Investor Presentation - FY2021 Second Quarter 1 - Steelcase
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investor
Presentation
FY2021 Second Quarter
1
Steelcase Q2, 2021
Investment thesis
Proven track record
We believe the office will continue to be
very relevant
Liquidity position is very strong
Industry leader in a changing workplace
environment
Experienced management team led
company through previous cycles
2
Steelcase Q2, 2021
We are a respected leader
— Greatest global market share
— $3.7 billion revenue in FY2020
— $358 million adjusted EBITDA in FY2020
— 1.4x total debt/adjusted EBITDA (FY2020 year-end)
— ~12,700 employees
— ~800 Steelcase dealer locations
— Recognized for innovative design, sustainability leadership and civic engagement
— Named one of the World’s Most Admired Companies by Fortune for fourteen years
— Multinational Finalist in the Circulars Awards – presented by World Economic Forum for circular economy leadership
— UN Global Compact participant since 2009, member of the CE 100
— SILQ™ received multiple design and innovation awards, including a Product Design Award in the prestigious Red Dot Awards
— 100% Corporate Equality Index by the Human Rights Campaign Foundation
— 2019 Breakfast of Corporate Champions Honored Company by the Women’s Forum on New York
3
Steelcase Q2, 2021
We have a proven track record of managing through a cycle
Adjusted Operating
Income (Million) Revenue (Billion)
$300 $3.7B $4.0
$3.4B
$3.5
$250
$3.0B
$3.0
$200
$2.3B $2.5
$150 $2.0
$1.5
$100
$1.0
$50
$0.5
$0 $-
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 TFQ
Adjusted Operating Income ($ Million) Revenue ($ Billion)
4
Steelcase Q2, 2021
Our global capability makes us a preferred partner for leading organizations
~800 Steelcase dealer
locations
45 Primary locations
in 17 countries
15 Manufacturing
locations, including
9 outside North America
5
Steelcase Q2, 2021
Our global scale makes us a preferred partner for leading organizations
GLOBAL OFFICE FURNITURE MARKET REVENUE* ($ IN BILLIONS)
$4.0
Home Country
Other $3.5 Outside Home Country
Category
10% $3.0
$2.5
EMEA
18%
$2.0
$1.5
Americas $1.0
72%
$0.5
$-
Steelcase Herman Miller Haworth HNI** Knoll Kokuyo** Okamura**
*Most recently published annual data and/or internal estimates
**Only office furniture segments included
6
Steelcase Q2, 2021
We employ user-based research to drive innovation
Develop insights on work, Provide products, strategies
Create a robust research network
workers and the workplace and customer solutions
Select Research Partners
— Georgia Tech Manufacturing Institute
— IDEO
— Institute for the Future
— MaRS
— Michigan State University
— Microsoft (Research + Global Real Estate Six-step research
& Security + Envisioning Group) and design process
— MIT (Media Lab + Self-Assembly Lab)
— Ohio State University
— Seamless
— Tableau
— University Florida Health
— University of Illinois at Chicago- Institute
for Healthcare Delivery Design
— University of Melbourne
Steelcase solutions are based on a
— University of Michigan
human-centered design approach that
— University of Nuremberg-Erlangen
includes extensive observation and
MaDLab
consultation with people who use
— Virginia Tech
spaces every day.
7
Steelcase Q2, 2021
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
77 85 46
68 69 92 97 101 105 43 43
56 85
40 41
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Source: U.S. Census Bureau (in US $,billions) 8
Steelcase Q2, 2021
Sustainability is a lens for innovation and growth contributing
to the financial wellbeing of our company
We deliver meaningful economic, environmental and social impact.
Our Corporate Values
Carbon Neutral Now. Carbon Negative Next. We believe every team
Steelcase is now carbon neutral and we plan to become member, in every location,
carbon negative by 2030 — decades ahead of the Paris lives our shared Steelcase
Agreement mandate values.
