DXYN - Earnings call transcript Q2 2024

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Daniel Frierson

I would like to welcome everyone to our second quarter conference call. I have with me Allen Danzey, our CFO, who will be participating. And our safe harbor statement is included by reference to our website and to our press release.

The good news from our second quarter is that we returned to profitability in a very challenging business environment. I'd like to go through some of the highlights of the quarter before Allen goes into more detail on our financial results.

second million XXXX of in year, approximately the compared $XX.X the in down $XX to the X.X%. sales quarter were of million prior Net same period margin despite quarter second XX.X% second of to the -- quarter of compared was margin sales in profit X months gross gross The profit XX.X% for net of the the that, the 'XX.

the a year. second $X.X operations in million loss income $XXX,XXX to the year. in of in Operating The continuing was compared prior same a million the had 'XX income the prior second quarter in of of of the net of the from second net company quarter 'XX period $X.X to $XXX,XXX of quarter compared

to our the warehouse income of annual in Subsequent company end, over Alabama to Saraland, amount quarter million term the will out agreement of space available lease recognize in completed other the The sublease facility. company XX-year $X.X an lease. approximately all the a

rates and interest negatively the housing from the inflation continues market the on home economy industry. affecting and impact to impact continued High the remodeling

soft sales industry, down surfaces we X%. was the less than quarter from X% while below believe, net Our approximately the were prior year, during

a margins Coast operations We second saw discussing our detail. more initiatives, be in other result in of which of quarter cost-saving in favorable consolidation as and the East the manufacturing the we will

to like the over to meeting I'd time, turn results. this our At financial to Allen review

Allen Danzey

Dan. you, Thank

spending, purchasing decisions decision-making, The are concerns drivers delayed business. which interest quarter inflationary the X.X% for sales rates remodeling, net around has X.X% consumers' large home the year-to-date. which impacted year second in and down higher our have down are Our from prior on including our the were discretionary and and

facility improved were company, reductions compared XX.X% consolidation Coast and our This gross reflection lower the start-up in the Although savings profit the sales margin the on of successful to improve margins profit XX.X% year-over-year the operations. from prior XXXX positive in East of throughout same year. to of extrusion gross of net results quarter, quarter did the our cost second sales is a our the of in

gross compared part to March was Production XX.X% a the year-to-date manufacturing in earlier the unfavorably and seasonally the of first volume to impacted with in year higher lower For line plants XX.X% month quarter. prior and prior were exceeding volumes margin gross production by year. expectations. the in were margins in our year-to-date, in returned XXXX the The level our of the margins forward,

the percent and XXXX second year-to-date dollars was were sales and of year. of This administrative in particularly result to when areas. our in samples the and administrative and quarter expenses prior June the for initiatives, lower as Selling of cost-cutting net compared

for $X.X current driven in $X.X million the And interest interest Our in $X.X $X.X million the being This quarter the million by decrease in expense debt million year. expense compared in in interest XXXX prior the expense year-to-date, in XXXX. we in had is to was in reduction the compared to year.

was $XXX,XXX XXXX Despite to same of million the of net $X.X compared second 'XX. in year-over-year the of the net in sales, the a income lower quarter loss period

the a to the $X.X net compared in $X.X prior we a loss year million. of On year, loss net million at have

Coast, the operations other is primarily income of improvement cost-cutting a extrusion on and from leadings Again, consolidation to operations the manufacturing this [ in our initiatives. margins, year-over-year East of higher related ] result the

balance Turning to our sheet.

billings was time last frame. of $X.X increased prior during receivables seasonally quarter-end the by current The balance. month the December to higher customers by to the period as driven Our year-end from the million compared increase lower

year-end with line Our inventory balance. in prior was

closely in to timely remain to continuing focused on our with manage to customers. inventory line service We maintaining while levels will continue the demand

due to the orders prior primarily were expenses accrued midyear online, activity and compared a higher with payable Accounts raw prior sales to $X.X material million, year-end. above by as year-end

increase year-end. in purchases Net $X.X the of offset to $X.X $X.X million. were from amount by in of deposits $X.X million included equipment cash million million property, increased These and property, moved equipment to additions and plant by plant PP&E This and approximately depreciation. prior-year

revolving Our increased million introductions part our XXXX, the million. costs from end was mainly our borrowing was quarter debt of of credit $X.X unused the driven end, other associated At in samples $XX with under first year. and by investments availability the by product that and the facility in

presentation at Dan? investor on is Our www.dixiegroup.com. website available our

