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Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Steelcase First Quarter Fiscal 2026 Conference Call. [Operator Instructions] Mr. O'Meara, you may begin your conference.

Thank you, Rob. Good morning, everyone. Thank you for joining us for the recap of our first quarter fiscal 2026 financial results. Here with me today are Sara Armbruster, our President and Chief Executive Officer; and Dave Sylvester, our Senior Vice President and Chief Financial Officer. Our first quarter earnings release, which crossed the wires yesterday, is accessible on our website. This conference call is being webcast, and this webcast is a copyrighted production of Steelcase Inc. A replay of this webcast will be posted to ir.steelcase.com later today. Our discussion today may include references to non-GAAP financial measures and forward-looking statements. Reconciliations to the most comparable GAAP measures and details regarding the risks associated with the use of forward-looking statements are included in our earnings release, and we are incorporating by reference into this conference call the text of our safe harbor statement included in the release. Following our prepared remarks, we will respond to questions from investors and analysts. I'll now turn the call over to our President and Chief Executive Officer, Sara Armbruster.

Hi, everyone, and thanks for joining the call. Today, I'll highlight our financial results and where we continue to build momentum against our strategy. And I'll start with our results. We saw a very strong start to the first quarter with the majority of our businesses and geographies performing well. The Q1 results continued our momentum from fiscal year 2025. In the first quarter, we delivered 7% revenue growth, which drove strong earnings improvement. And our adjusted earnings per share of $0.20 was up 25% versus the prior year. Our Q1 adjusted operating margin was 5% or 110 basis points higher than last year, driven by the Americas, which posted a 6.7% margin. I'm proud to say we delivered our 12th consecutive quarter of year-over-year gross margin expansion. Looking at total orders in Q1, we saw a less than 1% decline compared to the prior year and were up 7% on a 2-year stack basis. In the Americas, we continue to see order growth from large corporate customers. We've been predicting that our customers would recognize the need to transform their space to support hybrid work once their employees return to the office. And this growth from large customers was offset, however, by some declines from our education and government customers, which we believe were largely impacted by changes in federal funding policies. In international, growth in many of our markets was offset by declines in Germany and France, which were impacted by macroeconomic challenges. So we're doing the right things to win as much available business as possible. And at the same time, we're aligning our resources to focus on the best opportunities. In the Americas, our win rates in the first quarter continued to remain strong and orders from our global client collaboration customers grew again this quarter. The positive performance is the result of executing our strategy. So I'll take a few minutes now to describe how we're delivering on our 3 strategic pillars. So I'll start with leading the transformation of the workplace. Across the large corporate customer base, we continue to lead the transformation of the workplace. At the beginning of last fiscal year, the Americas experienced order growth from financial services companies as those customers return to the office. This quarter, we saw strong order growth from our large technology customers who are now also increasing their workplace presence and related investments. Companies across these leading industries, I think, are seeing the opportunity to use space to drive outcomes around productivity, innovation and growth. Earlier this month, I met with multiple customers at the Design Days event in Chicago, where we unveiled a brand-new WorkLife Center in Fulton Market, which is the city's vibrant Westside neighborhood, which is centered on design, commerce, art and culture. We saw thousands of attendees over the few days as they toured our space. We introduced an expansion of our innovative ocular collection that creates a reimagined hybrid work experience and improves how people see, hear and connect with each other and their content. We also showcased a variety of ancillary lines, most notably our new Jean Nouvel Seating Collection by Coalesse, which underscores our commitment to premium design and functional versatility. One customer mentioned that our Jean Nouvel Collection was the most comfortable lounge at the trade show. These products create great conversation spaces for any work environment and help maximize the limited real estate that employers have. The response from our applications at Design Days reinforces the positive sentiment we're feeling in the market right now. In fact, one influential architect commented that the new showroom highlights the full capabilities of what Steelcase has the potential to deliver. We also saw a large client's facilities team placing orders as they toured our space, remarking several times that they wanted to embed various applications into their upcoming project. Attendees left design days with strong optimism about our brands and applications. And we're hearing and seeing the momentum has been building for Steelcase to continue to lead the transformation of the workplace. Now as we think about expanding our reach within the markets we serve, which is our second strategic pillar, we continue to grow our capabilities while each market faces a bit of a different dynamic. In education, changing federal policy is impacting the buying patterns of K-12 school districts. The expiration of ESSER funds and uncertainty in the United States around future funding is causing some budget adjustments and project delays across the sector. Within the entire learning landscape, we're focused on supporting our customers as they manage this environment and on delivering our value proposition because the need to invest in learning environments continues and Steelcase remains well positioned. In Health, we're seeing key customers move forward with projects as the demand for health care services continues to grow. The need for more health care space is climbing as patient demand expands. And this quarter, both orders and revenue from our health care customers increased. Across all the vertical businesses, we continue to see our investments pay off. Finally, turning to how we strengthen profitability and reinvest in the business, I want to build on my opening remarks. In fiscal 2025, we delivered 110 basis points of gross margin improvement over the prior year, and we continued that progress in the first quarter when we drove 170 basis points of gross margin improvement. Strong volume growth was a major contributor to the margin increase this quarter, but we also continue to see the benefits of our cost reduction efforts, which partially offset the headwinds from higher tariff costs, net of pricing benefits. Our teams continue to do a great job improving processes, implementing new technologies and adjusting our production flow to drive higher efficiency. So in closing, our first quarter results were a strong start to the year. We continue to make progress against our strategy while we work through a dynamic environment of evolving tariff and trade policies. But as we highlighted last quarter, we continue to make adjustments in the business to navigate the uncertainty. We're proud of the momentum we're seeing from our businesses that are performing well. And I'll now turn it over to Dave to review the financial results and our outlook in more detail.

