FLXS - Earnings call 1 2024 | Flexsteel Industries, Inc.

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Operator

Good morning, and welcome to the Flexsteel Industries First Quarter Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Derek Schmidt, Chief Operating Officer and Interim Chief Financial Officer for Flexsteel Industries. Please go ahead.

Derek Schmidt

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

Relations available Our after earnings and the Events. is under market issued our Investor on close yesterday, at release, Tuesday, October News which www.flexsteelindustries.com, section of we website XX,

Executive call prepared I then remarks, today Chief we Dittmer, to call, today's will President Jerry here On we the your and questions. am and open with Officer. will provide

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

or Forward-looking in projections, to outcomes goals, materially statements, from are the estimates, that subject nature, risks and by involve forecasts and forward-looking and results could statements. to those their differ expressed assumptions uncertainties actual cause

XX-Q applicable. date and These as uncertainties that those be of should report this by and and events. of Form other reports limited risks the relied only recent are Form on described speak not include, our future XX-K but call SEC not annual of our as as forward-looking predictions updated most conference quarterly on are statements filings to, upon Such subsequent in as

the well refer today to non-GAAP non-GAAP and GAAP discussed may contains the reconciliation most on other which measures. available be to are directly the quantitative to as The intended financial but we of Additionally, to website measures. the comparable not measures, information supplement, substitute for as press GAAP release

Jerry? call to Dittmer. turn the will I that, over with And Jerry

Jerald Dittmer

our with XXXX am you pleased morning, year today. share us fiscal quarter thank I and Good results. first you for joining to

million offset double-digit quarter, and challenging compared business sales several revenue comparison growth have prior ocean traded to of our initiatives these leveraged adversely $X our the X% which we recent challenges our and to in by peers by freight decreases reduced surcharges, deliver year sales quarter. year-over-year year is quarter. of While faces the sales This the approximately publicly of have conditions prior within impacted industry seen elimination the

prior year, costs delivery, eliminated inflated fiscal which to surcharge throughout mechanism chain Container we year delivery through the of the significantly In this and due last this surcharge. higher we to ocean issues. cost normalized used supply container were pass subsequently

Excluding our was related ocean the a from unit $X million this and surcharge our freight execution growth sales impact reflecting strong X.X%, product initiatives. and momentum elimination, sales of mix robust the growth volume to

and a to drive share. industry environment difficult gaining are reinforces Our growth competing ability in well that we

our in propelled the same and on continue addition, the of year. million compared savings, compared $X.X to investment the quarter, the quarter in quarter This $X.X efficiency expansion while we of operational income cost margin XX% which prior XX.X% initiatives of same focus margin to the In a additional growth operating in gross million, helped of year. improved prior delivering still fund first in

and entertainment electronics like remain a travel from We the hard furnishings. is shifted to business and term near in industry the and away consumers arguably already discretionary environment experience-based expenditures goods spending have challenged. to home recession appliances, expect The as in like higher-priced

operating improving the momentum second quarter, our while to growing on margins XXXX. confident our and intensely challenges, grow with geopolitical The card continues interest rates, pandemic spending external debt. government deterred first consumer sales enter student High the We over ability in rates first last positive are year and gross savings, isn't payment list working concerns, grow. shrinking fuel and team and year both economy compared quarter our and focused restart, headwinds fiscal Despite of in and to rising also remained profitably business credit these to against mortgage uncertainty, quarter. prices, and the loan U.S. rising the

new profit strategies continue enhancement. to strong and remain while new for future Regardless in working. development uncertainties, and Our product growth identifying managing investing and innovate, we opportunities We'll of aggressive relevant demand build drive brands. growth expedient and prudently are costs

now financial results and for we I'll comments our of ahead. turn Derek our call over what some outlook to with to strategic back X the at discuss I'll be as call as the initiatives the on well see end quarter XXXX. closing

Derek Schmidt

the face. morning, Thank I'm market recent High October cognizant you, for Jerry, they I'll shape of the of headwinds Carolina, market, conversations quarter, while with of the share we Jerry, our encouraging what Like industry. customers, the away business in few held and took the we High our in a the year. North outlook everyone. view Point, fiscal may confident and in we At highlights Point near-term from how suppliers good others numerous and remainder of the

