In This Article:
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Revenue: $108.5 million, an 8.4% increase from the prior year quarter.
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Operating Margin: 6.1%, up from 4.6% in the prior year quarter.
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Operating Income: $11.7 million GAAP; $6.7 million adjusted (excluding a $5 million pretax gain).
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Free Cash Flow: $6.7 million generated in the quarter.
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Working Capital: $98.1 million at the end of the quarter.
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Cash Balance: $11.8 million, with no debt.
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Sales Guidance for Q3: $110 million to $115 million, reflecting 3% to 7% growth.
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Gross Margin Guidance for Q3: 21.0% to 22.0%.
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SG&A Costs Guidance for Q3: $16.5 million to $17.2 million.
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Operating Margin Guidance for Q3: 6.0% to 7.0%.
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Capital Expenditures for Q3: $0.7 million to $1.0 million.
Release Date: February 04, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Flexsteel Industries Inc (NASDAQ:FLXS) reported a sales growth of 8.4% compared to the prior year quarter, marking the fifth consecutive quarter of year-over-year growth.
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The company expanded its operating margin to 6.1% from 4.6% in the prior year quarter, demonstrating consistent profitability improvement.
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Flexsteel Industries Inc (NASDAQ:FLXS) successfully paid off its remaining bank debt and began accumulating cash, ending the quarter debt-free.
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Retailer appointments increased by 18% at the Las Vegas market, indicating strong engagement and positive retailer response to new products.
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The company generated $6.7 million of operating cash flow in the quarter and ended with a cash balance of $11.8 million.
Negative Points
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The overall industry demand remained soft, with concerns about potential adverse impacts from major policy changes under the new Trump administration.
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Higher tariffs, particularly on imports from Mexico and Vietnam, pose a significant risk to the company's profitability and supply chain.
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The home styles ready-to-assemble brand, largely sold online, struggled with a decline of almost 30% in the quarter due to competitive low-cost imports.
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Ocean freight costs remain volatile, impacting gross margins despite efforts to pass through costs to maintain retail price points.
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The potential imposition of a 25% tariff on Mexican imports could increase costs by $1.5 million to $2 million per month, creating financial uncertainty.
Q & A Highlights
Q: What were the main reasons for Flexsteel's revenue exceeding guidance, and how did core business growth compare to growth initiatives? A: Derek P. Schmidt, President and CEO, explained that the outperformance was due to broad-based growth across the business, except for the home styles ready-to-assemble brand. The Flexsteel branded core markets grew by 7%, while the home styles brand struggled, down nearly 30%. Expanded market initiatives, including Zecliner, Flex, and Charisma, contributed significantly, with a 92% year-over-year increase.