34% 83% Act with integrity
Reduction in greenhouse Decrease in Volatile Organic Tell the truth
gas emissions since 2010 Compounds (VOCs) air Keep commitments
emissions since 2010
Excel
Treat people with dignity
36% Six times and respect
Reduction in waste to Steelcase received perfect Promote positive
landfill since 2010 levels score of 100 points on the relationships
Corporate Equality Index
Protect the environment
Source: Steelcase 2020 Impact Report
9
Steelcase Q2, 2021
Our diverse, experienced Board of Directors serve to promote our growth and success
Lawrence J. Blanford Timothy C.E. Brown Connie K. Duckworth James P. Keane Todd P. Kelsey Jennifer C. Niemann
Retired; formerly Executive Chair, IDEO Retired; formerly Partner President and Chief President and Chief Executive President and Chief
President and Chief and Managing Director, Executive Officer, Plexus Corp. Executive Officer,
Executive Officer, Green Goldman, Sachs & Co. Officer, Steelcase Inc. Forward Space, LLC
Mountain Coffee
Roasters, Inc.
Robert C. Pew III Cathy D. Ross Catherine C.B. Schmelter Peter M. Wege II Linda K. Williams Kate Pew Wolters
Chair of the Board of Retired; formerly Executive SVP, Chief Transformation Chairman of the Board of Chief Audit Executive and Philanthropist; President, Kate
Directors, Steelcase Inc.; Vice President and Chief Officer, TreeHouse Foods, Inc. Directors, Contract VP, Enterprise Risk and Richard Wolters
Private Investor Financial Officer, Federal Pharmaceuticals Limited Management, Hewlett Foundation; Chair, Steelcase
Express Corporation Packard Enterprise Foundation
10Steelcase Q2, 2021
U.S. industry macro-factors had been supportive of growth before
the COVID-19 pandemic
CORPORATE PROFITS AFTER-TAX (U.S.) UNEMPLOYMENT (U.S.) THE CONFERENCE BOARD
With IVA and CCA adjustments Unemployment Rate (%) MEASURE OF CEO CONFIDENCE (U.S.)
(Year-over-Year % change)
15% 80
10%
0% 10% 60
-10% 40
5%
-20% 20
0% 0
-30%
Q1 2015 Q2 2020 Jan 2015 Aug 2020
Jan 2015 Jul 2020
NON-RESIDENTIAL FIXED INVESTMENT (U.S.) ARCHITECTURAL BILLING INDEX (U.S.)
Equipment (In US$, billions) (Billings $ billions)
60
1,300
1,250 50
1,200
40
1,150
1,100 30
1,050 20
1,000
Q1 2015 Q2 2020 Jan 2015 Jul 2020
11
Sources: BEA, BLS, CEO Conference Board, AIASteelcase Q2, 2021
EMEA industry macro-factors had been supportive of growth before the
COVID-19 pandemic
GERMANY REAL GDP GROWTH FRANCE REAL GDP GROWTH UK REAL GDP GROWTH SPAIN REAL GDP GROWTH
5% 5% 5% 5%
0% 0% 0% 0%
-5% -5% -5% -5%
-10% -10% -10% -10%
-15% -15%
Update -15% -15%
-20% -20% -20% -20%
-25% -25% -25% -25%
Q1 2015 Q2 2020 Q1 2015 Q2 2020 Q1 2015 Q2 2020 Q1 2015 Q2 2020
HARMONIZED UNEMPLOYMENT RATE OIL PRICE PER BARREL (BRENT INDEX)
(seasonally adjusted)
25%
$100
20%
$80
Spain
15% $60
Italy
10% $40
Eurozone
France
5%
Germany
$20
0% $-
Jan 2015 Jul 2020 Jan 2015 Sept 2020
12
Sources: Eurostat Energy Information AdministrationSteelcase Q2, 2021
Companies may continue to prioritize work environments
in order to support returning to the office
What strategies are you using to
C-suite engagement places higher emphasis on performance
attract + retain talent?