First, we new the groups. October Market new our product with debuted showroom at along XX

excellent was traffic are others the for differentiating visited, showcase excited and lines. customers compared product new current team well our gives which in noted sales from was competing showroom, Our levels they that which strong new customers and us suppliers The our our energized focus both extremely to Many through take and through and new exceptionally innovation feedback an showroom encouragement to positive. and and on were provided energy products. the that we

quarter, strong consumers. seen committing their that at been that recliner excess a on have has XX% adoption on calls, placed in October the with initially the even success. we Zecliner, initial product orders to over Notably, from by have product, placed retailers have new who more floors Market. have of past repeat orders placement the demonstrating first our Through mentioned the XXX sleep we Second, solution big I retailers

sleep people in the recently perceived a originally period same study party or sleep a of felt in better a nights their who least engaged on significantly XX% the different a who among regularly an conduct part study solution also XX% the products period, at sofa. than or Zecliner a Zecliner other over The in was recliner, experience third don't time results chair in sleep XXX This a study Zecliner past night over of X-week of they individuals used that showed that over analyzing of individuals to using and expand Zecliner The felt potential strength These in sleeping slept sleep. sofa study found category. compared plan product independent to these marketing improved the this results our sleep. of our We their chair study improve recliner show bed. to results. helped we also and And regular sleeping the

the In sleep solutions Market, innovate to plan extension in we to an [ sleep to sofa. expand offerings line space. the solution continue with introduced We addition, our a Zofa ], at October and

expand modular our it to line brick-and-mortar to continue the distribution we is traditional well. Flex, of Third, placing seating where retailers

October also to bed, Market, a We storage launched center, Flex pet line including the pieces a differentiated at technology hub, sleep kit. and several functional

We well. will as continue future innovating growth and expanding platform to this drive

grow Revenue in big e-commerce contributed notably with distribution, XX.X% through Finally, our growth through we box generated the in customer this continue Costco to sales quarter. costco.com. to the

expanded recently effort our Flex roadshow marketing Costco our we through collection. in-store first our modular event addition, In furniture to showcase

customer We to and to the throughout our remainder awareness events reach. of have and these forward using the these more several further events in-store look fiscal brand year scheduled of

choppy strategic provides success Market profit of sales positive near-term confidence well conditions growth the year. The our for that from and us deliver our energy and industry initiatives, interactions navigate fiscal the are positioned we at and the to

give financial additional the outlook year now the and I'll for that, of XXXX. fiscal second performance first details With some the you on for quarter quarter the

provided $XXX million, of For $XX.X million to the $XX earnings million XXXX fiscal guidance quarter, our net during call. within sales fourth quarter were our

volume and in and freight As the ocean channels. Jerry noted surcharges, e-commerce unit the retail we mix, to we earlier, momentum which growth related feel sustainable X.X% a quarter. have both strong sales was growth And excludes in

delivered range From of X% company a million of first within sales X% of our X%. $X.X which operating the profit to or perspective, guidance the quarter, was in income

to at to and The fiscal quarter of the and payables on reduction timing several beginning and balance of fourth working $X capital of quarter statement $XXX.X payments our Working of due cash the normal million. did our balance year. with the company increase of a our annual revolving Moving large million, credit balance in debt capital a occurring from of of a $XX sheet and ended million, the cash line balance the flows.

to down debt. pay we forward, and sources meaningful inventory year aggressively expect reduction improvement of profit be cash Going to in XXXX fiscal

be guidance forward, of quarter $X growth Looking for sales surcharge is million to X% by the ocean will freight revenue impacted elimination and first the approximately the between to unfavorably represents which net $XX comparisons of million. second $XXX sales Similar sales quarter, year-over-year of X%. million,

gains. strong growth mix momentum Excluding volume impact, has related initiatives the growth freight ocean reflecting and been unit XX%, to our of the continued and and forecasted share between X% surcharge

XX.X%. margin a gross quarter range quarter second forecasted the XX.X% expect of improve we profitability, first Regarding to to with from

expect of our with margins and the realization fiscal expected cost growth grow continued to initiatives. savings gross operational We efficiency throughout year and sales

We continue between our the to prudently initiatives, quarter. SG&A $XX investing million SG&A to while costs growth quarter, manage $XX similar spending for expect and first million the in and

by forecasted pricing parallel We percent throughout be expect to which second gross guidance the margin year conditions, consumer in of are competitive quarter of to in The projecting operating and variability the to both second for demand improve sales shaped continue of most and improvement. drivers factors. range margins be in significant will X% macroeconomic income with range income operating a the as of X% the quarter

