Flexsteel Industries (FLXS) investor relations material

Executive summary

• Net sales increased 9% year-over-year to $118.2 million for the quarter, driven by higher unit volume in sourced soft seating and tariff-related pricing, partially offset by declines in made-to-order and ready-to-assemble products.

• Profitability improved with operating margin at 7.6%, reflecting disciplined cost management and operational agility.

• Gross margin improved by 170 basis points to 22.7% due to favorable sales mix, despite tariff impacts.

• Growth was driven by new product introductions, share gains with strategic accounts, and expansion into health and wellness and case goods markets.

• Net income for the quarter was $6.6 million ($1.18 per diluted share), down from $9.1 million ($1.62 per diluted share) in the prior year, which included a one-time gain from asset sales.

Financial highlights

• Gross profit for the quarter was $26.8 million, up from $22.8 million year-over-year.

• GAAP operating income was $9.0 million (7.6% margin), down from $11.7 million (10.7% margin) in the prior year due to a prior-year gain on asset sale.

• Adjusted operating income rose 35% year-over-year to $9.0 million (7.6% of sales), up from $6.7 million (6.1% of sales in prior year quarter).

• Sales order backlog at quarter-end was $82.4 million, including estimated tariff surcharges, up 6.5% year-over-year.

• Ended the quarter with $36.8 million in cash, $126 million in working capital, and no bank debt.

Outlook and guidance

• Margin dilution is expected in the second half of FY2026 due to higher cost inventory burdened by 25% tariffs.

• No forward-looking guidance provided due to uncertainty around demand and tariff impacts.

• Management is actively evaluating cost reduction opportunities and alternative supply chain options to support long-term profitability.

• Management continues to invest in growth initiatives, reflected in higher SG&A expenses.

• Remains confident in ability to adapt to external changes and continue investing in growth and innovation.