Steelcase Inc. (SCS) Earnings Call Transcript

Good morning, and welcome to the 2023 Steelcase Investor Day. We want to thank you for joining us, whether you're here in the room at our New York WorkLife showroom or whether you're joining us online. We're very excited today to share what we've been seeing in our business as well as talk about what we see maybe moving forward over the next few years. Joining me today, we have -- my name is Michael O'Meara, Director of Investor Relations at Steelcase. Joining me today, we have Sara Armbruster, our President and CEO; Dave Sylvester, our Senior Vice President and Chief Financial Officer; Allan Smith, our Senior Vice President and Chief Revenue Officer; and Bob Krestakos, our Vice President of Global Operations. Before I turn it over to them, I just want to cover real quickly that we will be using forward-looking statements today and in the 8-K that we released this morning, we talk about any risks associated with using those forward-looking statements. We'll also be referring to some non-GAAP financial measures and a reconciliation in the back of the presentation that we posted online today. And everything we're saying is as of today, and we hold no obligation to update those as we move forward. Given those out of the way, I'd like to turn it over to Sara Armbruster, our President and CEO.

Great. Thanks, Mike, and welcome to everyone who's joining us today in the room and online. So Steelcase right now is at the center of a global conversation about the future of work. And we're really excited to be in the middle of that conversation because we think it positions us well to continue to move our strategy forward and create shareholder value over the coming years. So what we're going to do today is talk a little bit about that opportunity, why we think we have an exciting opportunity and the strategy that we're pursuing to capture that opportunity, then we're going to talk about the midterm financial targets that we believe we can deliver based on that strategy and then double-click a little bit into some of the specific growth strategies and profit enhancement opportunities that we're pursuing. And then as we wrap up, we'll make sure we have plenty of time to cover your questions. So to dive in, it is no surprise, I'm sure to any of you that Steelcase, like so many other organizations, has navigated through some extraordinary challenges over the past couple of years. We've certainly seen in our industry reduced demand as lockdowns closed offices and schools and more. We've experienced months and months of supply chain disruptions, of labor shortages. And we've all experienced the highest levels of inflation in recent memory. But despite those challenges in our fiscal year that recently ended, fiscal year '23, we were able to drive 17% revenue growth globally, and that included 23% growth in the Americas. So we feel really good about that. And we believe that the reason we could accomplish that is because we've taken aggressive action to respond to those challenges. So those actions included unprecedented levels of price adjustments, numerous actions to adjust our cost structure and bring it in line with changing demand. And while we were doing that, we continue to prioritize our strategic investments to ensure that we could manage for the long term and stay invested in our growth strategy. So we feel those actions have positioned us really well to move forward. And moving forward for us, looks like targeting midyear or midterm revenue growth of 5% to 7% annually and significantly improved profitability. So we really believe we're well positioned to drive value going forward. And we intend to do that by maintaining our focus on 3 core strategic pillars: one being to continue to lead the workplace transformation and really help our large customers, large corporate customers, in particular, evolve their workplaces as they navigate the aftermath of the pandemic. But we're not focused just on that large corporate customer segment. We also intend to continue to diversify our revenue as we explore opportunities to serve health care organizations, educational institutions, consumers and more. And then while we do those things, we remain committed to our profitability enhancement initiatives, and we'll continue to accelerate those and even accelerate them. So let me talk a little bit now about the opportunity that we see and why we believe that these targets are achievable. So you might be surprised because there's still a lot of noise in the news and in conversation about how organizations are still struggling in some cases to figure out how to navigate the new ways of working and hybrid work. There's a lot of noise and a lot of conversation that's still out there. And you see that in the headlines. And as we talk to business leaders, decision-makers, the leaders of the organizations that we serve, I would say the core message we hear from them is it's complicated, right? So people are trying things, some things are working, some things are not working. And we know that we're in a moment where employees on the one hand, are increasingly speaking up, they have a louder voice and business leaders are listening to that. But at the same time, we recognize that after 3 years of disruption, we see business leaders and decision-makers who are more determined than ever to figure out how to bring their people back together and to bring them together in the office. We also see organizations that really have a clear point of view in some cases, about how they believe their spaces need to evolve and they need to move forward. But in some cases, they can also feel the tension with a bit of reluctance to know when and how and how fast to make those investments because they're not exactly sure they have the right answer or what will work. So we see people wrestling with these tensions, and we see them trying to figure out how to move forward. But we believe that we can help and that it's actually time to even move the conversation further forward. So beyond hybrid, beyond the basics of who's working in the office and how many days are they there? To really focusing on how to explore the ways in which work is changing and how we can help our customers create workspaces that work better. So that's really where our focus is. So we know that the current state, as I said, is one of challenge and struggle and people trying to figure this out. And I'll share just a couple of data points to dimensionalize a little bit about what we're hearing. So certainly, we know that many people are struggling. And as we talk to employees around the world, the themes that we consistently hear are that people feel their connection to their organization's culture and their colleagues is weaker. They feel that their ability to balance work and life is diminished relative to what it was before the pandemic. They do report that they feel both on an individual level and at an organizational level, their productivity is declining and probably most concerningly, they report higher likelihood to leave their jobs. Gallup recently released their 2023 State of the Workplace survey and their findings echoed many of the things that we see in our own research. And one data point I'll call out is that in the U.S., employee engagement is now declining. And this comes after several years where the Gallup research showed employee engagement increasing prior to the pandemic. So if you're a business leader and you're counting on your talent to be engaged, to drive innovation, to drive growth. This is a really concerning data point. So we see leaders that know they need to act. I mean I would say that our customers, by and large, resoundingly feel like they need to do something. They need to move forward, they need to go beyond hybrid, but they're not quite sure how. So the good news for Steelcase, and I think where we see great opportunity and opportunity for growth is that we believe we know how to help. So I want to take a couple of minutes to dive a bit into some of our most recent research to give you a flavor for what we're seeing. I should start by mentioning that over the past 2 years since the pandemic began, we've talked to over 63,000 employees and leaders in 11 countries around the globe to understand what they feel is working in their workplaces, what they feel is not working and how they'd like to see the workplace evolve going forward. And we believe that this is the largest study of its kind into people's attitudes toward the workplace. So we have a terrific data set that we use actively to drive our strategies and our innovation. So a couple of things that I'll call out from this work. The first is kind of an interesting data point that globally, it's actually still true that most people work most days in the office. So more than 70% of employees globally report that they're in the office at least 3 days a week. So opportunity for us to continue to think about how we help those spaces evolve to serve all those people who are going to the office. Now if you're going to the office, it matters quite a bit where you live. So the adoption of hybrid work patterns relative to in-office patterns varies pretty widely by country. So countries like Canada, the United States and the U.K., at least as of right now, have tended to lean in more to at-home work or hybrid work or blended modes of work. Whereas interestingly, countries as distinct and diverse as Mexico, France and China all have very high