Daniel Frierson

Allen. you, Thank

the providing operated fiber This of color focused lines being through our which customers. all styles We're this new white extrusion a Our quarter. many fiber year, up reductions beautiful started supply needs dyeable in in is well continuous carpet This our nylon quarter serve throughout second nylon, this our used our help of us and of in to exceptionally cost facility, which is and extruding on facility used our is first meet carpet in late brands. fiber year. long of

the perfect which color the available brands hue Into a launched option we During in campaign, This and color, and great includes connects retail is and This is presence of well. in-store color. our who materials designers customers, with with quarter, looking a consumers options. for is marketing all Step now which world for customer campaign Color -- as our a digital a particular of custom that

which setting move offerings. that market, sameness a offering with continues timely toward apart of residential ourselves a color sea polyester, In solution-dyed beautiful is to we're

styles XXXX second of XX in DuraSilk launched in and have in carpet new DH styles new styles Decor dyed polyester including quarter our new line and solution the X Floors our offerings. XX, We XX decorative

We to Fabrica included and SKUs wood engineered Tile Looks, These also high-end our as SPC XX program. in collections high-end programs. X updates our surface WPC with hard new launched

off teams did busy foot the products products our this launched to volume. together our already for These not comes launches product generating complete XXXX. our are for already as getting putting job new good new gas meaningful design And XXXX. and when We we're new launches year in early, our a products products, it taking very are

we marketing On digital with build broadloom the and our room partnerships [ front, ]. continued

website As is engaged lead serving seeing and consumers space, the product a from online. customer critical. are promising in digital much ordering and flooring visualization our where as sample very are the today's is they result, This we increased are generations,

continues more the tremendous Our retail program outpacing promise. seen premier to the with and After the a XXXX XXXX, Center second have first show in even we Flooring market growth margin strong results by improve wide quarter half. for in

can training in stores and merchandising the samples, future. gain. the PFC with business in dividends excited we investment and We're these is paying where increased in to take concept see share Our

million starting year this of million our cost $XX of million. some reduction in Our XXXX and improved our margins are program a result of $XX $XX cost-reduction to

enabled cost have We us begun year. already a aspects to also plan better controllable our These the manage business. plans for have of next reduction

conditions we'll addition, flow, capital business we continued manage working to expenditures In have to until and continue improve to minimize our cash improve. capital

interest XXXX will home When since lowest the million fewer rates. and decline, over Existing rates home is sales far to units mortgage from the there begin begin tied gone We to have improve. to X existing below industry when business feel homes. million, were sales closely our to X

the think mean. As revert will home and existing business improve, sales we to conditions improve

We do show quarter not expect third to improvement.

next this later interest I decline year. early or rates year should think

performing to us. hard down lag soft better date surface than continues to quarter last with year surface, Third for slightly, which is

of is environment. it good the out have about in and company's entire over news have future. lease over the business and flow to on will XXX,XXX additional our cash period. that we in income we excited profitability leasing Saraland impact the challenging to We out We're space will of facility XX-year our do that Again, the a square feet the be have returned attempting very and

we'll to meeting time, the this open At questions.

Operator

Capital. with from Mike Instructions] [Operator question first Our comes Hughes SGF

Michael Hughes

in the and the First the in new down that quarter? third impact SG&A. I the and your you launches on release an run press costs think said product complete maybe that in for the back think have I XXXX. sampling Would fourth you half? that through in step one, are SG&A Will commentary

Allen Danzey

sampling do of standpoint, sales of expense the in an year introduction. From in cost line spread with the we our activities

our -- degree first greatly expenses but the of for so that will to be some to the pay investment is, not will half weighted flow we it it So positive year. cash heavily the impacted, be to a level as as

Michael Hughes

then savings say? program cost cost at savings, achieved in point? is you much to be million Would early next alluded really to $XX this And have year. another how you for it it the And magnitude Okay. too then or equal secondarily, of