Modernizing working environment
44% 42% 6% 86% Performance
(could now Favors
Decision criteria
Learning & development programs SCS value
include safety)
proposition
42% 43% 85%
Improving compensation packages
26% 53% 79%
Implementing flexible ways of working More
35% 42% 75% Aesthetic/price/ historical
functionality
Changing employee dress code
19% 33% 52%
Facilities & C-Suite
To a large extent To some extent Procurement
Decision Maker
PwC 21st CEO Survey, Talent 2018
13Steelcase Q2, 2021
Extreme work from home (WFH) strategies are not viable
Productivity Collaboration Wellbeing
Productivity decreased by: Collaboration decreased by: Wellbeing decreased by:
Lower employee engagement Less time spent working with Non-ergonomic home
others workspaces
Lack of proximity and social
accountability Unnatural conversation flow Longer workdays
during virtual meetings
Suboptimal home offices Feeling socially isolated
Lack of serendipitous
interactions
14
Sources: Steelcase COVID-19 Global Study, April 2020, Gensler’s U.S. Work from Home Survey 2020Steelcase Q2, 2021
Offices of the future will require changes to meet emerging needs
Leaders plan to add physical separation of 6 feet
workspaces and install physical barriers between
workstations
Leaders indicate increased demand for…
Modular, flexible furniture
Antiviral surfaces
Collaboration rooms to support distributed workers
Workplaces must become part of an ecosystem of
places as more organizations consider satellite
office locations and WFH policies
15
Sources: Steelcase COVID-19 Global Study, April 2020, McKinsey & Company: How US Companies Are Planning for a Safe Return to the Workplace, June 2020Steelcase Q2, 2021
The conversation around the outlook for the physical office is changing
Morgan Stanley CEO Sees a At JP Morgan traders
Facebook will buy
Future for the Bank With return to office
‘Much Less Real Estate’ REI’s unused
Bellevue HQ
Half of Facebook workers Amazon invests $1.4B
into new offices in U.S.
could work remotely within
tech hubs
10 years
At JP Morgan, productivity
Twitter makes WFH falls for staff working at
a permanent change home
for some employees
Early COVID More recent
16
Sources: Bloomberg, Wall Street JournalSteelcase Q2, 2021
Our investment in new and enhanced products accelerated in the last three years,
and we launched new product offerings that expanded our addressable market
Simpler Broader price Ancillary / Informal Innovative
workstations points spaces offerings
17Steelcase Q2, 2021
We established partnerships with other companies to increase
the breadth of our product offering
18Steelcase Q2, 2021
We invested over $300 million to enhance our offering through acquisitions
Broaden Strong,
Growth Channel
Addressable Stable
Model Leverage
Market Management
Revenue: ~£69 million* ~$82 million* ~$37 million*
Acquisition Date: August 2018 May 2018 November 2017
19Steelcase Q2, 2021
We have generated strong cash flows to fund growth
investments and shareholder return
CASH FLOW FROM OPERATIONS AND ADJUSTED EBITDA CAPITAL EXPENDITURES VS. DEPRECIATION AND AMORTIZATION
MARGINS ($ MILLIONS)
($ MILLIONS)
Cash Flow From Operations
$400 Adjusted EBITDA Margin 10% Capital Expenditures D&A
$100
8%
$300
6%
$200
4%
$100
2%
$0
*
$0 0% FY16 FY17 FY18 FY19 FY20 TFQ
FY16 FY17 FY18 FY19 FY20 TFQ
* Includes $26 for Replacement Corporate Aircraft
QUARTERLY DIVIDENDS PAID PER SHARE DIVIDENDS AND SHARE REPURCHASES
($ MILLIONS)
$0.16 Dividends
Repurchases
$0.12
$100
$0.08
$0.04
$0.00
Q1 Q2 $0
FY21 FY16 FY17 FY18 FY19 FY20 TFQ
FY16
20Steelcase Q2, 2021
Our investments in the business generated strong return on invested capital before
impact of pandemic in most recent two quarters
ADJUSTED RETURN ON INVESTED CAPITAL (ROIC) & ADJUSTED EBITDA ($M)
(% Adjusted Net Income of Average Capital)
ROIC Adj EBITDA
16.0% $400
14.3%
13.8%
14.0% 13.3% $350
12.0% 11.9%
12.0% $300
10.9%
10.0% $250
8.0% $200
6.0% $150
4.0% $100
2.0% $50
0.0% $0
FY16 FY17 FY18 FY19 FY20 TFQ
21Steelcase Q2, 2021
Our balance sheet remained strong in Q2 and provides stability
through business cycles
Q2 FY21, $ MILLION
Credit facility covenant information
$1,500 (1) maximum leverage ratio covenant, which is measured by the ratio
of indebtedness less liquidity to trailing four quarter adjusted
EBITDA (as defined in the credit agreement) and is required to be
less than 3:5:1
Cash
$1,000
Equity (2) minimum interest coverage ratio covenant, which is measured by
Credit
the ratio of trailing four quarter adjusted EBITDA (as defined in the
Facility
credit agreement) to trailing four quarter interest expense and is
COLI required to be no less than 3:0:1.