degrees or high percentages of people working in the office. So we see this. We're a global organization. We serve clients around the world, and we see these patterns play out in our conversations with our customers. Whether you're in the office also depends a lot on who you are, meaning if you work for a small or medium-sized business, you're much more likely to be in the office. If you live in a small or medium-sized city, not New York City, you're much more likely to be in the office. If you work in certain industries like education, utilities or manufacturing, which, by the way, are all industries that have a high preponderance of frontline workers you're also more likely to be in the office if you're an office-based employee. And if you're a leader, you are also more likely to be in the office. So who you are, in this respect, really matters. But perhaps even more interesting and really relevant to our conversation today is not just who's coming in, but it's really why. When people do come to the office, why? And this is, I think, some of the most interesting research insights that we've uncovered. So what I'll point out here is that the top reasons people tell us they like coming into the office or they need to be in the office, the top 3 reasons are all about getting work done, both individually and together. So people say, when I come to the office, that's where I can collaborate the best but it's also where I can focus as an individual, the best, which is interesting because I think a lot of us maybe have the mental model that when I work at home, kind of by myself, where it's quiet and I'm left alone and it's just me and the dog, I can be more focused. And that certainly is true in some cases, but people tell us the office is where they focus. What's also interesting is that the next set of reasons, reasons 4 through 7 are all about building relationships. So this idea that people are social creatures, like even when they're at work is real. People want to come to the office to be with people, to feel a connection to their organization, to build that sense of shared purpose and really to socialize. So the good news for Steelcase is that all of these things that people tell us about why they want to come to the office, are still things that can't very easily be replicated anywhere else. So we see tremendous opportunity to help organizations create the kinds of spaces that foster these benefits. Likewise, when we talk to people about what office improvement would cause you to want to come into the office more. The answer is it's all about me, right? People get really people-centric or me-centric really fast. So they want more individual privacy. They want an assigned workstation or a personal space that they know is there. So if I make that trip to get to the office, I know I'm going to have my place that I can sit down and put my stuff. They want larger individual space, and they want ergonomic tools that are supportive of them. So people say it's all about me and that would bring me into the office more. But at the same time, people also tell us that they want help with hybrid collaboration. So it's interesting to note that today, more than half of all meetings are hybrid, meaning some people are participating from the office and then other people are participating from another location. So this is the new reality. We all live in it. We're doing it right here today in this investor presentation. And what we hear from people is that the spaces that are typically used for hybrid collaboration kind of meetings are too small. They're too uncomfortable. There's not enough acoustic or visual privacy and in many cases, the technology is not easy, equitable or engaging. So people still spend more time trying to get the technology to work than they do actually working on the substance and the matter at hand. So again, another opportunity that we believe we've got the solutions and the innovation and the partnerships to help organizations solve. So for us, this is a really exciting time. I mean we've talked to people around the world about what's not working for them in the office, and we've heard those struggles. But we've also heard just as many people talk about the joy of being together of collaborating, of doing meaningful work and accomplishing things. And we're confident that the innovation we're pursuing and the things that we're doing to drive our business forward can make a real difference. And again, the core ways that we're going to focus on making that happen over the coming years are leading the transformation of the workplace diversifying the customer and market segments we serve, continuing to focus on improving our profitability and doing all those things while we continue to maintain our commitment to use our business as a force for good. So I just want to touch briefly for a minute on each of these 4 things. And then later in this discussion, Dave and Allan and Bob will share a bit more detail. So in terms of leading the transformation of work, this is really about how we can continue to grow our market share, the efforts that we are putting behind growing our market share with large corporate customers. These are the big organizations that are really facing dramatic changes in how they work, and we can be their trusted partner through our product innovation, through our insights and through the ways that we can serve them globally and help them navigate kind of what's happening beyond hybrid. So we're highly focused on doing the work we need to do to be successful here. But again, we're not stopping there. We really are focused on diversifying the customer and market segments we serve because we also see organizations in many different segments of the market facing some of the same struggles and some of the same challenges. And we believe we can use our insights-based innovation approach to also bring really relevant and needed solutions to those markets. So for example, in education, we have made significant investments over the past few years, including our acquisition of Smith System to really amp up our focus on learning and to drive solutions, both to higher education customers as well as through K-12 school districts, and we intend to continue that focus on learning. We also believe we have an opportunity to drive higher market share for Steelcase with small and medium-sized businesses, which have not historically been a huge focus of ours. But as we talk to organizations of all sizes. We know that many small and medium-sized businesses are wrestling with the same kinds of questions and have the same kinds of needs as large corporate organizations. So we think there's a terrific opportunity for us to grow within that segment. We also intend to continue to amplify our Steelcase health business, serving health care institutions and likewise, to expand our consumer business, both through our direct sales on our Steelcase online store, but as well through our retail partnerships. When it comes to profitability, we have numerous things kind of underway already and planned. And again, Bob will talk more about that a little later today. But those include in the immediate term, capturing the benefits from the pricing actions we've taken, making sure that we can capture those benefits and increase profits that way. But over the longer term, continuing to focus on how we optimize our operations, how we drive business value through transformation and how we continue to reallocate investments toward the highest profit, kind of highest value creation activities. So this is a strong focus of our entire team. And then lastly, I want to comment on the fact that we remain committed throughout all of this to work to design better futures for people and for the planet. So Steelcase remains focused and committed to the same core values that have served us for well over 100 years. So values like treating people with dignity and respect, values like building positive relationships, protecting the planet and acting with integrity. And those things are still really important touch points for us today. And our customers really trust and value us not just because of how we could help them solve their workplace needs, but they value our commitment to designing better futures that are more equitable and healthier for the planet and for people. So we have a number of initiatives that have been underway and will continue to help our communities thrive and to do things like reduce our carbon footprint. And again, even during the pandemic when there were so many things going on, I'm proud to say that Steelcase was the first company in our industry to achieve carbon neutrality back in 2020. So we remain committed here as well. And it's exciting for us to do this important work. And we certainly aren't done. We have a long ways to go. But I think it's also really nice to see that other organizations are recognizing the achievements we've made as well. And we hope that some of this external recognition will provide energy or encouragement to other organizations to set bold goals with respect to how they care for people and care for the planet. So again, we've navigated through some incredible challenges over the past couple of years. But through it all, we've remained really focused on executing our strategy in a way that we believe will drive improved results and shareholder returns which we're really excited about. So to talk a bit more about that, I'm going to hand it over to Dave. Here you go.

