Flexsteel Industries Inc (FLXS) 2024 Q2 法說會逐字稿

Good morning, and welcome to the Flexsteel Industries second quarter fiscal year 2024 earnings conference call. (Operator Instruction) Please note this event is being recorded.

早上好，歡迎參加 Flexsteel Industries 2024 財年第二季財報電話會議。（操作員說明）請注意此事件正在被記錄。

I would now like to turn the conference over to Mike Ressler, Chief Financial Officer for Flexsteel Industries. Please go ahead.

我現在想將會議轉交給 Flexsteel Industries 財務長 Mike Ressler。請繼續。

Thank you, and welcome to today's call to discuss Flexsteel Industries second quarter fiscal year 2024 financial results. Our earnings release, which we issued after market close yesterday, February 5, is available on the Investor Relations section of our website at www.flexsteelindustries.com under News and Events. I'm here today with Jerry Dittmer, Chief Executive Officer; and Derek Schmidt, President. On today's call, we will provide prepared remarks, and then we will open the call to your questions.

謝謝，歡迎參加今天的電話會議，討論 Flexsteel Industries 2024 財年第二季的財務業績。我們在昨天（2 月 5 日）收盤後發布了我們的收益報告，可在我們網站 www.flexsteelindustries.com 的“投資者關係”部分的“新聞和活動”下查看。今天我和執行長 Jerry Dittmer 一起來到這裡。和總裁德里克·施密特。在今天的電話會議上，我們將提供準備好的發言，然後我們將開始回答您的問題。

Before we begin, I would like to remind you that the comments on today's call will include forward-looking statements, which can be identified using words such as estimate, anticipate, expect, and similar phrases. Forward-looking statements by their nature involve estimates, projections, goals, forecasts, and assumptions and are subject to risks and uncertainties that can cause actual results or outcomes to differ material from those expressed in the forward-looking statements. Such risks and uncertainties include but are not limited to those that are described in our most recent annual report on Form 10-K as updated by our subsequent quarterly reports on Form 10-Q and other SEC filings as applicable.

在我們開始之前，我想提醒您，今天電話會議的評論將包括前瞻性陳述，可以使用估計、預期、期望和類似短語等詞語來識別。前瞻性陳述本質上涉及估計、預測、目標、預測和假設，並受到風險和不確定性的影響，這些風險和不確定性可能導致實際結果或結果與前瞻性陳述中表達的內容有重大差異。此類風險和不確定性包括但不限於我們最新的10-K 表年度報告中所述的風險和不確定性，以及我們隨後的10-Q 表季度報告和其他適用的SEC 備案文件中更新的風險和不確定性。

These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. Additionally, we may refer to non-GAAP measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures. Press release available on the website contains the financial and other quantitative information to be discussed today as well as the reconciliation of GAAP to non-GAAP measures.

這些前瞻性陳述僅代表本次電話會議之日的情況，不應被視為對未來事件的預測。此外，我們可能會參考非公認會計準則衡量標準，這些衡量標準旨在補充但不能取代最直接可比較的公認會計準則衡量標準。網站上提供的新聞稿包含今天討論的財務和其他定量信息，以及 GAAP 與非 GAAP 指標的調節表。

And with that, I'll turn the call over to Jerry Dittmer. Jerry?

接下來，我會將電話轉給傑瑞·迪特默。傑瑞？

Good morning, and thank you for joining us today. I'd like to start by welcoming Mike Rassler, our new Chief Financial Officer. Mike has been with Flexsteel over 17 years in various accounting, finance, and other cross functional roles. Most recently as the Vice President of Manufacturing. His appointment as CFO, reflects his leadership and contribution to the company's transformation over the past several years. And I'm excited for Mike, to further expand its positive impact on the company as CFO.

早安，感謝您今天加入我們。首先我要歡迎我們新任財務長 Mike Rassler。Mike 在 Flexsteel 工作了 17 年多，擔任過各種會計、財務和其他跨職能職位。最近擔任製造副總裁。他被任命為財務官，體現了他在過去幾年中對公司轉型的領導和貢獻。我很高興麥克作為財務長進一步擴大對公司的正面影響。

I would also like to congratulate Derek Schmidt, on his appointment to President and to the Board of Directors. Derek, promotion reflects his leadership of the company's operations and growth strategy and aligned with his expanded responsibility, since joining the company nearly four years ago.

我還要祝賀德里克·施密特 (Derek Schmidt) 被任命為總裁和董事會成員。德里克（Derek）的晉升反映了他對公司營運和成長策略的領導能力，並與他自近四年前加入公司以來擴大的職責相一致。

With that, I am very pleased to share with you our second quarter fiscal year 2024 results. While headwinds from macroeconomic challenges and shifts in consumer spending toward experiences and away from things persist in our industry, we continued to execute on our strategic initiatives and delivered sales growth of 7.5% when compared to the prior year quarter.