Thank you, Sara, and good morning, everyone. My comments today will start with the highlights related to our first quarter results, balance sheet and cash flow. I will then cover the outlook for the second quarter. Our first quarter revenue of $779 million was in the upper end of the estimated range we provided in March. Our adjusted earnings of $0.20 per share finished above our range, driven by favorable gross margins and lower operating expenses in the Americas. The impact of tariffs was in line with our projections for the first quarter and approximated $7 million, net of pricing benefits. Our International segment finished near our expectations as Asia Pacific performed better than expected, while EMEA results were below our expectations. Compared to the prior year, we posted organic revenue growth of 7%, including 9% growth in the Americas and a 1% decline in international. The Americas growth was driven by a strong beginning backlog versus the prior year and was led by our large corporate customers. The Americas posted an adjusted operating income margin of 6.7% or 200 basis points higher than the prior year. The international organic revenue decline of 1% included declines in Germany and France, mostly offset by growth in India, the U.K. and China. Our adjusted EPS increased $0.04 over prior year, and our adjusted operating income increased $11 million due primarily to the strong revenue growth. We incurred $9 million of restructuring costs in the Americas in the first quarter related to the exit of approximately 85 salaried employees. The expected benefits from those reductions were reflected in the fiscal 2026 targets we communicated in March. And these actions were done to prioritize investments in our strategic growth initiatives. As it relates to cash flow and the balance sheet, we used $141 million of cash in operating activities during the first quarter, primarily related to seasonal disbursements of fiscal 2025 variable compensation and retirement plan contributions and $45 million of higher working capital driven by the initial building of inventory for summer seasonality. Our trailing 4-quarter adjusted EBITDA of $266 million was 8.3% of revenue. Our total liquidity, which includes the cash surrender value of COLI aggregated to $392 million at the end of the quarter, and our total debt was $447 million. Shifting to orders. Q1 declined modestly compared to the prior year, driven by a 1% decline in the Americas and 1% growth in international. In the Americas, continued order growth from large corporate customers was offset by declines from education and government customers who had grown strongly in the prior year and now are being impacted by changes in federal funding policies. The growth in large corporate customers was driven by the technology sector as well as our HALCON brand. In the prior year, the Americas orders grew 10% compared to the first quarter of fiscal 2024, which included strong growth from large corporate customers in the financial services sector. For International, the 1% growth in orders was driven by India, China and Central Europe, largely offset by continued weakness in Germany and France, which reflected order declines from small to midsized businesses that are likely impacted by the soft macroeconomic environment. In response, we have initiated procedures with applicable unions and work councils in Europe as part of actions which are targeted to further reduce our cost structure. These actions are in support of our broader goal to improve profitability in our International segment. Turning to our outlook for the second quarter. Our overall backlog at the end of the first quarter was up 2% compared to the prior year. Orders during the first 3 weeks of the second quarter grew significantly versus the prior year. However, they include the pull- forward benefit ahead of a price increase we recently implemented. Accordingly, we expect to report revenue in the second quarter within a range of $860 million to $890 million, which represents organic growth of up to 3% compared to the prior year, with expected growth from large corporate customers projected to more than offset expected declines in the Education and Government segments. As it relates to earnings, we expect to report adjusted earnings of between $0.36 and $0.40 per share in the second quarter, which compares to $0.39 in the prior year. In addition to the projected range of revenue, the adjusted earnings estimate includes gross margin of approximately 33% to 33.5%, which includes an assumption that higher tariff costs and inflation of approximately $20 million will be offset by higher pricing benefits in the Americas as compared to the prior year and operating expenses of between $230 million to $235 million, which includes $4.3 million of amortization related to purchased intangible assets. Lastly, we expect interest expense and other nonoperating items to net to approximately $3 million of expense, and we're projecting an effective tax rate of approximately 27%. In closing, and as Sara mentioned, we're encouraged by the momentum we sustained in our -- into our first quarter with the majority of our business performing well as compared to the prior year and as compared to our year-to-date expectations for fiscal 2026. Importantly, our large corporate customers are continuing to invest more significantly in their workplaces. We have a strong balance sheet, and we're implementing necessary actions to: one, address the tariff and inflationary environment and mitigate the impact on our operating results; two, respond to the soft macroeconomic environment in Germany and France and bolster our prospects for improved international profitability; and three, prioritize our strategic growth initiatives in the Americas. From there, we'll turn it back to the operator for questions.