Good morning, everyone. Thank you for joining us today here in the showroom as well as online. I'm going to talk about our midterm financial targets, of course. I'll start with our targets for revenue growth over the midterm as well as our adjusted operating income targets. And then what we'll do is we'll transition to Allan and Bob, who will provide more detail and color behind some of the strategies and initiatives meant to drive those financial targets. And then I'll come back and talk about our balance sheet, our cash flow targets. And from there, we'll go to Q&A. Before I get into those targets, so I'd like to start with a little bit of historical context. And also remind you of the fiscal '24 targets that we communicated just a couple of months ago in March. We just finished the third year since the beginning of COVID. And while navigating, I would say, a very challenging external environment that was plagued with additional significant inflation, continued supply chain disruptions and a stalled or sluggish return to the office. We delivered 17% revenue growth and our earnings were 3x what they were in FY '22. And at the same time, we adjusted and updated our strategy. So we feel pretty good about FY '23 and it's been a challenging ride over the last 3 years for sure. You might remember in the first year of the pandemic, our results were quite challenged, they benefited in a significant way from beginning backlog as well as a project pipeline of opportunities that was really building right up until the start of the pandemic throughout calendar 2019. And our income -- our operating income in the first year was supported by dramatic actions that we took to protect the company. Some of those included salary reductions to the tune of about 50% for almost 5 months across much of the global workforce. We also, as you can imagine, did a significant number of layoffs across our hourly workforce. We did have some benefits from various government subsidies as well, and we began implementing longer-term actions to reduce our cost structure. It seems like a long time ago, but it was only 3 years ago that we were in that chaos. And I will tell you, having a conservative capital policy, while we were navigating that, it was also quite beneficial. The second year of starting the -- or following the start of the pandemic when COVID variants were starting to disrupt what we all believed was the beginning of the return to office we were forced to take additional actions, which we did. And we were also forced to deal with additional -- or with the onset of significant inflationary pressures. These were actually extraordinary. They came on so fast and we're so significant. I've been in the industry for 27 years, and I had never seen anything like what we were beginning to experience in FY '22. And at the same time, we had supply chain disruptions and logistical challenges and other issues across our business that we were navigating. That inflation required us to take 3 price adjustments in a 12-month period, which we had never done before and begin negotiating it with our customer base. What the little chart on the bottom right shows you is that the inflation hit us very quickly and it takes time in our industry, which is contract by nature. It takes us time to negotiate and get those price adjustments implemented with our customer base. So we were hit with supply chain disruptions. We were challenged by logistics and labor issues, and we were dealing with the beginning of extraordinary inflation, and we took action with price adjustments. Those challenges continued into '23. And therefore, we took additional pricing actions and layered in a temporary surcharge, which we've since removed. And of course, we also took other actions to continue to adjust our broader cost structure. However, what we saw in '23 is that the benefits from our pricing began to catch up to the cumulative inflation. You can see that on the bottom right. So those negotiations that our sales organization was driving with our clients and through our dealers were starting to get implemented and therefore, it was starting to offset the inflation that continued in a significant way into '23. And the benefits of our revenue diversification strategies that you're going to hear more about in a few minutes from Allan, those also started to pay dividends and helped fuel 17% revenue growth. And all of that together contributed to our earnings being 3x what they were in '22. So a very challenging 3 years following what was one of our most successful years in over a decade, which was fiscal '21 when we delivered just about 7% adjusted operating income. Today, as we start fiscal '24, we are cognizant of the macroeconomic uncertainty. It's in the news every day. It's in the conversations of most business leaders and we're cognizant of it. And we frankly, we felt a little of it in the second half of fiscal '23. When our order patterns, along with the rest of the industry, felt some pressure versus the prior year which was really the first time we had felt any kind of order decline year-over-year in several quarters or since the beginning of the pandemic. So we felt it and it affected our backlog as we finish the year, and therefore, we'll have some consequence to fiscal '24. But what we want to talk about today is the optimism that is building for return to office. We feel pretty good about the growing desire of CEOs to get people back in the office. And what I like about it now is that they're talking about a minimum number of days. It's less about the discretion of employees. It's about we need people in the office, and we want you in at least 2 or 3 days. Some companies are mandating 5 days because they want people to get back together and collaborate. So that is optimistic for us because large company has -- that segment of our business took the biggest hit, as you'll see in a few minutes, from the pandemic, and it's begun to recover, but it's an opportunity for it to continue to recover along with our targeted diversification areas. So when we communicated our targets for FY '24 in March, we were cautiously optimistic. We set revenue targets that reflected modest organic revenue growth. And we set a range of earnings expectations for fiscal '24, that could range between flat to up, maybe as much as 20-plus percent. And we communicated again that on our analyst call in the month of March. The assumptions behind those targets include a volume decline across large corporate customers. Again, we had a soft backlog coming into the year that was impacted by FY '23 second half order patterns. But we expect to offset that or at least partially offset that with volume growth in education, health care and small to medium businesses. In addition, we expect significant improvement in our gross margins, primarily led by pricing benefits, which you can see in the bottom charts on the right are finally starting to offset inflation on a dollar basis, and we're hopeful that we'll be able to get some margin on that inflation that we've incurred over the last couple of years. And there are also some incremental -- early incremental benefits from some of the gross margin improvement initiatives that you'll hear more about from Bob in a few minutes. So that's our FY '24 targets. Thereafter, what we're targeting across the midterm is 5% to 7% average annual organic revenue growth. And we believe we should be able to attain a 6% to 7% adjusted operating income margin. And for free cash flow as a percentage of revenue, we're targeting 5%. And I'm going to walk you through the first 2, we'll hear from Allan and Bob and then I'll come back and walk you through the third before we move to Q&A. So for revenue, you'll remember that our segments are -- include the Americas, EMEA and in Other category, which is made up of Asia Pacific and a textiles business that's based here in New York. None of those segments have recovered to pre-pandemic levels of revenue, but they all have grown from the initial impact of COVID in the first year. So they went down significantly and then up and up, and the average decline that we've experienced over those 3 years, you can see on the lower left, has been in the low to mid-single-digit percentages. If I go through the segments, if I start with EMEA and the Other category, if you focus on the middle of the page, the top are some factoids for you to reference. But if you focus on the middle of the page, you can see that we're targeting across the midterm in EMEA, a mid-single-digit percentage growth rate. And in Asia Pacific and across Designtex in the Other category, we're targeting a low double-digit revenue growth rate. And if you look at the bottom of the page, we continue to target a mid-single-digit percentage of revenue for adjusted operating income. Those are targets that we've communicated in the past on analyst calls and in our investor presentations, and those are the targets that we continue to have for those regions. However, the environment in those regions is still relatively challenged. If you look at the second to bottom line on the chart, you can see that we made a little bit of money in EMEA in FY '23, and we lost money in the Other category in FY '23. And that's why this morning, we announced a series of actions that we're taking in these 2 regions as well as a small action in the Americas that Bob will reference in his discussion. Together, all of these actions target annualized savings of approximately $10 million to $12 million, and we expect them to be fully implemented sometime in the second half of the year. Hopefully more closer to the third quarter, but sometime in the second half of the year. And of course, we'll incur restructuring costs and the like to get those done, but that's what we're targeting in those regions. For the Americas, we continue to target adjusted operating income within a range of a high single-digit percentage to a low double-digit percentage. And we think that will be driven by revenue growth targets of a mid-single-digit percentage over the midterm. We've also included our FY '24 targets in there for your reference, but I'm not going to get into those details. We expect the mix of our business represented by the pie chart on the right to continue to evolve. And in fact, if you look at it, the -- and start top right, the small plus medium-sized businesses, education, health care and consumer, these areas that we're targeting incremental growth and really emphasizing diversification, we expect over the midterm will represent more than half of our revenue in the Americas, which is a pretty significant change compared to pre-pandemic where it was less than 1/3 and where it is today, a little bit more than 40%. So our strategy continues to diversify the revenue base for the customers that we serve. This next chart is really meant to be more for your reference. What it describes are the segments -- what we mean by each of our customer segments. It also gives you a reference of the primary brands that serve the segments. We're also including our estimated size of the market and our current market share, how these segments have behaved over the last 3 years, what our targets are for this year and what our targets are for the midterm. That's a lot to absorb. You can look at that slide and study it in the investor presentation that's now posted online. What I guess the takeaway that I would ask you to focus on is the addressable markets that we're targeting are relatively big. And when you look at our market share, there's clearly room for us to improve our market share. And if you look at how they've behaved over the last 3 years, it shouldn't surprise you that large corporate declined the most, but it might surprise you that we've seen some of the growth rates or that some have returned or -- to the level they were pre-pandemic already. So if you focus on the far right, you can see that we're targeting mid-single digit for a large company and generally stronger growth rates across those areas of diversification that we're targeting. And Allan is going to get into this in more detail when we transition to him in a few moments. It's a lot. It's in the presentation that's posted online, and Allan is going to go into more detail. From there, I'll pivot to our target for adjusted operating income margin of between 6% to 7% over the midterm. We have a long history of focusing on organizational fitness and that's really not going to stop. We have been, for years, focused on continuous improvement across our manufacturing environment. Trying to offset labor inflation and other run-the-business costs that we incur. We've taken the broad application of lean manufacturing principles that we've been focused on for more than 20 years in manufacturing, and we've brought those into the offices. We've benchmarked our corporate functions. And what that chart in the middle of the page shows you is that we also leverage global business centers in different parts of the world. Our business centers are captive. They're in Malaysia, Mexico and Romania. And what is illustrated by that chart is the percent of employment across various functions in our SG&A -- across SG&A that are resident in those business centers, which has been part of our overall fitness efforts. How do we access really high talent at a more affordable price inside of our business. And the other thing that we've done more recently is we've reallocated a significant amount of our investment from kind of our core traditional focus of kind of the Steelcase brand and large corporate customers to invest more significantly in small to medium, health care, education, consumer et cetera. So some of that investment was incremental, but a lot of it was reallocated from other parts of our business, which again, we think is part of our overall fitness. The reason I go through that is that will support a nice contribution margin that will be associated with the targeted revenue growth over the midterm. We also expect pricing benefits primarily in FY '24 as we get the last wave of benefits from the pricing adjustments that we've announced and really negotiated with our customers already. So that will benefit FY '24. But beyond that, which is where I want to spend a few more minutes are the 2 other actions that we're targeting in our business. And one is across our operations and the other is across the business more broadly. The first is something we've talked about on the last several analyst calls, we've been talking about an effort to improve our gross margins. And today, we're quantifying that objective at least $50 million of net savings across our cost of goods. Now this is exclusive of absorption benefits related to the targeted revenue growth, it's exclusive of the targeted pricing benefits that we primarily are seeking in FY '24, it's exclusive of the benefits that Bob pursues every year to offset labor inflation and other run-the-business costs. These are truly incremental. And we expect to drive it across 5 primary work streams that Bob's going to spend 10, 15 minutes talking to you about in more detail in a few minutes. The other area of improvement in our profitability is what we refer to as business transformation. This was originated from the requirement that we implement a new ERP. Now I know what you're thinking, "oh, a new ERP. That usually takes a long time, costs a lot of money and sometimes doesn't go quite as planned." We're aware of that. This was not an optional thing for us. The support for our current system will no longer be available to us later in this decade. So what we decided to do was rather than just simply implement a new ERP solution, we decided to step back and look at our business model with a clean sheet of paper and think of it really more from a transformation perspective. And so what we're trying to do is really reinvent our business processes while we modernize our technology and enable more resiliency. And what we've identified through the partners that we're working with is significant opportunity to drive more efficiency for us as well as for our customers and dealers. And we think those savings will pay back the investment that will be required to do this over the next several years. And that's a big initiative for us, and you'll be hearing more about that as we talk about our progress on each quarterly analyst call. So those are the main drivers of our adjusted operating income, and that gives you a sense of what's behind the targeted revenue growth. From here, I'm going to turn it over to Allan again to go through revenue in more detail. He will then transition to Bob and then I'll come back and cover our free cash flow target. Allan?

