Flexsteel Industries, Inc. Reports Strong Fiscal Fourth Quarter and Fiscal Year 2024 Results

Flexsteel Industries, Inc. (“Flexsteel” or the “Company”), one of the largest manufacturers, importers, and marketers of residential furniture products in the United States, reported fourth quarter and full-year fiscal 2024 results.

Key Results for the Fourth Quarter and Fiscal Year Ended June 30, 2024

• Net sales for the quarter increased 4.7% to $110.8 million compared to $105.8 million in the prior year quarter. For the year, net sales increased 4.8% to $412.8 million compared to $393.7 million in the prior year.
• Robust sales orders of $108.5 million for the fourth quarter representing growth of $15.8 million, or 17.1%, compared to the prior year quarter.
• Gross margin increased to 21.3% for the fourth quarter and 21.1% for the year compared to 20.0% in the prior year quarter and 18.0% for the prior year.
• GAAP operating income of $7.6 million or 6.9% of net sales for the fourth quarter and $17.1 million or 4.1% of net sales for the year compared to $4.2 million or 4.0% of net sales in the prior year quarter and $10.5 million or 2.7% of net sales for the prior year.
  • Adjusted operating income of $6.2 million or 5.6% of net sales for the fourth quarter and $18.3 million or 4.4% of net sales for the year compared to $4.2 million or 4.0% of net sales in the prior year quarter and $8.1 million or 2.1% of net sales for the prior year.
• GAAP net income per diluted share of $0.89 for the current quarter and $1.91 for the year compared to net income per diluted share of $1.91 for the prior year quarter and net income per diluted share of $2.74 for the prior year.
  • Adjusted net income per diluted share of $0.75 for the quarter and $2.11 for the year compared to adjusted net income per diluted share of $0.36 for the prior year quarter and $0.87 for the prior year.
• Cash flow from operations in the fourth quarter of $7.5 million and $31.9 million for the year.
• Debt repayments of $23.5 million for the year, or an 83% reduction in borrowings under the line of credit.

GAAP to non-GAAP reconciliations follow the financial statements in this press release

Management Commentary

“I am extremely pleased with our fourth quarter results,” said Derek Schmidt, President & Chief Executive Officer of Flexsteel Industries, Inc. “Despite continued challenging conditions for our industry, we are executing well and delivered 4.7% sales growth in the quarter which represents our third consecutive quarter of mid- to high-single digit year-over-year growth. Our strategies to gain share in our core markets and pursue new growth in expanded markets are working due to our investments in innovation, new product development, customer experience and marketing.”

Mr. Schmidt continues, “At the same time, we continue to improve our profitability and achieved a third consecutive quarter of sequential quarter-over-quarter adjusted operating margin improvement. Adjusted operating margin was 5.6% in the quarter, up compared to 4.0% in the prior year quarter. The keys to our consistent profit improvement have been our sales growth, strong operational execution, cost savings and product portfolio management, all of which have strong momentum and will continue to be catalysts for continued margin expansion. The organization also continues to manage working capital and cash effectively, generating $7.5 million in operating cash flow and reducing debt by $9.4 million in the quarter.”

Mr. Schmidt concludes, “I’m very encouraged by these fourth quarter results and excited about the direction we are headed. In a period where many industry participants continue to realize meaningful year-over-year declines in both sales and profits, Flexsteel is financially strong, growing sales, improving profitability, generating cash, and aggressively investing for the future. While we expect industry headwinds will likely remain during our fiscal year 2025, our team is hyper-focused on continuing our sales growth and profit improvement momentum despite these challenges. I remain confident in our team and its ability to continue creating significant value for our customers and shareholders in both the near and long-term.”

Operating Results for the Fourth Quarter Ended June 30, 2024

Net sales were $110.8 million for the fourth quarter compared to net sales of $105.8 million in the prior year quarter, an increase of $5.0 million, or 4.7%. The increase was driven by higher sales of home furnishings products sold through retail stores of $6.7 million, or 7.3%, led by unit volume and product mix. Sales of products sold through e-commerce channels decreased by ($1.7) million, or (11.7%), compared to the fourth quarter of the prior year. Lower sales in the e-commerce channel were driven by softer consumer demand.

Gross margin for the quarter ended June 30, 2024, was 21.3%, compared to 20.0% for the prior-year quarter, an increase of 130 basis points (“bps”). The 130-bps increase was primarily due to fixed cost leverage on higher sales, supply chain cost savings and efficiency improvements, and product portfolio management partially offset by higher ocean freight costs.

Selling, general and administrative (SG&A) expense was 17.0% of net sales for the quarter ended June 30, 2024, compared to 16.0% in the prior year quarter. The current quarter includes non-recurring stock-based compensation expense of $1.5 million or 1.4% of net sales, related to the re-valuation of previously awarded equity grants to Flexsteel’s former CEO, Jerry Dittmer. The number of stock grants previously awarded to Mr. Dittmer under the Company’s long-term incentive plans were reduced based on a time proration of his employment from grant date through his retirement date with the Company. In accordance with US generally accepted accounting principles, the modified awards were revalued at the stock price at the time of modification, resulting in the $1.5 million non-cash expense.

In the quarter, the Company completed the sale of its former Starkville, Mississippi manufacturing facility resulting in a gain of $3.3 million.

Operating income for the quarter ended June 30, 2024, was $7.6 million compared to $4.2 million in the prior-year quarter. On an adjusted basis, operating income for the quarter ended June 30, 2024, was $6.2 million compared to $4.2 million in the prior year quarter.

Income tax expense was $2.5 million, or an effective rate of 33.9%, during the fourth quarter compared to tax benefit of ($6.4) million, or an effective rate of (167.5%), in the prior year quarter. The prior year effective tax rate was impacted by the reversal of a full valuation allowance on deferred tax assets.

Net income was $4.9 million, or $0.89 per diluted share, for the quarter ended June 30, 2024, compared to net income of $10.2 million, or $1.91 per diluted share, in the prior year quarter. On an adjusted basis, net income for the quarter ended June 30, 2024, was $4.1 million or $0.75 per diluted share compared to adjusted net income of $1.9 million or $0.36 per diluted share in the prior year quarter.

Manufacturing Network Optimization Update

During the quarter, the Company incurred $0.4 million of restructuring expense primarily related to the transfer of inventory and equipment to other facilities and a loss on sale of equipment as part of the Company’s previously announced closure of our Dublin, GA manufacturing facility. Total expense incurred in fiscal year 2024 related to the restructuring was $3.0 million. The facility closure was completed during the fourth quarter and the Company does not expect to incur any further expense related to the restructuring plan.

Liquidity

The Company ended the quarter with a cash balance of $4.8 million, working capital (current assets less current liabilities) of $95.0 million, and availability of approximately $55.2 million under its secured line of credit.

Capital expenditures for the year ended June 30, 2024, were $4.8 million.

For full 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.