\nFlexsteel Industries, Inc. (NASDAQ: FLXS) (\u201cFlexsteel\u201d or the \u201cCompany\u201d), one of the largest manufacturers, importers, and marketers of residential furniture products in the United States, today reported fourth quarter and fiscal year 2025 results.<\/p>\n
Key Results for the Fourth Quarter and Fiscal Year Ended June 30, 2025<\/b><\/p>\n \nGAAP to non-GAAP reconciliations follow the financial statements in this press release<\/p>\n Management Commentary<\/b><\/p>\n \n\u201cOur strategies are working and drove strong results in the quarter,\u201d said Derek Schmidt, CEO of Flexsteel Industries, Inc. \u201cWhile market conditions and macroeconomic uncertainty remain industry headwinds, we continued our growth momentum and delivered 3.4% sales growth in the quarter, which represents our seventh consecutive quarter of year-over-year growth. The sources of our growth remain diversified across our core business and new or expanded markets, and our continued investments in new product development, innovation, customer experience, and marketing are enabling our share gains. Additionally, we continue to drive meaningful profitability improvement and delivered an adjusted operating margin of 9% in the quarter, which represents our ninth consecutive quarter of year-over-year improvement and a 340 basis point increase compared to the prior year. Sales growth, operational productivity, and product portfolio management remain our key profit improvement levers.\u201d<\/p>\n \nMr. Schmidt continues, \u201cI\u2019m proud of the team\u2019s accomplishments in fiscal year 2025 and enthusiastic about the Company\u2019s prospects for continued success. For the year, we delivered sales growth of 7% in a challenging industry environment, expanded adjusted operating margins by 270 basis points to 7.1%, increased adjusted operating profit by 71% to $31.2 million, delivered record adjusted earnings per diluted share of $4.17, and generated $45.3 million of free cash flow, which enabled us to increase our dividend twice in the past 12 months and build a healthy cash balance of $40 million. While difficult industry conditions are expected to persist in the near-term, our team remains intensely focused on executing our growth strategies and profitability improvement initiatives to deliver strong financial results in fiscal year 2026. Tariffs represent a major risk to both demand and margins in the new year. To overcome the demand risk, we will continue delivering an exceptional customer experience, differentiated and innovative new products, high-ROI marketing investments, and deeper penetration into new or expanded markets. The margin risk from tariffs, notably the 20% tariff on imports from Vietnam, requires a multifaceted approach to mitigate including supply chain adjustments, new cost savings initiatives, and limited pricing actions. We have strong partners in our value chain and are working collaboratively with them to address the effect of tariffs while minimizing the impact on consumer prices and demand. Our team is agile and is well positioned to navigate the new tariff environment while effectively executing our growth strategies.\u201d<\/p>\n \nMr. Schmidt concludes, \u201cThe Company is financially strong, competing well, and gaining share. I\u2019m encouraged by our fiscal year 2025 results and growth momentum, excited about our future, and confident in our ability to continue creating significant value for our customers and shareholders.”<\/p>\n Operating Results for the Fourth Quarter Ended June 30, 2025<\/b><\/p>\n \nNet sales were $114.6 million for the fourth quarter compared to net sales of $110.8 million in the prior year quarter, an increase of $3.8 million, or 3.4%. The increase was driven by higher unit volume from soft seating products, partially offset by decreases in our homestyles branded ready-to-assemble products.<\/p>\n \nGross margin for the quarter ended June 30, 2025, was 23.9%, compared to 21.3% for the prior-year quarter, an increase of 260 basis points (\u201cbps\u201d). The 260-bps increase was primarily due to a 300-bps benefit from foreign currency translation of our peso denominated assets in Mexico. The benefit is the result of the peso significantly strengthening versus the dollar in the quarter. This was partially offset by the net impact of tariffs of 40-bps.<\/p>\n \nSelling, general and administrative (SG&A) expense was 15.0% of net sales for the quarter ended June 30, 2025, compared to 17.0% in the prior year quarter. The 200-bps decrease was due to leverage on higher sales in the quarter as well as the prior year quarter included a $1.5 million non-cash charge for the modification of previously awarded equity grants to our former CEO as part of his retirement agreement.<\/p>\n \nDuring the quarter, the Company completed the sale of an ancillary building, formerly part of its Huntingburg, IN distribution center complex which was previously listed as held for sale. The Company recorded a pre-tax gain of $3.7 million related to the sale.<\/p>\n \nOperating income for the quarter ended June 30, 2025, was $14.0 million compared to $7.6 million in the prior-year quarter. On an adjusted basis, operating income for the quarter ended June 30, 2025, was $10.3 million compared to $6.2 million in the prior year quarter.<\/p>\n \nIncome tax expense was $3.6 million, or an effective rate of 25.0%, during the fourth quarter compared to tax expense of $2.5 million, or an effective rate of 33.9%, in the prior year quarter.<\/p>\n \nNet income was $10.7 million, or $1.89 per diluted share, for the quarter ended June 30, 2025, compared to net income of $4.9 million, or $0.89 per diluted share, in the prior year quarter. On an adjusted basis, net income for the quarter ended June 30, 2025, was $7.9 million or $1.40 per diluted share compared to adjusted net income of $4.1 million or $0.75 per diluted share in the prior year quarter.<\/p>\n Liquidity<\/b><\/p>\n \nThe Company ended the quarter with a cash balance of $40.0 million, working capital (current assets less current liabilities) of $110.4 million, and availability of approximately $54.1 million under its secured line of credit.<\/p>\n \nCapital expenditures for the year ended June 30, 2025, were $3.3 million.<\/p>\n Financial Outlook<\/b><\/p>\n \nFor the first quarter fiscal 2026, the Company expects sales growth of 1% to 6% compared to the prior year quarter and operating margin of 5.5% to 7%. The impact of global trade policy changes, including tariffs, could materially change our business forecast. Besides tariffs, the most significant drivers of variability in the financial outlook are consumer demand and competitive pricing conditions, which will be shaped by macro-economic factors.<\/p>\n\n
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