至此，我很高興與您分享我們 2024 財年第二季的業績。儘管宏觀經濟挑戰以及消費者支出轉向體驗而非物質的不利因素在我們的行業中持續存在，但我們繼續執行我們的策略舉措，與去年同期相比，銷售額增長了 7.5%。

In addition, our relentless focus on operational efficiency and cost savings, propelled gross margin expansion and help fund additional investment in growth initiatives while delivering significantly improved operating income when compared to both the same quarter of the prior year and our first quarter fiscal 2024.

此外，我們對營運效率和成本節約的不懈關注，推動了毛利率的擴張，並幫助為成長計畫的額外投資提供資金，同時與去年同期和2024 財年第一季相比，營運收入顯著提高。

While we expect the business environment in the near term to remain challenged. Our team isn't deterred and remain intensely focused on continuing to profitably grow our business throughout the remainder of fiscal year 2024, and long term. We will continue our positive momentum going into the third quarter and are confident in our ability to grow sales both compared to last year and the second quarter.

但我們預期短期內的商業環境仍將面臨挑戰。我們的團隊並沒有被嚇倒，而是繼續高度關注在 2024 財年剩餘時間以及長期內繼續實現業務盈利增長。我們將在第三季度繼續保持積極的勢頭，並對我們與去年和第二季度相比增加銷售額的能力充滿信心。

I'll now turn the call over to Derek, to discuss our results and an update on our growth initiatives. I'll be back at the end of the call with some closing comments and what we see ahead.

現在我將把電話轉給德里克，討論我們的結果以及我們成長計畫的最新情況。我將在電話會議結束時回來提供一些結束語以及我們對未來的展望。

Thank you, Jerry, and good morning, everyone. Like Jerry, I am very pleased with our second quarter results. We are competing well in our core business and executing our market expansion initiatives, resulting in both sales and profit growth even in a difficult business environment.

謝謝傑瑞，大家早安。和傑瑞一樣，我對我們第二季的業績感到非常滿意。我們在核心業務方面表現出色，並執行市場擴張計劃，即使在困難的商業環境下，銷售額和利潤也實現了成長。

As Jerry, noted earlier, we grew our top line by 7.5% in the fiscal second quarter. This year-over-year sales comparison continues to be adversely impacted by the elimination of ocean freight surcharges, which reduced revenue by approximately $3.5 million compared to the prior year quarter.

正如 Jerry 先前指出的，我們第二財季的營收成長了 7.5%。取消海運費附加費繼續對同比銷售額比較產生不利影響，與去年同期相比，收入減少了約 350 萬美元。

As discussed in our first quarter call, in the prior year, we use this surcharge mechanism to pass through a higher cost of ocean container delivery, which were significantly inflated due to supply chain issues. Container delivery costs normalized throughout the last fiscal year, and we subsequently eliminated this surcharge. Excluding the $3.5 million impact from this ocean freight surcharge elimination sales growth related to unit volume and product mix was a robust 11.7%, further reinforcing our strong sales execution.

正如我們在第一季電話會議中所討論的，去年，我們使用這種附加費機制來轉嫁海運貨櫃運輸的較高成本，該成本因供應鏈問題而大幅上漲。貨櫃運輸成本在上一財年正常化，我們隨後取消了這項附加費。排除海運費附加費消除帶來的 350 萬美元影響，與單位數量和產品組合相關的銷售成長為 11.7%，進一步增強了我們強大的銷售執行力。

Despite challenging industry conditions, we remain confident in our ability to continue our growth momentum into the second half of fiscal 2024 from both continued share gains in our core business and increasing momentum in our market expansion initiatives. In our core business, we expect to continue outperforming the industry by continuously improving and providing a differentiated customer experience, aligning ourselves with the strongest, most capable distribution partners and driving a constant stream of relevant and compelling new product.

儘管行業情況充滿挑戰，但我們仍然相信，由於我們核心業務的份額持續增長和市場擴張舉措的不斷增強，我們有能力在 2024 財年下半年繼續保持增長勢頭。在我們的核心業務中，我們希望透過不斷改進和提供差異化的客戶體驗，與最強大、最有能力的分銷合作夥伴保持一致，並不斷推出相關且引人注目的新產品，從而持續超越產業。

We define our core business based upon where the majority of our current sales are derived from which is product design for primary living spaces like the living room, which are sold through independent furniture retailers and have a more traditional or transitional style that primarily appeals to Gen X and baby boomer consumers.

