FLXS - Earnings call transcript Q2 2020 | Flexsteel Industries, Inc.

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Operator

Good morning and welcome to the Flexsteel Industries Second Quarter of Fiscal Year 2020 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. [Operator Instructions] please note this event is being recorded. I would now like to turn the conference over to Donni Case, Investor Relations for Flexsteel Industries. ahead. go Please

Donni Case

welcome Second and call discuss to Thank of to fiscal Industries quarter results. year Flexsteel you today's XXXX financial

release, website and Chief today at with after Marcus issued under news XXth Hamilton, the which Ditmer, I'm yesterday, flexsteel.com Relations earnings here events. Investor our January on is Chief market of Financial section Jerry Officer. and Monday, available Our close we Executive Officer

questions. the will management prepared and call provide to open your On today's call then remarks we'll

I to statements will the like that be estimate, comments begin, phrases. and you we be, Before anticipate, by will on would similar as include the remind use such identified today's which words call expect of looking forward can

assumptions cause but recent and subject that on and on are other and most uncertainties XX-Q Forward SEC our those not results materially statements. include those and as actual risks Such are estimates, filings described statements looking reports their and in to nature to limited could by updated on subsequent outcomes forward by looking expressed involve annual applicable. from Form to or the risk differ quarterly uncertainties our that forecast report as projections, goals, XX-K Form are

looking conference speak date predictions as forward not of be upon of as call the These statements only this relied should events. and of future

measures. I'd directly reconciliation quantitative measures. to contains of to gap which to website the as the discussed as supplement and intended measures. comparable And like the today call are press but turn on non-GAAP also other measures for contains over be GAAP to may to gap management Jerry. substitute the non financial financial It Additionally, with most that to information refer release the well the not the The available

Jerry Ditmer

us as the year Good today. morning of CEO. celebrated I one Flexsteel's thank for beginning anniversary my January At joining you and

out and of operational Within assessed we a and to get the the and well. company being of year plan the organizational comprehensive the chain laid first effectiveness transformational working supply on board, operations

streams we of subject progress sales, engineering first in and six and financials solid supply injection organization is our confident realizing our of execution planned. talent IT. growth these benefits May, significant the we work on and a proceeding restructuring identify as right and win. we've cannot leadership our track completed last the Since but experts into and important, operations plan the business. the program announcement chain made the are activities is chain on matter we've and to to product supply development Additionally, Getting company our without restructuring We're from

We our increasing focus are on growth.

We the was progress here, to other couple comparative by sequential our strong of proof point Southeast the We've groups an quarters eCommerce continue begun rolling make from we busy it first back parts largest channel. the nice is growth topping and evidenced and of strong in seeing I in by import year right since after on China a strong been also this channel eCommerce channel of it these momentum that our are getting joined over second to year over XX% in positive our as quarter. year our redeveloping comp year This a groups. growth moving building product is prices Asia a

pricing transition on roll instantly inventory, we products hit rebound China these As of almost marketplace. out demand saw the we the backs the when

categories engine. Improving going our serve to catalyst volume possible lead to to as that our another Vietnam work from this times the soon customers our introductions as reducing and largest in region new into forward. product continue groups growth and restarting levels service are launched insure our will sourced We as key

needs reduce lead results. and to of our positively our for we seeing initiatives an delivery top recognized demand time to half over one down category in of stationary It are remains While our domestic largest resulted prove times of to times and products that a extended category, impact cost out on that be drag first reduced stationary lead increased, customers. XX.X% purchase. in performance takes are serve the the Right The being point period still is to year. still consistent now seeing we

first On up the same the performance strong half have domestic groups XX% year. recliner in where had our and very other continue we hand, XX% the contribute results not challenges time motion to respectively and lead the of

to growth in are categories we and customer overhauling using new building our accelerate future our insights robust introduction all product these opportunities. Additionally, for process introductions a further core pipeline product

In clear, our improving and categories with priorities distribution, streams and work approach our customer core life to a six development our our expanding in focus are experience, build by line short, grow product execute top management. and disciplined the cycle channels

I'm sales focus our turn on We Marcus going over to the expect turn the and to a in of results. in our profitability more priorities execution to back the quarters. Marcus? depth trajectory that and these to provide coming growth analysis call improve a quarter

