong growth in.
Speaker Change: We're where we wanted them to be.
David C. Sylvester: Small to mid-size businesses also had a good quarter and grew orders year over year. Healthcare, which has continued to be challenged by administrative settings and lower investment there that we've seen for a while, we posted order growth from healthcare, and even in retail and consumer, which is a smaller vertical market for us, that grew as well. But the big driver was large corporations.
Speaker Change: Small to mid also sized businesses also had a good quarter and grew orders year over year.
Speaker Change: Healthcare, which has continued to be challenged by administrative settings, and lower investment there that you've seen for a while we posted order growth from healthcare and.
Speaker Change: Even in the on the retail and consumer which is a smaller.
Vertical market for us that grew as well.
Speaker Change: But the big driver was large corporate.
Reuben Garner: Great, thank you guys, and good luck for the rest of the year.
Speaker Change: Great. Thank you guys and good luck rest of the year.
Speaker Change: Thanks.
Gregory John Burns: Your next question comes from the line of Greg Burns with Sidotian Company. Your line is open.
Speaker Change: Your next question comes from the line of Greg Burns with Sidoti <unk> Company. Your line is open.
Gregory John Burns: Good morning. Are your analysts that you laid out, like a midterm target of $50 million? http://TheBusinessProfessor.com progress towards that goal?
Speaker Change: Good morning.
Speaker Change: At your analyst day, you laid out like a midterm target of $50 million.
Gregory John Burns: Savings I think mostly around cost of goods line, how far along are you in.
Gregory John Burns: The progress towards that goal.
Gregory John Burns: Okay.
David C. Sylvester: I would say it is in the mid to early innings on it, Greg. We've accomplished a number of improvements that we feel really good about, teams have worked really hard on, and they're driving year-over-year benefits. The challenge is we have some offsetting other factors, so we're not seeing the net improvement that we would like to see yet. They are also in the midst of launching a number of additional initiatives. You've read
Speaker Change: I would say mid to early innings on it Greg.
Speaker Change: <unk> accomplished a number of improvements that we feel really good about the teams worked really hard on in.
Speaker Change: And they are driving year over year benefits. The challenge is as we have some offsetting other factor.
Speaker Change: Factors. So we're not seeing the net improvement that we would like to see.
Speaker Change: They are also in the midst of launching a number of additional initiatives you've read about some of them periodically you'll read about some of them in the Q when we file that tomorrow.
David C. Sylvester: You'll read about some of them in the queue when we file that tomorrow. We give more color in the queue behind some of the restructuring activities that we're doing. We feel pretty good about it. We just have had some other challenges that have dampened the net impact of gross margin improvement. We're still seeing year-over-year benefits in gross margin, which is, of course, in part due to the actions and activities that the Operations team is driving, but we're hoping to see a more significant net improvement, outside of pricing net of inflation and benefits from volume growth and business mix shifts. So I'd say we're in the early to mid innings on that and have gains in front of us yet.
Speaker Change: I'll give more color in the queue behind some of the restructuring activities that we're taking.
Speaker Change: Yes.
Speaker Change: We feel pretty good about it we just have had some other challenges that have.
Speaker Change: Dampened.
Speaker Change: The net impact of gross margin improvement, we're still seeing year over year benefits in gross margin, which is.
Speaker Change: Of course.
Speaker Change: In part due to.
Speaker Change: The actions and activities that the ops team is driving but.
Speaker Change: But we're hoping to see more of more significant net improvements.
Speaker Change: Outside of pricing net of inflation.
Speaker Change: Benefits from volume growth.
Speaker Change: And business mix shifts so I'd say, we're in the early to mid innings on that and have <unk>.
Speaker Change: Gains in front of us yet.
Speaker Change: Okay.
Gregory John Burns: Okay, so then I guess when we think about where the gross margin... can go from here, do you think they could get that, you know? past prior peaks?
Speaker Change: Okay. So then I guess, when we think about where the gross margins.
