Financial Data and Key Metrics Changes - The third quarter net sales were $114 million, representing a growth of 6.3% compared to $107.2 million in the prior year quarter, marking the sixth consecutive quarter of year-over-year sales growth [29][10] - The adjusted operating margin was 7.3%, which is the second highest quarterly adjusted operating margin over the past seven years, and reflects an increase of 210 basis points from the prior year quarter [13][31] - The company generated $12.3 million in operating cash flow and ended the quarter with $22.6 million in cash [14][32] Business Line Data and Key Metrics Changes - Sales growth was driven by higher unit volumes and pricing from ocean freight surcharges, with significant success in new product introductions and share gains with large strategic accounts [10][29] - The company showcased 25 new product groups at the April Highpoint Market, expanding its Z-Clinr lineup and introducing new case goods products [12][11] Market Data and Key Metrics Changes - Vietnam production supports approximately 55% of revenue, while Mexican operations account for nearly 40% of sales, with current tariff impacts primarily affecting Vietnam [17][30] - The company has seen a slowdown in incoming orders from retailers due to tariff announcements, with a healthy backlog of $78.3 million at the start of the fourth quarter [22][34] Company Strategy and Development Direction - The company remains focused on executing growth strategies, emphasizing new product introductions and enhancing customer experience as key components of its success [41][54] - The company is actively seeking alternative sourcing options beyond Vietnam and Mexico to mitigate tariff risks and maintain competitive pricing [62][63] Management's Comments on Operating Environment and Future Outlook - The management expressed concerns about the potential impact of tariffs on margins, pricing, and supply chain design, particularly in light of the proposed U.S. reciprocal tariff [15][24] - The outlook for the industry is moderately pessimistic due to external challenges to consumer spending, with management prepared to navigate multiple demand scenarios [25][24] Other Important Information - The company recorded a $14.1 million non-cash impairment charge related to its facility in Mexicali, Mexico, due to changes in U.S. furniture demand [30][31] - The company has implemented modest tariff surcharges on new orders to partially offset the impact of tariffs, although these do not completely offset the 10% tariff on Vietnam imports [20][57] Q&A Session Summary Question: Changes in order patterns during the March quarter - Management noted a typical seasonal slowdown in March, but year-over-year growth remained consistent until a significant slowdown in orders was observed following the April 2nd tariff announcement [50][52] Question: Goals for new product contributions to sales - Over half of current sales are derived from new products launched in the last couple of years, and the company remains committed to driving new product introductions regardless of external conditions [54][55] Question: Competitors' responses to tariff surcharges - Competitors have implemented varying surcharges based on their supply chains, and the company's guidance assumes the current 10% Vietnam tariff remains intact [57][58] Question: Sourcing from alternative countries - The company is actively seeking suppliers in other Southeast Asian countries and is prepared to optimize its supply chain based on trade negotiations [62][63] Question: Impact of tariffs on gross margins - Near-term tariffs are expected to be slightly dilutive to margins, with potential for greater impact if tariffs increase significantly [66][67]

Group 1: Earnings Performance - Flexsteel Industries reported quarterly earnings of $1.13 per share, exceeding the Zacks Consensus Estimate of $0.88 per share, and up from $0.67 per share a year ago, representing an earnings surprise of 28.41% [1] - The company posted revenues of $113.97 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.82% and increasing from $107.22 million year-over-year [2] Group 2: Stock Performance and Outlook - Flexsteel shares have declined approximately 39.8% since the beginning of the year, compared to a decline of 10.2% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $0.83 on revenues of $111.93 million, and for the current fiscal year, it is $3.40 on revenues of $436.3 million [7] Group 3: Industry Context - The Furniture industry, to which Flexsteel belongs, is currently ranked in the bottom 5% of over 250 Zacks industries, indicating a challenging environment [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Flexsteel's stock performance [5]

