Flexsteel Industries Conference Summary Company Overview - Flexsteel Industries is one of the top 10 furniture manufacturers in the US, founded in the late 1800s, employing approximately 1,400 team members [4] - The company has a hybrid supply chain with 50% of sales from North American manufacturing and 50% from globally sourced products [4] - For the fiscal year ending June 2025, Flexsteel reported sales of approximately $441 million, achieving a 6.9% growth despite industry challenges post-COVID [4] Growth Strategies - Flexsteel has experienced seven consecutive quarters of year-over-year sales growth, with guidance for 1% to 6% growth in Q1 FY 2026 [5] - The company focuses on three dimensions for growth: product offerings, consumer segments, and sales distribution channels [5] - Key product areas include primary living spaces, with over 80% of projected FY 2026 sales coming from these categories [5] Product and Brand Strategy - Flexsteel's product expansion includes areas like bedroom, dining, storage, outdoor, and health and wellness [6] - The company markets through three primary brands: Flexsteel (premium), Charisma (affordable stylish furniture), and Homestyles (value-oriented ready-to-assemble furniture) [7] - Sub-brands include Zeekliner (health and wellness recliner), Statements (bedroom and dining solutions), and Flex (modular furniture) [7] Distribution and Customer Base - A significant portion of sales comes from independent furniture retailers, with over 1,400 partnerships [9] - Flexsteel is expanding its presence in big box retail and e-commerce channels, including partnerships with Amazon, Wayfair, Costco, and TJX [10] - The company is also exploring direct-to-consumer sales, although this remains a small portion of total sales [11] Operational Efficiency - Flexsteel's supply chain is a competitive advantage, with manufacturing primarily in Mexico and a robust distribution network across the US [11] - The company has a diverse global supply chain with operations in Asia, ensuring quality and agility [12] Innovation and Differentiation - Flexsteel differentiates itself through superior value, quality, and comfort, supported by innovations like the patented Bluesteel Spring [12] - Recent innovations include a modular flex line with quick assembly features and a ZCLINER sleep solution recliner designed for comfort [13][14] Financial Outlook - The investment thesis includes a long-term positive industry outlook, promising growth prospects, operating margin expansion, strong cash flow generation, and disciplined capital allocation [15][16] - Despite near-term challenges, the company expects long-term growth driven by demographic shifts and housing demand [16][17] - Flexsteel aims to expand market share and penetrate new markets while investing in consumer research and brand awareness [18] Performance Metrics - Flexsteel has achieved 3.4% growth in the most recent quarter, with a forecast of 1% to 6% growth for the upcoming quarter [20] - The adjusted operating margin increased by over 60% to 7.1% of sales in FY 2025, with expectations for continued margin improvement [20][21] - The company maintains low capital requirements, with annual CapEx around 1% of sales, and has returned approximately $95 million to shareholders over the past six years [22] Conclusion - Flexsteel is positioned for growth with a strong leadership team, innovative product offerings, and a commitment to operational efficiency and market expansion [23]

Core Viewpoint - Flexsteel Industries, Inc. will participate in the Lytham Partners Fall 2025 Investor Conference, indicating its commitment to engaging with investors and enhancing market visibility [1] Company Participation - The company will host a webcast presentation and one-on-one meetings with investors during the conference, scheduled for September 30, 2025 [1]

Core Viewpoint - Flexsteel Industries (FLXS) is experiencing solid improvement in earnings estimates, which may lead to continued short-term price momentum for the stock [1][2]. Earnings Estimate Revisions - The rising trend in estimate revisions reflects growing analyst optimism regarding the earnings prospects of Flexsteel, which is expected to positively impact its stock price [2]. - For the current quarter, Flexsteel is projected to earn $0.78 per share, representing a +5.4% change from the previous year, with a 20% increase in the Zacks Consensus Estimate over the last 30 days [7]. - For the full year, the earnings estimate is $3.85 per share, indicating a -7.7% change from the prior year, but the consensus estimate has increased by 5.48% recently [8][9]. Zacks Rank and Performance - Flexsteel has achieved a Zacks Rank 2 (Buy), indicating promising estimate revisions that suggest potential for outperformance compared to the S&P 500 [10]. - Historically, Zacks 1 (Strong Buy) and 2 (Buy) ranked stocks have significantly outperformed the S&P 500, with Zacks 1 stocks averaging a +25% annual return since 2008 [3][10]. Recent Stock Performance - Flexsteel's stock has risen by 36.2% over the past four weeks due to strong estimate revisions, suggesting further upside potential [11].