Speaker Change: Can go from here or do you.
Jim: Thank you Jim.
David C. Sylvester: Do you feel like the business should be operating at a structurally higher gross margin once this is all realized? Yes. Okay. Thank you. Thank you. All right, and then in terms of... Demand, how much of this is like pent-up from maybe delays that happened due to work, you know, return to work being maybe slower than expected because when you look at some of the market indicators that we typically would look at to gauge demand, like the ABI index, still remained kind of subdued or in negative territory. So can you just help us triangulate, maybe? What's driving the demand here and, and, you know, how?
Speaker Change: Back past prior peaks like do you feel like the business should be operating at a structurally higher.
Speaker Change: Gross margin once this is all.
Speaker Change: Realized.
Speaker Change: Yes.
Speaker Change: Okay Alright.
Speaker Change: Alright, and then in terms of.
Speaker Change: Demand.
Speaker Change: Is there.
Speaker Change: How much of this is.
Pent up from maybe delays that happened.
Speaker Change: Were returned to work being maybe slower than expected.
Speaker Change: Because when you look at some of the market indicators that we typically would look at to gauge demand like the Abi index still remains.
And a subdued or a negative territory. So can you just help us triangulate maybe.
Speaker Change: What's driving the demand here and how sustainable it is.
David C. Sylvester: It's a good question. I don't know that I have any data behind this. So this is, I guess, what I think, and I'll be interested in what Sara wants to build on it. But I don't think that a big part of what we're seeing right now is due to delays. I think we saw that a couple of years ago, right when, as we went into the pandemic, everything stopped, then things that were in flight, really, let's say, late in flight projects were finished that were paused.
Speaker Change: It's a good question I don't know that I have.
Speaker Change: Paul.
Speaker Change: Data behind Us. So this is I guess, what I think interested what.
Speaker Change: Sarah wants to build on it but I don't think that a big part of what we're seeing right now is due to delays.
Speaker Change: I think we saw that a couple of years ago right. As we went into the pandemic everything stopped and things that were in flight really let's say late in flight projects were finished.
Speaker Change: We're a pause.
David C. Sylvester: But many things were put on hold for six months or 12 months, and then they restarted, which I think is what drove kind of the initial rebound that then softened again because of new variants of COVID, lack of return to office, and economic uncertainty. This feels like more of a, um, a restart. I'm sure there are some projects in there that were thought about years ago that were placed on hold and are restarting, but when I think of some of the large project activity that is starting to show up in our order patterns, these are things we've been working on for quite some time, and I don't believe they were slowed down necessarily during the pandemic. And is that helpful? I mean, that's about as much color as I can give you. See what Sara has.
Speaker Change: But many things were put on hold for six months or 12 months and then they restarted which I think is what drove kind of the initial rebound.
But then softened again because of new variance of Covid lack of return to office economic uncertainty this feels like more of a.
Speaker Change: A restart I am sure there are some projects in there that were thought about years ago that were placed on hold and are restarting, but when I think of some of the large project activity.
Speaker Change: Net.
Speaker Change: Are you starting to show up in our order patterns and these are things we've been working on for quite some time and I don't believe they were slowed down necessarily during the pandemic.
Speaker Change: And.
Speaker Change: Is that helpful. I mean, that's about as much color as I see what's there.
Sara E. Armbruster: Yeah, I agree with that. Maybe I'll build on it. I mean, as we've always seen, we've always seen clients that are kind of operating at a different place on the spectrum from, say, kind of progressive and leading to maybe more conservative or lagging. So we definitely see clients who, you know, had spaces that were perfectly good spaces before the pandemic, but they're continuing to invest in and update them to try to bring an even more modern perspective to how their organizations are working.
Speaker Change: I agree with that and then download on it I mean, I think as we've always seen we've always seen clients that are kind of operating at.
Speaker Change: A different place on the spectrum from let's say kind of progressive in and leading to maybe more.
