1Q22 Signals Improvement; Guidance Indicates Continuing Gains Ahead



KEY POINTS
  • Steelcase reported 1Q22 (its first fiscal quarter ended May 2021) in late June. A snapshot of the year-over-year comparison with 1Q21 (the first fiscal quarter ended May 2020) is shown in this report.
  • Consolidated reported revenues grew 15.3% y/y. 1Q21 was the first quarter when the pandemic shutdown occurred. As the snapshot shows, in the comparable quarter last year, organic growth fell by nearly $317 million (-39.6%) while organic growth in 1Q22 grew by ~$47 million, or 9.3% y/y.
  • According to management, orders grew 11% organically (adjusted for both currency and an acquisition) and “strengthened over the quarter”. Organic order growth also improved sequentially from 4Q21, growing by 25% on a consolidated basis.
  • In the release, CEO Jim Keane made the following observation: “Our first quarter results were better than we expected, as our teams did a great job winning business and navigating multiple supply chain challenges while also continuing to maintain strong cost controls. We are confident we are entering the recovery phase of this cycle as our backlog and project opportunity pipelines are building and many of our customers around the world are announcing plans to bring their employees back to the office over the summer.”
  • Operating results demonstrated modest improvement. Adjusted operating loss, excluding a $17.6 million impairment charge booked last year, was modestly improved.
  • Management issued specific guidance for 2Q22 and made directional comments about the balance of the year. 2Q22 revenues were guided to $750-$780 million, which translates to an 8%-11% organic decline. The 2Q22 beginning backlog was ~$624 million, 20% lower (~$175 million) than 2Q21 due to last year’s mandated shutdowns. In 2Q22, it will book ~$15 million pre-tax gain on the sale of land and, including the gain, will post enough profit for the first half of FY22 to be profitable. Management further guided to strong growth and profitability for the second half of FY22.
  • Our 2Q22 estimate is $0.26 per share on sales of $758.5 million. Our full economic model is attached and incorporates management’s view for the balance of FY22 for increased revenues and profitability.

SNAPSHOT: 1Q22 vs. 1Q21

Source: Steelcase Filings; Water Tower Research

Steelcase reported 1Q22 (its first fiscal quarter ended May 2021) in late June. A snapshot of the year-over-year comparison with 1Q21 (the first fiscal quarter ended May 2020) is shown in this report.

DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.

WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information p...