PART I [ITEM 1. BUSINESS](index=6&type=section&id=Item%201.%20Business) Flexsteel Industries, Inc. is a leading US residential furniture manufacturer, importer, and marketer, using a blended manufacturing and offshore sourcing strategy - Flexsteel Industries, Inc. is one of the largest manufacturers, importers, and marketers of residential furniture products in the United States, operating in a single reportable segment[14](index=14&type=chunk)[15](index=15&type=chunk) - The company employs a blended strategy of manufacturing in Juarez, Mexico, and sourcing finished products and component parts from offshore suppliers to offer a wide range of price points, styles, and product categories[16](index=16&type=chunk)[17](index=17&type=chunk) Customer Order Backlog (in thousands) | | June 30, 2025 | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Backlog | $66,465 | $59,543 | $49,729 | - Flexsteel had approximately **1,400 employees** on June 30, 2025, with about **1,000 in Mexico** and **30 in Asia** managing quality and coordinating deliveries[21](index=21&type=chunk)[29](index=29&type=chunk) [ITEM 1A. RISK FACTORS](index=10&type=section&id=Item%201A.%20Risk%20Factors) Flexsteel faces risks from global trade policy, tariffs, inflation, economic downturns, supply chain disruptions, and operational challenges - Changes in global trade policy, including new tariffs (e.g., **20% on goods from Vietnam** effective July 31, 2025), could materially impact net sales, cost of goods sold, profit, and cash flow[32](index=32&type=chunk) - Inflation in ocean container rates, raw materials, labor, and domestic transportation costs, along with negative shifts in foreign currency values, may continue to impact profitability and increase manufacturing costs[33](index=33&type=chunk)[34](index=34&type=chunk) - The company recorded a pre-tax non-cash asset impairment charge of **$14.1 million** in Q3 FY2025 for its Mexicali facility's right-of-use asset due to trade uncertainty and diminished subleasing interest[55](index=55&type=chunk) - Future success depends on managing its global supply chain, vulnerable to delays, availability issues, and cost increases due to international trade policies, geopolitical pressures, and transportation challenges[37](index=37&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=18&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - There are no unresolved staff comments[61](index=61&type=chunk) [ITEM 1C. CYBERSECURITY](index=18&type=section&id=Item%201C.%20Cybersecurity) Flexsteel's cybersecurity program aligns with NIST, overseen by the Board, with no material incidents reported to date - The company's cybersecurity risk management program aligns with NIST framework and includes a cross-functional steering team, 24/7 third-party monitoring, regular penetration testing, and quarterly employee training[62](index=62&type=chunk)[63](index=63&type=chunk) - The Board of Directors oversees the cybersecurity risk management program, receiving quarterly status reports from the Chief Information Officer (CIO), who reports directly to the CEO[65](index=65&type=chunk) - As of the report date, no cybersecurity incidents have materially affected or are reasonably likely to materially affect the company's business, results of operations, or financial condition[64](index=64&type=chunk) [ITEM 2. PROPERTIES](index=19&type=section&id=Item%202.%20Properties) Flexsteel owns and leases various facilities for distribution, manufacturing, corporate offices, showrooms, and design centers across the US, Mexico, and Asia Owned Facilities as of June 30, 2025 | Location | Size (square feet) | Principal Operations | | :--- | :--- | :--- | | Edgerton, Kansas | 500,000 | Distribution | | Huntingburg, Indiana | 337,000 | Distribution | | Dubuque, Iowa | 40,000 | Corporate Office | Leased Facilities as of June 30, 2025 | Location | Size (square feet) | Principal Operations | | :--- | :--- | :--- | | Mexicali, Mexico | 508,000 | Manufacturing | | Greencastle, Pennsylvania | 206,000 | Distribution | | Juarez, Mexico | 225,000 | Manufacturing | | Juarez, Mexico | 197,000 | Manufacturing | | Juarez, Mexico | 131,000 | Manufacturing | | High Point, North Carolina | 54,000 | Showroom | | El Paso, Texas | 38,000 | Warehouse | | High Point, North Carolina | 11,000 | Design & Engineering Center | | Las Vegas, NV | 10,000 | Showroom | | Shenzhen, China | 2,000 | Office | | Bangkok, Thailand | 1,500 | Office | | Binh Duong, Vietnam | 1,000 | Office | [ITEM 3. LEGAL PROCEEDINGS](index=19&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, none of which are considered material to its business or financial condition - The company is subject to various legal proceedings but does not consider any currently pending matters to be material[68](index=68&type=chunk)[242](index=242&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=19&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures to report - There are no mine safety disclosures[69](index=69&type=chunk) PART II [ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=19&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Flexsteel's common stock trades on NASDAQ under FLXS, with a $30 million share repurchase program approved but not yet utilized - Flexsteel's common stock is traded on the NASDAQ Global Select Market under the symbol **FLXS**[70](index=70&type=chunk) - As of August 22, 2025, there were **5,275,963 shares** of common stock outstanding[7](index=7&type=chunk) - The Board of Directors approved a **$30 million share repurchase program** on December 11, 2024, with the full amount remaining available as of June 30, 