Flexsteel Industries, Inc. (NASDAQ: FLXS) (“Flexsteel” or the
“Company”), one of the largest manufacturers, importers, and
marketers of residential furniture products in the United States,
today 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.
GAAP to non-GAAP reconciliations are
provided at the end of this press release
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.”
Financial Outlook
Third Quarter
Fiscal 2024
Fourth Quarter
Fiscal 2024
Full Year
Fiscal 2025
Sales
$101 - 106 million
$107 - 112 million
$416 - 432 million
Sales Growth (vs. Prior Year)
2% to 7%
1% to 6%
2% to 6%
Operating Margin
4.5% to 5.5%
5.0% to 6.0%
5.5% to 6.5%
Free Cash Flow
$11 to 17 million (for 2nd half
Fiscal 2024)
$20 to 30 million
Line of Credit Borrowings
$12 to 17 million
$0 to 10 million
$0
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.
Conference Call and Webcast
The Company will host a conference call and audio webcast with
analysts and investors on Tuesday, February 6, 2024, at 8:00 a.m.
Central Time to discuss the results and answer questions.
- Live conference call: 833-816-1123 (domestic) or 412-317-0710
(international)
- Conference call replay available through February 13, 2024:
877-344-7529 (domestic) or 412-317-0088 (international)
- Replay access code: 4637022
- Live and archived webcast: ir.flexsteel.com
To pre-register for the earnings conference call and avoid the
need to wait for a live operator, investors can visit
https://dpregister.com/sreg/10185617/fb60745fee and enter
their contact information. Investors will then be issued a
personalized phone number and pin to dial into the live conference
call.
The second quarter 2024 earnings release can be accessed at
ir.flexsteel.com after market close on Monday, February 5,
2024.
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.
Forward-Looking Statements
Statements, including those in this release, which are not
historical or current facts, are “forward-looking statements” made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. There are certain important factors
that could cause our results to differ materially from those
anticipated by some of the statements made herein. Investors are
cautioned that all forward-looking statements involve risk and
uncertainty. Some of the factors that could affect results are the
cyclical nature of the furniture industry, supply chain
disruptions, litigation, restructurings, the effectiveness of new
product introductions and distribution channels, the product mix of
sales, pricing pressures, the cost of raw materials and fuel,
changes in foreign currency values, retention and recruitment of
key employees, actions by governments including laws, regulations,
taxes and tariffs, the amount of sales generated and the profit
margins thereon, competition (both U.S. and foreign), credit
exposure with customers, participation in multi-employer pension
plans, disruptions or security breaches to business information
systems, the impact of any future pandemic, and general economic
conditions. For further information regarding these risks and
uncertainties, see the “Risk Factors” section in Item 1A of our
most recent Annual Report on Form 10-K.
For more information, visit our website at
http://www.flexsteel.com.
NON-GAAP DISCLOSURE (UNAUDITED)
The Company is providing information regarding adjusted net
sales, adjusted operating income, and adjusted earnings per diluted
share which are not recognized terms under U.S. Generally Accepted
Accounting Principles (“GAAP”) and do not purport to be
alternatives to net sales or operating income as a measure of
operating performance. A reconciliation of adjusted net sales,
adjusted operating income, and adjusted earnings per diluted share
is provided below. Management believes the use of these non-GAAP
financial measures provides investors useful information to analyze
and compare performance across periods excluding the items which
are considered by management to be extraordinary or one-time in
nature. Because not all companies use identical calculations, these
presentations may not be comparable to other similarly titled
measures of other companies.
Reconciliation of GAAP net sales to non-GAAP adjusted net
sales:
The following table sets forth the reconciliation of the
Company's reported GAAP net sales to the calculation of adjusted
net sales for the three months ended December 31, 2023 and
2022:
Three Months Ended
December 31,
December 31,
(in millions)
2023
2022
% Change
Net Sales
$
100.1
$
93.1
7.5%
Freight Surcharges
$
—
$
(3.5)
Adjusted Net Sales
$
100.1
$
89.6
11.7%
Reconciliation of GAAP operating income to non-GAAP adjusted
operating income:
The following table sets forth the reconciliation of the
Company’s reported GAAP operating income to the calculation of
non-GAAP adjusted operating income for the three months ended
December 31, 2023, and 2022:
Three Months Ended
December 31,
(in millions)
2023
2022
Reported GAAP operating income
$
4.6
$
3.8
Environmental remediation
—
(2.8)
Non-GAAP operating income
$
4.6
$
1.0
Reconciliation of GAAP earnings per share of common stock to
non-GAAP adjusted earnings per share of common stock:
The following table sets forth the reconciliation of the
Company’s reported GAAP earnings per share to the calculation of
non-GAAP adjusted earnings per share for the three months ended
December 31, 2023, and 2022:
Three Months Ended
December 31,
(in millions)
2023
2022
Reported GAAP diluted earnings per
share
$
0.57
$
0.53
Environmental remediation
—
(0.52)
Tax impact of the above adjustments(1)
—
0.07
Non-GAAP diluted earnings per share
$
0.57
$
0.08
(1)
Effective tax rate of 13.5% was used to
calculate the three months ended December 31, 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240111667486/en/
INVESTOR CONTACT: Michael Ressler, Flexsteel Industries, Inc.
563-585-8116 investors@flexsteel.com
Flexsteel Industries (NASDAQ:FLXS)
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Flexsteel Industries (NASDAQ:FLXS)
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