INVESTOR PRESENTATION. Fourth Quarter, FY2018

Transcription

1 INVESTOR PRESENTATION Fourth Quarter, FY2018

2 WHO WE ARE Steelcase is the world s leading provider of office furniture

3 We believe we are positioned to grow in a changing market Our scale and track record of performance presents distinct, significant advantages. MARKET LEADER REVENUE & EBITDA GROWTH STRONG SHAREHOLDER RETURN 3

4 MARKET LEADER We are a respected leader Greatest global market share 11,000+ employees 800+ Steelcase dealer locations Recognized for innovative design, sustainability leadership and civic engagement A Fortune World s Most Admired Company for eleven years Multinational Finalist in the Circulars Awards presented by World Economic Forum for circular economy leadership UN Global Compact participant since 2009 Brody WorkLounge received nine design and innovation awards, including a Silver Award in the multi-industry Edison Awards 4

5 MARKET LEADER Our global capability makes us a preferred partner for leading organizations GLOBAL OFFICE FURNITURE MARKET SALES* ($ in billions) STEELCASE DEALER LOCATIONS $3.5 $3.0 $2.5 Outside Home Country Home Country Americas ~400 $2.0 $1.5 $1.0 EMEA ~350 $0.5 $0.0 Steelcase Herman Miller Haworth HNI** Knoll Kokuyo** Okamura** Asia ~50 *Most recently published annual data and/or internal estimates **Only office furniture segments included 5

6 MARKET LEADER We employ user-based research to drive innovation CREATE A ROBUST RESEARCH NETWORK DEVELOP INSIGHTS ON WORK, WORKERS AND THE WORKPLACE PROVIDE PRODUCTS, STRATEGIES AND CUSTOMER SOLUTIONS Select Research Partners IDEO Mayo Clinic CFI Oakridge National Lab Georgia Tech Manufacturing Institute Santa Fe Institute MIT Media Lab Intel Research University of Michigan Stanford University Harvard Graduate School of Education University of Delft Fraunhofer Institute Argonne National Laboratory University of Wisconsin-Madison SIX-STEP RESEARCH AND DESIGN PROCESS Steelcase solutions are based on a human-centered design approach that includes extensive observation and consultation with people who use spaces every day. 6

7 MARKET LEADER We serve leading organizations to create places that amplify the performance of people, teams and enterprise CORPORATE EDUCATION HEALTHCARE OFFICE CONSTRUCTION SPENDING EDUCATION CONSTRUCTION SPENDING HEALTHCARE CONSTRUCTION SPENDING % +3% % +5% % +4% Sources: U.S. Census Bureau (in US $,billions) American Institute of Architects forecast 7

8 WHY INVEST IN US Steelcase is poised for growth

9 REVENUE & EBITDA GROWTH We see opportunities for strong revenue growth as our core market faces major forces of change FORCES OF CHANGE RESULTING IN DIFFERENT APPLICATIONS Global teams Mobile technologies Past Present Future Collaborative nature of work Real estate compression Generational preferences Mix private offices, cubicles open, shared work areas Historically, a significant amount of office space was based on private offices and cubicles in the future, we expect the mix of open environments to increase. 9

10 REVENUE & EBITDA GROWTH Space is more important that ever as the war for talent increases and companies seek increased employee engagement U.S. LABOR FORCE EMPLOYEE ENGAGEMENT 23% 13% Nearing retirement Retirement New Recent entrants Entrants 11% Source: U.S. Bureau of Labor Statistics Nearing retirement - percentage of workforce age 55+ Recent entrants - percentage of workforce age Source: 2016 Steelcase Global Report 10

11 REVENUE & EBITDA GROWTH Our growth historically has been achieved through gross margin improvements in the Americas, and more recently we re making progress in EMEA 70% 60% 50% 40% 30% 20% 10% Americas Adjusted Gross Margin% Reported Revenue ($B) % 29% 29% 30% 31% 33% 34% 35% 35% 34% % 60% 50% 40% 30% 20% 10% EMEA Adjusted Gross Margin% Reported Revenue ($M) % 29% 29% 29% 27% 24% % 20% 26% 27% % FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18-0% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Constant Currency - MANUFACTURING CONSOLIDATION THIRD-PARTY SOURCING Million square feet, MSF* FY00 FY08 FY18 Past FY00 Present FY17 11

