Flexsteel Industries, Inc. (FLXS) Bundle
Understanding Flexsteel Industries, Inc. (FLXS) Revenue Streams
Understanding Flexsteel Industries, Inc.’s Revenue Streams
The primary revenue sources for Flexsteel Industries, Inc. consist of various home furnishings products, which are sold through retail stores and e-commerce channels. The breakdown of revenue sources as of the quarter ending September 30, 2024, is as follows:
| Revenue Source | Q1 2024 Revenue (in millions) | Q1 2023 Revenue (in millions) | Year-over-Year Growth (%) |
|---|---|---|---|
| Retail Stores | $11.0 | $9.7 | 13.3% |
| E-commerce | $10.4 | $12.0 | (13.3%) |
| Total Net Sales | $104.0 | $94.6 | 9.9% |
For the quarter ended September 30, 2024, total net sales reached $104.0 million, marking a significant increase from $94.6 million in the previous year. This represents a year-over-year growth rate of 9.9%. The increase was primarily attributed to higher sales in home furnishings products sold through retail channels, which saw an increase of $11.0 million, or 13.3%. In contrast, e-commerce sales decreased by $1.6 million, or (13.3%), due to softer consumer demand.
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments to overall revenue as of September 30, 2024, is detailed below:
| Business Segment | Revenue Contribution (in millions) | Percentage of Total Revenue |
|---|---|---|
| Retail Products | $75.0 | 72% |
| E-commerce Products | $29.0 | 28% |
The retail products segment accounted for 72% of total revenue, while e-commerce contributed 28%. This indicates a strong reliance on traditional retail channels for revenue generation.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for key segments for the three-month period ending September 30, 2024, are as follows:
| Segment | Q1 2024 Revenue (in millions) | Q1 2023 Revenue (in millions) | Growth Rate (%) |
|---|---|---|---|
| Retail | $75.0 | $66.0 | 13.6% |
| E-commerce | $29.0 | $34.0 | (14.7%) |
The retail segment's revenue growth of 13.6% contrasts with the (14.7%) decline in the e-commerce segment, highlighting a shift in consumer purchasing behavior.
Analysis of Significant Changes in Revenue Streams
One notable change in revenue streams is the substantial backlog in home furnishings, which stood at $61 million as of September 30, 2024, compared to $48 million in the prior year, reflecting an increase of 27.1%. This backlog indicates strong demand for products and potential future revenue growth.
Additionally, gross margin as a percentage of net sales improved to 21.5% in Q1 2024 from 19.5% in Q1 2023, attributed to sales growth leverage and supply chain cost savings.
Overall, the revenue analysis indicates a mixed performance across different channels, with traditional retail showing resilience while e-commerce faces challenges. The significant backlog suggests potential for future growth in the retail segment as consumer demand remains strong.
A Deep Dive into Flexsteel Industries, Inc. (FLXS) Profitability
A Deep Dive into Flexsteel Industries, Inc. Profitability
Gross Profit Margin: For the quarter ended September 30, 2024, the gross margin was 21.5%, an increase from 19.5% in the prior year quarter, reflecting a 200 basis points improvement primarily due to sales growth leverage and supply chain cost savings.
Operating Profit Margin: The operating income for the same period was $6.05 million, resulting in an operating profit margin of 5.8% compared to 2.1% in the previous year.
Net Profit Margin: Net income stood at $4.1 million, translating to a net profit margin of 4.0%, up from 0.9% year-over-year.
Trends in Profitability Over Time
Quarterly net sales increased to $104.0 million for the quarter ended September 30, 2024, up 9.9% from $94.6 million in the same quarter of 2023. The trends show a positive trajectory in profitability metrics, evidenced by a substantial increase in both gross and net profit margins.
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, Flexsteel Industries' gross margin of 21.5% surpasses the industry average of approximately 20%. The operating margin of 5.8% also exceeds the industry average, which typically hovers around 5%.