我們根據目前大部分銷售的來源來定義我們的核心業務，即客廳等主要生活空間的產品設計，這些空間透過獨立的家具零售商銷售，具有更傳統或過渡的風格，主要吸引一代X 和嬰兒潮一代消費者。

This core business is large and profitable, and we will continue to defend and expand our penetration in this market. At the same time, we are pursuing growth in markets outside of our core that we believe are relevant and growing and where we have a clear right to win. If you recall from prior calls, these market expansion initiatives take three forms- first, consumer segments, namely Gen Z and millennials; second, product categories outside of primary living spaces; and lastly, sales distribution outside of independent furniture retailers. I'm pleased with our solid progress in all three of these areas.

這核心業務規模龐大且利潤豐厚，我們將繼續捍衛並擴大在該市場的滲透率。同時，我們正在尋求核心以外市場的成長，我們認為這些市場具有相關性和成長性，並且我們有明確的獲勝權利。如果你還記得之前的電話會議，這些市場擴張舉措採取了三種形式：首先是消費者群體，即 Z 世代和千禧世代；其次是消費群體，即 Z 世代和千禧世代；其次，主要生活空間以外的產品類別；最後，獨立家具零售商以外的銷售分佈。我對我們在所有這三個領域取得的堅實進展感到高興。

First, to address younger consumers, we are repositioning our brand portfolio through a three-pronged approach. We are modernizing the Flexsteel brand and last October, we launched a strong lineup of more contemporary product at lower price points with exceptional comfort and quality. We're encouraged by initial placements and sales of these new products are ramping nicely.

首先，為了迎合年輕消費者，我們正在透過三管齊下的方式重新定位我們的品牌組合。我們正在對 Flexsteel 品牌進行現代化改造，去年 10 月，我們以更低的價格推出了一系列更現代的產品，具有卓越的舒適度和品質。這些新產品的初始投放和銷售量正在快速成長，這讓我們深受鼓舞。

We also launched the new brand Charisma last year to reach younger consumers with even lower price on-trend products. In this year, we've invested in new talent and product engineering to support Charisma, and we'll be launching multiple exciting new products at April's High Point market to grow this new brand. Additionally, we continue expanding our new Flex solution with broader accessories to further improve its modularity and appeal to younger consumers.

我們去年也推出了新品牌 Charisma，以更低價格的流行產品吸引年輕消費者。今年，我們投資了新的人才和產品工程來支持 Charisma，並且我們將在四月的 High Point 市場推出多種令人興奮的新產品，以發展這個新品牌。此外，我們繼續透過更廣泛的配件擴展我們的新 Flex 解決方案，以進一步提高其模組化性並吸引年輕消費者。

Moving on to our second market expansion focus, which is to expand into newer product categories. We focused on health and wellness this year with our new zecliner sleep chair. Our recent third party sleep study validated the superior sleep results from using zecliners, which we are now leveraging in our marketing and demand-generation initiatives. The product is now placed in over 960 retailers, and we are investing aggressively in additional innovation to protect our leadership position in this emerging market.

接下來是我們的第二個市場擴張重點，即擴展到新的產品類別。今年，我們推出了新款 zecliner 睡眠椅，專注於健康和保健。我們最近的第三方睡眠研究驗證了使用 zecliner 帶來的卓越睡眠效果，我們現在正在行銷和需求產生計劃中利用它。該產品現已在 960 多家零售商銷售，我們正在積極投資更多創新，以保護我們在這個新興市場的領導地位。

Our third market expansion focus is to broaden our sales distribution to position our brands where and how consumers want to purchase furniture, both now and into the future. For example, our flex modular solution, which I mentioned earlier. It can be purchased not only in leading retailers but also on Amazon, Wayfair, costco.com, and our own online platform at flexsteelstore.com.

我們的第三個市場擴張重點是擴大我們的銷售分佈，以將我們的品牌定位在消費者現在和未來想要購買家具的地方和方式。例如，我之前提到的我們的柔性模組化解決方案。它不僅可以在領先的零售商處購買，還可以在 Amazon、Wayfair、costco.com 和我們自己的線上平台 flexsteelstore.com 上購買。

Well, I'm excited about our top line growth and future growth prospects, I am equally energized by our improved profitability, which has been propelled by four drivers.

嗯，我對我們的收入成長和未來的成長前景感到興奮，我同樣對我們獲利能力的提高感到興奮，這是由四個驅動因素推動的。

First, new products with higher margin profiles. We've raised the threshold for new product margins and expect product lifecycle management will continue to improve our gross margin over time. Second, we're executing well operationally and delivering strong cost savings within our supply chain. Third, we've remained disciplined with pricing and pulled back promotions where needed to improve overall profitability. And fourth, we are achieving leverage on fixed costs through higher sales volume, which we believe will continue to be an important driver of operating margin improvement going forward as we grow the business.