[Operator Instructions] And your first question comes from the line of Reuben Garner from Benchmark.

Dave, can you help us size up how much -- I know education plays a big role in the quarter that you just reported, like it may not be as big of a piece of the business for the full year, but how big of a drag was that in the quarter? And more importantly, I guess, what does that say about how strong your typical corporate customer was from a growth perspective?

That's a good question, Reuben. I'd size it something in the neighborhood of 1/3, 2/3. So -- and I'm going to speak to orders. So in the first quarter, about 1/3 of our orders came from education and government inside the Americas and 2/3 came from large corporate, SMB, health, consumer, all the other vertical markets that we track. And the other vertical markets, the 2/3 of our business in the Americas that grew not only versus prior year, but was at or above our expectations for the quarter. So a good start to the year for 2/3 or 70% of our business and a tough challenge in the education and government sectors inside the Americas. Interestingly enough, it's kind of a similar ratio or mix of business in the International segment. Something like 2/3 of our business in the International segment is doing quite well and meeting expectations for order growth. But 1/3, which is a big piece of our business is related to the small to midsized business we do in Germany and France, and that continues to be negatively impacted by macro factors.

And Dave, that 1/3 education and federal in this quarter, what does that look like on a go-forward basis? Like next quarter, it won't be quite that large of a piece of the orders, will it?

Well, we do -- we have historically still received a significant amount of education orders early in the quarter -- in the second quarter for shipment in the second quarter -- later in the second quarter. So from an orders perspective and revenue perspective, it will still have a relatively high mix, but then it has much less of an impact in the back half of the year because I think you'll recall that Smith System, as an example, tends to ship a significant amount of their business in the summer quarter while schools are on holiday.

Yes, that's great. And then in terms of -- you guys, I think, are implying price cost from a dollars perspective is neutral in the next quarter that you're guiding to. Any signs of pull forward in demand in the quarter from your corporate customers? Can you talk about, I guess, the timing of when your surcharge and price increases went into place relative to kind of your order patterns throughout the quarter?

Sure. First of all, our tariff recovery charge went into effect on March 29. And we estimate that, that all settled within the quarter. So of course, we had a significant pull forward of orders in advance of that tariff recovery charge. But we don't feel that any meaningful amount of orders were pulled from Q2 into Q1 as an example. And then I also referenced pull forward in the first 3 weeks of the second quarter. So we announced a price increase back when we announced the tariff recovery charge. The price increase went into effect in mid- June. So we had a pull-forward effect in the middle of June. But we don't think that any orders from Q2 were pulled into Q1 related to that mid-June price increase that we had in the Americas. So it's all kind of contained within each quarter, we believe.

Okay. That's really helpful. And then last one for me. I don't think you updated the full year guidance, but it sounds like the general drivers of your expectations for the year kind of remain intact with maybe a couple of caveats. How do we think about your updated thoughts on the full year? There seems to be even more momentum in corporate kind of coming out of design days, but maybe that incremental upside is offset by education and things you have going on in that small piece of international.