Financial Performance - Net sales for the third quarter were $114.0 million, an increase of 6.3% compared to $107.2 million in the prior year quarter, marking the sixth consecutive quarter of year-over-year sales growth [4]. - Adjusted operating income for the quarter was $8.3 million, or 7.3% of net sales, compared to $5.6 million, or 5.2% of net sales in the prior year quarter [4]. - The company reported a GAAP net loss of $3.7 million, or ($0.71) per diluted share, compared to net income of $1.8 million, or $0.33 per diluted share in the prior year quarter [13]. - Net sales for the three months ended March 31, 2025, increased to $113,972 thousand, up 6.5% from $107,219 thousand in the same period of 2024 [25]. - The company reported a net loss of $3,742 thousand for the three months ended March 31, 2025, compared to net income of $1,803 thousand in the same period of 2024 [25]. - Adjusted operating income for the three months ended March 31, 2025, was $8,266 thousand, compared to $5,609 thousand for the same period in 2024, reflecting a 47.3% increase [28]. - Adjusted net income for the nine months ended March 31, 2025, was $15,737 thousand, up 111.5% from $7,443 thousand in the same period of 2024 [29]. - Adjusted diluted earnings per share for the three months ended March 31, 2025, was $1.13, compared to $0.67 for the same period in 2024, marking a 68.7% increase [30]. Cash Flow and Working Capital - Operating cash flow generated in the quarter was $12.3 million, resulting in an ending cash position of $22.6 million [4]. - The company ended the quarter with working capital of $103.4 million and no line of credit borrowings [14]. - The company had cash and cash equivalents of $22,634 thousand at the end of the period, significantly up from $4,570 thousand at the end of the same period in 2024 [26]. - Operating activities generated net cash of $21,353 thousand for the nine months ended March 31, 2025, compared to $24,361 thousand for the same period in 2024 [26]. Margins and Expenses - Gross margin for the quarter was 22.2%, an increase of 50 basis points from 21.7% in the prior year quarter, driven by higher sales and favorable product mix [7]. - Selling, general and administrative (SG&A) expenses decreased to 15.0% of net sales from 16.5% in the prior year quarter, reflecting cost savings and higher sales leverage [8]. Future Outlook - For the fourth quarter fiscal 2025, the company expects sales growth of (2.0%) to 5.0% and an operating margin of 6.0% to 7.3% compared to the prior year quarter [15]. - The company plans to continue investing in new products and innovation while managing spending prudently in response to changing consumer demand [5]. Impairment Charges - The company recorded a pre-tax impairment charge of $14.1 million related to its leased facility in Mexicali, Mexico, impacting GAAP operating results [10]. - The company incurred a right-of-use asset impairment of $14,079 thousand for the nine months ended March 31, 2025 [25]. Tax Rate - The effective tax rate for the three and nine months ended March 31, 2025, was 24.6%, compared to 30.0% and 30.1% for the same periods in 2024 [31].

Core Viewpoint - Growth investors are focused on stocks with above-average financial growth, but identifying such stocks can be challenging due to associated risks and volatility [1] Group 1: Growth Stock Identification - The Zacks Growth Style Score system aids in identifying promising growth stocks by analyzing real growth prospects beyond traditional metrics [2] - Flexsteel Industries (FLXS) is highlighted as a recommended stock with a favorable Growth Score and a top Zacks Rank [2] Group 2: Earnings Growth - Earnings growth is crucial for investors, with double-digit growth being a strong indicator of future stock price gains [4] - Flexsteel's historical EPS growth rate is 16%, but projected EPS growth for this year is significantly higher at 67.3%, surpassing the industry average of 37.7% [5] Group 3: Cash Flow Growth - High cash flow growth is essential for growth-oriented companies, allowing them to fund new projects without external financing [6] - Flexsteel's year-over-year cash flow growth is 68.9%, compared to an industry average of -20.9% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 8%, while the industry average is 2.9% [7] Group 4: Earnings Estimate Revisions - Positive trends in earnings estimate revisions correlate strongly with near-term stock price movements [8] - Flexsteel's current-year earnings estimates have been revised upward, with the Zacks Consensus Estimate increasing by 8.6% over the past month [9] Group 5: Conclusion - Flexsteel has achieved a Growth Score of A and a Zacks Rank 1 due to positive earnings estimate revisions, indicating it is a potential outperformer for growth investors [11]

Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, with Flexsteel Industries identified as a promising candidate due to its strong growth metrics and favorable rankings [1][2]. Group 1: Earnings Growth - Flexsteel's historical EPS growth rate stands at 16%, but projected EPS growth for this year is expected to be 67.3%, significantly surpassing the industry average of 40.5% [4]. Group 2: Cash Flow Growth - The year-over-year cash flow growth for Flexsteel is currently at 68.9%, which is notably higher than the industry average of -20.9% [5]. - Over the past 3-5 years, Flexsteel's annualized cash flow growth rate has been 8%, compared to the industry average of -1% [6]. Group 3: Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for Flexsteel, with the Zacks Consensus Estimate for the current year increasing by 8.6% over the past month [7]. Group 4: Overall Positioning - Flexsteel has achieved a Growth Score of A and holds a Zacks Rank 1, indicating strong buy potential, positioning it well for outperformance in the growth stock category [9].

Financial Performance - Net sales for the quarter ended December 31, 2024, were $108.5 million, an increase of 8.4% compared to $100.1 million in the prior year quarter[54]. - Gross margin for the quarter ended December 31, 2024, was 21.0%, a decrease of 90 basis points from 21.9% in the prior year quarter[55]. - Selling, general and administrative expenses decreased to $16.1 million, or 14.9% of net sales, down from $17.4 million, or 17.3% of net sales in the prior year quarter[56]. - Net income for the quarter ended December 31, 2024, was $9.1 million, or $1.62 per diluted share, compared to $3.1 million, or $0.57 per diluted share in the prior year quarter[58]. - For the six months ended December 31, 2024, net sales were $212.5 million, a 9.1% increase from $194.7 million in the prior year[60]. - Gross margin for the six months ended December 31, 2024, was 21.3%, an increase of 60 basis points from 20.7% in the prior year[61]. - Net cash provided by operating activities for the six months ended December 31, 2024, was $9.1 million, down from $17.2 million in the prior year[68]. - The company recorded a pre-tax gain of $5.0 million from the sale of its Dublin, Georgia facility during the quarter ended December 31, 2024[57]. Backlog and Inventory - Home furnishings backlog increased by 40.0% to $77 million as of December 31, 2024, compared to $55 million in the prior year quarter[55]. Foreign Currency and Tariff Risks - The company is assessing options to mitigate potential impacts from a 25% tariff on products from Mexico, effective February 4, 2025[59]. - The Company did not have sales during the quarters ended December 31, 2024 and 2023, but incurred purchases and expenses in foreign currencies, primarily the Mexican Peso[79]. - A negative shift in the value of the U.S. dollar against the Peso could increase the cost of manufactured products[79]. - The Company began using a derivative instrument in Q3 of fiscal year 2025 to reduce exposure to foreign currency risk from changes in the Peso's exchange rate[79]. - The Company does not employ any foreign currency hedges against its exposure to the Mexican Peso[79]. Market and Operational Risks - Political issues and shipping disruptions can adversely affect the ability to import furniture products[78]. - The Company faces risks related to government regulations, duties, taxes, and tariffs on imports[78]. - Significant fluctuations in the value of the U.S. dollar against foreign currencies could interrupt supply and decrease earnings[78]. - The Company has certain assets and liabilities related to manufacturing operations denominated in Pesos, including a VAT receivable[79]. - The primary market risk exposure for the Company is changes in interest rates[80]. Debt and Credit - As of December 31, 2024, the Company had no outstanding borrowings on its line of credit, exclusive of fees and letters of credit[80].