$500
Cash Debt
As of August 28, 2020, we were in compliance with all covenants
under the facility.
$0
Liquidity Profile Capital Base
22Appendix
Learn more
23Appendix
Forward-looking statements
From time to time, in written and oral statements, we uncertainties that could cause actual results to vary from
discuss our expectations regarding future events and our expectations because of factors such as, but not limited
our plans and objectives for future operations. to, competitive and general economic conditions
domestically and internationally; acts of terrorism, war,
These forward-looking statements discuss goals, intentions governmental action, natural disasters, pandemics, and
and expectations as to future trends, plans, events, results other Force Majeure events; the COVID-19 pandemic and
of operations or financial condition, or state other the actions taken by various governments and third parties
information relating to us, based on current beliefs of to combat the pandemic; changes in the legal and
management as well as assumptions made by, and regulatory environment; changes in raw material,
information currently available to, us. Forward-looking commodity and other input costs; currency fluctuations;
statements generally are accompanied by words such as changes in customer demand; and the other risks and
“anticipate,” “believe,” “could,” “estimate,” “expect,” contingencies detailed in our most recent Annual Report on
“forecast,” “intend,” “may,” “possible,” “potential,” “predict,” Form 10-K and our other filings with the Securities and
“project,” “target” or other similar words, phrases or Exchange Commission. We undertake no obligation to
expressions. Although we believe these forward-looking update, amend or clarify forward-looking statements,
statements are reasonable, they are based upon a number whether as a result of new information, future events or
of assumptions concerning future conditions, any or all of otherwise.
which may ultimately prove to be inaccurate.
Forward-looking statements involve a number of risks and
24Appendix
Segment revenue and earnings
AMERICAS – REVENUE EMEA – REVENUE OTHER CATEGORY – REVENUE
(US$ millions) (US$ millions) (US$ millions)
$2,673
$2,470
$2,256 $2,232 $2,194 $2,322 $670
$617 $580
$521 $524 $356 $381
$504 $338
$283 $297 $301
FY16 FY17 FY18 FY19 FY20 TFQ FY16 FY17 FY18 FY19 FY20 TFQ FY16 FY17 FY18 FY19 FY20 TFQ
AMERICAS – ADJUSTED OPERATING INCOME EMEA – ADJUSTED OPERATING INCOME (LOSS) OTHER CATEGORY –OPERATING INCOME MARGIN
MARGIN * MARGIN * (Percent of Revenue)
(Percent of Revenue) (Percent of Revenue)
11.4% 10.8% 1.5% 10.3%
8.2% 8.5% 9.0% 8.8% 9.2%
6.3%
4.0% 4.7% 4.0%
-1.1% -1.7%
-3.7% -2.7%
-8.5%
FY16 FY17 FY18 FY19 FY20 TFQ FY16 FY17 FY18 FY19 FY20 TFQ FY16 FY17 FY18 FY19 FY20** TFQ **
* Operating income restated due to implementation of ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715). Please see Q1 FY19 10-Q for more information.