Thanks, Dave. Good morning, everyone. So you heard Sara talk a little bit about our research and our strategy. You heard Dave talk about financial targets, and I'm here to really talk about how specifically we're going to achieve those over the next few years. As Sara mentioned, we're really focused on growth, but we're also focused on diversification. When we think about growth, we think about our typical large customer segment, which has historically been the largest part of our business. And as those customers are coming back to the office, and as Dave mentioned, some customers are requiring their employees to be back 3 days a week, we've heard that quite a bit, also in New York City, which is a surprise because some of these larger markets typically are working from home. We really see companies are looking to transform their workplaces as they invest as their employees come back. What they've said is their employees don't want to come back to the same kind of rack 'em and stack 'em benches that they had pre-pandemic. They're looking for these new spaces that Sara mentioned to help collaborate but also to focus on privacy. The other way that we'll grow is through additional revenue diversification in the customers and the markets that we serve. So I'm going to dive into those in depth. First, I'll talk about our large corporate business. When we think about this, again, historically, it has been the largest portion of our business at Steelcase. Typically, we think of those customers that have more than 500 employees, we're targeting a midterm CAGR of mid-single digit. And again, this varies depending on where you are around the world, different markets, as Sara mentioned, in Canada are much slower to come back than certainly our customers in China. But we think there's a huge opportunity as hybrid work really isn't working for folks to help them reinvent their workspaces. I would also say that we stayed invested throughout the pandemic in not only our research but also our product development initiatives. And these are the things I'll talk about in just a few minutes about how specifically we're going to help people collaborate or focus. As Dave mentioned, one of our largest segments has declined quite a bit. But again, we think it also has an opportunity to represent a greater share of that revenue growth and profitability over these next few years. So let me talk about how we're hoping to do that. As Sara mentioned, one of the top issues that people are looking for when they come back to the office is a space to collaborate. We think there's a huge opportunity to improve the hybrid experience. And we recognize that there's a lot of in-person collaboration that will happen. So we've set up a lot of social spaces, and I'll show some examples. But we also think there's an opportunity to enhance the hybrid collaboration where part of the group might be at home, part of the group might be in the office. And we've worked with these tech partners over the past few years to create spaces that are really easy to use, they encourage employee engagement, and we also think they have a high degree of equity. And so when we talk about those things, easy-to-use means walk up and use. So the technology should be seamless. When we think about engagement, we think about this idea of both see, can I see the content and can I be seen as a participant? And can I hear what's going on and can I also be heard, do I have a voice in the room. And so we think that contributes to both equity and engagement. And we've worked with Microsoft, Logitech, Crestron and Zoom to create specific applications that integrate their technology that enhance the employee experience. Again, this is all based on research that we've done together. And again, we're not necessarily inventing the technology, but we're seamlessly integrating it into our furniture, and that is really a differentiator for us. You'll have a chance to see one of these new product explorations called Project Ghost that we worked on with Logitech. We had 90 CEOs here last week and each of them had a chance to go through this mockup experience. And what you'll see is it both blends the digital and the physical experience to create a near in-person experience with a person on the other end. So we invite you to come up and see that, and we've got a demo upstairs. Again, this is just a product exploration but our goal with all of our product innovation and development is to turn these into real products that are super affordable, easy to specify and you can put in multi endpoints around the globe. Other ways we're innovating with large corporate customers are our products like Karman, which we just introduced. And what I would say is Karman is our first-ever mesh chair with a new proprietary textile that we've developed that really creates, what I would call, a feeling of weightlessness in the chair. And it's named after the Karman line, which is when astronauts go into space, and they feel that first sense of weightlessness right, as they pass that Karman line. We wanted to really encapsulate that in our product. So we're continuing to innovate -- now this is a mid-price point product. This is like $600. So it's really in the bulk of the mid-price point for these ergonomic products, but it also has an incredible sustainability story. It's one of our lightest weight chairs, broadest color range available and it's true innovation. So this is an example of how we stayed invested throughout the pandemic to create innovation. So as people emerge from the pandemic, they've got these great solutions to not only help them collaborate but also help them at their individual workstation. And by the way, it's also great for home office. So we've started selling it on our store just 2 days ago this week. We invested a ton in understanding privacy. We worked with MIT and really top researchers on privacy throughout the pandemic. And this is just some examples of our privacy solutions that we developed all in the past few years. The reason that's important is we knew privacy was going to be a top issue for people as they came back to the office. So we believe we have one of the largest privacy collections, a portfolio of screens and other privacy elements, which I'll show you, to help people manage both territorial privacy, psychological privacy, acoustical privacy and importantly, visual privacy. What people have said in the research is they want as much privacy as they have at home or more as a reason to come back to the office. We did an Orangebox acquisition several years ago now. And Orangebox is probably the leading purveyor of pods -- acoustical pods in the market. And what you see in the lower left is a picture of some new innovations that we have, which are both for individual use. So you see on the lower left, those pods, we see them for group and team spaces. And at the top, actually, we have our CEO's office, so Sara's office, she sits in one of these Orangebox privacy pods. And the idea here is that these can go up in less than 2 hours. They're super affordable and they have a proprietary innovation, which is an articulating roof, which opens in the event of a fire and closes obviously when you enter the room for privacy. But the cool thing about it is you don't have to plumb it to any of the building's systems. So these are super easy to put up, if you don't like where it is, you can take it down in less than 2 hours and move it over a weekend. Again, we think we're uniquely positioned, and they continue to innovate every few months on new opportunities for pods. If customers need even more privacy, we suggest things like full-height walls. We have invested a ton with our new Everwall product over this past few years. We've just launched that and we have sold miles and miles of walls at this point. So we're really excited about this. This is a great solution that people need really strong acoustical privacy. The other thing we did last year was we invested in the HALCON business. This is a high-end wood manufacturer in Minnesota. They're probably the top in the industry for private offices. And we bought them last year to really help us round out our portfolio to enhance these levels of privacy. Also, we wanted to invest in areas that were growing. Legal, those financial services customers that are still investing in private offices. So we wanted to make sure that as workers return, they had a great place to go that was super acoustically private. Another growth area for us is the outdoor space. Typically, people think of this as southern locations, got a patio or things like this. Actually, we see is this is across the globe in both northern and southern climates. And again, people are looking to activate these outdoor spaces as a place to socialize, have places to eat and really enjoy being together. We have products that we make through our Coalesse and Viccarbe brands. We bought Viccarbe several years ago as well as through partners, which you see listed on the right-hand side. And this allows us to have what we think is the broadest portfolio for outdoor products in the industry. And the last way that we really think about helping our corporate customers return to the office is our thought leadership. We really want to be a trusted partner for our customers. And they've really turned to us in the pandemic to ask us questions about our industry-leading research. And how we articulate that is through our Work Better magazine. And each of you have a copy in your takeaway bag, so please check it out. Or if you want to listen online, we got great podcasts, which help our customers understand some of the issues that they need to consider as they ask employees to come back to the office. And I think that while the employee value proposition is certainly shifting back to the employer, our customers, which are typically these leading organizations always want to balance employee needs. And I think this is a great way for our customers to understand and think about that. The next area I'll talk about really is around our diversification strategy. And as Sara mentioned, historically, small- and medium-sized businesses have not been a strong focus for us. But since our AMQ acquisition back in 2017, we really got focused on how to help, support small and medium-sized businesses. These are typically customers that have less than 500 employees, we're targeting a midterm CAGR of high single digit. And what we found was this is typically groups of people that were less impacted during the pandemic. They maybe went home for a few weeks, and they were right back in the office or some in certain markets didn't go home at all. We see this segment as much more transactional. They're really looking for inexpensive products to be able to specify quickly and get in their offices and be able to make changes quickly as well. So I'll talk a little bit about how we're supporting small and midsized businesses. First is the product portfolio. I mentioned AMQ. That's certainly a great portfolio, which we have expanded quite a bit since we bought the company back in 2017. Again, stayed invested during the pandemic, but we also expand our offering with West Elm. So West Elm, as you guys know, is I think they are one of the larger home retailers in the country. And they have a great aesthetic and a terrific price point. So what we wanted to do is bring the West Elm aesthetic to the commercial market. So we have these