12 REVENUE & EBITDA GROWTH We are making progress in EMEA and much is in place that is expected to drive additional improvements EMEA GROSS MARGIN TARGET WHAT WE ARE SEEING: Improved economic and political sentiment in France and Germany 27% Cost reductions/ other initiatives Pricing Volume Low-to-Mid 30% range Stability in our operating performance leading to stronger day-to-day business Improvement in our pipeline of project activity compared to the prior year Continued benefits from cost reduction initiatives Customer traffic at our new Learning + Innovation Center in Munich FY18 Munich LINC Learning + Innovation Center Future target 12

13 REVENUE & EBITDA GROWTH We are increasing our focus towards growth to capture these opportunities as our industry changes PAST 10+ YEARS PRESENT growth initiatives growth initiatives business model optimization business model optimization 13

14 REVENUE & EBITDA GROWTH We are taking actions to capitalize on the opportunities In FY18, we have been focused on growth in tangible ways: Launched more new and enhanced products this year than we have in any of the last 5 years Simpler workstations Broader price points Residential design Innovative offerings Established partnerships with other companies to leverage our scale Acquired AMQ Solutions and continue to explore other potential acquisitions that advance our strategies Helping customers create a smart + connected workplace by offering a range of new technology solutions 14

15 REVENUE & EBITDA GROWTH Our investment in new and enhanced products has accelerated, and we have launched new product offerings that expand our addressable market SIMPLER WORKSTATIONS BROADER PRICE POINT RESIDENTIAL DESIGN INNOVATIVE OFFERINGS 15

16 REVENUE & EBITDA GROWTH We have established partnerships with other companies to increase the breadth of our product offering 16

17 REVENUE & EBITDA GROWTH Our smart + connected initiatives are expected to provide new opportunities with existing customers Steelcase is creating smart and connected workplaces for customers, using technology to fuel engagement and improve organizational performance. WORKPLACE ADVISOR SPACE ANALYTICS CREATIVE SPACES A cloud-enabled system that utilizes occupancy data and transforms it into actionable insights for a more effective workplace. An episodic workplace study empowering facility managers with easy-to-understand data, giving them the information they need to make the most of real estate. Together with Microsoft, Steelcase is creating an immersive ecosystem that brings together place and technology to help people generate new ideas and move them forward. 17

18 REVENUE & EBITDA GROWTH Our Asia Pacific performance is the result of a successful growth initiative and is indicative of our global strength Investments in China and India have driven the growth in Asia-Pacific, which is the largest portion of the Other category. OTHER CATEGORY Revenue ($ millions) $340 Revenue Adj. OI % Adjusted Operating Income (% of revenue) 6% $320 $300 $280 $260 $240 $220 5% 4% 3% 2% 1% $200 FY13 FY14 FY15 FY16 FY17 FY18 0% 18

19 REVENUE & EBITDA GROWTH Traditional market drivers of demand are strong 15% 10% 5% 0% -5% -10% -15% CORPORATE PROFITS AFTER-TAX (U.S.) With IVA and CCA adjustments (Year-over-Year % change) Q Q JOB GROWTH & UNEMPLOYMENT (U.S.) Total non-farm jobs (in thousands) 1000 Non-farm Payroll Growth Unemployment rate Q Unemployment Rate (%) 8% 7% 6% 5% 4% 3% 2% 1% 0% Q THE CONFERENCE BOARD MEASURE OF CEO CONFIDENCE (U.S.) Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 ARCHITECTURAL BILLING INDEX (U.S.) (Billings $ billions) NON-RESIDENTIAL FIXED INVESTMENT (U.S.) Equipment (In US$, billions) NORTH AMERICA BIFMA SALES (In US$, billions) $1,200 $1,000 $20 $16 $12 $8 $4 $0 Forecast Forecast EUROPE OFFICE FURNITURE CONSUMPTION 40 Jan 2013 Dec 2017 Sources: BEA, BLS, CEO Conference Board, AIA, BIFMA and CSIL $800 $600 Q Q (In US$, billions) $9 $6 $3 $

