Exchange: NYSE | Sector: Industrials | Industry: Business Equipment Supplies
Q4 2025
Published: Apr 18, 2025
Earnings Highlights
Revenue of $788.00M up 1.7% year-over-year
EPS of $0.24 increased by 41.2% from previous year
Gross margin of 31.9%
Net income of 27.60M
"In fiscal '25, we delivered 100 basis points of gross margin improvement over the prior year, which included benefits from operational cost reductions." - Sara Armbruster
Steelcase Inc. (SCS) QQ4 2025 Results – Q4 FY2025 Backlog Improves, Margin Expansion Advances, Tariff Environment and ERP Upgrade Path to 2026
Executive Summary
Steelcase reported a resilient QQ4 2025 despite a softer macro environment, delivering revenue of $788 million and an 11th consecutive quarter of gross margin expansion. Management highlighted meaningful momentum in the Americas, led by large corporate and government customers, with Q4 order growth of 9% and a 12% surge in the Americas segment for the full year. Full-year adjusted EPS came in at $1.12, ending above the top end of prior guidance, aided by a 100 basis point gross margin improvement and efficiency initiatives. The company also emphasized strategic progress in its workplace transformation, dealer analytics initiatives, and ongoing ERP modernization, while signaling continued tariff-related pricing actions and ERP-related cloud investments into calendar 2026.
Looking ahead, Steelcase provided a cautious but constructive near-term view. Q1 2026 revenue guidance is $760–$785 million with adjusted EPS guidance of $0.13–$0.17 and a gross margin target around 33%, incorporating roughly $9 million of higher tariff costs year-over-year. For FY2026, the company targets mid-single-digit organic revenue growth, a modest lift in adjusted operating margin, and breakeven adjusted operating income in International. Management also announced a June list-price increase in the Americas and a tariff recovery charge for orders received after today, underscoring the ongoing inflation/tariff headwinds and the need for pricing actions. The balance sheet remains solid with liquidity of about $558 million, and the company continues to invest in growth avenues including AMQ (small-to-mid) and GCC-driven international expansion, while absorbing ERP-related costs and capex of roughly $70–$80 million planned for 2026.
Net income: $27.6 million; net margin 3.50%; YoY +29.58%; QoQ +44.50%
Financial Highlights
Overview of QQ4 2025 financials and selected metrics:
- Revenue: $788.0 million; YoY +1.65%; QoQ -0.87%
- Gross profit: $251.3 million; gross margin 31.89% (0.3190); YoY +3.16%; QoQ -5.31%
- Operating income: $9.5 million; margin 1.21%; YoY -68.44%; QoQ -76.83%
- EBITDA: $35.5 million; EBITDA margin 4.50%
- Net income: $27.6 million; net margin 3.50%; YoY +29.58%; QoQ +44.50%
- EPS (diluted): $0.24; YoY +41.18%; QoQ +50.00%
- Weighted average shares: ~117.6 million (basic), ~118.8 million (diluted)
- Backlog: up 11% YoY entering FY2026
- Q4 orders: +9% YoY; Americas +12%; International +1%
- Operating cash flow: $0.6 million; Capex: $11.5 million; D&A: $20.6 million
- Free cash flow: -$10.9 million (quarter); trailing four-quarter adjusted EBITDA: $262 million (8.3% of revenue)
- Cash and equivalents: $346.3 million; total debt: $600.7 million; net debt: $254.4 million; liquidity (including COLI): $558 million
- Balance sheet highlights: cash and equivalents $346.3M; total assets $2.330B; total liabilities $1.3787B; stockholders’ equity $951.7M
- Valuation snapshots (as of QQ4 2025): P/E ~12.95x; P/B ~1.50x; P/S ~1.82x; dividend yield ~0.83%; dividend payout ratio ~42.8% (from ratiosInfo)
- Guidance for Q1 2026: revenue $760–$785M; adjusted EPS $0.13–$0.17; gross margin ~33%; operating expenses $230–$235M; effective tax rate ~27%; tariff costs assumed at ~$9M higher than the prior year.
- FY2026 targets: mid-single-digit organic revenue growth; modest margin improvement; International breakeven (losses likely in first half; profits in second half); capex + cloud costs $70–$80M; ERP-related elevated costs (~$10M) year-over-year.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
788.00M
1.65%
-0.87%
Gross Profit
251.30M
3.16%
-5.31%
Operating Income
9.50M
-68.44%
-76.83%
Net Income
27.60M
29.58%
44.50%
EPS
0.24
41.18%
50.00%
Key Financial Ratios
currentRatio
1.54
grossProfitMargin
31.9%
operatingProfitMargin
1.21%
netProfitMargin
3.5%
returnOnAssets
1.18%
returnOnEquity
2.9%
debtEquityRatio
0.63
operatingCashFlowPerShare
$0.01
freeCashFlowPerShare
$-0.09
dividendPayoutRatio
42.8%
priceToBookRatio
1.5
priceEarningsRatio
12.95
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the QQ4 2025 earnings call:
- Strategy and market conditions: CEO Sara Armbruster emphasized that fiscal 2025 delivered EPS above the top-end target and gross margin expansion for the 11th straight quarter, with a 12% Americas order growth helping lead market share gains. She highlighted the ongoing workplace transformation and the growth in demand from large corporate and government customers, aided by CBRE data showing rising US office leasing activity (Q4 up 24% vs Q3; up 23% YoY).
- Execution and efficiency: Armbruster noted 100 basis points of gross margin improvement YoY, supported by cost-reduction initiatives, among them production-line moves, in-sourcing, and network optimization. The company also referenced its AI-driven analytics program with dealers (more than 5 million workplace applications analyzed) to identify trends and maintain relevance.