** Q4 FY20 included a ~$21M gain on the sale of PolyVision in the Other Category 25Appendix
Select segment statistics (as of February 28, 2020)
END OF FISCAL YEAR 2020 AMERICAS EMEA OTHER CATEGORY
Number of Steelcase dealer locations ~ 400 ~ 350 ~ 50
Employees – non-manufacturing ~2,900 ~ 1,400 ~ 800
Employees – manufacturing ~ 5,500 ~ 1,300 ~ 800
Number of primary manufacturing locations Michigan – 2 France – 1 China – 1
Alabama – 1 Germany – 1 Malaysia – 1
Mexico – 2 Spain – 1 India – 1
Texas – 1 Czech Republic – 1
U.K. – 2
FY20 VERTICALS IN THE AMERICAS SEGMENT
15%
FY20 PRODUCT MIX FY20 LONG-TERM EMPLOYEE BENEFIT
10% OBLIGATIONS FUNDING STATUS
($ millions)
5%
Total Obligation $152
25% Other
0%
DTA
Education
Manufacturing
Government
Other
Insurance Services
Professional
State/Prov/Local
Financial Services
Healthcare
Information
Energy
Technology
Technical /
30% Seating
Federal
Gov
$160
$111
45% Systems/ After-tax
Storage Obligation
Product Mix Assets (COLI) Liabilities
26Appendix
Historic shares outstanding
SHARES (IN MILLIONS)
180
160 Class A Shares Class B Shares
140
120
100
26.7
80
88.1
60
40
14.1 139.2
20
0
FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Q2
FY21
27Appendix
Historical market data
ESTIMATED U.S. OFFICE FURNITURE SHIPMENTS*
(USD billions)
$20
$15
$10
$5
$-
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EUROPEAN OFFICE FURNITURE CONSUMPTION**
(EUR billions)
€ 14
€ 12
€ 10
€8
€6
€4
€2
€0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
28
Sources: 1997-2015: internal Steelcase estimates, 2015-2018: BIFMA, CSILAppendix
Non-GAAP financial measures
This presentation contains certain non-GAAP financial measures. A “non- (3) adjusted Earnings Before Interest Taxes and Depreciation and Amortization
GAAP financial measure” is defined as a numerical measure of a company’s (EBITDA), which represents EBITDA, excluding restructuring and goodwill and
financial performance that excludes or includes amounts so as to be different intangible asset impairment charges, (4) adjusted Earnings Before Interest Taxes
than the most directly comparable measure calculated and presented in
and Depreciation and Amortization (EBITDA) margin, which represents adjusted
accordance with GAAP in the statement of income, balance sheet or
statement of cash flows of the company. Pursuant to the requirements of EBITDA as a percentage of revenue, (5) total debt to adjusted EBITDA ratio, which
Regulation G, the company has provided a reconciliation of non-GAAP represents total debt divided by adjusted EBITDA and (6) adjusted return on
financial measures to the most directly comparable GAAP financial measure. invested capital (ROIC), which represents income before income tax expense,
The non-GAAP financial measures used within this presentation are: (1) excluding interest expense, restructuring costs and goodwill and intangible asset
adjusted operating income (loss), which represents operating income (loss), impairment charges, less income tax expense at an assumed long-term effective tax
excluding restructuring costs and goodwill and intangible asset impairment rate, divided by average capital (defined as the average of total debt and
charges, (2) adjusted operating income (loss) margin, which represents shareholders’ equity at the beginning and end of the applicable period). These
operating income (loss) margin, excluding restructuring costs and goodwill measures are presented because management uses this information to monitor and
and intangible asset impairment charges,
evaluate financial results and trends. Therefore, management believes this
information is also useful for investors.
ADJUSTED OPERATING INCOME
$ Million FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 TFQ
Operating Income/(Loss)
$203 $1 ($12) $52 $97 $59 $166 $137 $170 $196 $155 $184 $257 $180
as Restated*
Restructuring Costs - $38 $35 $31 $31 $35 $7 $41 $20 $5 - - - $16
Goodwill and intangible
$21 $65 - - - $60 $13 - - - - - - $18
asset impairment charges
Adjusted Operating Income $225 $107 $27 $83 $124 $151 $180 $178 $190 $201 $155 $184 $257 $213
* Operating income restated due to implementation of ASU No. 2017-07, Compensation
- Retirement Benefits (Topic 715). Please see Q1 FY19 10-Q for more information.
