FLXS - Earnings call transcript Q2 2022 | Flexsteel Industries, Inc.

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Operator

Good morning, and welcome to the Flexsteel Industries Second Quarter Fiscal Year 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please now Derek Schmidt, would for Industries. like Chief to to over Flexsteel conference the Chief Officer turn Operating I Financial and Officer Please ahead. go

Derek Schmidt

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

available which Web is Chief site, am News Events. the earnings www.flexsteel.com, January will release, close here Monday, section today's call call, prepared On open provide then I Jerry Officer. and issued under Executive we Our Investor Dittmer, today market questions. Relations after your yesterday, will XX, the on our President to and with of & we remarks, we

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

as Form our of as their assumptions and and uncertainties date the that outcomes are by in described annual limited Form expressed on on as from other predictions goals, by statements and and conference not call include, cause those are as this recent of be nature our to statements reports upon quarterly actual are future SEC not report involve updated those filings, speak forward-looking relied projections, uncertainties risks to to, applicable. and results statements. or subsequent the Such risks materially could estimates, forecasts, that These but Forward-looking XX-K only differ most forward-looking XX-Q of should and subject in events.

turn well reconciliation be call Web to contains quantitative GAAP the available discussed for refer the not will are the the over directly we financial And with today and GAAP to measures. that, intended comparable Jerry site information Jerry? to to as the may to substitute which I the release measures, press on The Dittmer. but as non-GAAP Additionally, most non-GAAP measures. of other supplement

Jerry Dittmer

our and chain share for of gaining sales continued well We and joining XX.X% continue sixth encouraged quarter supply quarter us our growth longer year-over-year strong was of the thank today. by during term. I challenges, market performance. delivered it I'm growing to digit growth. positioned ongoing and feel we're morning you double Good consecutive sales the despite

our charges. has contending challenges, costs ancillary with supply pressure which been performance container top demurrage, are While several noteworthy on ocean line global we're putting profits. with as solid, and logistics, are chassis Most chain detention such near-term intense associated

are globally containers a products, As of reminder, sales XX% import which thousands our each of quarter. sourced supported by us to almost require

with in as truck imports weeks, conditions worsening is At or ports at COVID demand days congestion for our and strategically the combined supply up concerns ramp severe containers gap of supply issues, ongoing about disruptions coincided in between imported incurring growth supply time, build protect the industry fees. and the our growth the with left same trucking widening crisis strong service drivers. given to past inventory trajectory levels. record and chain support Unfortunately, our our months from of we global seven Given a in the to and stranded railroads chain containers number other ancillary

rates, ancillary firms the to of has rates to by us, number have to to comments Derek expenses, forward, P&L of on charges and costs million are unexpectedly per Xx the days return which expound which in item the these while a Xx our pick recent further has is negligible disruption cases For aggressively other The over compounded and his The waiting ballooned drivers on emboldened logistics and of variety pre-COVID going also some not ancillary to our lack tightening used deployed in containers a quarter. strategies up to these incurring containers result, All will also magnitude truck we increase terms. XX in be fees. shortly. diem this of manage acceptable

is significant navigating cost other inflation. issue we're The

global noted, I continue highs demand imports container of business imbalances. climb due to to to portion ocean large a supply rates, As new are our freight are which exposed and to and we

from by are experienced We seeing areas digit our where other wages, transportation, and in Mexico, increases including also which in materials of chain, we've inflationary recently cost pressures domestic recently supply double notably increased XX%.

negatively we implementing along term. much margins near price pass assertively the chain for but pressures, where a price in global increases the to conditions and realization return margin of manage XXXX. to to could the market lag possible, a supply can, We remains and Though these address uncertainty cost will company fiscal costs are higher remainder to where impact in the cost actions are to level taking we worsen, profitable gross

the I'll and over what discuss some we to Now turn see back results. Derek I'll call ahead. our to And financial closing operational with on comments be