Daniel Frierson

the Let last to -- year. also. $XX million I'll ask respond would this half XX% million Of to half about in XX% and the say we the $XX year, and first in the remainder were XX% I reduction me to respond the of then Allen

is It terms beginning next of for year, half In magnitude. the at are the not now, same level just plan. for we Right we about year. this that the are the reduction plan of

Allen Danzey

as able continue the forward. plays expect are contribute February do Yes. And year, to savings now time discussed the out, with as I that would we to extrusion in be this frame, the to the we which year that for have started operations, contributing, achieve will agree going

as look We can. next cost additional savings, and continue update on we'll to and we that year on for

Michael Hughes

repeat this in that then I quarter were level of this But it's with you be And there onetime revenue, to number that basis? make nature anything were little impressive. level go-forward revenue. vary over that Was unsustainable? on gross margins at the to would the Okay. if a know a going XX% that would the of number in

Allen Danzey

we again, during things the are -- take consolidated that was Coast these which able that there's significant company, we've magnitude nothing going out. made of also feel both East leasing operations, but the of our margins cost to we're at particularly Yes. period, every onetime space the quarter. available are We savings the any on We at, volume advantage as there like manufacturing always sustainable do reflecting, directions throughout

Michael Hughes

Number I commentary the business, would then think hard surfaces down one, And if hard it was about that? can just maybe XX% And imply XX%. services that comment surfaces soft is, on that Okay. correct? to you is your

Daniel Frierson

correct. is that Yes,

than of Of is surface hard less course, total business. XX% our

us, down a share for positive our soft on the gaining obviously, being So surface are surface soft is market we and side. slightly

for We good surface the side XX% the But the is yes, surface range hard We business to in the was do soft quarter. data market side. to on what XX% on hard exactly have down. don't know surface down our the

Michael Hughes

Okay. would a to the sublease $XXX,XXX $X.X And And quarter in we'll that, million you income, that all income? in line is just other then straight on see start incremental?

Allen Danzey

except have full to place straight taking incremental, lease of This is is of Saraland under already feet that, the the replacing rate. at in that are It's lease we do a It similar the line. point square that. space XXX,XXX

of $X but about just $X So under have million, already revenue. we it's incremental, lease million current

additional incremental. be the So would $XXX,XXX

Michael Hughes

level of the at Okay. And the what's this looking to point? interest space additional you're out, lease

Allen Danzey

to able area. not We Saraland this We're point. in our the because most efforts ability that of the we market on facility focused that say at of have

to also We other lease. are that the space to working shifting to been clean make available we our available have out now to focus

we're can get in look early opportunity if expect see to the Saraland So the and market, when but us, that. it excited on rates certainly opportunity do return. about in some but high on great a we the working We we and to were not of the as be that to stage forward to focus as for we get able

Michael Hughes

you -- I'm half sorry, CapEx year? to of in What the do expect you. last back question cash be the And for Okay. the last

Allen Danzey

a X.X the or includes range, we We to CapEx in X.X total, $X [ just maintenance [ to In ] million ] in range, half. on are for general looking which expect million $X.X be at back -- projects. the the

maintain we're at CapEx at ] earlier, our to and mentioned periods levels, our business [ looking improve to over around the operations. Dan facing waiting As low decision on upcoming

Michael Hughes

Okay.

first the elevated? projects? number that bit half is that for did the a CapEx Is So why little extrusion include

Allen Danzey

extrusion Yes. quarter. equipment in the the that first We've in recognized the prior deposits But in again, of the cash the CapEx heavily portion spent was most of years.

it much capital So books. on just recognizing it commitment cash was the our a this as was year as not

Daniel Frierson

for was the in portion the So cash quarter. this first year

Allen Danzey

Yes.

Operator

I queue, back now Dan the turn over the no call Frierson. will With in further questions to

Daniel Frierson

and We we us Thank will you. with to Again, environment being rates the in be Thank industry. everybody forward our future, pleased are a impact interest a have looking major profitability appreciate quarter. in much. business which lower on we very to returning think hopefully very to you this difficult

Operator

Ladies today's conference. for participation. conclude you again Thank and will gentlemen, that your

The Dixie Group, Inc. (DXYN) 8 Aug 242024 Q2 Earnings call transcript