Speaker Change: Conservative or lagging so we definitely see clients too.
Speaker Change: Had spaces that were perfectly good spaces before the pandemic, but they're continuing to invest and update them eat to try to bring them even more modern perspective to how their organizations are working.
Sara E. Armbruster: We also see a group of clients who, I would say, maybe had more traditional spaces, or maybe their spaces were already somewhat outdated before the pandemic. And with, you know, years having passed now since 2020, they're realizing they're, you know, even more out of date, and they have to do something to make those spaces compelling and attractive and, frankly, functional. And then there are also clients that are growing. I mean, I talked not that long ago to a CEO of a major financial services institution who was sharing with me that, you know, during the pandemic, they lost a number of leases.
Speaker Change: We also see a group of clients, who I would say maybe had more traditional spaces or maybe their spaces were already somewhat outdated before the pandemic.
Speaker Change: With years, having passed analysis 2020, they're realizing they're even more out of date and they have to do something to to make those spaces.
Speaker Change: Compelling and attractive and frankly functional.
Speaker Change: And then there are also clients that are growing I mean, I talk not that long ago to a CEO of a major financial services institution. He was sharing with me that.
Speaker Change: During the pandemic they shut a number of leases.
Sara E. Armbruster: But at the same time, they were also continuing to hire; they hired thousands of people. And now that they're getting people back to the office, he said, even if only a fraction of those people actually go to the office, they have no place for them to go.
Speaker Change: But at the same time they were also continuing to hire they hired thousands of people and now that theyre getting people back to the office you said, even if only a fraction of those people actually go to the office. They have no place for them to go. So he was describing how they are actually a b C news, new space and expanding because they need to place for all the hiring that they did.
Sara E. Armbruster: So he was describing how they are actually leasing new space and expanding because they need a place for all the hiring that they have done, you know, over the past couple of years. So I think there's, as Dave said, I don't think we can give you precise data, but I do think we feel that there are multiple drivers depending on the kind of which clients are in which category that, you know, give us, I think, you know, some degree of optimism, as we've been talking about for continued momentum. Maybe one other comment, Greg, is that, you know, you probably see the same industry data that we see from BISMA. It's not, you know, perfect.
Speaker Change: Over the past couple of years, So I think as Dave said I don't think we can give you precise data, but I do think we feel that there are multiple drivers depending on kind of which clients are and which category that.
Speaker Change: Give us I think some.
Speaker Change: Some degree of optimism as we've been talking about for continued momentum.
Speaker Change: One other agreement Greg Greg.
Speaker Change: Pete.
Speaker Change: You probably see the same industry data that we see from this month.
David C. Sylvester: It doesn't include everyone in the industry, but it's the only industry information that we have. And the industry has been growing modestly more recently, but we've been growing at a faster rate, and we think, you know, that's linked to our strong win rates, which are linked to us staying invested in where we think work is going in this, you know, kind of hybrid world going forward. So I think another factor is even though the ABI might be sluggish and the industry is growing modestly, we've been doing better than that because we've stayed focused on the office and stayed invested in how we thought the office needed to change to support hybrid work. So I definitely think a factor in there is some share.
Speaker Change: It's not.
Speaker Change: Perfect. It doesn't include everyone in the industry, but it's the only industry information that we have and the industry has been.
Speaker Change:
Speaker Change: Growing modestly more recently.
Speaker Change: But we've been growing at a faster rate.
Speaker Change: No.
Speaker Change: Linked to our strong win rates that's linked to us staying invested in where we think work is is going in this kind of a hybrid world go forward. So.
Speaker Change: I think another factor is even though the <unk>.
Speaker Change: It might be.
Speaker Change: Sluggish and the industry is growing modestly and we've been doing better than that because we've stayed.
Speaker Change: Focused on the office and stayed invested in how we thought the office needed to change to support hybrid work. So I definitely think of factor and there is some share gain.
Gregory John Burns: All right, great. Thanks for the caller.
