GRAND RAPIDS — A cyberattack that stalled global operations for two weeks did not lend any favors for Steelcase Inc., which continues to see sluggish revenue stemming from rough market conditions brought on by the COVID-19 pandemic.
The company’s quarterly earnings report offered a peek into the financial ramifications caused by a ransomware attack that occurred on Oct. 22 and ground global operations to a halt.
Steelcase reported the attack effectively delayed approximately $60 million in shipments to the present fourth quarter of its 2021 fiscal year.
The delay contributed to a 35-percent drop in revenue for the third quarter, which ended Nov. 27. Steelcase said 6 percent of the decline could be attributed to the shipment delays associated with the shutdown related to the cyberattack. Of those delayed shipments, $50 million are scheduled for the Americas and $10 million are for clients in Europe, the Middle East and Africa (EMEA).
“During that time, our lead times for new orders were longer than normal, of course, and we may have lost some discretionary business,” Steelcase CEO Jim Keane said on a phone call with brokerage analysts Friday morning. “We don’t think this was significant. We are estimating we incurred about $6 million in incremental costs in Q3, which is significant, of course, but not material to our results.”
By Keane’s account, the company’s I.T. department was able to identify the ransomware attack early enough before it deeply infiltrated the company’s system. In some cases of ransomware, bad actors can encrypt files and systems and hold them hostage until the company pays a monetary ransom.
“Our lawyers tell us we were hit by a novel day-zero attack orchestrated by very sophisticated actors,” Keane said on the call. “Their plan is to encrypt all your data, destroy your backups and collect a ransom. None of that happened.
“While we were initially penetrated and some of our network systems were compromised, our I.T. team caught it early, and our layers of defense were able to stop the attack,” he added. “And we were able to restore our data from backup. Many of our systems were completely unaffected and we are not aware of any loss of sensitive customer or employee data.”
On Thursday afternoon, the Grand Rapids-based Steelcase (NYSE: SCS) said it generated $617.5 million in revenue for the third quarter of its 2021 fiscal year, a 35-percent year-over-year decline.
The company’s quarterly earnings plummeted to $2.1 million, or 2 cents per diluted share, which compares to a year ago when it reported earnings of $54.9 million, or 46 cents per diluted share.
Executives said a delay in return-to-office planning contributed to the declines in sales and orders in the quarter. In its Americas division, revenues fell 40 percent and orders declined 42 percent compared to a year ago. Meanwhile, revenues were off 15 percent in the EMEA region and orders fell 29 percent, according to the earnings statement.
Steelcase ended the quarter with $484.4 million in cash on its balance sheet.
The company said it had a $545 million backlog in customer orders at the end of the quarter, which was 15 percent lower than in the prior year. Steelcase also said order levels in its present quarter were similar to what it experienced in the third quarter.
Based on those trends, Steelcase expects to generate $650 million in revenue for the fourth quarter, 31-percent lower than in the same period last year. Adjusting for the sale of PolyVision and currency, the company expects revenues to be down 28 percent on an organic basis.
Steelcase also said it expects earnings to be roughly breakeven for the quarter.