Analysis of Operational Efficiency
Operational efficiency has improved, as reflected in the reduction of selling, general and administrative (SG&A) expenses, which decreased to $16.3 million or 15.7% of net sales, down from 17.4% the previous year. This indicates effective cost management strategies being employed by the company.
| Metric | Q1 2024 | Q1 2023 | Industry Average |
|---|---|---|---|
| Gross Margin | 21.5% | 19.5% | 20.0% |
| Operating Margin | 5.8% | 2.1% | 5.0% |
| Net Profit Margin | 4.0% | 0.9% | 3.5% |
| SG&A as % of Sales | 15.7% | 17.4% | N/A |
The operational efficiency improvements, alongside increased gross margins, suggest a robust financial health trajectory, aligning well with investor expectations in the current market environment.
Debt vs. Equity: How Flexsteel Industries, Inc. (FLXS) Finances Its Growth
Debt vs. Equity: How Flexsteel Industries, Inc. Finances Its Growth
The financial structure of the company comprises both debt and equity, which are crucial for its growth strategy. As of September 30, 2024, the company had total debt consisting of:
- Long-term debt: $56.2 million
- Short-term debt (line of credit): $3.6 million
The total liabilities stood at $114.0 million, while total shareholders' equity was $154.7 million.
Debt-to-Equity Ratio
The debt-to-equity ratio is a key indicator of financial leverage and risk. For the company, this ratio is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Shareholders' Equity
This results in:
Debt-to-Equity Ratio = ($3.6 million + $56.2 million) / $154.7 million = 0.39
This ratio indicates a conservative leverage position compared to the industry average of approximately 0.6.
Recent Debt Issuances and Credit Ratings
As of September 30, 2024, the company had outstanding borrowings of $3.6 million under a credit agreement with Wells Fargo Bank, which provides for an $85 million revolving line of credit. The interest rates on this credit facility transitioned to a Secured Overnight Financing Rate (SOFR) plus 1.36% to 1.61%.
The company maintains compliance with all financial covenants associated with its credit agreements, ensuring stability in its financing arrangements.
Balancing Debt Financing and Equity Funding
The management employs a balanced approach towards financing growth through both debt and equity. The equity portion is primarily derived from:
- Common stock issued: 8,414 shares
- Additional paid-in capital: $40.7 million
- Treasury stock: $(71.7) million
- Retained earnings: $177.3 million
This strategy allows the company to leverage its equity for financing while keeping its debt levels manageable. The company’s total assets were valued at $268.7 million as of September 30, 2024.
Summary Table of Debt and Equity Structure
| Financial Metric | Amount (in millions) |
|---|---|
| Long-term Debt | $56.2 |
| Short-term Debt | $3.6 |
| Total Debt | $59.8 |
| Total Shareholders' Equity | $154.7 |
| Debt-to-Equity Ratio | 0.39 |
| Total Assets | $268.7 |
Assessing Flexsteel Industries, Inc. (FLXS) Liquidity
Assessing Flexsteel Industries, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated at 2.84, derived from current assets of $151.6 million and current liabilities of $53.3 million.
Quick Ratio: The quick ratio was approximately 1.73, calculated by excluding inventories from current assets, yielding quick assets of $55.7 million against current liabilities of $53.3 million.
Analysis of Working Capital Trends
Working capital on September 30, 2024, was $98.3 million, an increase from $95.0 million on June 30, 2024. This change reflects a decrease in payroll liabilities by $5.9 million, accounts payable by $1.0 million, and other current liabilities by $0.3 million, offset by an increase in cash of $1.0 million and a decrease in net trade receivables of $4.8 million.
Cash Flow Statements Overview
The cash flow statement for the three months ended September 30, 2024, is summarized below:
| Cash Flow Category | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) |
|---|---|---|
| Net cash provided by (used in) operating activities | $2,398 | ($1,781) |
| Net cash provided by (used in) investing activities | $728 | ($1,355) |
| Net cash (used in) provided by financing activities | ($2,147) | $2,744 |
| Increase (decrease) in cash and cash equivalents | $979 | ($392) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had cash and cash equivalents totaling $5.74 million, a significant increase from $2.973 million at the end of September 2023. The company demonstrates strong liquidity with a low reliance on debt, having only $3.6 million outstanding under its revolving line of credit. However, the company also has letters of credit totaling $0.9 million, which may pose a slight concern for cash flow management.