Speaker Change: Alright, great. Thanks for the color.
Brian Gordon: Your next question comes from the line of Brian Gordon with Watertower Research. Your line is open.
Speaker Change: Your next question comes from the line of Brian Gordon with Water Tower Research. Your line is open.
Brian Gordon: Good morning, and thank you for taking my question. First of all, I just wanted to say Bud apologizes for not being able to make it to the call today. He's on the road and was not able to dial in, but he wanted to congratulate you guys on the great margins and the progress you guys have seen there. I had a question sort of about how, so let me say it this way, what are customers, you know, kind of thinking about as they're thinking about redesigning their offices for hybrid work, about things like space per employee and spend per employee, and how has that been changing when we compare what's going on today versus pre-COVID?
Brian Gordon: Good morning, and thank you for taking my question.
Brian Gordon: First of all we just wanted to say.
Speaker Change: By the apologizes for not being able to to make it to the call today. He's on the road and was not able to two.
Speaker Change: To dial in but wanted to congratulate you guys on the great margin progress you guys have seen there.
Speaker Change: Had a question sort of about.
Speaker Change: How so.
Speaker Change: Let me say it this way.
Speaker Change: Our customers kind of thinking about as they're thinking about redesigning their offices.
Speaker Change: For hybrid work about things like <unk>.
Speaker Change: Space per employee and spend per employee and how has that been changing.
Speaker Change: When we compare what's going on today versus pre COVID-19.
Sara E. Armbruster: Well, one thing we've seen with respect to space per employee, and again, I can't give you really precise data, but I can think of a number of clients right off the top of my head who have been thinking about somewhat increasing space per employee. I think a couple of years ago, that was driven more in the immediate aftermath of the pandemic by people not wanting to be quite so close together. But I think since then, it's really reflected in evolution and how we think about how we think about how people work and creating ancillary spaces, creating social spaces and more informal spaces, adding solutions like ocular view or orange box campers and dens into their floor plate to provide different levels of privacy, technology support, et cetera. So while I can't give you an exact metric, I would be willing to bet that that space per employee number is at least stable, if not potentially increasing a bit in some organizations. Yeah.
Speaker Change: Well one thing we've seen with respect to space per employee and again I don't I can't give you really precise data but.
Speaker Change: I can't think of a number of clients were at the top of my head who have been thinking about somewhat increasing todays per employee I think.
Speaker Change: <unk> years ago that was driven more in the immediate aftermath of the pandemic by people.
Speaker Change: Not wanting to be quite so close together, but I think since then it's really reflected an evolution in how we think about.
Speaker Change: How we think about how people work in creating ancillary spaces, creating social spaces in more informal spaces, adding solutions like like ocular view or orange box campers and dan's into their floor play to provide.
Speaker Change: Provide different levels of privacy technology support et cetera, So while I can't give you an exact metric.
Speaker Change: I would be willing to bet that that space per employee number is is at least stable, if not potentially increasing a bit and some organizations.
David C. Sylvester: Yeah, I would definitely agree with that. I mean, it's hard to point at concrete data, but I mean we are selling fewer benching applications, which were really, you know, the philosophy was really around density, and we are now selling more freestanding furniture, and we are selling more screens and partitions and architectural pods and walls and other applications that kind of divide up the space, and it's all linked, I think, to the need for privacy. You know, one of the largest complaints about the office before the pandemic was the lack of privacy. People found privacy in their homes.
Yes, I would definitely agree with that.
Speaker Change: Hard to point at concrete data.
Speaker Change: But I mean, we are selling fewer benching applications, which were really.
Speaker Change: The design philosophy was really around density.
Speaker Change: We are now selling more freestanding furniture, and we are selling more screens and partitions and architectural pods and walls and.
Speaker Change: And other.
Speaker Change: Applications that kind of divide up the space and it's all linked I think to the need for privacy.
Speaker Change: One of the largest complaints about the office before the pandemic was the lack of privacy people found privacy in their homes. They were able to do their focused work in as they come back to the office they struggled to find privacy.
