Flexsteel Industries Reports Fiscal Third Quarter Results

April 30, 2024  by HFBusiness Staff in Business Strategy, Industry   

Key Results for the Third Quarter Ended March 31, 2024

·      Strong sales growth of 8.2%. Net sales for the quarter of $107.2 million compared to $99.1 million in the prior year quarter.

·      Robust sales orders of $111.5 million representing growth of $12.2M, or 12.3%, compared to the prior year quarter.

·      Significant gross margin expansion to 21.7% compared to 18.8% in the prior year quarter.

·      GAAP operating income of $3.0 million or 2.8% of net sales compared to $2.1 million or 2.1% of net sales in the prior year quarter.

·      Adjusted operating income of $5.6 million or 5.2% of net sales for the third quarter compared to $2.1 million or 2.1% of net sales in the prior year quarter.

·      GAAP net income per diluted share of $0.33 for the current quarter compared to net income per diluted share of $0.28 in the prior year quarter.

·      Adjusted net income per diluted share of $0.67 for the quarter compared to adjusted net income per diluted share of $0.28 in the prior year quarter.

·      Cash flow from operations of $7.2 million for the quarter and $24.4 million year to date.

·      Debt repayments of $3.7 million for the quarter, or a 21% 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 third quarter results," said Jerry Dittmer, CEO of Flexsteel Industries, Inc. "While macroeconomic conditions continue to present headwinds in our industry, we continue to execute on our strategies, are outperforming the industry, and are growing our top line while improving our profitability."

Mr. Dittmer continues, "We delivered strong net sales of $107.2 million, or growth of 8.2%, which exceeded our sales guidance range of $101 to $106 million. In addition, 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 $1.5 million impact from surcharge reductions, growth from unit volume and sales mix was impressive at 9.9% in the quarter. This out-performance is a result of continued investment in new product development and innovation coupled with an intense focus on our growth initiatives.”

“From a profitability perspective, we are executing well operationally and leveraging the combined benefits of operational efficiency, cost savings, and product life cycle management to meaningfully expand gross margin and improve operating income. Our GAAP operating margin for the quarter was 2.8% of net sales.”

“Excluding the approximately $2.6 million in restructuring charges related to the closure of our Dublin, GA facility, our adjusted operating margin was a healthy 5.2% of net sales in the quarter and represented strong, sequential margin improvement versus the prior quarter. Lastly, we are making good progress in improving working capital efficiency and optimizing our manufacturing network. Given improved demand stability and better supplier lead times, we optimized and reduced our inventories by another $8.6 million in the third quarter which allowed us to reduce debt by an additional 21% in the quarter."

Mr. Dittmer concludes, "I’m very encouraged by these third quarter results and excited about the direction we are headed. Our strategies are working, and I am confident in our ability to continue creating significant value for our customers and shareholders in both the near and long-term."

Financial Outlook

For the fourth quarter fiscal 2024, the Company reiterates previously disclosed sales guidance. The Company is increasing the low-end range of expected non-GAAP operating margin from 5.0% to 5.2%. GAAP operating margin in the fourth quarter has been updated to reflect non-cash costs related to the revaluation of equity awards associated with our CEO transition and retirement. The Company reiterates its full year fiscal 2025 guidance.

Investor Presentation
An updated investor presentation has been posted on the Company's website at https://ir.flexsteel.com/news-events/events-and-presentations which incorporates third quarter fiscal 2024 operating results as well as the financial outlook noted above.

CEO Transition
Flexsteel Industries has announced the appointment of Derek P. Schmidt to the position of President and Chief Executive Officer effective July 1, 2024. Mr. Schmidt will succeed Jerald K. Dittmer who has announced his resignation from the position of Chief Executive Officer effective June 30, 2024, and retirement from Flexsteel on December 31, 2024. Further discussion of this matter can be found in the press release announcement, which can be accessed on the Company's website at https://ir.flexsteel.com/news-events/press-releases.

Conference Call and Webcast
The Company will host a conference call and audio webcast with analysts and investors on Tuesday, April 30, 2024, at 8:00 a.m. Central Time to discuss the results and answer questions.

Conference call replay available through May 7, 2024: 877-344-7529 (domestic) or 412-317-0088 (international)

Replay access code: 9414420
For archived webcast: ir.flexsteel.com