Marcus Hamilton

decreased XX second and a quarter. or during Net a XXX million million XX% Thank decline the sales Jerry morning. you, good to of approximately

products noteworthy an we of decline second the accounted the saw quarter XXXX. for first that Exiting increase it's fiscal commercial office custom of the in However, design from X.X from X.X% quarter. of hospitality million

results disappointing largest domestic XX.X%. stationary Our quarter second with group off sales delivered product

XXXX. with and assemble the fiscal of styles the ready primarily which home the first eCommerce with in fiscal ready motion respectively begin and XX.X% our As pleased of in this quarters. reported positive puts to should quarter XX.X discussed, a the see continued quarter. XX.X% under we improved with our note, very were category were over brand up were recovery believe On to lead the the to furniture we our our up distributed first through times recliners XX.X% the our delivered also over in in this next we sold growth We strong very up couple XX.X% channel performance pleased in XXXX assemble of and half a Jerry groups through category, domestic quarter

I'd performance. like to to briefly turn contract

contraction year. the end of the of expect hospitality overall wind this the completed down our in remaining quarter also sales first quarters sales months. and to seating be by custom for the to through fiscal quarter down The the six the three We products in XX% XX% to decline accounts and down wind contributed nearly the of design Vehicle date. orders contract and year

in These It's of date to has opinion through perhaps are and carries important a space. representing or is of requirements the our complexity, our note regulatory compliance cyclical and Mississippi exclusively For this approximately support our plant manufactured vehicle A nature in plan, be smaller fair premium seating our bit the crossed in to automotive almost context, manufacturers. the Dubuque are the Also, Starkville our home Iowa products with X% motor manufacturing manufacturing Class products in specialized portion engineering sales. year to a strict product line line cycle. successful product neared demand peak to sold

product we long categories, profitability within As and product evaluate to growth potential opportunities. line and to each with term the our other of continue resource relative all requirements portfolio

in $X.X reported to million or $.XX per loss diluted $X.X last the Turning share second income share net of net $X.XX a or quarter year. of to compared per profitability we million

assets some a small expense of pretax a related $X.X impairment charges loss on million and The reported gain sale included some from to some and restructuring immaterial other related net restructuring. inventory to

adjusted our of more reported share. net million refer XX.X% non-gap percent items, in press disclosure as adjusted Excluding calculation an these information company loss for or the loss. our of second quarter declined a X.X XX.X% versus to prior quarter Please earnings per the second $X.XX included fiscal the margin points the net on to quarter. of basis Gross in sales in the net XXX release

for holiday promotions sales, an lean and both to take of in margin compression expected and season XX approximately points in mortar quarter. basis inventory e-commerce on channels. advantage and took move season gross back selling We activity the of This brick across to strong share, accounted

As our managing improving term. approximately part rationalizing the margins cycle, long resulted the products the an profitability which customer inventory by initiative, the rationalizing valuation key to the simplifying product the offering tail, life our started portfolio product products, quarter further cutting and product XXX and in basis is allowance, product in in off pressuring points. Effectively for of profitability we

of points of basis supply the have through teams chain committed experience to Additionally, approximately been costs. in turnaround as customer improving operations XX our resulting increased strategy, the reduced part lead times

will increase to this work with stream. We cost mitigate our optimization work network

expenses general Selling million administrative decreased & XX.X million. X.X to

XXX,XXX or income As work compared second tremendous was tax during rate the new to recall, will a of onetime with prior we of charges of offset the to stream. delivering incentive effective effective an our I'm CEO We to XX.X% associated the rate XX.X%. an million accelerated we've to or partially made to with of and progress approximately depreciation pleased the had related of transition. savings with expenses transition restructuring in SG&A benefit the progress reported the the quarter second $X.X you on report tax compensation. ERP year, million comparable associated optimization This period quarter scope X.X higher on tax expenses the

including X.X balance Turning in sheet, cash quarter quarter. the restructuring good operating managing payments X.X the to sheet and balance of the within had million million generated we a very

in promotions confident our minus to Our season and million deeper of to channels XXXX. full to are XXX our to compared and by into holiday purpose we plan advantage assets driven where current XXX.X consumer liabilities progress to categories inventory of key execute. smart million ability December current sentiment and was the reduce strong in share an targeted capital, at take on take June lean XXst XX, was with market Working as

collection first were recorded decline second a million offset property X.X from cash of decline other an X.X the in The cash increase and increase of primarily due equivalents due $XX.X in receivables increase the Capital increase of by X.X the quarter sale of X.X current refund. of million tax included fiscal to in in million. assets in a payable accounts in expenditures trade Riverside primarily million, inventory a in the working of proceeds an million, and capital income million quarter and XXXX in $XX.X the to X million in