Yes. I mean we're -- there are a lot of moving pieces in this year, and we'll see what happens come July 9, which is a date that some of the reciprocal tariffs and other changes are set to go back into effect. So we'll see what plays out and have to react or deal with any meaningful movement there. But we are still targeting mid-single-digit organic revenue growth, and we are still targeting to expand our adjusted operating margin for the year compared to the prior year. Now in the prior year, you have to adjust for the land gain and some other things. But on an adjusted basis, we are targeting to expand our operating margin, and it's going to be fueled in large part by mid-single-digit organic revenue growth.

Your next question comes from the line of Greg Burns from Sidoti.

When we look at the profitability of the International segment, do you think that the actions you're projecting to take and get that business back to profitability at the current demand levels? Or I guess, what are the goals with the restructuring efforts? And are you going to need some volume benefit there to get that business back to consistent profitability?

We are definitely targeting consistent profitability and the actions that we're taking now are based on an outlook that we have -- order patterns we're experiencing currently and an outlook that we have for the balance of the year that does not reflect a lot of improvement. So we are trying to do inside of Europe, what we've done inside of Asia. Asia actually was profitable for the quarter, and we feel pretty good about where they're positioned. And in EMEA, we thought last year that things were starting to get a little bit better. There were a lot of signs, positive signs that they were. We took actions and it turned out -- our actions were successful, but it turned out the demand environment notched down another degree, which is why we're taking additional actions. I don't know because we just initiated procedures yesterday with the applicable unions and works councils, and that takes time to work through negotiations and discussions. So I don't know exactly where we'll land, which is why we didn't size the amount of actions that we're targeting. But we are working shoulder to shoulder with our partners to get this business on a sustained level of profitability go forward.

All right. Great. And in terms of the large corporate demand that you're seeing. I think it's definitely been more resilient than I would have thought given some of the macro headwinds that are out there. Can you just point to maybe why you think that is, what you're seeing in the market that is driving demand?

Yes. I mean I'll share that. I mean, I continue to hear consistently that people are, in many cases, back to the office, but work has really changed. So collaboration and privacy and connection, I think, matter more. And our largest clients are seeking our help to reshape space to support those things and not the way work used to happen. So I would say that's why I think at Design Days, we saw such a, I think, excited reception to products like Ocular and Campers & Dens and Jean Nouvel Collection because I think these solutions directly reflect the evolving needs of teams. So I think that those are the trends and the forces that are creating new opportunity and allowing us to continue to see nice strength in the large corporate sector.

Your next question comes from the line of Steven Ramsey from Thompson Research Group.

I wanted to come back to the Asia profitability comment you just made with Greg's question. The demand is better there, and I think you said it's profitable. Do you think that, that geography needs more cost improvement moves to see more progress? Or is it more of a volume and operating leverage-driven story?

I'd say it's both. And we're in the midst of actually shrinking our footprint in China within our existing campus -- we had favorable negotiations with our landlord to reduce the amount of space that we're utilizing. So I see some continued cost reduction efforts. And I know the team is working very hard to drive efficiencies in different processes, trying to automate things and move us away from kind of a historic manual effort to do some of the things in our business that you would typically do as more of a start-up. But given the size of that business, we want to begin to drive some more automation and efficiency. But there's definitely growth on the horizon as well, especially with China now starting to show a couple of quarters in a row of order growth. It's more than just a suggestion we might be coming off the bottom. It feels like we are coming off the bottom. And India just remains an incredibly strong market for us. Our team is doing a terrific job in that market. And we are winning a lot of business with large global accounts that we do -- that we work with in all parts of the world.

Okay. Great. That's helpful commentary. I wanted to dissect some of the Americas demand a little bit, and I apologize if I missed this in the prepared remarks. Maybe the first way to break it out project versus continuing activity, kind of the year-over-year trends you're seeing there in the quarter and implied in the second quarter? And then secondly, you've talked about conference rooms being a long-term opportunity as those are aging. Are you seeing that play out in current orders and implied in the FY guide? Or is that something that is more implied over the longer term?