2025[72](index=72&type=chunk)[74](index=74&type=chunk) [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=22&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Flexsteel's financial performance, liquidity, capital resources, and critical accounting policies for fiscal years 2025, 2024, and 2023 [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Flexsteel saw increased net sales and improved gross margin in FY2025, despite an asset impairment, leading to higher net income Key Financial Highlights (as % of Net Sales) | | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net sales | 100.0 % | 100.0 % | 100.0 % | | Cost of goods sold | 77.8 | 78.9 | 82.0 | | Gross margin | 22.2 | 21.1 | 18.0 | | Selling, general and administrative expenses | 15.1 | 17.1 | 16.0 | | Operating income | 6.0 | 4.1 | 2.7 | | Net income and comprehensive income | 4.6 % | 2.6 % | 3.8 % | Net Sales and Net Income (in thousands, except EPS) | Metric | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Net sales | $441,073 | $412,752 | $393,692 | | Net income | $20,154 | $10,528 | $14,778 | | Diluted EPS | $3.55 | $1.91 | $2.74 | - Gross margin increased by **110 basis points** in FY2025 to **22.2%** (from 21.1% in FY2024), driven by fixed cost leverage, supply chain savings, and product portfolio management[83](index=83&type=chunk) - A pre-tax non-cash asset impairment charge of **$14.1 million** was recorded in FY2025 for the Mexicali, Mexico facility's right-of-use asset due to changes in U.S. trade policy and reduced subleasing interest[85](index=85&type=chunk) - The company recorded pre-tax gains of **$5.0 million** from the sale of its Dublin, Georgia facility and **$4.4 million** from the sale of two ancillary buildings in Huntingburg, Indiana during FY2025[86](index=86&type=chunk)[87](index=87&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Flexsteel's working capital increased to $110.4 million in FY2025, supported by improved operating cash flow and asset sales, with no outstanding line of credit borrowings Cash Flow Summary (in thousands) | (in thousands) | FY2025 | FY2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $36,979 | $31,883 | | Net cash provided by (used in) investing activities | $9,432 | ($593) | | Net cash (used in) financing activities | ($11,166) | ($29,894) | | Increase in cash and cash equivalents | $35,245 | $1,396 | | Cash and cash equivalents at end of year | $40,006 | $4,761 | - Working capital increased by **$15.4 million** to **$110.4 million** on June 30, 2025, primarily due to a **$35.2 million increase in cash**, offset by decreases in trade receivables and inventory[101](index=101&type=chunk) - The revolving line of credit was reduced from **$85 million to $55 million** on June 3, 2025, with no outstanding borrowings as of June 30, 2025[113](index=113&type=chunk)[114](index=114&type=chunk) Contractual Obligations as of June 30, 2025 (in thousands) | Obligation | Total | 1 Year | 2-3 Years | 4-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease obligations | $67,976 | $10,003 | $20,062 | $17,511 | $20,400 | | Warehouse management obligation | $1,735 | $1,388 | $347 | — | — | [Outlook](index=29&type=section&id=Outlook) For fiscal year 2026, Flexsteel plans to focus on financial agility, profitable growth, supply chain resiliency, operational excellence, and customer experience - Fiscal 2026 focus areas include maintaining financial agility, building foundations for profitable long-term growth in retail and e-commerce, enhancing global supply chain resiliency, operational excellence, strengthening digital capabilities, re-imagining customer experience, and building strong culture and talent[117](index=117&type=chunk) [Critical Accounting Policies](index=29&type=section&id=Critical%20Accounting%20Policies) Flexsteel's critical accounting policies involve significant estimates for credit losses, inventory valuation, long-lived assets (including a $14.1 million impairment), and income taxes - Key accounting policies involve estimates for credit losses, inventory valuation (lower of cost or net realizable value using FIFO), and long-lived asset valuation, including a **$14.1 million impairment** for the Mexicali facility's right-of-use asset in FY2025[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - The company's income tax accounting involves significant judgment in determining deferred tax assets and liabilities, with recoverability dependent on future taxable income[124](index=124&type=chunk)[125](index=125&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=31&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Flexsteel's primary market risk is foreign currency fluctuations, particularly the Mexican Peso, with minimal interest rate risk due to no outstanding debt - Primary market risk exposure is foreign currency risk, mainly from the Mexican Peso, impacting manufacturing wages and VAT receivables, where a negative shift in USD against the Peso could increase costs and decrease receivable value[127](index=127&type=chunk) - The company does not currently employ foreign currency hedges, although it utilized a derivative instrument in Q3 FY2025 to reduce Peso exchange rate exposure, which expired without being utilized[127](index=127&type=chunk) - Interest rate risk is minimal as the company had no outstanding balance on its line of credit as of June 30, 2025[128](index=128&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=32&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Flexsteel's audited consolidated financial statements and an unqualified opinion from Deloitte & Touche LLP on financial statements and internal controls - Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements for the period ended