David C. Sylvester: They were able to do their focused work, and as they come back to the office, they struggle to find privacy, and they need to be on video periodically, which is oftentimes not necessarily supported by a conference room or a suite where technology has been embedded. So they need to take video occasionally at their desk, and you cannot do that in the open plan at a desk application, or you can't do it very effectively.
Speaker Change: And they need to be on video periodically oftentimes not necessarily supported by a conference room or suite, where technology has been embedded so they need to take video occasionally at their desk and you cannot do that in the open plan.
Speaker Change: The benching application that you can't do it very effectively.
David C. Sylvester: So what we see is this increased desire for privacy, and in some cases, there was actually a recent article about this as well, a little bit more toward ownership. I don't think the pendulum is going to swing all the way back to one-to-one desks per employee, but it has swung a long way toward shared in the open plan, and to enable privacy, it might move a little bit back toward owned and certainly embed more privacy elements in the open plan.
Speaker Change: What we see is this increased desire for privacy and in some cases, there was actually a recent article about this as well a little bit more toward ownership I don't think depends on them is going to swing all the way back to one to one desks per route per employee, but it's one a long way toward shared in Nielsen plan and to any.
Speaker Change: <unk> privacy, if might move a little bit back toward owned.
Speaker Change: And certainly embed more privacy elements in Nielsen plan, and then of course, all the collaborative references that Sir.
Speaker Change: As I mentioned are a big deal.
David C. Sylvester: And then, of course, all the collaborative references that Sarah mentioned are a big deal. Conference rooms were not designed to support hybrid collaboration. They were designed really to share information with people that were predominantly, if not entirely, in the So I think there's a lot of arguments that suggest the spend per employee or spend per workstation, let's say, is increasing.
Speaker Change: The conference was were not designed.
Speaker Change: To support hybrid collaboration they were designed really to share information.
Speaker Change: With people that were predominantly if not entirely in the room.
Speaker Change: So I think I think lots of arguments that suggest the spend per employee or spend per workstation, let's say.
Speaker Change: Is increasing.
Brian Gordon: That's great. Thank you so much for that.
Speaker Change: That's great. Thank you so much for that just really one quick follow up.
David C. Sylvester: Just really one quick follow up. How do you think this should affect when we're doing our modeling? How should we think about things like margin instruction and replacement cycle?
Speaker Change: How do you think this should affect.
Speaker Change: When were doing our modeling, how we think about things like margin destruction and replacement cycles.
David C. Sylvester: I think from a margin perspective, we really don't have products that are significantly different from other products in their gross margins. I mean, I think it's well-known and understood in the industry that seeding has a higher gross margin than average gross margins inside of companies in the industry, and that's true for Steelcase. It's because of all of the intellectual property and investments that are made into those products and the life cycle of those products as well, so gross margin can be a little bit higher than average.
I think from a margin perspective, we really don't have products that are significantly different than other products in their gross margins I mean, I think it's well known and understood in the industry.
Speaker Change: Seating has a higher gross margin.
Average gross margins inside of companies in the industry and it's true for steelcase, it's because of all of the intellectual property and investments that are made into those those products in the lifecycle of those products as well.
Speaker Change: So gross margin can be a little bit higher than that average as far as the general lifecycle. We do we have believed that that was shortening.
David C. Sylvester: As far as the general life cycle is concerned, we have believed that that is shortening. In the world of cubicles, 20-plus years ago, I mean, they didn't really wear out, so many clients used them for a long time, and it's not that products are wearing out faster, that is impacting work; and so many different design elements that are being embedded into the solution, that is causing more churn inside, you know, kind of an office structure, whether it's conference rooms needing to embed technology more effectively There is more embedding of social spaces that allow for more informal collaboration.
Brian Gordon: Great, thank you very much.
In the world of Cubicles 20, plus years ago.
Speaker Change: I mean, they didn't really wear out so.