Maybe I'll take the first part and see what Sara wants to say about the second part on the conference room question. But on the first part, the orders in the Americas in the first quarter, continuing business grew at a mid-single digit and project business was down by double digit, but project business last year grew like practically 40% over the previous year. So it was a tough comp in the project business more than anything. And on what we're seeing in the demand patterns as it relates to conference rooms, I don't know that it's particularly Q1 or Q2. think generally we're seeing...

Yes, I would say generally, I mean I would say to your question about near-term demand, certainly, as we look at our plans and expectations and kind of data points around things like the ocular collection or other products that are really designed to support hybrid collaboration and conference rooms, obviously, our sort of near-term expectations about what we think demand and product orders and sales can be are certainly built into our thinking for this fiscal year. But beyond that, I think we recognize that the installed base of conference rooms in the world is enormous. And if -- while I don't have a data point to give you, I think we can all imagine from our own experiences that the ratio of conference rooms that have been updated to reflect current technologies and current ways of working relative to those that haven't, you have to believe that there is significant opportunity and need to continue to update that installed base because it's so massive. So I think while we can't quantify that, that's what gives us a lot of confidence in making the investments we're making in solutions to support conference rooms and hybrid collaboration that we think will carry for some time.

Understood. That's helpful. And then last one for me. Gross margin, very strong in the first quarter. Thinking about the second quarter, the guidance a bit lower year-over-year. Can you help me understand if that's the large corporate comp being a tough one, if it's the education coming in lower, given it's the busy seasonal quarter, maybe just to understand the gross margin comp in the second quarter.

Sure. Maybe 2 things. One is that, remember, our guide includes tariff and inflation of approximately $20 million, offset by pricing benefits. So you have $20 million of revenue with no gross margin essentially in the guide. That's a component. Probably a bigger component is the demand and the impact in the education sector. I think you know from prior years with Smith System, in particular, reporting such a big piece of their year in the summer quarter, our fixed cost absorption is just incredible. And so we really produced very, very strong operating margins and gross margins in the Smith System business in the summer quarter. And while they are still very good, it's a great business, it's not to the extent that it has been in prior years going from Q1 to Q2. So I think those are probably the 2 biggest factors. in the gross margin guide.

Your next question comes from the line of Joe Gomes from NOBLE Capital.

Just wanted to start out. You just mentioned that you took some pricing here in June. As you look out over the rest of the year, kind of what is your thoughts on additional price increases?

Well, I mean, Joe, I think we have a history of managing inflation in multiple ways, including pricing. We -- our procurement teams work very hard to negotiate as much of the inflation away and force our suppliers to drive productivity, and we do being supply chain moves and shifts, moving things in our production to try to mitigate inflation. But to the extent we can mitigate it, we have historically taken price increases. So if we have continued inflation, I think you'll see us follow our historical pattern.

Okay. And then if you look at the conference board measure of CEO confidence, it's been kind of on a declining trend here. Kind of maybe you can talk about how that may play or may not play into some of the large corporate business for the rest of the year.

I'll start and then Sara can pile on. I mean I think it's nothing but good. I mean when Sara and I are confident about the future, we're investing in the business. And I think the same can be said about all of our customers. If the sentiment is positive about the future, they're investing back in the business. And what is a multiplier, so to speak, for our industry is when the C-suite is actually paying attention to the workplace. And I think Sara can talk a lot about that, especially when she's at Business Roundtable and is one of the most popular people there these days.

Yes. No, I think that's right. And I think it's interesting because obviously, we're in a moment where there may be greater uncertainty in certain aspects of the economy or economic policy than maybe in past times. But I think even with that, there are so many organizations and so many CEOs that recognize the dynamics of their business are going to force them to invest. I was just thinking about a conversation I just had recently with the CEO of a major financial services firm who had been through kind of the same thing that many other companies have been through where everybody gets such home during COVID. And during that period, they shed some leases and they consolidated real estate. But actually, their business continued to grow. And so now they have several thousand more employees than they did pre-pandemic. And now that they brought everybody back to the office, I mean, his comment to me is like we literally have nowhere to put people. Like we are signing leases as fast as we can, and we need to fill these spaces. So I do think that there are stories like that out there that, to me, speak to the likelihood of some continued strength in activity even in an environment that arguably is a bit more uncertain than it was a year ago or prior.

And there are no further questions at this time. Ms. Armbruster, I turn the call back over to you.

Great. Well, I'll just say thanks to all of you for joining us this morning, and we appreciate, as always, your interest in Steelcase.