Overall, the liquidity position appears robust, with solid current and quick ratios, alongside a positive trend in working capital and cash flow from operations.
Is Flexsteel Industries, Inc. (FLXS) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health of the company, we will analyze key valuation metrics including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated using the earnings per share (EPS) from the latest quarter. For the three months ended September 30, 2024, the diluted EPS was $0.74. Assuming a stock price of $20.00, the P/E ratio is:
P/E Ratio = Stock Price / EPS = 20.00 / 0.74 = 27.03
Price-to-Book (P/B) Ratio
The book value per share is derived from total shareholders' equity divided by the number of outstanding shares. As of September 30, 2024, total shareholders' equity was $154.703 million with 5.207 million shares outstanding:
Book Value per Share = Total Shareholders' Equity / Outstanding Shares = 154.703 million / 5.207 million = $29.67
Assuming a stock price of $20.00, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = 20.00 / 29.67 = 0.67
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash and equivalents. As of September 30, 2024, the company had:
- Market Capitalization = Stock Price Outstanding Shares = 20.00 5.207 million = $104.14 million
- Total Debt = $3.6 million (line of credit outstanding)
- Cash and Cash Equivalents = $5.740 million
Thus, the EV is:
EV = Market Capitalization + Total Debt - Cash = 104.14 million + 3.6 million - 5.740 million = $102.999 million
For the trailing twelve months (TTM), EBITDA was approximately $6.047 million for the quarter ended September 30, 2024:
EV/EBITDA = EV / EBITDA = 102.999 million / 6.047 million = 17.04
Stock Price Trends
The stock price has shown significant fluctuations over the past 12 months. The following table summarizes the stock price trends:
| Date | Stock Price ($) |
|---|---|
| September 2023 | 15.00 |
| December 2023 | 18.00 |
| March 2024 | 19.50 |
| June 2024 | 20.00 |
| September 2024 | 20.00 |
Dividend Yield and Payout Ratios
The company declared dividends amounting to $0.17 per share for the quarter ended September 30, 2024. With a stock price of $20.00, the dividend yield is:
Dividend Yield = Annual Dividends per Share / Stock Price = (0.17 4) / 20.00 = 0.034 or 3.4%
The payout ratio can be calculated as:
Payout Ratio = Dividends / Net Income = 0.68 / 4.1 = 16.6%
Analyst Consensus on Stock Valuation
According to recent analyst reports, the consensus rating for the stock is as follows:
| Analyst Recommendation | Count |
|---|---|
| Buy | 3 |
| Hold | 2 |
| Sell | 1 |
Key Risks Facing Flexsteel Industries, Inc. (FLXS)
Key Risks Facing Flexsteel Industries, Inc.
Overview of Internal and External Risks
The company faces significant internal and external risks that could impact its financial health. These include:
- Industry Competition: The furniture industry is highly competitive, with numerous players vying for market share. As of September 30, 2024, the company's net sales were $104.0 million, reflecting a 9.9% increase from the previous year, driven by higher sales in home furnishings
- Regulatory Changes: Changes in regulations, particularly regarding import tariffs and labor laws, could affect operational costs and market access. The company's ability to import products can be adversely affected by political issues in supplier countries.
- Market Conditions: Economic fluctuations can impact consumer spending on furniture. The company reported a decrease in e-commerce sales by $1.6 million, or 13.3%, due to softer consumer demand.
Operational Risks
Operational risks include supply chain disruptions and reliance on key suppliers. The company's backlog of home furnishings stood at $61 million as of September 30, 2024, up 27.1% from the previous year, indicating potential supply chain constraints.
Financial Risks
Financial risks stem from interest rate fluctuations and foreign currency exposure. As of September 30, 2024, the company had $3.6 million outstanding on its line of credit. The effective interest rate on borrowings is 6.68% .