Derek Schmidt

Thank you, Jerry, and good everyone. morning,

$XXX.X million in Second million, year XX.X%, prior or quarter were million, net sales the to up $XXX.X compared period. $XX.X

quarter, the high of revised continues million the to as range, million, channel earlier. million issues the were or chain at results end prior highlighted Jerry faced to be strong performance sales versus Sales Our $XX.X retail our which our supply in $XXX despite guidance $XXX XX.X% year. sales ongoing increased in

the products. gains of well the in position in-stock placements We as our continue product to inventory year retail as over benefit past in healthy levels service from made

our we times remainder source capacity, the we As fiscal a of growth custom be even year. which lead American competitive, to North should expect of the up manufacturing for manufactured become ramp more on products

On of the our solid sales performance e-commerce at million. business, side $XX was

million, improved prior first quarter Although year results. was sales by to to a growth flat in compared strong $X or XX%, comparison quarter,

feel growth in of remainder for regaining fiscal on year. and momentum our the the bullish this channel growth are We outlook

quarter points the gains From improved driven content provided in loss customers, with million prior business or share diluted per that fiscal customers, net to restructuring $X.X in and existing million a a Please year second $X.X expect expected reconciliation associated of as loss compared an which $X.XX December update net with quarter. and $XXX,XXX included as e-commerce margin addition included negative Jerry non-GAAP to net release containers, see both quarter. and ancillary to share the gross share X.X%, of detailed ancillary was non-GAAP we quarter new net quarter X,XXX The was guidance, the be advertising in a GAAP expense. Gross with pre-tax year net income decline that a to to significantly is in the profit In higher Consistent new of that exceeded than due growth a higher diluted product perspective, ocean explained, effectiveness. share. million the a disclosure or reported reported we per and costs of operating in the loss $X.XX costs. which in year-over-year per prior we lower in income income basis adjusted earnings sales of launches the the driver net margin a $XX primary The we adjusted percent quarter. by second earnings percentage for

in capacity basis margins the release. profit offset related each There the factors to inflation margins, XXX influencing and reduction growth than press reduction the SG&A more earnings As are other of in offset but in year-over-year points gross other outlined as cost investments. they largely

$XX cash of of credit. quarter company Compared line with Moving million million of on the the a end and working fiscal to $X of balance secured the ended balance for by balance to largely sheet, inventory purchased million. $XX.X primarily XXXX. increased at and capital working inventory related $XXX.X payable, working XXXX, the our capital in a decrease in payment $XX.X The a was related a $XX.X to million capital which million increase to end increase fiscal accounts the of and in million

earlier, inventory of in support maintaining XXXX, As with over customer levels the service anticipate balance made inventory fiscal levels. noted while Jerry and strategic still reducing a service we advantaged investment improve higher gradually We customers. an to position to our sales

million the growth to Looking is quarter between XX% forward, XX% for $XXX guidance $XXX which and sales translates third sales year-over-year. million, and between

For inflation the the growth in global half achievement to between that but year growth and still of will chain the second fiscal sales XX%, we fiscal conditions dependent year. impact XXXX, XX% of be the supply of on rising cost full are targeting

providing as Given But uncertainty at taking the this earlier, are increase we quarter and chain detailed are guidance cost to inflation to conditions, not we alluded time. actions profit third Jerry aggressive on of for levels third likelihood profitable less the charges ancillary in lowering $X and first, returning include; containers. initiatives the the inbound in company to by million to key reducing fourth the quarter quarters. than Three supply third

Given intend inventory strong inventories compromising gradually we levels. service reducing our without on position,

basis. and who select containers dedicating we our of resources fees. to a managing with additional freight container effectively realigning minimize reducing physical the are by group a of can are perform external on daily finally, track And and ancillary forwarders we fees more and and internal flow Next,

February from are offset improvement will inflation wages profit with pricing products freight, of be our pricing second to our new in compared quarter For Revised across initiative, price by ocean we the increases domestic and the cost realization, quarter. price inflation implementing materials, million effective to run most transportation costs. than orders. cost to the to higher third $X expect million Due to roughly we in $X lag second

quarter Lastly, we funding growth will adjust tightly pressures actions worsen higher, or critical take below while additional $XX.X investments. we'll supply at as our long-term in the and If inflationary plan still million conditions or escalate chain manage third SG&A expenses necessary.