20 STRONG SHAREHOLDER RETURN We generate strong cash flows to fund growth investments and shareholder return MAINTAINING DISCIPLINED CASH MANAGEMENT Cash Flow From Operations and Adjusted EBITDA Margins ($ millions) $400 $300 $200 Cash Flow From Operations Adjusted EBITDA Margin 14% 12% 10% 8% Capital Expenditures vs. Depreciation and Amortization ($ millions) $300 $200 Capital Expenditures D&A $100 6% $100 $0 -$100 FY01 FY18 4% 2% 0% $0 FY01 $18 $14 $13 $10 $20 $26 Payments Included for Replacement Corporate Aircraft FY18 Quarterly Dividends Paid Per Share* $0.16 $0.12 FY18 divided yield >3% Dividends* and Share Repurchases ($ millions) $300 Dividends Repurchases $0.08 $200 $0.04 $100 $0.00 Q1 FY01 Q4 FY18 $0 FY01 FY18 * Excludes special cash dividend of $1.75/share paid January

21 STRONG SHAREHOLDER RETURN We have a proven record of managing well through economic cycles Adjusted Operating Income Margin (% of revenue) 12% $4.0B Adjusted Operating Income % Revenue ($ Billion) $4.2 10% Revenue $3.4B $3.7 8% 7.6% $3.1B $3.2 6% 6.5% 5.1% $2.7 4% $2.3B $2.3B $2.2 $1.7 2% $1.2 0% $0.7-2% $0.2-4% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 -$0.3 21

22 STRONG SHAREHOLDER RETURN Our strong balance sheet provides flexibility through cycles FY18, $ MILLION PRIORITIES FOR CASH $1,200 Business reinvestment $1,000 $800 $600 $400 Credit Facility COLI Equity Acquisitions Dividends Share repurchases $200 Cash Debt $0 Liquidity Profile Capital Base 22

23 LEARN MORE Appendix

24 Forward looking statements From time to time, in written and oral statements, we discuss our expectations regarding future events and our plans and objectives for future operations. These forward-looking statements discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to us, based on current beliefs of management as well as assumptions made by, and information currently available to, us. Forward-looking statements generally are accompanied by words such as anticipate, believe, could, estimate, expect, forecast, intend, may, possible, potential, predict, project or other similar words, phrases or expressions. Although we believe these forward-looking statements are reasonable, they are based upon a number of assumptions concerning future conditions, any or all of which may ultimately prove to be inaccurate. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to vary from our expectations because of factors such as, but not limited to, competitive and general economic conditions domestically and internationally; acts of terrorism, war, governmental action, natural disasters and other Force Majeure events; changes in the legal and regulatory environment; changes in raw materials and commodity costs; currency fluctuations; changes in customer demand; and the other risks and contingencies detailed in our most recent Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. We undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise. 24

25 FY19 Targets (as of March 21, 2018) Americas EMEA Other Inc Organic revenue (growth % vs FY18) Mid single digit growth % (> market); Q1 FY18 - $20M from large project Mid single digit growth % Mid-to-high single digit growth % Mid single digit growth % Gross margin % Stable to improving vs. FY18; Progress toward low-to-mid 30% longer-term goal Volume and cost reduction benefits; inflationary pressure net of potential pricing Relatively stable to FY18 Improvement over FY18 Operating expense $ Spending stabilizing at Q4 FY18 run-rate (excluding variable costs) Relatively flat to FY18 in constant currency Reinvesting a portion of incremental contribution margin Improved leverage as a percentage of revenue Operating income (OI) Volume growth driving towards 10% OI margin longer-term goal 1 st Half: $10-15M loss 2 nd Half: profitable Adjusted to exclude a $4M property gain and stated in constant currency: FY18 1 st half: $17M loss FY18 2 nd half: $2M loss Mid single digit OI margin Interest expense, net ~$4M per quarter Other income, net ~$2M per quarter (excluding foreign exchange gain/loss) Effective tax rate ~27% Adjusted EPS (growth % vs FY18) More than 2X rate of revenue growth