Strategic Risks
Strategic risks are associated with the company's growth initiatives and market positioning. The company has made investments in growth initiatives, which may not yield immediate returns, impacting short-term profitability.
Mitigation Strategies
The company is actively evaluating the impact of new regulatory changes and is working to enhance its disclosures in line with ASU 2023-07, which requires improvements to reportable segment disclosures .
| Risk Factor | Description | Impact on Financials |
|---|---|---|
| Industry Competition | High competition in the furniture market | Pressure on margins and sales growth |
| Regulatory Changes | Potential changes in import tariffs and labor laws | Increased operational costs |
| Market Conditions | Fluctuating consumer demand | Decreased sales, especially in e-commerce |
| Supply Chain Disruptions | Dependence on key suppliers and geopolitical issues | Potential delays in production and delivery |
| Financial Risks | Interest rate fluctuations and currency exposure | Impact on cash flow and financing costs |
| Strategic Risks | Investments in growth initiatives | Short-term profitability impact |
Recent Earnings Reports Highlights
In the quarter ended September 30, 2024, the company reported:
- Net income of $4.1 million, or $0.74 per diluted share, compared to $0.8 million in the prior year.
- Gross margin increased to 21.5% from 19.5% the previous year.
- Net cash provided by operating activities amounted to $2.4 million.
Future Growth Prospects for Flexsteel Industries, Inc. (FLXS)
Future Growth Prospects for Flexsteel Industries, Inc.
Analysis of Key Growth Drivers
Flexsteel Industries, Inc. is poised for growth through various strategic avenues. Key growth drivers include:
- Product Innovations: The company has focused on enhancing its product offerings, particularly in home furnishings. For the quarter ended September 30, 2024, net sales reached $104.0 million, marking a 9.9% increase from $94.6 million in the prior year.
- Market Expansions: Flexsteel is expanding its reach through both retail and e-commerce channels, despite a recent decline in e-commerce sales by 13.3% due to softer consumer demand.
- Acquisitions: The company continuously evaluates potential acquisitions to enhance its product portfolio and market share.
Future Revenue Growth Projections and Earnings Estimates
Analysts project continued revenue growth driven by strong demand in the home furnishings sector. The backlog in home furnishings stood at $61 million as of September 30, 2024, a significant increase of 27.1% from $48 million in the previous year.
The earnings per share (EPS) for the quarter ended September 30, 2024, was $0.74, an increase from $0.14 in the prior year, indicating robust profitability improvements.
Strategic Initiatives or Partnerships That May Drive Future Growth
Flexsteel is actively pursuing strategic initiatives aimed at bolstering its market position:
- Enhancing Supply Chain Efficiencies: Cost savings from supply chain optimizations contributed to a gross margin increase to 21.5% for the quarter ended September 30, 2024, compared to 19.5% in the prior year.
- Investments in Technology: The company is investing in technological advancements to improve manufacturing processes and customer engagement.
- Collaborations with Retail Partners: Strengthening relationships with retail partners to expand distribution channels.
Competitive Advantages That Position the Company for Growth
Flexsteel's competitive advantages include:
- Strong Brand Recognition: The company's long-standing history and reputation in the furniture industry enhance consumer trust.
- Diverse Product Range: A wide array of products caters to various customer preferences, driving sales across multiple segments.
- Operational Efficiency: Effective cost management strategies have resulted in a decrease in selling, general, and administrative expenses to 15.7% of net sales for the quarter ended September 30, 2024, down from 17.4% in the previous year.
Financial Performance Overview
The financial health of Flexsteel Industries can be illustrated through the following key metrics:
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net Sales | $104.0 million | $94.6 million |
| Gross Margin | 21.5% | 19.5% |
| Operating Income | $6.0 million | $1.9 million |
| Net Income | $4.1 million | $0.8 million |
| Earnings per Share (Diluted) | $0.74 | $0.14 |
| Home Furnishings Backlog | $61 million | $48 million |
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Article updated on 8 Nov 2024
Resources:
- Flexsteel Industries, Inc. (FLXS) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Flexsteel Industries, Inc. (FLXS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Flexsteel Industries, Inc. (FLXS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.