On December 19, 2023, Steelcase Inc (SCS, Financial) released its 8-K filing, announcing third-quarter fiscal 2024 results that showcased a mix of challenges and financial achievements. Despite a 6% decline in revenue to $777.9 million, the company reported a significant increase in net income to $30.8 million, or $0.26 per share, and adjusted earnings per share of $0.30, compared to $11.4 million, or $0.10 per share, and adjusted earnings per share of $0.20 in the prior year.
Financial Performance Overview
Steelcase Inc's revenue decrease was attributed to a lower backlog at the start of the third quarter, with a 5% decline in the Americas and a 7% decline in International. However, the company experienced robust order growth, with a 16% increase in the Americas and a 10% increase in International, primarily driven by large corporate customers and growth in the Asia Pacific region.
Operating income for the quarter stood at $43.8 million, marking a substantial improvement from the $20.5 million reported in the previous year. Adjusted operating income also saw an uptick, reaching $50.1 million. This increase was partly due to 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 land and other fixed assets.
Margin Improvements and Expense Management
Gross margin for the third quarter improved by 360 basis points to 32.4%, driven by higher pricing benefits and operational improvements. Operating expenses decreased slightly to $206.5 million, benefiting from the aforementioned decrease in the valuation of an acquisition earnout liability and gains on asset sales, which offset higher variable compensation expenses and unfavorable currency translation effects.
Steelcase Inc's total liquidity increased to $424.6 million, up by $110.1 million from the end of the second quarter, while total debt was reported at $446.1 million. The company's trailing four-quarter adjusted EBITDA of $264.2 million represented a 49% increase compared to the prior year.
Future Outlook and Dividend Announcement
Looking ahead, Steelcase Inc expects fourth-quarter fiscal 2024 revenue to range between $765 to $790 million, with projected earnings per share between $0.16 to $0.20 and adjusted earnings per share between $0.19 to $0.23. The company's backlog of customer orders at the end of the third quarter was approximately $699 million, 10% lower than the previous year. However, orders in the first three weeks of the fourth quarter grew by 7% compared to the prior year.
President and CEO Sara Armbruster expressed pride in the company's progress, stating,
We are proud of the progress we've been making in fiscal 2024 to improve our profitability which has supported the increase in our stock price this year,"and highlighted the company's strengthened liquidity and continued investment in growth strategies.
Furthermore, the Board of Directors declared a quarterly cash dividend of $0.10 per share, reinforcing the company's commitment to shareholder returns.
Segment Performance and Non-GAAP Measures
The Americas segment reported a 5% decrease in revenue, while the International segment saw a 7% decline. Operating income, however, improved in both segments, with the Americas posting $37.2 million and International $6.6 million.
Steelcase Inc also provided non-GAAP financial measures, including organic revenue growth (decline), adjusted operating income (loss), adjusted earnings per share, and adjusted EBITDA, to offer additional insights into its financial performance. These measures exclude the impact of certain items such as amortization of purchased intangible assets and restructuring costs, providing a clearer picture of the company's operational profitability.
In summary, Steelcase Inc's third-quarter fiscal 2024 results reflect a resilient performance amidst revenue challenges, with significant improvements in gross margin and operating income. The company's focus on operational efficiency and strategic growth initiatives positions it to navigate the evolving market landscape and continue delivering value to its shareholders.
Explore the complete 8-K earnings release (here) from Steelcase Inc for further details.