26 Segment revenue and earnings AMERICAS REVENUE (US$ millions) EMEA REVENUE (US$ millions) OTHER CATEGORY REVENUE (US$ millions) $2,154 $2,181 $2,256 $2,232 $2,194 $567 $595 $521 $504 $524 $268 $284 $283 $297 $338 FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 AMERICAS ADJUSTED OPERATING INCOME MARGIN (Percent of Revenue) EMEA ADJUSTED OPERATING INCOME MARGIN (Percent of Revenue) OTHER CATEGORY ADJUSTED OPERATING INCOME MARGIN (Percent of Revenue) 11.5% 11.4% 11.7% 11.1% 8.5% 1.7% 1.7% 4.0% 4.4% 5.4% FY14 FY15 FY16 FY17 FY18 3.7% 2.7% 4.8% 5.4% 8.5% FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 26

27 Select segment statistics AMERICAS EMEA OTHER CATEGORY Number of Steelcase dealer locations ~ 400 ~ 350 ~ 50 Employees non-manufacturing ~2,700 ~ 1,100 ~ 900 Employees manufacturing ~ 5,100 ~ 1,000 ~ 900 Number of primary manufacturing locations Michigan 2 Alabama 1 Mexico 2 France 1 Germany 1 Spain 1 Czech Republic 1 China 1 Malaysia 1 India 1 FY18 VERTICALS IN THE AMERICAS SEGMENT FY18 PRODUCT MIX FY18 LONG-TERM EMPLOYEE BENEFIT OBLIGATIONS FUNDING STATUS ($ millions) 24% Other Total Obligation $146 30% Seating Deferred Tax Asset Health Care Financial Services Education Manufacturing Insurance Services Information Technolo Technical/Profession Federal Government Energy State/Prov/Local Gov Other 46% Product Mix Systems/ Storage $172 Assets (COLI) $95 Liabilities After-tax Obligation * No vertical represented more than 13% of Americas revenue 27

28 Historical shares outstanding Shares (in millions) Class A Shares Class B Shares FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 28

29 Historical market data ESTIMATED U.S. OFFICE FURNITURE SHIPMENTS* (USD millions) $14 $12 $10 $8 $6 $4 $2 $ EUROPEAN OFFICE FURNITURE CONSUMPTION** (EUR millions) $14 $12 $10 $8 $6 $4 $2 $ Sources: * : BIFMA; : internal Steelcase estimates **CSIL 29

30 Non-GAAP financial measures This presentation contains certain non-gaap financial measures. A non-gaap financial measure is defined as a numerical measure of a company s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of the company. Pursuant to the requirements of Regulation G, the company has provided a reconciliation of non-gaap financial measures to the most directly comparable GAAP financial measure. ADJUSTED OPERATING INCOME MARGIN (Percent of Revenue) The non-gaap financial measures used within this presentation are: (1) adjusted operating income (loss) margin, which represents operating income (loss) margin, excluding restructuring costs and goodwill and intangible asset impairment charges, (2) adjusted Earnings Before Interest Taxes and Depreciation and Amortization (EBITDA) Margin, which represents EBITDA, excluding restructuring costs and goodwill and intangible asset impairment charges, and (3) adjusted gross margin, which represents gross margin, excluding restructuring costs (benefits). These measures are presented because management uses this information to monitor and evaluate financial results and trends. Therefore, management believes this information is also useful for investors. FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Operating Income (Loss) Margin as Reported 7.6% 0.5% (2.4%) (3.2%) 0.7% 2.9% 3.7% 5.9% 0.0% (0.5%) 2.1% 3.5% 2.1% 5.6% 4.8% 5.7% 6.6% 5.1% Restructuring Costs - 1.7% 2.4% 2.3% 0.5% 1.3% 0.8% - 1.2% 1.5% 1.3% 1.1% 1.2% 0.2% 1.3% 0.7% 0.2% - Goodwill and intangible asset impairment charges % 0.6% 2.0% % 0.4% Adjusted Operating Income (Loss) Margin 7.6% 2.1% 0.0% (0.9%) 1.2% 4.2% 4.8% 6.5% 3.2% 1.0% 3.4% 4.6% 5.4% 6.2% 6.1% 6.4% 6.8% 5.1% 30