year cash debt. flow is capital reduce we reducing second in flow funding inventory as Near-term for source cash of expected working the priorities a outlook, cash half and our expenditures the capital Regarding include be of levels. to

to expenditures, quarter a new effective anticipates fourth For expenses in will the be outlook. Mexicali, year. The $X XX% rate perspective is fiscal on spending are Mexico. company to facility XXXX, at XXXX over turn still tax portion full capital to the I'll to share equipment million and large call of fiscal restructuring in of for his expected $XX.X for which our our be the the XX% spent back range the to estimated in production related to for $XX.X million Jerry million for

Jerry Dittmer

Thanks, Derek.

growth While our the team is confident adjusting profit executing by continued supply chain manage strategies. and remaining cost steadfast while short-term to long-term growth encouraged impact I'm our momentum pressures, is difficulties frustrating, our external to that of

on investments expand by ramping resiliency. is manufacturing still recent Juarez, to in up will and start Mexico in both Our build completed June Mexico capacity as in supply our and production chain growth future to August. of plant Mexicali, target and construction at facility expected, be and is new third support will our newest Production

service begin to month, East new Pennsylvania improve center region. future and will next Coast growth distribution Greencastle, customers Our shipping in levels that and support will in

In in innovation, questions. we'll that, With brands, our open our summary, In advance and product digital prospects your to enthusiastic ambitions. addition, profitable the remain continue up I talent, capabilities growth. growth strategically about to we our long-term to invest for Operator? call

Operator

first our comes Perala of go And We will ahead. from Instructions]. question begin question-and-answer now Associates. the Please session. [Operator Punch & Anthony

Anthony Perala

guys. my morning. Thanks taking Good Hi, for questions.

Jerry Dittmer

morning. Good

Anthony Perala

could from you helpful that quarter? and If volume be of is sales the breakdown most line much the -- what's -- on how between it recent there top the pricing in would growth, XX.X%

Derek Schmidt

the price is Yes, is and growth. the component teens unit the remainder low in volume

Anthony Perala

give forward, more how then we going into conversations orders? great. going those And could that's Okay, head on you increase customers as price fiscal just February QX are some with color into and

Jerry Dittmer

an everybody competes impacted the inflation. industry Yes, broadly in by from perspective, industry who is

So seeing this actions. at similar time we take pricing are competitors

that No everyone is the in with it, understands effective competitive likes industry factors feel forward Xst but pushing the pricing we So we're set. the inflationary February the it. that in that's behind one line

impacted going are by to our So be disadvantaged we we our adversely pricing to or competitors. actions don't that compared believe

Anthony Perala

of of had the is that in one couple update I anything ancillary last just change, it's a one, up in And that the then or charges pops you higher around costs in December, the with I million. quoted the think just mentioned? that led there realization release, think million. business XX around months XX ancillary difference the to Is And last that that at you

Jerry Dittmer

involved and Unfortunately, in companies, current are the extents, of environment or say, the advantage much Yes. there's shipping different of the least them, raising at on have, really container; prices logistics, either so new there to over charges last so Anthony, trucking varying started parties moving freight in probably taken forwarder, the all implementing specifically been six ports, many and the lines, months, railroads, that's and global existing domestic I'll charges. disruption the chain, supply

knew passing think that of end And and I visibility ancillary in charges, so we just when of the supply ancillary parties have ramifications had of many to you quarter the be limited at total last terms the we chain on disruption understood what charges. along

slowing significantly in to I noted in comments, we quarter these As are inbound perspective month. control in term that somewhere 'XX, the We we between are charges is quarter received XXX the we over XXX than my of year doing I'll first so XXX per containers. in containers the you on what our specifically containers of for near get give anticipate and fiscal third period. per lower average, the year receiving month, peak

we are We that the are internal forwarders are that give effectively freight coming the said, things with also charges and believe these ancillary most we're I aligning are manage us capable the the what resources. substantially Those ourselves, like steps this, putting confidence who quarter. strongest, those -- we in reduce can can

Anthony Perala

That's up good the great. me. guys. That's all Keep work, fine. for That's

Jerry Dittmer

Anthony. Thanks, Okay.

Operator

comes The Value Global question from Jeff go of Investment next Please ahead. Geygan Corp.