Regarding debt, and inventories savings priorities full related modest flow cost second working and year. be new decline outlook, a cash of remain IT source Near-term quarter to resourcing major as cash innovations, flow modernization we our year systems. to reducing steadily to expenditures and expected in is funding the throughout capital continued projects capital cash the mainly for of anticipate

XXXX the in $XX of range at levels $X end debt to expect million. million fiscal of We the

quarter, million. is to tax XX% XXXX be million fiscal of second expenditures to capital the XX%. expected and expect the For rate $X between The range $X.X for in we effective

on call I'll to Jerry perspectives the Now to back over share our his outlook. turn

Jerald Dittmer

Thanks.

we While steps choppy to secure the profitable in confident we to near and taking remains long-term promising. outlook expect am business I that are growth term, the conditions our growth right be

successfully positioned an We remainder balance improved well year earnings the stronger XXXX. to fiscal even and sheet over of are deliver

open questions. that, will we your the With call Operator? to

Operator

We Lebiedzinski will Sidoti. of question Anthony [Operator Instructions] is the now first from session. begin The question-and-answer

Anthony Lebiedzinski

surcharges year you impact about indication guess, the for freight I quick I quarter. thought provided it you guys first that of a the of an quarter and gave just was second last So first, helpful comment.

anything the as last the us as could was that. So about there it far of issue? rate out year, was of Or less second as an as remind we half beyond just look surcharges? quarter meaningful as to call second If you far

Derek Schmidt

Derek. it's Anthony, Yes,

year. it throughout So dissipates the

little third a a would in than the quarter, quarter, $X fourth little be the less it's million. $X for less than So the And impact surcharges million. of the

freight why surcharges ocean those gradually throughout unwound impact revenue. hence to So a year-over-year decrease the see in we the year, you

Anthony Lebiedzinski

Got terms impacted it. Flex, And year? much your much as can then get helping you your quantify about Just as of and quarter in and expansion growth is clarity results, initiatives, guys. first that perhaps far of the you more to for sales big-box balance the how Zecliner looking outlook how maybe the

Derek Schmidt

color give provide, Yes. you I were in but exact I numbers, our No, of a to can not is prefer initiatives terms the Anthony, substantial growth growth. factor the

external be If those be double-digit high it the our certainly I as would probably but in our down of business low range. to you peers, probably kind large were mean, take would single-digit, out, as down not

and are grow growth for time of allow initiatives revenue those believe So the momentum, there's to initiative we for -- every working, growth is here the really, growth quarter year-over-year remainder initiatives to good year. to we're believe, will us room building which expand, the the thing the from single this continue we the at again,

Jerald Dittmer

also more we of The the come more of in that future. Anthony, out too, growth and help other initiatives that going piece are to these line with extensions is us continue to

You at SKUs Flex to those both and even are Market, out Zecliner, we additional and might more. there enhance that brought products remember

Anthony Lebiedzinski

as Got it. Yes, yes. well. looked good pretty new And showroom certainly, the

the job there as sounds gross And far margin nice well. expect it certainly continued you improvement as like as there. improvement, So

I assuming, business, to get out to, the -- a to 'XX, to can improvements we as demand like gross beyond where your sense we as environment? overall look go mean, I mean normalized the what's mean, given mean, course, of I I margins So fiscal could

Derek Schmidt

Yes.

XX%. I think, closer target be to certainly, year the would our to end

year closer to gross XX% the kind to margin. leverage and then cost to that 'XX. of grow So exit expand line year fixed fiscal top into continue And this a

Anthony Lebiedzinski

I mean, All fast grow? well. for you QX in know SG&A mean, And XX% outlook right, as your I kind how those guys so here. were term, up is around then for guidance will dollars, helpful. growth that's mean I for know beyond then But longer those looking But this looks I your you are initiatives. what very gave of terms And quarter like expenses of that, investing I in guess that? I

Derek Schmidt

would expect, to remainder million year -- $XX to kind Anthony, of be range within Yes. for I of the SG&A million the quarterly for quarter. per $XX that SG&A

we overall as a about top I year to expect the grow think think I SG&A 'XX, at than lower rate would line. fiscal

fixed kind So going we SG&A leverage investments to including costs, expect would forward. of

is So our investment had to top at overall in more future line, the than there to it a line, would to top propel there but years. be continue rate grow lower

Anthony Lebiedzinski

best others. luck. it Well, of right. pass good. All I'll much, I and thank on to have. sounds very That's all Well, you

