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Flexsteel(FLXS) - 2025 Q4 - Annual Results
FlexsteelFlexsteel(US:FLXS)2025-08-18 20:10

Company Overview 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 furniture17 - 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 force17 Executive Summary & Key Highlights 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 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 investments3 - 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 $4.175 - 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 savings5 Financial Highlights (Q4 & FY2025) 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) 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 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 products6 Gross Margin Analysis 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 tariffs7 Selling, General and Administrative Administrative Expenses 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 year8 Other Operating Items 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 complex9 Operating Income and Net Income 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 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) 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 factors13 Financial Statements (Unaudited) The unaudited financial statements present the company's balance sheets, income statements, and cash flow statements for the reported periods Condensed Consolidated Balance Sheets 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 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 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 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 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 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 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 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 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 results15 - Investors can pre-register for the call at https://dpregister.com/sreg/10201908/ffafac91fc to receive a personalized phone number and PIN16 - 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.com20 Forward-Looking Statements & Risks 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 fuel18 - 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 conditions18 Investor Contact 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.com30