June 30, 2025, and on the effectiveness of internal control over financial reporting[133](index=133&type=chunk)[134](index=134&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) - Critical audit matters included the estimation of net realizable value for inventories (**$89.1 million** as of June 30, 2025) and the Mexicali Right-of-Use Asset Impairment (**$14.1 million** in FY2025), both involving significant judgment and subjectivity[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Asset/Liability | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $40,006 | $4,761 | | Total current assets | $172,372 | $155,381 | | Total assets | $282,486 | $274,462 | | Total current liabilities | $62,014 | $60,406 | | Total liabilities | $114,624 | $124,095 | | Total shareholders' equity | $167,862 | $150,367 | Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Net sales | $441,073 | $412,752 | $393,692 | | Gross profit | $97,944 | $87,244 | $70,947 | | Operating income | $26,615 | $17,080 | $10,542 | | Net income | $20,154 | $10,528 | $14,778 | | Diluted EPS | $3.55 | $1.91 | $2.74 | Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $36,979 | $31,883 | $22,989 | | Net cash provided by (used in) investing activities | $9,432 | ($593) | ($4,450) | | Net cash (used in) financing activities | ($11,166) | ($29,894) | ($17,358) | | Increase in cash and cash equivalents | $35,245 | $1,396 | $1,181 | | Cash and cash equivalents at end of year | $40,006 | $4,761 | $3,365 | [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=42&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[248](index=248&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=42&type=section&id=Item%209A.%20Controls%20and%20Procedures) Flexsteel's disclosure controls and internal control over financial reporting were effective as of June 30, 2025, with no material changes reported - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[249](index=249&type=chunk) - Management assessed and concluded that internal control over financial reporting was effective as of June 30, 2025, with an unqualified opinion from Deloitte & Touche LLP[250](index=250&type=chunk)[251](index=251&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[252](index=252&type=chunk) [ITEM 9B. OTHER INFORMATION](index=42&type=section&id=Item%209B.%20Other%20Information) No Rule 10b5-1 trading arrangements were adopted or terminated, and the company amended its Cash Incentive and Severance Plans - No director or officer adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[253](index=253&type=chunk) - Effective August 19, 2025, the company amended its Cash Incentive Plan, Cash Incentive Notification of Award, and Severance Plan for Management Employees to align with market practices and improve administrative consistency[254](index=254&type=chunk) - Amendments to the Severance Plan for Management Employees include an increase to the change of control protection period to **24 months** and an increase to the CEO's severance benefits to **twice that of other eligible employees**[254](index=254&type=chunk) [ITEM 9C. DISCLOSURE REGARDING FOREIGN JURSIDICTIONS THAT PREVENT INSPECTIONS](index=42&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jursidictions%20That%20Prevent%20Inspections) The company has no disclosures regarding foreign jurisdictions that prevent inspections - There are no disclosures regarding foreign jurisdictions that prevent inspections[255](index=255&type=chunk) PART III [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE](index=43&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance will be filed in the 2025 Proxy Statement - Information for this item will be filed in the 2025 Proxy Statement within **120 days** of the fiscal year-end[256](index=256&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=43&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation will be filed in the 2025 Proxy Statement - Information for this item will be filed in the 2025 Proxy Statement within **120 days** of the fiscal year-end[257](index=257&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=43&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and related stockholder matters will be filed in the 2025 Proxy Statement - Information for this item will be filed in the 2025 Proxy Statement within **120 days** of the fiscal year-end[258](index=258&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE](index=43&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Party%20Transactions%20and%20Director%20Independence) Information on related party transactions and director independence will be filed in the 2025 Proxy Statement - Information for this item will be filed in the 2025 Proxy Statement within **120 days** of the fiscal year-end[259](index=259&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES](index=43&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services will be filed in the 2025 Proxy Statement - Information for this item will be filed in the 2025 Proxy Statement within **120 days** of the fiscal year-end[260](index=260&type=chunk) PART IV [ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, AND SCHEDULES](index=44&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statements%2C%20and%20Schedules) This section lists exhibits, financial statements, and schedules, including accounts receivable allowances, and provides required report signatures - This section includes the Index to Consolidated Financial Statements and a schedule for Valuation and Qualifying Accounts[262](index=262&type=chunk)[263](index=263&type=chunk) Accounts Receivable Allowances (in thousands) | Year | Balance at Beginning of Year | Reductions to Income | Deductions from Reserves | Balance at End of Year | | :--- | :--- | :--- | :--- | :--- | | 2025 | $2,440 | ($244) | ($406) | $1,790 | | 2024 | $2,600 | ($144) | ($16) | $2,440 | | 2023 | $2,980 | ($230) | ($150) | $2,600 | - The report is signed by Derek P. Schmidt (CEO and Director) and Michael J. Ressler (CFO), along with other directors, on August 22, 2025[268](index=268&type=chunk)[269](index=269&type=chunk)

