Flexsteel(US:FLXS)2025-04-22 13:00Financial 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 [18] - The adjusted operating margin was 7.3%, which is the second highest quarterly adjusted operating margin over the past seven years and a 210 basis point increase from the prior year quarter [20][21] - Operating cash flow for the quarter was $12.3 million, with ending cash of $22.6 million [21] Business Line Data and Key Metrics Changes - Sales growth was driven by higher unit volumes and pricing from ocean freight surcharges, with significant success from new product introductions and share gains with large strategic accounts [4][18] - The company continues to focus on new product introductions, with over half of current sales derived from products launched in the last couple of years [36] Market Data and Key Metrics Changes - The company has moved out of China for finished goods sourcing, with Vietnam supporting approximately 55% of revenue and Mexico nearly 40% [8][10] - The potential implementation of a 46% reciprocal tariff on Vietnam goods poses significant risks to the company and the overall U.S. furniture industry [10][12] Company Strategy and Development Direction - The company is focused on executing growth strategies, including expanding into new markets and enhancing customer experience through new product offerings [4][5] - There is a commitment to maintaining investments in product development, innovation, and marketing despite economic uncertainties [28][30] Management Comments on Operating Environment and Future Outlook - Management expressed concerns about short-term demand volatility and the mid-term outlook for the U.S. economy, anticipating challenges due to potential tariff impacts and consumer spending [14][15] - The company remains optimistic about its financial strength and ability to navigate market challenges while continuing to invest in growth [17][30] Other Important Information - The company has implemented modest tariff surcharges on some products to partially offset tariff costs, but anticipates an overall dilutive impact on gross margins [24][38] - The company is actively seeking alternative sourcing options to mitigate tariff risks and maintain competitive pricing [40][41] Q&A Session Summary Question: Changes in order patterns or delivered sales in March - Management noted that March typically sees lighter orders, but year-over-year growth remained consistent until a significant slowdown was observed following the April 2 tariff announcement [32][33] Question: Revenue derived from new products - Over half of current sales are from new products launched in the last couple of years, and the company will continue to prioritize new product introductions regardless of external conditions [35][36] Question: Tariff surcharges and competitor responses - Competitors have implemented their own surcharges, and the company's guidance assumes the current 10% Vietnam tariff remains intact [37][38] Question: Product sourcing and potential margin impacts - The company is exploring alternative suppliers in Southeast Asia and is prepared to optimize its supply chain based on future tariff negotiations [40][41]