products that are designed by West Elm and made by Steelcase. And obviously, we have a lot of Steelcase products that we sell to this market as well. One of the big things for these customers are experience. So we have typically served this customer as a made-to-order product -- sorry, made-to-stock product which is in contrast to our made-to-order product, which is primarily what we do around the globe. So that means people can usually, in most cases, get their own fabric, get their own special surface materials, et cetera. What we found with this customer base is they really need things in stock. And so they're probably less choosy about the surface materials, less choosy about the finishes and they really need to get it quickly. So we've just most recently opened a new AMQ East facility in Grand Rapids to serve customers on the East Coast. And again, what we're looking to is promise that those products can be delivered within 10 days. That's a big deal in our industry because a lot of times people will place an order, and it might be weeks until it's delivered. Now customers can place an order and have it delivered within 10 days. The other way we're looking to improve the experience for these customers is to offer free design specification services. So imagine sitting down with one of our in-house designers. You can actually choose your fabrics, choose your finishes, and again, do layouts that are simple and easy to implement, put the order in and all of that will arrive to your office in less than 10 days. So free design services is a key as well as improving our experiences on things like our website. We've seen a huge increase in our user base in the past few years as we implemented more digital tools. And we also see that this is around demand generation, right? We've created a huge robust marketing platform for our teams to be able to qualify people, turn leads into qualified leads and then track it all the way through to a sale. And by the way, this is also engaging with our dealer community, which we believe we have one of the top distribution groups in the world, and each of these folks are able to participate as well with these small- and medium-sized businesses, which actually creates new client opportunities for them because in some cases, these are not clients that they're doing business with today. Another area of growth for us is education. We've been in the education business for a long time, as Sara mentioned, but primarily up until the Smith System acquisition, it was focused on higher education. When we think about Education now, we think about K-12, we think about higher education. And if you think back to our corporate groups, we also think about corporate learning, so we can take that same portfolio and apply it to those kinds of spaces. But for today's purposes, we're just going to talk about K-12 and higher education. We are targeting a low double-digit CAGR in the midterm. And what we found was throughout the pandemic, this is an incredibly resilient purchasing group, right? They were really looking to transform the classroom. They were taking advantage of federal stimulus money and K-12 spaces really haven't actually kept up with the change in learning pedagogy that's happened over the past few years. So when you look at most classrooms today and infrastructure -- I was in Atlanta Public Schools last week, they have 55,000 students that they serve, and they are really looking to transform their spaces. And many of those spaces have not been updated since the '50s, so not only are they trying to take advantage of the federal stimulus money, they're trying to have their new spaces match their learning curriculum. So we think we can continue to increase market share. We gained a whole new series of dealers with our Smith System dealers, which are typically education, K-12 only and we think there's continued favorable dynamics in the K-12 market over the next couple of years as federal stimulus money continues to flow into local school districts. The other thing would be higher education. They are continuing to have to compete for students and while certainly, admissions are going down, that makes those students who are choosing colleges even more important as they choose a lot of times based on the physical facilities. We've done a great job expanding the portfolio during the pandemic. Again, brand-new Smith System's products that can apply not only to K-12, but also higher ed. And then we've also cross-sold with the AMQ portfolio into administrative spaces for K-12 school districts. So we're really trying to think about how these portfolios can mix and mingle to create new opportunities for us and our customers. And then we are also leveraging digital tools. I think this is an important thing to help us find new customers. So a new business intelligence platform that helps us identify potential customers. We track engagement with each of those folks. We're able to retarget with new specific communications, and it helps us track and qualify leads. So again, we have a very serious team that's focused on turning leads into sales. And we like to say at Steelcase that we are not only the most local, but we're also the most global in our industry. And this is an example of taking that Smith System portfolio and growing internationally. So one of our fastest-growing subsegments is our international schools in Asia Pacific. We have a team of I think, about 15 people now in Asia Pacific that are just focused on growing that international school group. That's been very successful taking that Smith portfolio and bringing it to Asia. And also, we're working on higher education. This is an example of University of Glasgow in Scotland in our EMEA business that is also focused on not only higher ed, but K-12 as well. Next, I want to talk about health care. When we think about health care, we think about large IDNs, large systems, we think about regional clinics, but we also think about medical office buildings. We're targeting a high single-digit midterm CAGR, and we've served health care organizations since the '40s. We have been in this business for a very long time. But most recently, we've really redoubled our efforts on the clinical areas because what we find is with health care customers, if you know a lot about the clinical area, it pulls the admin through oftentimes. And so that gives us a high degree of credibility because we study human behavior. We study nursing behavior. We think about how to increase patient outcomes, we think about speed of healing, attracting and engaging nursing staff. And it's a big deal when we talk about these business benefits for hospitals, and this gives us a tremendous amount of credibility. We expect that clinical market to continue to grow, we see admin cooling off a little bit. It depends on the region. But we think also obviously, a dramatic age in rising -- rise in aging will help stimulate the health care segment. We've worked a lot on expanding our clinical offerings over the past few years. And when we think about clinical, we really think about innovation, patient seating, we think about sleeper sofas. On the upper right, you see a new deployment screen that people have rather than cubical curtains. We have a new screen that can be pulled out and custom printed to divide the space and give patients privacy. We think about nursing respite areas, a place to kind of get away without having to go away. And then we think about social, how do we create break rooms and social spaces for nurses to be able to recharge and refresh. So we've thought a lot about expanding our clinical offering in the hospital. We have also focused on new marketing and promotion, whether it's in the Work Better magazine, which you'll see, new webinars and seminars for hospital administrators, new brand story, video, sales tools and we have a huge new digital marketing campaign that started in April of this year. The last segment I'll talk about is consumers. When we think about consumers, we really think about what we call prosumers. These are people that have high ergonomic needs. They value high-quality solutions, and they're really looking to us to help direct them as to what to choose. We're targeting high single-digit growth CAGR over the next midterm. And what I think is interesting is this is a segment that has really grown throughout the work-from-home period. I remember back to the pandemic in May of 2020, and we stood up a team that was maybe at the time, 2 people and by the end of the month, we had 25 people selling our work from home products, got a website up, started taking orders literally within 30 days. And I'm really pleased to say that we grew that business from almost nothing to almost $100 million in a year. So when we think about it, and we focus on it, Steelcase really tries to remove any kind of executional risk. We try to staff it correctly, resource it correctly and make sure that we actually win when we play to win. I would say that in addition to the prosumer area, we're also looking to influence retailers. We have a terrific relationship with Amazon, Best Buy, West Elm, where they sell our products in their stores, but also Alibaba, one of our fastest-growing consumer segments is really in Asia, and we're working with these retailers around the world. Again, I think that we'll still see demand for work from home because even as people come back to the office, what we see is they might have a dedicated 1 or 2 days a week where they need a proper ergonomic setup and customers are telling us this. In some cases, it might be a customer purchase directly. In other cases, it might be a company-sponsored purchase. But either way, we can provide those solutions. I'll give an example of a tech company that -- we were asked to supply 16,000 chairs all around the world to individual addresses. Now this is throughout the world, including India. And we were able to kind of pull that off with Bob's logistics platform to provide these choices to these work from home folks that are working from home just 1 day a week. One other way in addition to the home office, which you see up in the right, we're really expanding on our seating success. And how we're doing this is through a couple of different ways. One is esports that goes back to connecting with consumers in a way that applies a personal interest to why they might be interested in buying a Steelcase product. We have a huge program with schools all around the country, and we've developed new esports applications and specific products to support both professional and educational teams. And we're also focused on gaming, which I think has been a big thing over the past few years as you know. We worked with influencers and we had 1 influencer that I thought was great. He took a 58-minute video to unbox our Gesture chair and declare at the end that this was the best chair to support gaming. And this guy has over 4 million followers and just from that one thing, we can cite $1 million worth of sales in less than a few weeks. So a lot of these guys have a tremendous following. So we're working not only to create the great products but also to work with great promotion to help sell these products. So again, as Sara mentioned, we believe our offer is super well positioned to help customers work better and achieve our growth targets over the next few years. So happy to take questions at the end, and I'll turn it over to Bob Krestakos.