Speaker Change: So many clients use them for a long time, and it's not that that products are wearing out faster.
Speaker Change: There is so much change that is impacting work and so many different design elements that are being embedded into the solutions.
Speaker Change: That is causing more churn inside.
Speaker Change: Kind of in office structure, whether it's the conference rooms need to embed technology more effectively or we went to the owned complain and shared desking and benching applications and now we need to move to more freestanding height adjustable and privacy.
Speaker Change: There is more embedding of social spaces that allow for a more informal collaboration all of that change I think is happening more frequently.
Speaker Change: Because of how work is changing.
Speaker Change: Great. Thank you very much.
Steven Ramsey: Your next question comes from the line of Steven Ramsey with Thompson Research Group. Your line is open.
Speaker Change: Your next question comes from the line of Steven Ramsey with Thompson Research Group. Your line is open.
Chris White: Good morning, everyone. This is Chris White calling in on behalf of Steven.
Speaker Change: Good morning, everyone. This is Chris white, calling in for Stephen Thanks for taking my questions I wanted to follow up on a return to office question. It seems like that's been the major topics for the past couple of years, but now based on recent results and the conversational tone at Neocon.
Chris White: Thanks for taking my questions. I wanted to follow up on a return to office question. It seems like that's been the major topic for the past couple of years, but now, you know, based on recent results and the conversational tone at Neocon, it was less about return to office and more about the hybrid model. Sara, you mentioned the Acura collection to open the call. So, my question is, do you think that the return to office chapter is over, and are we now instead focused on kind of implementing the hybrid model and sort of seeing it as highly valued in our company spending to make them functional and attractive?
Speaker Change: It was less about return to office and more about the hybrid model. Sarah you mentioned the ocular collection to open the call. So my question is do you think that returned to August chapter is over and are we now instead focused on kind of implementing the hybrid model.
Speaker Change: <unk> seen as highly valued in our company spending to make them functional Atlanta traffic.
Sara E. Armbruster: Hi Chris, it's Sara. So a great question. And here's how I would think about that. As you think about return, I'll separate return to office from the hybrid model because, you know, if you think about it, you know, back in February of 2020, before the pandemic, there were a few organizations that were strictly 100% in the office then, right? We work with a lot of clients where people, especially white-collar employees, have some degree of flexibility, you know, have different models.
Sara E. Armbruster: Hi, Chris it's Sarah So so great question and here's how I would think about that.
Speaker Change: As you think about return to I'll separate return to office from the hybrid model because if you think about it you know back in February of 2020 before the pandemic there were a few organizations that were strictly.
Speaker Change: 100% in the office that right, we work with a lot of clients, where people, especially white collar employees had some degree of flexibility.
Speaker Change: <unk> had different models, so I think in some ways the pandemic because it really just accelerated or push forward a trend that was already happening. So I think hybrid with something that we were focused on even before the pandemic, we really doubled down on hybrid and our investments in solutions to support hybrid work during the pandemic and I think those are the things that we've been launching and well.
Sara E. Armbruster: So I think in some ways, the pandemic has really just accelerated or pushed forward a trend that was already happening. So I think hybrid vaccines were something that we were focused on even before the pandemic. We really doubled down on hybrid and our investments and solutions to support hybrid work, you know, during the pandemic. And I think those are the things that we've been launching and will continue to launch into the market. And we, you know, hope to kind of, you know, reap the benefits of having the right solutions for the moment.
Speaker Change: We continue to come to market.
Speaker Change: And we hope to to kind of reap the benefits of having the right solutions for the moment. So so I think we definitely still see lots of organizations thinking about and working on what hybrid means for them and those decisions as they make those decisions and evolve that thinking we believe will continue to drive demand for our solutions.
Sara E. Armbruster: So I think we definitely still see lots of organizations thinking about and working on what hybrid means for them, and those decisions as they make those decisions and evolve that thinking, we believe will continue to drive demand for our solution. With respect to returning to office, in terms of just simply getting people back to the office at all, you know, I don't think we're anywhere near done.
