Flexsteel Industries (FLXS) investor relations material

Executive summary

• Net sales increased 6.2% year-over-year to $110.4 million for Q1 FY2026, marking the eighth consecutive quarter of growth, driven by new products, strategic account gains, and expansion in case goods and health/wellness categories, with sourced soft seating products leading growth.

• Operating income rose to $9.0 million (8.1% of net sales), a 230 basis point improvement over the prior year.

• Net income for the quarter was $7.3 million ($1.31 per diluted share), up from $4.1 million ($0.74 per diluted share) in the prior year.

• Over 50% of Q1 sales came from products launched within the last three years.

• Home furnishings backlog grew 9.8% to $67 million compared to the prior year quarter.

Financial highlights

• Gross margin improved to 23.5% from 21.5% year-over-year, a 200-basis-point increase due to sales leverage and favorable foreign currency translation.

• SG&A expenses decreased to 15.4% of net sales from 15.7% year-over-year.

• Cash balance was $38.6 million at quarter end, with no bank debt and $54.1 million available under the secured line of credit.

• Working capital stood at $116.9 million at quarter end, up from $110.4 million at June 30, 2025.

• Sales order backlog stood at $66.7 million, flat sequentially.

Outlook and guidance

• Management anticipates short-term disruption to demand and margins due to new Section 232 tariffs on imported furniture, rising from 25% to 30% in January 2026.

• No forward-looking financial guidance provided due to tariff uncertainty.

• Company remains optimistic about long-term growth and market share gains despite near-term headwinds.

• Management does not expect recent tax legislation (OBBBA) to impact income tax expense.

• No material changes to risk factors or contractual obligations since the last annual report.