Thank you, Allan. Hi, everyone, thanks for coming. So as the pandemic and the supply chain challenges began to abate, global operations at Steelcase began to work on these 4 imperatives. 4 things that are so important to our business strategy to give it a stable foundation. And I'll take you through each one of them briefly. So first, Dave alluded to it, a competitive -- a more competitive cost structure. He alluded to it as $50 million plus, and I'll say it too, we won't stop at $50 million, we'll keep going and going as we can. And I have a lot of confidence in that number, and we've been in motion on this. We've got 60 to 70 active projects right now. Another 110 projects are in our queue. We're actively tracking those in our database. Every month, Sara and Allan and Dave and I meet with the teams in a steering team context to give them guidance and help them set priorities. So very confident in that. Let me tell you a little bit more about how we'll go after that cost structure. So Dave said, here are the 5 work streams, I'll take you into each one individually. So first, on the footprint and efficiency. So when you think of footprint, think of all of our factories and all of our distribution centers in North America. The key to getting better cost of goods sold and margin improvement is to make sure that, that footprint is working efficiently and effectively. It's got to be hard working and internal metrics that we use around revenue per square foot kind of tell us if we're on the right track. One of the ways that we'll go after those margin improvements is we've made some investments already, significant investments in wood laminate casegoods. The fit and finish of our wood laminate casegoods is going to be better than it ever has been, but significant margin improvement comes from dramatically reducing the labor content in each of those products. Similarly, in our core steel operations, we've made significant investments there, too. Core steel in modernization of the equipment for laser cutting, tube cutting, it allows us to compress that footprint. We get better capacity, better throughput, and it opens the door for some of the in-sourcing for products or for parts that we didn't use to have. So those are significant levers as well. But as a lean and just-in-time manufacturer, the flow of the plant, the material flow, the labor flow is also part of the efficiency work that we're doing as well. I mentioned also that it's part of distribution. Dave alluded to our 8-K that was posted today. We're announcing that we're closing our Atlanta distribution center, and we'll move that operation into Athens, Alabama where we have a factory and we'll operate out of there. About 6 months ago, we closed our distribution center in Denver, Colorado. When we made that closure, we moved that operation into our facility that already existed in Dallas, Texas. We had no customer disruption as a result of that. And I don't expect any customer disruption from the Atlanta closure as well. We designed for that, and we'll gradually move the distribution into the new facility. So footprint and efficiency is a significant area of improvement for us. Complexity, all types of complexity, complexity in the products, complexity in the process. That's an opportunity for us as well. Working jointly with Allan's team. We're taking a hard look at the product offerings, we're able to cull some of the older products that we have, migrate our customers to some of the newer generation things. We're also scrubbing all the options and features in the existing products and paring away things that add complexity, but not much value. And that's been a successful area for us as well, and we'll continue to do that. Design for margin is another work stream. Sometimes we call this design for manufacturability. And I've got a couple of good examples as we go along. But essentially, again, as working jointly with our sales teams and with our product and design teams to find ways to make it easier to manufacture and easier to assemble. It could be common parts, it could be common platforms, we've had some significant successes there already. I'll talk more about the supplier cost improvements. It's a fairly big area all by itself. So I'll give you a little bit more detail on that as well. The final stream was cost of non-quality. Sometimes we call that CoNQ, but it's basically the cost of our mistakes, damages, defects, returns, warranty work. 7 years ago, we took a pretty big deep dive into that area, and we made a significant change. We got to a new normal that's a lower level. We're going to do that again. And then we're going to go down a significant level again in cost of non-quality. So that -- I should have mentioned, but that chart is proportional where we think the $50 million will come from, and I'll keep going on some of those discussions. Supply management is essentially our procurement and sourcing organization. 3 activities within this area will drive the cost savings. Cost reduction and cost avoidance, we've been working on that. The hyperinflationary times that we've been in drove commodity prices way up, and we see significant opportunities to negotiate them back down. Cost avoidance is real it takes work in order to avoid those costs. But as Dave said, it's not counted in our number. It's exclusive of that number. The collaborative opportunities is new for us. So we've been working on this collaborative opportunities start out as ideas. There could be some possibilities for this. As we develop them and vet them, they'll end up in some of those already other existing work streams. But for example, looking across all of the products, standardizing on thicknesses of edge banding, thicknesses of screens. There's a number of those kinds of ideas that will come through, the wood core that we use can be standardized. Tons of opportunities there for collaborative opportunities. So the supply management area is quite active and quite a big contributor to that goal. This design for margin opportunity, this is a nifty little project that I really like. It's an intellectual property opportunity for us. We filed a patent. And what it does is it helps us increase the density of our chairs as we move from our seating factory into our distribution centers. So believe me, it's not that easy to increase the cube density of a truck. So a 30% improvement is pretty good. It's pretty significant. The sustainability story there is a headline all by itself. But taking trucks and trailers off the road is where we get that savings. And that $1.5 million savings, that's just 1 chair line. So as we kind of develop this and refine it, we think that, that number will grow as well. I'm excited about that one. I want to keep going with supply chains a little bit with you and into the second imperative, which is we need more agility and resiliency in our supply chains. Supply chains are different now. So we have to adjust for that fitness. So I want to talk to you about the 4 elements of our supply chains, the long-distance supply base, the local supply base, a part that we use in our industry called the vended finished goods suppliers and of course, things that we do to in-source parts, parts that we make ourselves. So in this slide, I describe, here are the characteristics of those different elements of the supply chain. It's pretty straightforward. But what we do is we -- and we've been working on making some of these adjustments. What we believe to get more agility and resiliency is you've got to place those parts in the right area. So in other words, we see that some things that are in the long distance supply chain today should maybe move to local so that they can be just in time or they can be in-sourced. And other things might have to move into long distance. We've been doing that manually, but what we're working on today is an AI-driven supply chain tool that I think will be unique to us. I don't think anyone else will have this. And what it will do is it'll analyze the thousands of purchase parts that are out there and recommend a placement for those. And then we'll adjust those accordingly. So I'm excited about that opportunity as well. And then I want to talk to you about the third area, which is improving the dealer and customer experiences. It was really tough during the worst times of the pandemic. And we learned a ton. So what we've said here in this imperative is, first, you've got to get back to those service levels that existed before the pandemic. We're essentially there, our product lines are at standard lead times, 96% of the products are at standard lead time. Other areas where we have on-time deliveries and stuff, those are pretty much in line as well. We have to keep going. And when -- in the worst parts of the supply chain disruption, we had really a lot of difficulty shipping complete orders to our dealers. They felt that pain, and we did too. One of the tools that we developed in the course of this, is another AI tool that was able to predict when an order would ship and complete. And what we saw was a significant amount of the issue was from the supply base being late, this tool could predict with 92% accuracy if an order would ship and complete with 10-days notice. That's huge for us. 10 days gives us opportunity to inform the dealer. The dealer can make plans or we can correct, and we can make adjustments in order to avoid incomplete shipments. We've seen other things in how we can dynamically prioritize the orders. When you don't have enough parts for all the orders, you have to make hard choices. And that didn't always -- that wasn't always so easy. The tools that we're developing have made that significantly better. So I really think we can get to better-than-ever service levels. Our true north in this area make ourselves easy to work with for our dealers and differentiate ourselves on that basis. So I'm excited about that one as well. Finally, I labeled this one just do new things, right? And Allan and Sara and Dave have described the very traditional part of our business, which has been large corporate. I'm going to use an internally focused kind of term here about operational models. When you think about large corporate, for us in operations, that is on a line dealer base, placing an order, they're expecting 4 to 6 week lead times on almost everything. We make to order with a just-in-time approach and we deliver in a consolidated shipment. That's large corporate. That's our sweet spot. And we do that really well. But as Allan and Sara and Dave have described, there are other things to do as well. So that small and medium business model blends make the stock and make the order together. That's very different for us. So we're thinking about inventory placement and replenishment and things that we didn't really have to do in large corporate before. The other couple of models as well, retail and consumer, Allan talked about working with online retailers like Amazon and being in sync with replenishment with Amazon, very different than the traditional operational model for us. Architectural products, essentially walls. We're really excited about the new product Everwall. And our operational model there helps us work much more effectively in a general-contractor context rather than the majority of the other work that we do for other products is kind of in the fit-out stage. So it's different. The final thing in this new operational model is the disruption model itself. So we've learned just a bunch of adjustments to make in our systems, in our inventory levels and the way that we do things to buffer customers and dealers from supply chain impacts when they exist. And that's been quite effective. So now we have that playbook that we can turn to immediately as we see things start to rise up in supply chain disruptions. The other side of this, in terms of doing new things is something we call subscale. Subscale is essentially being able to operate at low volume, high variation. Exactly inverted from where scale wants to be. This supports us in our customization efforts today. So when we do nonstandard products, subscale's at work. It's been very effective. We've built garages in our factories, areas that we -- where we do bench builds and bespoke operations. And also we've been building out a subscale-based supply chain. What we think is possible, though and new is to use subscale in certain situations to support our product development efforts. The Frank Lloyd Wright Collection is a good example of that. It's operating at subscale today, and we'll be able to move it to scale if the volume materializes the way that we hope. But other areas as well where there's maybe a long lead time for tooling or other things while we're waiting, we want to be in the market. And subscale may be able to help us do that in the right conditions. That's a flavor for some of the new things, and I look forward to your questions. And I'll pass it back to Dave.