is at the million show. annualized XXst, The for prepared on to concludes five furniture Las the of our XXXX. currently I'll maintains December which This company his the at XX.X CapEx the from Vegas Jerry to be We expect quarter market turn to million the available who remained observations million. in results range call remarks revolver back and a of on now four XX

for will your call that Following we the questions. open

Jerry Ditmer

them Thanks great placements winning and showing Marcus. our with We're assortment. robust partners and enhanced our having a retail traffic discussions in

retail retail partners digital that let's recognize We our related platforms call is Thanks. the We them success and seamless the with experience are our continuing refinement mortar directly for and and our development stores. the some of of and discuss business that, to between up with questions. success our to open brick of

Operator

now We Instructions] will from session. Value begin question go Corp. Investment the Geygan Our answer first and Please ahead. with [Operator question Global J.P. comes

J.P. Geygan

as where noted remarks, comprehensive savings cost Jerry, both not, quantitative in those and when we'll can taking element cost of touched you've but Good your little morning. in Marcus, stand you see we out the period is If restructuring opening that I some a fully believe in on appreciate bit, involves you elaborate if and the on business? qualitative elements. savings? current you plan the or

Marcus Hamilton

J.P. Sure

some the SG&A. further SG&A in, seen quite we've, savings good, on a So on we've the are operation we've ahead of in side. bit we seen, than we're We're, pretty

some up and there. of pretty in getting of our overall quarter with productivity staffed We Just little of fully terms to good, had bit saw a productivity plants. first speed, out QX, in setback a plants in the we the the

new couple as quarters. side, the SG&A facilities. stuff we traction, much we, into the, seeing of But, get more we're and the the first through transferred As settled through certainly on

J.P. Geygan

Okay.

more You've China geographic to that proceeded market? production the to how how and exposure some Can complete to Vietnam. the you processes advantages and shift shifting has each noted about add your from possibly color

Jerry Ditmer

Yeah, I do can that.

So appreciate the question.

we'll done, were when know, total exact maybe So but land China. was XX% of when to where of be number the volume probably I come a to actual don't our closer in continued all the we're down we probably we're complete. and have our you percentages it'll quarter of, is

of the a We the pricing the see lot orders We've moving and middle of able we to For we of that. suppliers several do We've a fact, when continue are the transitioned we've pickup. that. and and doing without few are good that our in good transition products, and there. were But got probably already that there that over been innings most it's part take in a going well. seen tariffs. new We've really happens to our

have we've stuff's our, China. partners and how real their pleased a because suppliers a uh, with there over that and We couple are been obviously overall from our with lot struggling performing. of But they're coming

J.P. Geygan

Great.

might funding potential suggested you've not provide past line this on credit searching quarter, in your for be Marcus, and and Can seems imperative flow update alternate additional Finally, of the it might your the recently you on company based for the capital an business? that renewed an sources anymore. be operating of like you that cash

Marcus Hamilton

we've, you so as we cashflow we really from Yeah, good a said, expect that and had a continue. perspective to quarter

we've December. here expired financing you've of of renewed the that So in that release couple the the you'll extended as backed methods. a terms our you'll alternative end we've up What our I, through know, off the, you, in for We you coming that line credit days, in as at and of see looking June. one those queue see in seen

So changed letters on outside drawn on of course, that the nothing, there. one, credit of any the the one And lines lines line. really haven't we are of of nothing of the

that's on, on we're So liquidity standpoint at loans. where a from

J.P. Geygan

you Thank for your Great. time.

Operator

[Operator Capital. go SGF with Please Our next Mike comes Hughes Instructions] from question ahead.

Mike Hughes

you Good percentage What the questions business. just stationary of of the that does couple morning. A mix for on represent?

Jerry Ditmer

domestic domestic business. don't know than but know, know. don't of head. business. total our I important from mean, I be part something would an a, of off I top business, Overall the my XX-XX% that business, less our XX% I'd that our it's it's of you probably, our it it's have of

Mike Hughes

you next what us the Okay. and happened And actually there lead will improve few times quarters? the why over remind can

Jerry Ditmer

lead Yeah, of product got moves the Starkville if just a just Dublin prove six, product are down right that to our plants transformation made last bit into going we've partners just little we that to and area But, back back normal we've and lot that times Lorez one in are as we've facilities we're our go actually, you months, now. over manufacture and the actually of We've slower. that that's absorbing we shut eight some to our forward. a going got

good part, and feeling think For behind we're us the it. it's we about most pretty

Mike Hughes

X% seating on vehicle business, Okay. a year? say the of revenue half just that And in question overall you then, the first of was the did the Is that correct?