31 Non-GAAP financial measures AMERICAS ADJUSTED GROSS MARGIN (Percent of Revenue) FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Gross Margin as Reported 26.4% 27.9% 28.7% 29.2% 30.6% 33.2% 34.0% 34.6% 34.8% 33.9% Restructuring Costs (Benefits) 1.2% 0.6% 0.4% 1.1% 0.7% - (0.5%) 0.1% 0.1% - Adjusted Gross Margin 27.6% 28.5% 29.1% 30.3% 31.3% 33.2% 33.5% 34.7% 34.9% 33.9% AMERICAS ADJUSTED OPERATING INCOME MARGIN (Percent of Revenue) FY14 FY15 FY16 FY17 FY18 Operating Income (Loss) Margin as Reported 11.4% 11.9% 11.7% 11.0% 8.5% Restructuring Costs (Benefits) 0.1% (0.5%) - 0.1% - Goodwill and intangible asset impairment charges Adjusted Operating Income (Loss) Margin 11.5% 11.4% 11.7% 11.1% 8.5% 31

32 Non-GAAP financial measures EMEA ADJUSTED GROSS MARGIN (Percent of Revenue) FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Gross Margin as Reported 32.0% 27.0% 25.2% 28.3% 26.8% 24.8% 13.9% 17.9% 26.1% 27.1% Restructuring Costs (Benefits) - 1.9% 3.4% 0.8% 0.2% (0.6%) 8.0% 2.1% 0.3% - Adjusted Gross Margin 32.0% 28.9% 28.6% 29.1% 27.0% 24.2% 21.9% 20.0% 26.4% 27.1% EMEA ADJUSTED OPERATING INCOME MARGIN (Percent of Revenue) FY14 FY15 FY16 FY17 FY18 Operating Income (Loss) Margin as Reported (5.6%) (13.9%) (12.4%) (4.1%) (2.7%) Restructuring Costs 0.8% 8.5% 3.9% 0.4% - Goodwill and intangible asset impairment charges Adjusted Operating Income (Loss) Margin (4.8%) (5.4%) (8.5%) (3.7%) (2.7%) 32

33 Non-GAAP financial measures OTHER CATEGORY ADJUSTED OPERATING INCOME MARGIN (Percent of Revenue) FY13 FY14 FY15 FY16 FY17 FY18 Operating Income (Loss) Margin as Reported (7.8%) (3.2%) 1.7% 4.0% 4.4% 5.4% Restructuring Costs 0.4% 0.1% Goodwill and intangible asset impairment charges 9.6% 4.8% Adjusted Operating Income (Loss) Margin 2.2% 1.7% 1.7% 4.0% 4.4% 5.4% 33

34 Non-GAAP financial measures ADJUSTED EBITDA MARGIN $ Million FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Revenue $3,989 $3,038 $2,530 $2,346 $2,614 $2,869 $3,097 $3,421 $3,184 $2,292 $2,437 $2,750 $2,869 $2,989 $3,060 $3,060 $3,032 $3,055 Income before income tax expense $301 ($5) ($67) ($93) $5 $76 $125 $211 ($9) ($31) $51 $82 $55 $147 $137 $175 $196 $162 Interest Expense $18 $21 $21 $19 $21 $18 $19 $17 $17 $18 $19 $26 $18 $18 $18 $18 $17 $18 Depreciation and amortization $163 $172 $157 $141 $128 $119 $101 $92 $87 $74 $64 $56 $58 $60 $60 $66 $60 $66 Restructuring costs - $50 $61 $54 $13 $39 $24 - $38 $35 $31 $31 $35 $7 $41 $20 $5 - Goodwill and intangible asset impairment charges $11 $21 $ $4 $60 $ Adjusted EBITDA $482 $238 $173 $121 $167 $253 $279 $341 $199 $96 $166 $199 $226 $245 $256 $278 $279 $245 Adjusted EBITDA Margin (% of Revenue) 12.1% 7.8% 6.8% 5.1% 6.4% 8.8% 9.0% 10.0% 6.2% 4.2% 6.8% 7.2% 7.9% 8.2% 8.4% 9.1% 9.2% 8.0% 34

35 2018 Steelcase Inc. Trademarks used herein are the property of Steelcase Inc. or of their respective owners.