Speaker Change: <unk>.
Speaker Change: With respect to return to office in terms of just simply like getting people back from you know back to the office at all.
Speaker Change: I don't think we're anywhere near done.
Speaker Change: I would describe the progress that we've seen or the evolution, we've seen in terms of organizations.
Sara E. Armbruster: I would describe the progress that we've seen or the evolution we've seen in terms of organizations, you know, taking steps or taking, you know, more significant steps to really define how their organizations are going to work. We have seen that happen.
Speaker Change: Taking steps youre, taking more significant steps to really define how the organizations are going to work, we see that happening and I think we continue to see that happening again.
Sara E. Armbruster: And I think we continue to see that happening. And again, I was at an event with a group of CEOs two weeks ago and was speaking to, you know, one individual, again, a Fortune 100 company, who shared with me that on that very day they had announced that they were moving from four days a week to five days a week, right? And I do hear stories like that, or they're going from three days a week to four days a week.
Speaker Change: Added event with a group of Ceos two weeks ago.
Speaker Change: Speaking to you.
Speaker Change: One individual again, a fortune 100 company, who shared with me that like that very day, they had announced that they were moving from four days a week.
Speaker Change: To five days, a week right and I do hear stories like that or Theyre going for three days a week to four days a week. So I think I think it's at.
Sara E. Armbruster: So I think it's, I'll say, a steady march. It's not a sprint, but it's a steady march. And I expect we'll continue to see organizations moving back forward, you know, a significant amount of in-person work per week, not 100%, but, you know, in-person work still matters, and the spaces in which people come together to do that work still matter. So, you know, we still believe that it's likely to be what's in front of us.
Speaker Change: I'll say a steady March.
Speaker Change: It's not a sprint, but it's a steady March and I expect we'll continue to see organizations moving back toward you know a significant amount of in person week, not 100%, but in person works still matters in the spaces in which people come together to do that work still matter. So.
Speaker Change: So we still believe that's likely to be what's in front of us.
Sara E. Armbruster: And then following up on a question you had, a comment you made about a financial company hiring thousands, are you starting to see kind of green shoots of traditional business coming back, where people are actually hiring and expanding in a traditional sense?
Speaker Change: Great. Thank you and then following up on a question you had a comment you made about a financial company.
Hiring thousands are you starting to see kind of green shoots of traditional business coming back where people are actually hiring again expanding in a traditional sense.
Speaker Change: Okay.
Sara E. Armbruster: Well, I'm not sure if I'm following the traditional sense, but I mean, we do, I mean, we, you know, again, we work with clients across, you know, every part of the world and, you know, every industry. And so I can't say that, universally, all of them are hiring, but there are, there are industries and their clients, and there are parts of the world where we still see them. We still see growth, you know, India as an example, certain sectors and certain clients where they are, they are growing, they're investing, they're adding to their workforce, and they are taking advantage of whatever the factors might be in their particular industry or market that allow them to capture that growth. So I think we continue to see that, you know, even in spite of some of the. The headwinds that also exist in certain places and parts of the world.
Speaker Change: Well I'm not sure if I am.
Speaker Change: I'm not sure I'm exactly following the traditional sense, but I mean, we do I mean, we you know again, we work with clients across every part of the world in every industry and so I can't say that universally all of them are hiring.
Speaker Change: But there are are there are industries and their clients and there are parts of the world, where we still see.
Speaker Change: We still see growth, India as an example, certain sectors and certain clients, where they are theyre growing theyre investing they're adding to their workforce and they are taking advantage of whatever the factors might be in their particular industry or market that allow them to to capture that growth. So.
Speaker Change: So I think we continue to see that.
EBIT in spite of some of that the headwinds that also exist in certain certain places in parts of the world.
