One of the largest manufacturers, importers, and marketers of residential furniture in the U.S., Flexsteel Industries, Inc. has announced its financial results for the fourth quarter and full fiscal year 2024, ending June 30, 2024.
Key Financial Highlights:
- Q4 Net Sales: Increased by 4.7% to $110.8 million, compared to $105.8 million in Q4 of the previous year.
- Full-Year Net Sales: Rose by 4.8% to $412.8 million, up from $393.7 million last year.
- Sales Orders: Q4 orders totaled $108.5 million, a 17.1% increase compared to the prior year.
- Gross Margin: Improved to 21.3% for Q4 and 21.1% for the full year, compared to 20.0% and 18.0% in the prior year, respectively.
- GAAP Operating Income: $7.6 million (6.9% of net sales) in Q4 and $17.1 million (4.1% of net sales) for the year, compared to $4.2 million (4.0%) and $10.5 million (2.7%) last year.
- Adjusted Operating Income: $6.2 million (5.6% of net sales) in Q4 and $18.3 million (4.4% of net sales) for the year, up from $4.2 million (4.0%) and $8.1 million (2.1%) in the prior year.
- GAAP Net Income: $0.89 per diluted share for Q4 and $1.91 for the year, compared to $1.91 and $2.74 in the prior year.
- Adjusted Net Income: $0.75 per diluted share in Q4 and $2.11 for the year, up from $0.36 and $0.87 in the prior year.
- Cash Flow: Generated $7.5 million in Q4 and $31.9 million for the year from operations.
- Debt Reduction: Paid down $23.5 million in debt, reducing borrowings under the credit line by 83%.
Management Commentary:
Derek Schmidt, President and CEO of Flexsteel Industries, expressed satisfaction with the company’s Q4 performance, highlighting strong sales growth and continued improvement in profitability. Despite challenges in the industry, the company has achieved three consecutive quarters of mid-to-high single-digit year-over-year growth. The company’s focus on innovation, customer experience, and marketing has contributed to its success.
Schmidt also noted that the company’s operational execution, cost savings, and product portfolio management have driven margin improvements. Flexsteel generated $7.5 million in operating cash flow in Q4, allowing for significant debt reduction. Looking ahead, Schmidt remains optimistic about the company’s direction and its ability to create value for customers and shareholders despite ongoing industry headwinds.
Q4 Operating Results:
- Sales: Net sales for Q4 were $110.8 million, a 4.7% increase from the previous year, driven by a 7.3% rise in sales of home furnishings through retail stores. However, e-commerce sales decreased by 11.7% due to softer consumer demand.
- Gross Margin: Improved to 21.3% due to better fixed cost leverage, supply chain savings, and product management, though partially offset by higher ocean freight costs.
- SG&A Expenses: Increased to 17.0% of net sales, impacted by a $1.5 million non-recurring stock-based compensation expense related to the revaluation of equity grants for the former CEO.
- Operating Income: Q4 operating income was $7.6 million, up from $4.2 million in the prior year. Adjusted operating income also rose to $6.2 million.
- Net Income: Net income for Q4 was $4.9 million, or $0.89 per diluted share, compared to $10.2 million, or $1.91 per share, in the previous year. Adjusted net income was $4.1 million, or $0.75 per share.
Manufacturing Network Optimization:
The company completed the closure of its Dublin, GA manufacturing facility during Q4, incurring $0.4 million in restructuring expenses related to inventory and equipment transfers. Total restructuring costs for FY 2024 were $3.0 million.
Liquidity:
Flexsteel ended the quarter with $4.8 million in cash, $95.0 million in working capital, and approximately $55.2 million available under its secured line of credit. Capital expenditures for FY 2024 were $4.8 million.
Financial Outlook for FY 2025:
- Q1 Sales: Expected to be between $100 million and $105 million.
- Full-Year Sales: Projected to range from $420 million to $436 million.
- GAAP Operating Margin: Expected to be between 5% and 6% for Q1 and 5.5% to 6.5% for the full year.
- Free Cash Flow: Anticipated to be between $0 and $5 million for Q1 and $20 to $30 million for the full year.
Conference Call and Webcast:
Flexsteel will host a conference call on Tuesday, August 20, 2024, at 8:00 a.m. Central Time to discuss these results. The call will be accessible via phone and webcast, with replay options available through August 27, 2024.