Marcus Hamilton

Correct.

Mike Hughes

Okay.

a and Right? Because the would the of is quarterly roughly contract revenue is this at million So hundred in two which be it of contract represents X% thirds revenue, it point. X revenue roughly million dollars X million.

two So it's about thirds, right?

Jerry Ditmer

correct. That's Ballpark.

Mike Hughes

business? And seating. Okay. how vehicle The are the margins on that

Marcus Hamilton

uh, bit expense, have in the reached again industry are, it been because So be that Dubuque, cyclical etc the are declined, know, and to just depreciation, as mainly quite of and have overall new I'll nature it. last business a are, XXXX. down has in that as you well down volume year margins We've because business and, on of the the peak, of relocation in of, the for been, has projected the a facility been, know, has um, the in that call put on you challenged

So we a be from margin business that challenged find perspective. to

Mike Hughes

my there was last year So destocking the I in know, by, seven retail five, of lot understanding points better the six, RV performed you, than a businesses, wholesale numbers. don't wholesale

So or it all? you that help is you that which are seeing now looks wholesale business improving, should that at like for

Jerry Ditmer

business. decline. business XXXX We we're is we're decline that we'll that said, projecting saw, nature that not we're we we're XXXX, seeing we're, further what cyclical a actually, in decline saw we're, through in I seeing, a No, as of see

Mike Hughes

Okay.

of can year, carry expect I the June should The Just quarter? to that December in pricing March over there. we the aggressive to the a few saw the and back If quarter, some sneak you half in more. that

Jerry Ditmer

Marcus. Go ahead

Marcus Hamilton

promoting we and we So the our in were, That holiday and out in, I switch to Vietnam to for on overseas, think the eCommerce aggressive that from season pretty room bit overstocked a during little product over we're areas of where inventory some China that our, coming in get the was some in specifically trying of making product. business. on

inventory resetting I the, resetting both there So we, good overall those and the job we've think the, in done really a areas.

don't, I quarter see through that I continuing So the heavy. as third don't

for look going spot we we're the, et in something cetera, opportunities we'll to not to holiday did QX course in do that promotions, like continue to Of it's season. drive, but the

Mike Hughes

with Okay. but And caller, you the already I'm on touched on prior a the this more little specific saves. cost

the standpoint. You G&A operational think said saves you quarter? it September little quarter there net In in quarter, the a operationally, I December the on, a bit was in back actually basis saves. from a December step productivity of million any between the just in, had cost Were front, on about $X any a on the

Jerry Ditmer

December margin in a the about we versus of a restructuring prior didn't million SG&A perspective, In the in we But little productivity, just gross quarter feel, side, saw a from quarter a, Yeah. dollars quarter. of million the much dollars we from savings. year didn't, the a over of,

Mike Hughes

is quarter go good on SG&A, a forward this a number point at $XX basis? in million So the a

Jerry Ditmer

we think think I about, know, at that's probably can, you right stage. that's about I this probably

Mike Hughes

one And saw on like tax reversal to I and for statement one a me. a VAT cashflow last related there the was it Okay. to you. something looked

the in was benefited That $XXX,XXX quarter? that So December all margins. would've

Jerry Ditmer

Yeah.

benefit that So margin did gross

Mike Hughes

December all was that quarter? in And the

Jerry Ditmer

in was quarter. all the That December

Mike Hughes

you very Okay. much. Thank

Operator

would time, Instructions] closing [Operator At there Jerry to are I turn further conference like this no remarks. any Ditmer for over Mr. back the questions. to

Jerry Ditmer

Sarah. thanks Hey,

in us am actually Vegas you'd clunky the a today Marcus be I in and So show because Dubuque. is little at saw furniture is

potential. full want We're handoff our that hard little we updating I know achieve company let forward partners transform So its you Everybody day. ability that working we're that's you great a do and next why progress of Thanks. for grateful to quarter. I face bit continued even to our am on on look all confident where to you the have to a execute our our associates strong and heard headwinds. our teams have support.

Operator

now for Thank attending you presentation. is conference concluded. today's The

You may now disconnect.

Flexsteel Industries (FLXS) 28 Jan 202020 Q2 Earnings call transcript