Operator

question is Bugatch next from Research. of The Water Tower Bud

Beryl Bugatch

basis, the a X.X% in of freight on surcharge quarter. that about can good that I you sales Jerry was receipts, how the talked example, I questions. us and units basis. did excluding idea and growth a But mix, on how an a Derek, grow an were know on on had year-over-year? you dollars like, congratulations units upholster for couple units apples-to-apples growth give that

Derek Schmidt

XX% categories, the of we about probably about are sourced kind stationary categories. way of and Yes. They encompass product our largest Bud, seating soft sales. think our The manufactured almost

to So was XX.X% was year-over-year units some our on sourced on soft perspective stationery seating you manufactured up up and units, X.X%. business give

and both think that of So the and we reflective feel they're gaining of fact competing share. numbers, about well good in those market we're the I

Beryl Bugatch

cost where you is get product that? cost? leverage think primarily of the about And sourced goods sold, is that would on to growth is way the The manufactured variable

Derek Schmidt

related But ways we our be I distribution Manufactured, Primarily to have structure X to centers. certainly, leveraging it. also there's mean -- about think fixed plants. X we'd our cost

cost as about our fixed that network And well. sourced our distribution the I does growing way so the leverage business, think of

Beryl Bugatch

I'm goods That memory sold composition my like me gets I the and old is failing. of But it. and wrong, I right, me correct into if if remember the think, cost of I and am, because

-- getting there? highest that Is look year, about I You the kind I or ago, largest gross that a maybe close ago going think XX% gross had the talked margins about you back if And -- for to maybe was target. years that of margin I see that back the the couple of range, historically, and into how quarter XX.X% get second looking you watermark? are for of high was X do X years like particularly end XX%. the the that Where and to percentage

Derek Schmidt

a you when -- office, composition all, ago, back X to many businesses look of significant different the Recall first exited you business So Those had X today. margin, SG&A a hospitality, or businesses care, it RV also we is our that that years much health gross commercial of than of remember had have higher load. but those they was seating.

SG&A And so sales margin that as split of mix. of and a because changed gross has between the percent

benchmark. the comparisons historical aren't best one, the So

forward, continued continued XX% we to I fixed gross is to range. talked of growth, And a there management several top going get about prudent said, with get think in cost up that our margins the to we've have with XX% path over years. That next structure, cost aspiration and line savings, our

Beryl Bugatch

the Okay. do balance about distribution sold, somewhere and around Materials, you XX% how And and there? of think and in between MLO that? particularly goods XX%, transportation. components Labor the should of or the Overhead How manufactured, cost we get

Derek Schmidt

Yes.

goods. little on off, difficult finished You're sourced probably we're the far Materials because not it's -- too Bud. side, a buying bit

in terms XX% right, to in overhead and materials, materials, XX%. I then you're XX%, in business. overhead XX% labor about between XX% But labor logistics and that don't So sourced to range, kind visibility general, the of our of breakout have for

Beryl Bugatch

of would the impact a be hit the -- primarily, And would goods not the logistics I primarily cost sold. logistics mean, but primarily goods sourced to

You think the the... and way is bring works logistics that way inventory in sold, and to And inventory where you get to the the through that's it's cost that? you it as its about add

Derek Schmidt

DC, costs, No. costs. then and so all container goods parts the for finished sourced capitalized The of inbound those into drayage cost are our

is inter-DC about transfer then logistics, kind well well. as costs talked I to XX%, our our that as cost centers when of distribution outbound of So as and customers that inter-plant, the shipments any

Beryl Bugatch

Got you.

would for gaining How competing you so That's me -- and well, the you're other on very X.X%. quarter? about And And lift much new Costco tell gaining to of the helpful. sales, much me was Costco Okay. the -- due your maybe of to due the what's talked sales accounts. that is you're how for

that you can way? So at sales look

Derek Schmidt

X.X% Costco that. about Yes. of If decompose growth, probably made the up X.X% I

competing we away, business like core retailers. still that traditional we're take well our our feel really within So in

Beryl Bugatch

how and X.X%, same is new how much that customer much customer? same location be So or would

Derek Schmidt

new lot There's not a customers. of

For winners really strategic believe largest, most the to within I most are part, penetration gaining in we're we're that's driving the with future where our retailers is who where going we And business. share. mean, the be the

Jerald Dittmer

other this other with Flex are those other is product a that lot and the that, things that. and obviously are the enhanced the Zecliner that like year driving those we're of The place gaining and things lines,

Beryl Bugatch

So that's right? of in new -- many floor to are space you, retailers but dedicated those retailers existing

Derek Schmidt

of Correct. we for number mean look track good that of is That's we the growing. growing. Yes. placements number I isn't And of we to mean, retail space the is I the other our way it. at placements -- products every a corollary single know and one have

encouraging gaining indication retail. that So again, share we're that another would give in us

Beryl Bugatch

have growth? you to percentage a you're that willing placement Do of maths. percentage great a That's share on

Derek Schmidt

last been of over between kind single XX%, high and the mean, I of -- years, Yes, X% it's couple digit.