Financial Data and Key Metrics Changes - For the fourth quarter, net sales were $114.6 million, representing a growth of 3.4% compared to $110.8 million in the prior year quarter, marking the seventh consecutive quarter of sales growth [14] - The adjusted operating margin was 9% in the quarter, a 340 basis point improvement over the prior year quarter, while the adjusted operating profit increased by 71% to $31.2 million for the fiscal year [5][7] - Free cash flow for the quarter was $19.1 million, contributing to an ending cash balance of $40 million [6][7] Business Line Data and Key Metrics Changes - Growth in core markets was driven by strategic accounts and new product introductions, particularly in the health and wellness category with ZCLINER products [5] - The company experienced a sales order backlog of $66.5 million at the end of the period, an increase of $6.9 million compared to the prior year [14] Market Data and Key Metrics Changes - The company noted soft market conditions and tariff uncertainty as industry headwinds, yet managed to achieve sales growth in both core and new markets [4][10] - The demand environment was characterized as "choppy," with retail traffic being soft during the summer months, influenced by uncertainty around tariffs and inflation [40] Company Strategy and Development Direction - The company plans to focus on further penetrating the health and wellness and case goods product categories, with an emphasis on innovation and marketing to drive brand awareness [9][10] - Strategic initiatives include enhancing customer experience, product relevance, and faster product launches to maintain growth momentum [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current environment, despite anticipating continued difficult industry conditions [10][21] - The company is actively working on cost savings initiatives to mitigate the impact of tariffs, including supply chain adjustments and pricing actions [11][12] Other Important Information - The company has increased its dividend twice in the past twelve months and maintains a healthy cash balance [7] - The effective tax rate for fiscal year 2026 is expected to be in the range of 25% to 27% [19] Q&A Session Summary Question: Initial reaction to pricing actions or surcharges - Management noted that they are closely collaborating with retailers to understand the impact of pricing changes on demand and believe they are positioned well despite the challenges [25][26] Question: New cost savings initiatives - Management confirmed that they are pursuing cost savings across the supply chain and these initiatives are factored into the first quarter guidance for margins [27][28] Question: Focus on new product innovation - Management indicated that the focus on new product innovation is a continuation of previous efforts, which have been key to their growth success [30] Question: Inventory management - Management expressed confidence in their inventory position and ability to serve customers, while also noting potential incremental costs due to higher tariff rates [31][32] Question: Capital allocation strategy - Management reiterated their capital allocation strategy of reinvesting 70% of operating cash flow back into the business and returning 30% to shareholders [33][34] Question: Demand characterization - Management characterized demand as choppy, influenced by external factors such as tariffs and inflation, but remains optimistic about long-term recovery [40][41]

Company Performance - Flexsteel Industries Inc (NASDAQ: FLXS) reported fiscal Q4 results for the April-June period, showing an impressive profitability beat and fair sales momentum despite challenging conditions [1] - The stock increased by 22% in post-market trading following the earnings report [1] Investment Insights - The investment philosophy focuses on identifying mispriced securities by understanding the drivers behind a company's financials, often revealed through a DCF model valuation [1]

[Company Overview](index=4&type=section&id=About%20Flexsteel) Flexsteel Industries, Inc. is a leading US residential furniture manufacturer, importer, and marketer, known for its unique steel drop-in seat spring - Flexsteel Industries, Inc. is one of the largest manufacturers, importers, and marketers of residential furniture products in the United States, offering a wide variety of furniture including sofas, loveseats, chairs, tables, and bedroom furniture[17](index=17&type=chunk) - A featured component in most upholstered furniture is Flexsteel's unique steel drop-in seat spring, with products distributed throughout the United States through its e-commerce channel and direct sales force[17](index=17&type=chunk) [Executive Summary & Key Highlights](index=1&type=section&id=Key%20Results%20for%20the%20Fourth%20Quarter%20and%20Fiscal%20Year%20Ended%20June%2030%2C%202025) The company achieved strong Q4 and FY2025 financial results, marked by consistent sales growth, improved operating margins, record EPS, and robust free cash flow generation [Management Commentary](index=1&type=section&id=Management%20Commentary) Management reported strong Q4 and FY2025 performance with consistent sales growth, improved margins, record EPS, and strategic actions to mitigate tariff risks - Flexsteel