• Net Sales: $64.877 million in Q3 2024, down from $68.576 million in Q3 2023.

• Operating Loss: $2.107 million in Q3 2024, compared to $913,000 in Q3 2023.

• Net Loss from Continuing Operations: $3.9 million in Q3 2024, compared to $2.4 million in Q3 2023.

• Gross Profit Margin: 24.6% in Q3 2024, down from 26.6% in Q3 2023.

• Interest Expense: $1.6 million in Q3 2024, compared to $1.8 million in Q3 2023.

• Net Inventory Balance: $76.8 million at the end of Q3 2024, $3.2 million lower than September 2023.

• Debt: Increased by $3.99 million from the end of 2023; year-over-year debt reduced by $9.5 million.

• Unused Borrowing Availability: $12.3 million under the revolving credit facility.

• Warning! GuruFocus has detected 5 Warning Signs with DXYN.

Release Date: November 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Dixie Group Inc (DXYN) outperformed the industry in soft surfaces sales, which were down 3% compared to the industry's 6.5% decline.

• The company successfully reduced selling and administrative expenses both in dollar terms and as a percentage of sales due to cost-cutting initiatives.

• Interest expenses decreased due to lower average debt, with a year-over-year reduction of $9.5 million in debt.

• The successful operation of new extrusion equipment has provided cost savings and secured an internal supply of fiber.

• The company's marketing initiatives, including the 'Step into Color' campaign and digital marketing efforts, have resulted in increased lead generation and sample order activity.

Negative Points

• Net sales for the third quarter of 2024 were down 5.4% from the prior year, reflecting challenging market conditions.

• The company reported an operating loss of $2.1 million, which was higher than the $913,000 loss in the same quarter of 2023.

• Gross profit margins declined to 24.6% from 26.6% in the prior year, impacted by lower manufacturing volumes and non-recurring costs.

• High interest rates and low consumer confidence have delayed consumer decisions on large discretionary spending, affecting sales.

• The company faced challenges from higher ocean freight rates and the impact of the hurricane season on business in several geographical areas.

Q & A Highlights

Q: In the last call, we discussed the NASDAQ delisting. The stock did get delisted. What is management's thinking going forward, and how does this tie into the refinancing of the October 2025 line? A: Allen Danzey, CFO: We monitored the situation and made efforts on our side, consulting with our board and investors. We decided that moving to the OTC markets was the best option as we approached the deadline. This transition has worked well for us, allowing us to maintain similar reporting requirements while saving on internal costs. We are also considering our options with lenders as we approach the refinancing period.