Thank you, Bob. Thanks Allan, thanks Bob, for providing that color. I trust that you all found that beneficial to better understand some of the drivers behind our targeted revenue growth and improved profitability. I will wrap this up with some comments about our free cash flow target before we move to Q&A. As I said earlier, what we're targeting is free cash flow as a percentage of revenue of approximately 5%, that's a significant improvement of where we've been tracking for the last few years. On our analyst calls, we've been talking about the impact that working capital has had on our overall free cash flow because of the supply chain disruptions that got -- started to get bad in '22, got worse in the early part of '23 and has since been improving, and that impacted not only inventory, but also our receivables which has been improving over the back half of '23, and we expect that to continue to improve into '24. The targets across the midterm include a working capital day assumption of about 45 days. That's a little higher than what we were tracking at pre-pandemic. I think it was a little bit lower than 40 days. But with where the supply chains are today, the fact that they haven't completely stabilized and haven't been pressure tested with kind of consistent volume growth. We've -- we're taking a bit of a conservative approach in how we manage our inventories over the next couple of years. And then from a capital-expenditure perspective, we're continuing to target 2% to 3% but believe that, that could be closer to the 3% range than the 2% range that it had been tracking at pre-pandemic and more recently. Of course, if we hit those targets, it's going to put out a lot of cash for us to think about how we're going to put to use. So I'll spend just a minute talking about our priorities. As you can imagine, our top priority is reinvestment not only organically, but inorganically, we have done a series of acquisitions, as Allan mentioned, over the last 5 or 6 years, they've been doing very well and have helped accelerate some of our targeted growth areas. And so I imagine that we'll continue to look at those as opportunities to accelerate revenue growth. And that's really the driver of why you see depreciation and amortization going up at a faster rate than CapEx. It's because of the acquisitions. It's the amortization associated with the intangible assets that we capitalized in connection with the purchase. So clearly, our priority is to continue to invest in the business as we continue to strengthen our overall revenue base and diversify across the customers and markets that we serve. From a dividend perspective, we target to sustain a strong dividend. We've recently reset it at a $0.10 per quarter level. You can see that we took a deep reduction initially in the pandemic, moved it to $0.10, moved it back to where we were pre-pandemic and then more recently, have reset it at $0.10. We target to continue to use the dividend as a means to return value to shareholders. In addition, from a share-repurchase perspective, we will continue to offset or target to offset dilution from executive awards or broader employee awards that we have. And occasionally, we'll be opportunistic like we have in the past and take advantage of market conditions and/or excess liquidity that we feel on our balance sheet and look to the market and buy back some shares. That's our story this morning. As we said, FY '24, we're cautiously optimistic about. We feel like we can continue to build on the momentum that we've established in '23, and we are feeling pretty good about the midterm, where we're targeting, again, 5% to 7% annual -- average annual organic revenue growth, we're targeting a 6% to 7% adjusted operating margin and strong free cash flow. So from there, I'll invite Sara to join me upfront. And I'll turn it over to Mike O'Meara to facilitate any questions that you might have.