29Appendix
Non-GAAP financial measures
AMERICAS ADJUSTED OPERATING INCOME MARGIN *
(Percent of Revenue)
FY16 FY17 FY18 FY19 FY20 TFQ
Operating Income
11.4% 10.7% 8.2% 8.5% 9.0% 8.1%
Margin as Restated *
Restructuring Costs
- 0.1% - - - 0.7%
(Benefits)
Adjusted Operating Income
11.4% 10.8% 8.2% 8.5% 9.0% 8.8%
Margin
* Operating income restated due to implementation of ASU No. 2017-07, Compensation
- Retirement Benefits (Topic 715). Please see Q1 FY19 10-Q for more information.
30Appendix
Non-GAAP financial measures
EMEA ADJUSTED OPERATING INCOME (LOSS) MARGIN *
(Percent of Revenue)
FY16 FY17 FY18 FY19 FY20 TFQ
Operating Income (Loss)
(12.4%) (4.1%) (2.7%) (1.1%) 1.5% (5.6%)
Margin as Restated *
Goodwill and intangible asset
- - - - - 3.9%
impairment charges
Restructuring Costs 3.9% 0.4% - - - -
Adjusted Operating Income
(8.5%) (3.7%) (2.7%) (1.1%) 1.5% (1.7)%
(Loss) Margin
* Operating income restated due to implementation of ASU No. 2017-07,
Compensation - Retirement Benefits (Topic 715). Please see Q1 FY19 10-Q for
more information.
31Appendix
Non-GAAP financial measures
ADJUSTED EBITDA MARGIN and TOTAL DEBT / ADJUSTED EBITDA
$ Million FY16 FY17 FY18 FY19 FY20 TFQ
Revenue $3,060 $3,032 $3,055 $3,443 $3,724 $3,203
Income before income
$175 $196 $162 $164 $245 $167
tax expense
Interest Expense $18 $17 $18 $38 $27 $28
Depreciation and amortization $66 $60 $66 $82 $86 $88
Restructuring costs $20 $5 - - - $16
Goodwill and intangible asset impairment charges - - - - - $18
Adjusted EBITDA $278 $279 $245 $283 $358 $316
Adjusted EBITDA Margin 9.1% 9.2% 8.0% 8.2% 9.6% 9.9%
(% of Revenue)
Total Debt $299 $297 $295 $487 $484 $483
Total Debt / Adjusted EBITDA 1.1 1.1 1.2 1.7 1.4 1.5
32Appendix
Non-GAAP financial measures
ADJUSTED RETURN ON INVESTED CAPITAL (ROIC)
$ Million FY16 FY17 FY18 FY19 FY20 TFQ
Income before income tax expense $175 $196 $162 $164 $245 $167
Interest Expense $18 $17 $18 $38 $27 $28
Restructuring costs $20 $5 - - - $16
Goodwill and intangible asset impairment charges - - - - - $18
Adjusted Income before income tax expense $213 $218 $180 $201 $273 $229
(1)
Assumed Long-Term Effective Income Tax Rate % 36.0% 36.0% 34.5% 27.0% 27.0% 27.0%
Adjusted Net Income $136 $140 $118 $147 $199 $167
Total Debt $299 $297 $295 $487 $484 $483
Total shareholders’ equity $737 $767 $813 $850 $970 $948
Total Capital $1,036 $1,064 $1,108 $1,337 $1,455 $1,431
Prior Year Total Capital $946 $1,036 $1,064 $1,108 $1,337 $1,374
Average Capital $991 $1,050 $1,086 $1,223 $1,396 $1,403
Adjusted Return on Invested Capital (ROIC)
13.8% 13.3% 10.9% 12.0% 14.3% 11.9%
(Adjusted Net Income as a % of Average Capital)
(1) Assumes 10 months at 36% and 2 months at 27% as after U.S. Tax Reform
33© 2020 Steelcase Inc. Trademarks used herein are the property of Steelcase Inc. or of their respective owners. 34
You can also read