achieved its **seventh consecutive quarter of year-over-year sales growth (3.4%)** and **ninth consecutive quarter of adjusted operating margin improvement (9%)** in Q4 FY2025, driven by diversified growth and investments[3](index=3&type=chunk) - For FY2025, the company delivered **7% sales growth**, expanded adjusted operating margins by **270 basis points to 7.1%**, increased adjusted operating profit by **71% to $31.2 million**, and achieved record adjusted diluted EPS of **$4.17**[5](index=5&type=chunk) - Flexsteel generated **$45.3 million of free cash flow** in FY2025, enabling two dividend increases and building a healthy cash balance of **$40 million**, with plans to mitigate tariff risks in FY2026 through supply chain adjustments and cost savings[5](index=5&type=chunk) [Financial Highlights (Q4 & FY2025)](index=1&type=section&id=Financial%20Highlights%20%28Q4%20%26%20FY2025%29) Q4 and FY2025 financial highlights demonstrate significant improvements in net sales, operating income, and diluted EPS, alongside strong cash generation Financial Highlights (Q4 & FY2025) | Metric | Q4 FY2025 | Q4 FY2024 | YoY Change (Q4) | FY2025 | FY2024 | YoY Change (FY) | | :-------------------------------- | :------- | :------- | :-------------- | :------- | :------- | :-------------- | | Net Sales (millions) | $114.6 | $110.8 | +3.4% | $441.1 | $412.8 | +6.9% | | GAAP Operating Income (millions) | $14.0 | $7.6 | +84.2% | $26.6 | $17.1 | +55.6% | | GAAP Operating Margin | 12.2% | 6.9% | +5.3 pp | 6.0% | 4.1% | +1.9 pp | | Adjusted Operating Income (millions) | $10.3 | $6.2 | +66.1% | $31.3 | $18.3 | +71.0% | | Adjusted Operating Margin | 9.0% | 5.6% | +3.4 pp | 7.1% | 4.4% | +2.7 pp | | GAAP Diluted EPS | $1.89 | $0.89 | +112.4% | $3.55 | $1.91 | +85.9% | | Adjusted Diluted EPS | $1.40 | $0.75 | +86.7% | $4.17 | $2.11 | +97.6% | | Cash Flow from Operations (Q4, millions) | $15.6 | N/A | N/A | N/A | N/A | N/A | | Cash on Hand (June 30, millions) | $40.0 | N/A | N/A | N/A | N/A | N/A | [Financial Performance Review (Q4 & FY2025)](index=2&type=section&id=Operating%20Results%20for%20the%20Fourth%20Quarter%20Ended%20June%2030%2C%202025) The company reported strong Q4 and FY2025 financial performance with increased sales, improved margins, higher operating income, and a robust liquidity position [Net Sales Performance](index=2&type=section&id=Net%20Sales%20Performance) Q4 FY2025 net sales increased by 3.4% due to higher soft seating unit volume, partially offset by lower homestyles ready-to-assemble product sales - Net sales for Q4 FY2025 increased by **$3.8 million, or 3.4%, to $114.6 million**, primarily due to higher unit volume from soft seating products, partially offset by decreases in homestyles branded ready-to-assemble products[6](index=6&type=chunk) [Gross Margin Analysis](index=2&type=section&id=Gross%20Margin%20Analysis) Gross margin improved by 260 basis points to 23.9% in Q4 FY2025, primarily due to foreign currency translation benefits, despite tariff impacts - Gross margin for Q4 FY2025 was **23.9%**, up **260 bps** from 21.3% for the prior-year quarter, primarily driven by a **300-bps benefit from foreign currency translation** of peso-denominated assets, partially offset by a **40-bps net impact of tariffs**[7](index=7&type=chunk) [Selling, General and Administrative Administrative Expenses](index=2&type=section&id=Selling%2C%20General%20and%20Administrative%20Administrative%20Expenses) SG&A expense decreased by 200 basis points to 15.0% of net sales in Q4 FY2025, driven by sales leverage and non-recurring prior-year charges - SG&A expense was **15.0% of net sales** in Q4 FY2025, a **200-bps decrease** from 17.0% in the prior year, attributed to leverage on higher sales and the non-recurrence of a **$1.5 million non-cash charge** for equity grant modification in the prior year[8](index=8&type=chunk) [Other Operating Items](index=2&type=section&id=Other%20Operating%20Items) Flexsteel recognized a $3.7 million pre-tax gain in Q4 FY2025 from the sale of an ancillary building - Flexsteel recorded a **pre-tax gain of $3.7 million** in Q4 FY2025 from the sale of an ancillary building, formerly part of its Huntingburg, IN distribution center complex[9](index=9&type=chunk) [Operating Income and Net Income](index=2&type=section&id=Operating%20Income%20and%20Net%20Income) Q4 FY2025 saw substantial increases in both GAAP and adjusted operating income and net income, alongside changes in effective tax rates Operating Income and Net Income | Metric | Q4 FY2025 (millions) | Q4 FY2024 (millions) | YoY Change | | :----------------------- | :------------------- | :------------------- | :--------- | | GAAP Operating Income | $14.0 | $7.6 | +84.2% | | Adjusted Operating Income | $10.3 | $6.2 | +66.1% | | Income Tax Expense | $3.6 | $2.5 | +44.0% | | Effective Tax Rate | 25.0% | 33.9% | -8.9 pp | | GAAP Net Income | $10.7 | $4.9 | +118.4% | | GAAP Diluted EPS | $1.89 | $0.89 | +112.4% | | Adjusted Net Income | $7.9 | $4.1 | +92.7% | | Adjusted Diluted EPS | $1.40 | $0.75 | +86.7% | [Liquidity and Financial Position](index=3&type=section&id=Liquidity) Flexsteel maintained a strong liquidity position at Q4 FY2025 end, characterized by a significant cash balance, healthy working capital, and substantial credit availability Liquidity and Financial Position | Metric | June 30, 2025 (millions) | | :-------------------------------- | :----------------------- | | Cash Balance | $40.0 | | Working Capital | $110.4 | | Secured Line of Credit Availability | $54.1 | | Capital Expenditures (FY2025) | $3.3 | [Financial Outlook (Q1 FY2026)](index=3&type=section&id=Financial%20Outlook) The company provided a Q1 FY2026 financial outlook, projecting sales and operating margin, while acknowledging potential impacts from global trade policies and macroeconomic factors Q1 Fiscal 2026 Outlook | Metric | Q1 Fiscal 2026 Outlook | | :----------------------- | :--------------------- | | Sales | $105 - $110 million | | Sales Growth (vs. Prior Year) | 1% to 6% | | GAAP Operating Margin | 5.5% to 7% | | Free Cash Flow | $(5) to $0 million | - The financial outlook for Q1 FY2026 is subject to material changes due to global trade policy changes, including tariffs, as well as consumer demand and competitive pricing conditions influenced by macro-economic factors[13](index=13&type=chunk) [Financial Statements (Unaudited)](index=5&type=section&id=FLEXSTEEL%20INDUSTRIES%2C%20INC.