Great. Thank you, Dave. For those of you in the room as we work into Q&A, we'll just ask that you grab the microphone from Brad so that those online can clearly hear your question. And for those of you online, you can either directly e-mail me a question at momeritsteelcase.com or there is an option in your online box where you can submit a question, and we'll take your questions that way. And we have a question from Greg Burns.

Greg Burns from Sidoti. Can you just talk about your confidence in the midterm growth targets that you've laid out today? Are you seeing anything specifically now in terms of maybe forward-looking metrics? I know there's been a little bit of a lull in terms of order patterns, but are you seeing anything changing incrementally positive that gives you confidence in those targets?

Yes. It's a good question. It's a fair question. Maybe I'll share a couple of things. One is from our last analyst call -- last couple of calls, we've talked about a strengthening project opportunity pipeline in the Americas. I think in March, we referenced that 8 out of the last 9 months. We saw growth over the prior year in our project opportunities, and that tends to be driven by our large corporate customers. Also maybe a couple of other things to think about, I would just say the growing sentiment from CEOs about getting their people back into their spaces, which maybe I'll invite Sara to talk about a little bit more significantly. And I think that's evidenced by the fact that we had an event here last week in the showroom that Allan and other executives participated in, and we had something like 90 or 100 CEOs that participated in the event in our showroom. So I think that is kind of telling us something about the sentiment or attitude about getting back into the office.

Yes. I think that's well said. I would just add that in general, I think we see C-suite level engagement in these questions around workplace, and workforce and investment in spaces being at a high. I can't recall a time when we've seen this much interest. And this much commitment and conviction. I think we're far enough into the pandemic that as more and more CEOs and leaders see their peers or their competitors start to make moves there's a bit of this feeling like, "okay, what are we going to do? How are we going to make those choices and catch up." So we see that reflected in the fact that while maybe a year ago, we were having good conversations with customers and decision makers. We weren't always seeing that really good discussion translate into activity and planning a project in an action. And I think now we are definitely seeing conversations more and more translate into customers saying, "okay, yes, I want to move forward and make that investment, pilot that space, build out that floor," whatever it might be for them to move forward.

Yes. So that's large corporate, Greg. And then if you think about the other areas that Allan talked about and I summarized, I mean, we've seen growth, nice growth in those areas and believe that we can continue to see growth in those targeted segments.

Great. I'm going to read a question that we received online from Budd Bugatch from Water Tower Research. He directed this to Sara. He just said, are there any peculiarities or trends across the globe to explain why the U.S. has lagged on its return to office trends versus some of the other geographies?

It's a great question. And I think there are a lot of hypotheses about why that might be, I think it's hard to say that there's any specific one answer. I think we definitely see that in some parts of the world, it has to do with a wide variety of differences. We serve customers in markets where for many people, the office is actually the place where you have reliable access to things like air conditioning or electricity or WiFi that you might not have in your home. We see different dynamics in different parts of the world with respect to things like commuting or access to childcare that I think influence patterns and behaviors around who feels that they can or should come back to work versus not. So I think there are a lot of broader, I'll say, societal dynamics for lack of a better word that I think we hypothesize our influence in those differences. But again, the really good news for us is, I mean, we are a global leader in workplace. But again, the really good news for us is, I mean, we are a global leader in workplace. So we have the benefit of being able to take things we're learning in 1 market and leverage that in another market. Where we see places in the world where our customers are actively in the office, we're there. We can sell them the products we need while we spend more time in other parts of the world, maybe nudging and encouraging customers to take action. So I think this dynamic, while it's highly varied depending on what part of the world you're talking about, in some ways really plays to our strengths as a global provider of solutions.

We received a question from Reuben Garner from the benchmark company. I think this is directed to you, Dave, probably. He's asking what level of volume is needed to get to your midterm targets. The peak last cycle, we had -- you had $3.7 billion in revenue and 7% operating margin. Do you need to get revenue well above the 3.7% given all the pricing that we've taken? Or is it on the -- what's the volume base?

Well, I think if you listen carefully to the targets that we talked about for pricing, primarily playing out in FY '24 and then you take the midterm targets and you roll those out over the next 3 years, you -- 3 to 4 years, you would roughly get to a kind of a $4 billion range of revenue, which would imply that we would be getting back to similar levels of volume that we had in FY '20 with pricing benefits covering the extraordinary inflation on top of that.

Great. We received -- we actually have a few questions in the queue. There's a question on the small business initiative, and this is probably for Sara or maybe Allan. The question is what's the go-to-market strategy here? Is the plan to use existing distribution? Or do you need to expand your options to grow this business? And what about product portfolio? Often, this segment wants lower-priced products? Do you think you have the right products? Or does it require additional investment?