Beryl Bugatch

you're right, can base, health year, to math XX of that? the those looking like me, right days versus like, And at is last of your retail a numbers? the days around XX about you great. closer the talk look end little bit the somewhere the Are if receivables something That's for my

Derek Schmidt

range. to No. we typically that kind XX-day XX I mean of run around

thing The that down. on So change. dependent sales be accounts have typically in that up is, receivable the SKUs, what the heavy only or doesn't will quarter, if last month we of either

about feeling there. we're feel economic and watching overall, closely, of uncertain quality AR. good or about So in credit the concerns quality credit this issues overall time, good we're but concerns of Obviously No AR. the

Beryl Bugatch

Okay.

And so XX? the are significant, particularly over delinquencies not

Derek Schmidt

No.

Beryl Bugatch

XX And Great. be -- your normal Okay. terms? term is that the would normal

Derek Schmidt

terms of in to yes, XX days. But... XX,

Beryl Bugatch

the luck the Congratulations balance this and on good year. year calendar fiscal and of

Operator

John question of [Operator is from Pinnacle. Instructions] The Deysher next

John Deysher

solid just I couple Looks of quarter. questions. like a have a quick

First, end the what was the backlog the quarter? at of

Derek Schmidt

Yes. million. $XX Around

relatively So it unchanged the from where beginning of at the was year.

John Deysher

Great. Okay.

Another question. I'm to And noticed assets increasing? I $X.X bucket? that million. other are balance sheet just other in It's why growing. current assets, is what's curious, been that assets up other And

Derek Schmidt

X things, quarter, are There and we first SAP the year our license. insurance, prepay Yes. we in prepay annual also our John. annual software Every

X those combined things $X.X worth So million. about are

increase QX. the was So that in

John Deysher

Okay.

that come going So down may forward?

Derek Schmidt

our beginning Correct. And we normal that's each fiscal the full cadence. in pay at of those Typically, year.

John Deysher

What's sense. couple think, a the plant, It's you makes status opened status it. within know built What's last I of I of the That relatively the this point? years. haven't the plant? Okay. that Mexicali new at of

Jerald Dittmer

with be in need we short The a didn't that environment, moving we'd John. there in Yes, is, right the current status the now see term.

out next have we year, leased basically for the at back something we And in it's out time. leased basically visit and it's about every have it -- this months. X come But XX it to we'll point So XX%.

John Deysher

year-to-year? what, the is month-to-month or lease And Okay.

Jerald Dittmer

options, look when that it need with work -- continue obviously just and there's parties folks to and continue leasing these we'll with to there. And right are in we'll it our and demand with different X year-to-year at They're now. really

John Deysher

of -- when at Okay. end year? What does That's roll over, the news. it good the

Jerald Dittmer

Different times.

the quarter one out of quarter, other in first rolls out One fourth next will year. the roll them

John Deysher

I from $XX.X on in the Great. the What decline And the million think the press said year. substantially reason $XX.X the That's down availability? at of million. for finally, the release availability, that was pretty end

Derek Schmidt

inventory to reduction. due largely It's

inventory at was million. $XXX over Today mean, peak, our million. it's its I $XXX So

asset-backed So facility. is an that line of credit

John Deysher

availability between that. got inventory quarters X million. steady, it and I've up right, always last All at looking or $XX $XXX was pretty so, million $XXX above But the and million your was over

not me, it's been it's So inventory the not mean, the clear same, I has dropped to about significantly.

So availability -- the so low? why down is what

Derek Schmidt

specific back look which get to to to periods glad and have at I'm the do. I'll you,

Operator

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

Jerald Dittmer

dedication us have questions. Everybody, to would additional during outstanding their performance to all for all you we next a Thanks I contact in like any great if thank forward you for Thanks. our on our look have the In updating employees of to Flexsteel call. today's closing, and And day. participating of call. quarter. you Please

Operator

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

disconnect. may You now

Flexsteel Industries (FLXS) 1 Nov 232024 Q1 Earnings call transcript