Jeff Geygan

appreciate you Good guys. morning, my Thank I you. taking here. questions

Jerry Dittmer

Good morning, Jeff.

Jeff Geygan

X that you cost in logistics there may can $XX to be number of million that think mitigated? With maybe during So have you that going QX? XX been million increase understand I suggest to did broadly respect the million was quarter, more ancillary, discussing that a your

Jerry Dittmer

that part Derek's just XXX in. to Jeff, we're close of comments, Well, of sort to containers bringing

Now that we're bring XXX going down XXX. to or to closer

Our now. seen not have And all. these though at charges inventories in that continuing right place to escalations are see we're we even good minimize a

we're container still rise. rates seeing In fact, ocean

the bit not. with we New have hoping that coming a we would little a decrease, are Year's Chinese We see of

can Because our be hopefully to better. better forward there six using they've get be of they’ve big negligible to us to folks mentioned, So who stabilize, able these less this were main is a terms also and to conditions costs that set used overall and folks business. or bringing eight gone are as But starts decrease that a we'll going where it been using and big some the as still Plus, we've Derek help in containers. now averages cost are just higher. less estimate we'll these down part to lot be become we've until costs

place we're So lot a of continue just this. in going have put monitor resources to to them, and monitor to

Jeff Geygan

appreciate I sure. the color. Yes,

Just certain this. to on be

an roughly So event? the event, inventory replenishment is or XXX XXX seasonal truly this normal a versus one-time is

Jerry Dittmer

maintain levels. Yes, it's we and we we lower inventory a rate slow Because position, up strong than still would really, things can what our such normal really feel service run be. that have good

Jeff Geygan

Great, I appreciate it.

a SG&A XXX to basis? question, this your good forward of a XX.X% points rate sales. Next improved by Is basis run on percent

Derek Schmidt

an it's Jeff, the think, I No. I term. percentage say for would appropriate, near

we're a margin very pressures gross the Given that going fashion. we're to and in control the cost disciplined uncertainty facing,

XX% prospectively mindset in to we of a XX%. period, As think multiyear margins about to still gross the term, I'm target the going SG&A then about that we XX% longer and are

Jeff Geygan

Got on respect been approved Board it, question buyback. it's tricky I time Last good capital everybody. job your all to with $XX know management. right. for your allocation, a cost million Well, a

you're paying current basis. have You dividend that on a a

credit CapEx recently potentially announced how your potential about revolving XX million. or Board share and light How and facility talked You've of net XX your the buyback? should allocation, we and you million, about think particularly in thinking capital drawn are this

Jerry Dittmer

I of out existing priorities we Mexicali XX trading then the of view facility, and of additional is to directionally priorities funding about to going below was we And remainder a the when a which debt want flexibility calendar earlier. the the Really XXXX is repurchase believe change, share are build a our of million our intrinsic I primarily new to think, calendar I The our then is and shares one cash price reduction Jeff, One, for debt. value. reduction. on the only be What at to least I'll am in mentioned CapEx, related due that in Yes, and of million the decrease two XXXX reiterate for targeting cash at still inventory and optionality today, we corresponding repurchase factors. left authorization. as authorization $X have our our stock

wouldn't is repurchases. future So But more Jeff, we a repurchases that share where priority additional what do continue authorization it that do, have is the $XX million to I of we to appropriate. it's the option in share constitutes cash believe near-term an interpret

Jeff Geygan

Thank Good clarification your the and you again. luck. time for

Jerry Dittmer

Thanks, Jeff.

Derek Schmidt

Jeff. Thanks,

Operator

over turn would I conference session. for closing to question-and-answer like Jerry our concludes Dittmer remarks. the This any back to

Jerry Dittmer

for you And you reach Thank if have thank out have next second employees today. please Thanks. participating we your service you questions during closing, call. updating additional ones. day. thank like all In Flexsteel today's like you And for and their a to any quarter. you. to Thank on outstanding for the forward would great Everyone to our look I our in call. I'd also performance

Operator

The conference attending may disconnect. today's you has presentation. you now And now concluded. Thank for

Flexsteel Industries (FLXS) 25 Jan 222022 Q2 Earnings call transcript