%20AND%20SUBSIDIARIES%20-%20Financial%20Statements) The unaudited financial statements present the company's balance sheets, income statements, and cash flow statements for the reported periods [Condensed Consolidated Balance Sheets](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS%20%28UNAUDITED%29) The balance sheet reflects increased total assets and shareholders' equity, primarily due to higher cash, while total liabilities decreased Condensed Consolidated Balance Sheets | ASSETS (in thousands) | June 30, 2025 | June 30, 2024 | Change | | :-------------------------- | :------------ | :------------ | :----- | | Cash and cash equivalents | $40,006 | $4,761 | +$35,245 | | Total current assets | $172,372 | $155,381 | +$16,991 | | Total assets | $282,486 | $274,462 | +$8,024 | | LIABILITIES (in thousands) | | | | | Total current liabilities | $62,014 | $60,406 | +$1,608 | | Lines of credit | $0 | $4,822 | -$4,822 | | Total liabilities | $114,624 | $124,095 | -$9,471 | | SHAREHOLDERS' EQUITY (in thousands) | | | | | Total shareholders' equity | $167,862 | $150,367 | +$17,495 | [Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20AND%20COMPREHENSIVE%20INCOME%20%28UNAUDITED%29) The income statement shows strong growth in net sales, gross profit, and net income for Q4 and FY2025, with improved operating income and diluted EPS Consolidated Statements of Income and Comprehensive Income | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $114,611 | $110,822 | $441,073 | $412,752 | | Cost of goods sold | $87,175 | $87,255 | $343,129 | $325,508 | | Gross profit | $27,436 | $23,567 | $97,944 | $87,244 | | Selling, general and administrative expenses | $17,164 | $18,878 | $66,696 | $70,444 | | Operating income | $13,974 | $7,596 | $26,615 | $17,080 | | Income before income taxes | $14,262 | $7,447 | $26,966 | $15,550 | | Net income and comprehensive income | $10,702 | $4,922 | $20,154 | $10,528 | | Diluted Earnings per share | $1.89 | $0.89 | $3.55 | $1.91 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20%28UNAUDITED%29) FY2025 operating cash flow significantly increased, leading to a substantial rise in cash and cash equivalents, despite net cash used in financing Condensed Consolidated Statements of Cash Flows | (in thousands) | For the years ended June 30, 2025 | For the years ended June 30, 2024 | | :-------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $20,154 | $10,528 | | Net cash provided by operating activities | $36,979 | $31,883 | | Net cash provided by (used in) investing activities | $9,432 | $(593) | | Net cash (used in) financing activities | $(11,166) | $(29,894) | | Increase in cash and cash equivalents | $35,245 | $1,396 | | Cash and cash equivalents at end of period | $40,006 | $4,761 | [Non-GAAP Financial Measures Reconciliation](index=8&type=section&id=NON-GAAP%20DISCLOSURE%20%28UNAUDITED%29) This section provides reconciliations of GAAP financial measures to non-GAAP adjusted figures for operating income, net income, and diluted earnings per share [Adjusted Operating Income and Margin](index=8&type=section&id=Reconciliation%20of%20GAAP%20operating%20income%20to%20adjusted%20operating%20income%20and%20GAAP%20operating%20margin%20to%20adjusted%20operating%20margin) Reconciliation details adjustments to GAAP operating income and margin for non-recurring items, resulting in higher adjusted figures for FY2025 Adjusted Operating Income and Margin | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :-------------------------------- | :-------------------------------- | | Reported GAAP operating income | $13,974 | $7,596 | $26,615 | $17,080 | | Adjusted operating income | $10,272 | $6,199 | $31,248 | $18,310 | | GAAP operating margin | 12.2% | 6.9% | 6.0% | 4.1% | | Adjusted operating margin | 9.0% | 5.6% | 7.1% | 4.4% | [Adjusted Net Income](index=8&type=section&id=Reconciliation%20of%20GAAP%20net%20income%20to%20adjusted%20net%20income) Adjusted net income for Q4 and FY2025 significantly surpassed GAAP net income after accounting for non-recurring items and tax impacts Adjusted Net Income | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :-------------------------------- | :-------------------------------- | | Reported GAAP net income | $10,702 | $4,922 | $20,154 | $10,528 | | Adjusted net income | $7,933 | $4,142 | $23,666 | $11,645 | [Adjusted Diluted Earnings Per Share](index=9&type=section&id=Reconciliation%20of%20GAAP%20diluted%20earnings%20per%20share%20of%20common%20stock%20to%20adjusted%20diluted%20earnings%20per%20share%20of%20common%20stock) Adjusted diluted EPS for Q4 and FY2025 exceeded GAAP diluted EPS, reflecting the exclusion of specific non-recurring items and their tax effects Adjusted Diluted Earnings Per Share | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :-------------------------------- | :-------------------------------- | | Reported GAAP diluted income per share | $1.89 | $0.89 | $3.55 | $1.91 | | Adjusted diluted earnings