- Tariffs and ERP: The company is navigating tariffs and trade uncertainty with pricing actions and supply-chain shifts, and has deferred ERP go-live to 2026 to ensure readiness. CFO David Sylvester outlined the Q4 results as strong in Americas but softer in International, with tariff and ERP-related costs driving some of the earnings variance.
- Backlog and demand resilience: Backlog grew 11% YoY entering FY2026. The Q4 call underscored demand strength in large corporate, government, SMB, and healthcare segments, with education showing solid growth; West Coast recovery was noted as a contributing factor to demand in certain channels.
- Outlook and risk: Management maintained a cautious view given tariff dynamics and macro uncertainty, but expressed confidence in mid-term targets of 4–6% organic revenue growth and a modest margin expansion, contingent on price actions and tariff exemptions (e.g., USMCA) and macro stability.
In fiscal '25, we delivered 100 basis points of gross margin improvement over the prior year, which included benefits from operational cost reductions.
— Sara Armbruster
For fiscal 2026, we are targeting additional progress toward our mid-term financial targets, including mid-single-digit organic revenue growth and a modest improvement in our adjusted operating margin.
— David Sylvester
Forward Guidance
Outlook and assessment for the near-to-medium term: Steelcase anticipates revenue growth in the low-to-mid single digits in FY2026, with a targeted mid-single-digit organic revenue expansion and a modest uplift in adjusted operating margin. In Q1 2026, the company guided to $760–$785 million of revenue and $0.13–$0.17 of adjusted EPS, with gross margin around 33% and operating expenses of $230–$235 million. The guidance includes about $9 million of higher tariff costs year-over-year and assumes a 27% blended tax rate. The firm expects gross-margin expansion to be mostly driven by volume, aided by cost-reduction initiatives and ERP-related efficiency gains, though offset by ERP and tariff-related costs.
Management cautions that tariff dynamics and exemptions (e.g., USMCA) and macro conditions could impact pricing power and demand. The company also plans a June list-price increase in the Americas and a tariff recovery charge on orders received after today, signaling a dual strategy of pricing to offset inflation and tariffs while maintaining competitive positioning. For International, the plan envisions breakeven adjusted operating income for the full year, with losses likely in the first half and profitability in the second half, assuming volume growth and cost-control measures. Investors should monitor: (1) tariff policy developments and exemptions, (2) pace of demand recovery in large corporate accounts and international markets, (3) ERP go-live progress and any related cost headwinds, and (4) the trajectory of backlog conversion into revenue and margin expansion.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
SCS Focus
31.89%
1.21%
2.90%
12.95%
EBF
29.50%
13.00%
2.99%
15.29%
ACCO
34.70%
9.37%
3.40%
5.99%
ACTG
17.60%
-32.40%
-2.61%
-7.85%
HNI
40.50%
8.50%
4.56%
15.77%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, Steelcase presents a balanced risk-reward profile. Near-term revenue and adjusted EPS guidance for FY2026 imply modest top-line growth, with margin expansion anchored by volume-driven gross margin improvements and ongoing cost discipline. The company’s strength in the Americas, backed by a diversified mix across large corporate, government, healthcare, and SMB segments, supports a constructive outlook even amid tariff and macro uncertainty. The ERP upgrade and AI analytics program offer potential long-term efficiency and competitive advantages, though ERP-related costs will weigh on near-term profitability. Investors should monitor tariff dynamics and potential exemptions (USMCA), the pace of backlog conversion into revenue, and International profitability, where stabilization remains critical to achieving the full-year targets. The stock trades around mid-teens on earnings multiples, with a dividend yield under 1% and a modest FCF profile, suggesting a cautious but favorable stance to exposure to the secular trend of workspace transformation in the US and select international markets.
Key Investment Factors
Growth Potential
Backlog up 11% entering FY2026 with sustained Americas order strength (6th straight YoY order growth in Q4; 12% YoY in Americas for the quarter) and growth across education, healthcare, and SMB segments. AMQ (small-to-mid) growth remained robust in the Americas during fiscal 2025. Management expects mid-single-digit organic revenue growth in FY2026 driven by higher office utilization and continued demand from large corporate customers seeking better workplace outcomes. ERP modernization could improve operating efficiency and data-driven sales execution, supporting margin expansion as volume grows.
Profitability Risk
Tariff and trade-policy uncertainty remains a key risk, including tariff recovery charges and potential adjustments due to USMCA exemptions and evolving policy. International profitability is still a work-in-progress (breakeven target for FY2026; losses possible in the first half). Economic softness in Canada and Europe, plus macro volatility, could dampen demand. The business is discretionary and cyclically sensitive to corporate capex cycles, which could amplify volatility if macro conditions worsen. ERP deployment risks (go-live in 2026) could incur additional costs and execution risk if timelines slip.
Financial Position
Solid liquidity position with $558 million in total liquidity (including COLI) vs. $447 million in total debt; net debt of $254.4 million. Cash at $346.3 million and trailing four-quarter adjusted EBITDA of $262 million (8.3% of revenue) support financial flexibility. The balance sheet remains strong, with a robust equity base ($951.7 million) and a payout ratio of ~42.8%. However, near-term free cash flow was negative (-$10.9 million in the reported quarter) due to capex and cloud-related ERP investments.
SWOT Analysis
Strengths
Strong backlog growth with an 11% YoY increase entering FY2026, signaling durable demand.
Significant Americas strength with 12% Q4 order growth and multiple verticals (large corporate, government, healthcare, SMB).
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