Flexsteel Industries, Inc. Reports Strong Preliminary Results for Second Quarter

Flexsteel Industries, Inc. (“Flexsteel” or the “Company”), one of the largest manufacturers, importers, and marketers of residential furniture products in the United States, provided several business updates, including preliminary second quarter fiscal 2024 results, a financial outlook for the remainder of fiscal year 2024 and fiscal year 2025, and recent management and board changes. The Company also announced it will issue its second quarter 2024 financial results after market close on Monday, February 5, 2024.

Preliminary Fiscal 2024 Second Quarter Financial Results

The Company expects to report the following financial results for its second quarter ended December 31, 2023:

• Healthy sales growth of 7.5%: Net sales for the quarter of $100.1 million compared to $93.1 million in the prior year quarter.
• Robust sales orders of $104.8 million representing growth of $12.8M, or 13.9%, compared to prior year quarter.
• Significant gross margin improvement to 21.9% compared to 17.0% in the prior year quarter.
• Solid GAAP operating income of $4.6 million or 4.6% of net sales compared to $3.8 million or 4.0% of net sales in the prior year quarter.
  • Non-GAAP operating income of $4.6 million or 4.6% of net sales compared to $1.0 million or 1.0% of net sales in the prior year quarter.
• GAAP net income per diluted share of $0.57 for the current quarter compared to net income of $0.53 in the prior year quarter.
  • Non-GAAP net income per diluted share of $0.57 for the quarter compared to non-GAAP net income of $0.08 in the prior year quarter.
• Strong cash flow generation: cash flow from operations of $18.9 million for the quarter driven by higher profits and a $15.6 million reduction in inventories.
• Strengthened balance sheet: Debt repayments of $15.1 million for the quarter, or a 46% reduction in borrowings under the line of credit.

Management Commentary

“I am extremely pleased with our second quarter results. We are competing well, growing and gaining share, improving profitability, and generating cash to reduce debt and further strengthen our balance sheet,” said Jerry Dittmer, CEO of Flexsteel Industries, Inc. “While macroeconomic conditions combined with discretionary consumer spending shifts away from home furnishings continue to present headwinds to the industry, our growth initiatives are enabling us to profitably grow despite difficult conditions. As a result, we delivered strong net sales of $100.1 million, or growth of 7.5%, which was slightly above our sales guidance range of $94 to $100 million. Comparisons to prior year continued to be adversely impacted by the elimination of ocean freight surcharges in the prior year when ocean container delivery costs were inflated. Excluding the approximately $3.5 million impact from surcharge reductions, growth from unit volume and sales mix was an impressive 11.7% in the quarter, reflecting our strong sales execution.”

Mr. Dittmer continues, “In addition to our sales momentum, we are executing well operationally and leveraging the combined benefits of continued productivity and cost savings, pricing discipline, and ongoing product portfolio management, to meaningfully expand gross margin and improve operating income. As a result, our operating margin of 4.6% in the second quarter was a significant improvement compared to the first quarter and prior year quarter, and above our guidance range of 2 to 4%. We also expect to further improve operating margins in the second half of fiscal year 2024 and fiscal year 2025. Lastly, we are making strong progress in improving working capital efficiency. Given improved demand stability and better supplier lead times, we optimized and reduced our inventories by $15.6 million in the second quarter while continuing to provide exceptional service levels to customers. Our strong cashflow was largely used to reduce debt in the quarter. We are pursuing additional working capital improvements in the second half of the year, and when combined with improved profits, we expect to end fiscal year 2024 with nominal to no debt.”

Mr. Dittmer concludes, “Our strategies are working, and we’re seeing the outcomes in our improved financial performance. While I’m encouraged by second quarter’s results, I’m more enthused about the results yet to come. Our organization is driven and executing well on multiple fronts which gives me confidence in our ability to continue to profitably grow and generate cash near-term, but more importantly, to generate significant value for our shareholders and customers long-term.”

Management and Board of Directors Updates

Effective January 10, 2024, Michael Ressler was promoted to Chief Financial Officer, Treasurer and Secretary. Mr. Ressler has over seventeen years of experience with Flexsteel and has held a variety of cross functional leadership positions in accounting, finance, change management and manufacturing. Most recently, Mr. Ressler has served as Vice President, Manufacturing. In his new role as CFO, Mr. Ressler will retain his leadership responsibilities of the Company’s manufacturing operations.

“Mike’s leadership contributions have been instrumental in the Company’s transformation over the past several years,” stated Derek Schmidt, President. “Mike has a strong track record of delivering results, and I’m confident that his deep knowledge of Flexsteel and our industry combined with his extensive experience in finance and operations, will enable him to make a profound impact on the Company’s success as CFO in the years to come.”

Concurrent with Mr. Ressler’s promotion, Mr. Schmidt has been promoted to the position of President and appointed to Flexsteel’s Board of Directors. “Flexsteel is fortunate to have an executive with Derek’s capabilities. Since joining the Company in April 2020, his responsibilities have meaningfully expanded, and his promotion to President appropriately reflects his leadership responsibility for the Company’s operations and growth strategy,” noted Jerry Dittmer, CEO.

Unrelated to the management updates, Matt Kaness announced his resignation from the Board on January 9, 2024, effective immediately due to a need to focus on his primary professional commitments and to consider other opportunities. “Mr. Kaness has made significant contributions to Flexsteel as a member of the Board over the last four years. His leadership and expertise will be missed,” said Board Chairman Thomas M. Levine.

For full second quarter results click here.

About Flexsteel

Flexsteel Industries, Inc., and Subsidiaries (the “Company”) is one of the largest manufacturers, importers, and marketers of residential furniture products in the United States. Product offerings include a wide variety of furniture such as sofas, loveseats, chairs, reclining rocking chairs, swivel rockers, sofa beds, convertible bedding units, occasional tables, desks, dining tables and chairs, kitchen storage, bedroom furniture, and outdoor furniture. A featured component in most of the upholstered furniture is a unique steel drop-in seat spring from which the name “Flexsteel” is derived. The Company distributes its products throughout the United States through its e-commerce channel and direct sales force.

Contact:

Michael Ressler – Investor Contact – investors@flexsteel.com – (563) 585-8116

Source: Flexsteel Industries, Inc.