per share | $1.40 | $0.75 | $4.17 | $2.11 | [Additional Information](index=4&type=section&id=Conference%20Call%20and%20Webcast) This section provides details on the conference call, outlines forward-looking statements and associated risks, and lists investor contact information [Conference Call and Webcast Details](index=4&type=section&id=Conference%20Call%20and%20Webcast%20Details) Flexsteel hosted a conference call and webcast on August 19, 2025, to discuss results, with details provided for access and replay - Flexsteel hosted a conference call and audio webcast on Tuesday, August 19, 2025, at 8:00 a.m. Central Time to discuss the results[15](index=15&type=chunk) - Investors can pre-register for the call at https://dpregister.com/sreg/10201908/ffafac91fc to receive a personalized phone number and PIN[16](index=16&type=chunk) - Conference call replay is available through August 26, 2025, via domestic (877-344-7529) or international (412-317-0088) numbers with access code 5539061, and live/archived webcast is available at ir.flexsteel.com[20](index=20&type=chunk) [Forward-Looking Statements & Risks](index=4&type=section&id=Forward-Looking%20Statements) The report includes forward-looking statements subject to risks such as industry cyclicality, supply chain disruptions, tariffs, and general economic conditions - Forward-looking statements in the report are subject to risks and uncertainties, including the cyclical nature of the furniture industry, supply chain disruptions, litigation, new product introductions and distribution channels effectiveness, product mix of sales, pricing pressures, and the cost of raw materials and fuel[18](index=18&type=chunk) - Additional risk factors include changes in foreign currency values, retention and recruitment of key employees, actions by governments (laws, regulations, taxes, tariffs), sales generated and profit margins, competition, credit exposure with customers, participation in multi-employer pension plans, disruptions or security breaches to business information systems, the impact of any future pandemic, and general economic conditions[18](index=18&type=chunk) [Investor Contact](index=9&type=section&id=Investor%20Contact) Investor relations contact information is provided for inquiries - For investor inquiries, contact Michael Ressler at Flexsteel Industries, Inc. via phone at **563-585-8116** or email at **investors@flexsteel.com**[30](index=30&type=chunk)

Earnings Report - Flexsteel Industries, Inc. is set to release its fourth-quarter earnings results on August 18, with analysts expecting earnings of 84 cents per share, an increase from 75 cents per share in the same period last year [1] - The company is projected to report quarterly revenue of $111.82 million, compared to $110.82 million a year earlier [1] Dividend Information - Flexsteel Industries currently offers an annual dividend yield of 2.24%, translating to a quarterly dividend of 20 cents per share, or 80 cents annually [2] - To achieve a monthly income of $500 from dividends, an investment of approximately $268,050 or around 7,500 shares is required, while a more modest goal of $100 per month would need about $53,610 or 1,500 shares [2] Dividend Yield Calculation - The dividend yield is calculated by dividing the annual dividend payment by the stock's current price, which can fluctuate based on changes in the stock price [3] - For instance, if a stock pays an annual dividend of $2 and is priced at $50, the yield is 4%. If the price rises to $60, the yield drops to 3.33%, and if it falls to $40, the yield increases to 5% [3] Impact of Dividend Changes - Changes in dividend payments can also affect the yield; an increase in dividends will raise the yield if the stock price remains constant, while a decrease will lower the yield [4] Stock Performance - Shares of Flexsteel Industries fell by 1.8%, closing at $35.74 on Thursday [4]

Core Insights - Five stocks have been added to the Zacks Rank 1 (Strong Buy) List, indicating strong potential for investment returns Group 1: Company Earnings Estimates - Flexsteel Industries, Inc. (FLXS) has seen a 7.4% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Rockwell Automation, Inc. (ROK) has experienced a 5.7% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - The E.W. Scripps Company (SSP) has seen a 14.3% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Virtu Financial, Inc. (VIRT) has experienced an 8.5% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Greystone Housing Impact Investors LP (GHI) has seen a 10.1% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [3]

Group 1: Flexsteel Industries, Inc. (FLXS) - The company is a manufacturer of upholstered furniture and holds a Zacks Rank 1 [1] - The Zacks Consensus Estimate for its current year earnings has increased by 7.4% over the last 60 days [1] - Flexsteel has a price-to-earnings ratio (P/E) of 8.06, which is lower than the industry average of 8.30, and possesses a Value Score of A [1] Group 2: Greystone Housing Impact Investors LP (GHI) - The company operates in the mortgage revenue bonds sector and also carries a Zacks Rank 1 [2] - The Zacks Consensus Estimate for its current year earnings has increased by 10.1% over the last 60 days [2] - Greystone Housing has a P/E ratio of 9.08, significantly lower than the industry average of 15.20, and has a Value Score of B [2] Group 3: Virtu Financial, Inc. (VIRT) - This financial services company holds a Zacks Rank 1 [3] - The Zacks Consensus Estimate for its current year earnings has increased by 8.5% over the last 60 days [3] - Virtu has a P/E ratio of 10.36, compared to the industry average of 15.20, and possesses a Value Score of B [3]