Sara E. Armbruster: Great. Thank you. And last question, you called out education a couple of times in the press release and on the call. I'm wondering, are you seeing an uptick in education due to kind of previous federal stimulus dollars, or are these traditional state-led funding initiatives, and are you seeing strength in any particular regions? Thanks for taking my question. Sure.
Speaker Change: Alright. Thank you and last question is kind of education, a couple of times in the press release and on the call.
Speaker Change: Wondering are you seeing an uptick in education to do to kind of previous federal stimulus dollars or are these traditional state led.
Speaker Change: Funding initiatives.
Speaker Change: Are you seeing strength in the particular regions. Thanks for taking my questions.
Sara E. Armbruster: Sure, so first of all, yes, the stimulus spending or stimulus dollars in the U.S. have certainly had a noticeable impact on investment in education and investment in educational facilities. So we've seen that.
Speaker Change: Sure.
Speaker Change: First of all yes, the stimulus.
Speaker Change: Spending or stimulus dollars in the U S.
Has has certainly had a noticeable impact on investment in education and investment in educational facilities that we've seen that I think we continue to see that to some degree.
Sara E. Armbruster: I think we continue to see that to some degree, so that's certainly a driver of demand. But we also see, you know, certainly some state-led efforts in education as well. I was in Texas a couple months ago and had the opportunity to tour a couple of high schools and some public school districts that were, you know, just phenomenal examples of some of the, just as an example, some of the decisions that the state of Texas has made in terms of supporting and funding K-12 education.
Speaker Change: That's been a certainly a driver of demand.
Speaker Change: But we also see you know certainly some state led efforts in education as well I was in Texas, a couple of months ago and had the opportunity to two or a couple of high schools and some public school districts that were.
Speaker Change: Just phenomenal examples of some of the just as an example, some of the decisions that the state of Texas has made in terms of supporting a Sunday in case, your 12 education and I think we we see that as well and enjoy the benefit of that as well. So at least with respect to K 12, and then I think with higher education.
Sara E. Armbruster: And I think we see that as well and enjoy the benefit of that as well, so at least with respect to K-12. And then I think with higher education, you know, we continue to see what we've seen for some time, which is, I'll say maybe it's a war for talent, you know, universities are trying to continue to attract students, they're trying to attract world-class faculty, they're trying to attract, you know, research or other kinds of investment dollars, so we still see that playing out in terms of many universities and higher education institutions making investments in facilities.
Speaker Change: We continue to see what we've seen for some time, which is Oh I'll say, maybe it's a war for talent.
Speaker Change: Universities are trying to continue to track.
Speaker Change: Since they're trying to attract world class faculty, they're trying to attract a research or other kinds of investment dollars.
Speaker Change: So we still see that playing out in terms of.
Speaker Change: Many universities and her education institutions, making investments in facilities. So so I expect that we'll continue to see that going forward that seems to be a trend that we've.
Sara E. Armbruster: So I expect that we'll continue to see that, you know, going forward. That seems to be a trend that we've enjoyed the benefits of for some time, and I think that feels like it's..., going to be somewhat persistent, would be my guess.
Speaker Change: We've enjoyed the benefit of that for some time and I think that feels like that's going to be somewhat brief consent would be my guess.
Speaker Change: Great. Thank you again.
Operator: There are no further questions at this time. Ms. Armbruster, I turn the call back over to you.
Speaker Change: There are no further questions at this time.
Speaker Change: MS Armbruster, I'll turn the call back over to you.
Sara E. Armbruster: Great. Well, I just want to thank all of you for joining us this morning. As always, we appreciate your interest in Steelcase, and I hope you have a great day.
Sara E. Armbruster: Great well I just want to thank all of you for joining us. This morning as always we appreciate your interest in Steelcase and I Hope you have a great day.
Operator: This concludes today's conference call. We thank you for joining.
Operator: This concludes today's conference call. We thank you for joining us. You may now disconnect.
Speaker Change: This concludes today's conference call. We thank you for joining you may now disconnect.
Operator: You may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.