Core Viewpoint - Flexsteel Industries (FLXS) is experiencing solid improvement in earnings estimates, which is likely to positively impact its stock price [1][2]. Earnings Estimate Revisions - Current quarter earnings are expected to be $0.88 per share, reflecting a +31.34% change from the previous year [4]. - The Zacks Consensus Estimate for the current quarter has increased by 8.64% due to one upward revision and no negative revisions in the last 30 days [4]. - For the full year, the earnings estimate is $3.53 per share, indicating a +67.3% change from the previous year [5]. - The consensus estimate for the full year has risen by 8.62%, supported by one upward revision and no negative revisions [5]. Zacks Rank and Performance - Flexsteel has achieved a Zacks Rank 1 (Strong Buy), indicating strong potential for outperformance based on earnings estimate revisions [6]. - Historically, Zacks 1 Ranked stocks have generated an average annual return of +25% since 2008 [3][6]. - Stocks with Zacks Rank 1 and 2 significantly outperform the S&P 500 [6]. Stock Performance - Flexsteel shares have increased by 22.5% over the past four weeks, reflecting investor confidence in its earnings growth prospects [7].

Core Viewpoint - Flexsteel Industries (FLXS) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Performance - The Zacks rating system emphasizes the correlation between changes in earnings estimates and stock price movements, making it a valuable tool for investors [2][4]. - Flexsteel's earnings per share (EPS) for the fiscal year ending June 2025 is projected to be $3.53, reflecting a year-over-year increase of 67.3% [8]. - Over the past three months, the Zacks Consensus Estimate for Flexsteel has risen by 8.6%, indicating a positive trend in earnings expectations [8]. Investment Implications - The upgrade to Zacks Rank 1 suggests that Flexsteel is positioned among the top 5% of stocks covered by Zacks, which typically leads to increased buying pressure and potential stock price appreciation [10]. - Rising earnings estimates and the corresponding rating upgrade signal an improvement in Flexsteel's underlying business, which should encourage investor confidence and drive the stock higher [5][10]. Zacks Rank System Overview - The Zacks Rank system categorizes stocks into five groups based on earnings estimates, with a strong historical performance of Zacks Rank 1 stocks averaging an annual return of +25% since 1988 [7]. - The system maintains a balanced distribution of ratings, ensuring that only the top 20% of stocks receive favorable ratings, which enhances the reliability of the rankings [9].

Group 1 - The investment strategy focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective, rather than market-driven dynamics [1] - The articles emphasize understanding the long-term earnings power of companies and the competitive dynamics within their industries [1] - The majority of recommendations will be holds, indicating a cautious approach to investment opportunities [1] Group 2 - A very small fraction of companies are considered a buy at any given time, highlighting a selective investment strategy [1] - Hold articles are intended to provide valuable information for future investors and introduce skepticism in a generally bullish market [1]

Core Insights - Flexsteel Industries, Inc. reported strong second-quarter fiscal 2025 results, with earnings and net sales exceeding expectations and showing year-over-year growth [1][4] Financial Performance - Adjusted earnings per share (EPS) reached 95 cents, surpassing the Zacks Consensus Estimate of 74 cents, and increased from 57 cents in the prior-year quarter [4] - Net sales amounted to $108.5 million, exceeding the consensus estimate of $105 million by 3.7% and reflecting an 8.4% increase from the previous year [4] - Home furnishings sales through retail stores rose by 10.3% year-over-year, contributing to the overall sales growth [4] Operational Highlights - Flexsteel achieved its fifth consecutive quarter of positive sales growth, driven by strong performance in core markets and new initiatives [2] - The company expanded its operating margin by 150 basis points year-over-year to 6.1% [7] - Gross margin contracted by 90 basis points to 21% due to higher ocean freight costs, although selling, general, and administrative expenses as a percentage of net sales decreased by 240 basis points to 14.9% [6] Cash Flow and Debt Management - The company generated positive free cash flow, allowing it to pay off remaining bank debt and accumulate cash, with cash and cash equivalents increasing to $11.8 million from $4.8 million at the end of fiscal 2024 [2][8] Future Guidance - For the third quarter of fiscal 2025, Flexsteel expects net sales between $110 million and $115 million, indicating a growth of 3% to 7% compared to the prior year [9] - The company raised its fiscal 2025 net sales guidance to a range of $435 million to $445 million, up from the previous expectation of $427 million to $440 million, reflecting a projected growth of 5.5% to 8% year-over-year [9] Market Reaction - Following the positive earnings report, shares of Flexsteel increased by 6.9% in after-hours trading, driven by favorable investor sentiment [3]