首先，新產品具有更高的利潤率。我們提高了新產品利潤率的門檻，並預計產品生命週期管理將隨著時間的推移繼續提高我們的毛利率。其次，我們的營運執行良好，並在供應鏈內實現了顯著的成本節約。第三，我們仍然嚴格定價，並在需要提高整體獲利能力時取消促銷活動。第四，我們正在透過更高的銷售量來實現對固定成本的槓桿作用，我們相信，隨著我們業務的發展，這將繼續成為營運利潤率改善的重要驅動力。

As I noted earlier, differentiated customer experience is an important element of share gains in our core markets. As part of our ongoing commitment to improve the customer experience, the company announced the closure of our Dublin, Georgia manufacturing plant. While this decision was very difficult, it enables us to reduce customer lead times and handling damage to improve the overall customer experience while also decreasing inventory, simplifying logistics execution, and improving profitability.

正如我之前指出的，差異化的客戶體驗是我們核心市場佔有率成長的重要因素。作為我們持續致力於改善客戶體驗的一部分，該公司宣布關閉喬治亞州都柏林的製造工廠。雖然這個決定非常困難，但它使我們能夠減少客戶交貨時間和處理損壞，從而改善整體客戶體驗，同時減少庫存、簡化物流執行並提高獲利能力。

Currently, the Dublin facility supports less than 5% of the company's sales, and we expect to retain virtually all sales through this transition. Closure of the facility is expected to occur by the end of our fiscal fourth quarter. As part of this transition, the company expects to incur pre-tax restructuring and related expenses between $2.5 million and $3.2 million.

目前，都柏林工廠只支持該公司不到 5% 的銷售額，我們預計透過此次過渡將保留幾乎所有銷售額。該設施預計將在第四財季末關閉。作為過渡的一部分，該公司預計將產生 250 萬至 320 萬美元的稅前重組及相關費用。

The one-time costs are associated with employee separations, inventory and equipment transfers, and other expenses directly related to the closure and are expected to be incurred primarily in our third and fourth quarters of fiscal year 2024. Once the closure is fully executed, the company expects annualized savings in the range of $4 million to $4.5 million. The Dublin facility will be listed for sale upon closure, and the company anticipates a future one-time gain in excess of the carrying value of the asset.

這些一次性成本與員工離職、庫存和設備轉移以及與關閉直接相關的其他費用有關，預計主要在 2024 財年第三和第四季度產生。一旦關閉完全執行，該公司預計每年可節省 400 萬至 450 萬美元。都柏林工廠將在關閉後掛牌出售，該公司預計未來的一次性收益將超過該資產的帳面價值。

To summarize, we are growing and gaining share under challenging industry conditions. We have robust plans to continue that growth, both through our core markets and expansion into new markets. We are rapidly improving profitability with more gains expected through fiscal 2024, and into fiscal 2025. We are generating strong free cash flow and strengthen our balance sheet, and we are investing to continuously improve our customer experience and to drive new innovation that will differentiate us and strengthen our market leadership long-term. Future is bright, and I am excited about what lies ahead for our organization.

總而言之，我們在充滿挑戰的行業條件下不斷成長並贏得份額。我們制定了穩健的計劃，透過我們的核心市場和新市場的擴張來繼續這一成長。我們正在迅速提高獲利能力，預計到 2024 財年和 2025 財年將實現更多收益。我們正在產生強勁的自由現金流並加強我們的資產負債表，我們正在投資不斷改善我們的客戶體驗並推動新的創新，這將使我們脫穎而出並長期加強我們的市場領導地位。未來是光明的，我對我們組織的未來感到興奮。

With that I'll turn the call over to Mike, who will give you some additional details on the financial performance for the second quarter and the outlook for the third quarter of fiscal year 2024.

接下來，我將電話轉給 Mike，他將向您提供有關第二季度財務業績和 2024 財年第三季前景的更多詳細資訊。

Thanks, Derek. For the quarter, net sales were $100.1 million, slightly above our guidance of $94 million to $100 million provided during our first quarter fiscal 2024 earnings call. As Derek noted earlier, sales growth related to unit volume and mix, which when excluding prior year quarter ocean freight surcharges was a strong 11.7% in the quarter, and we feel we have sustainable growth momentum throughout the rest of fiscal 2024, and into fiscal 2025.

謝謝，德里克。本季淨銷售額為 1.001 億美元，略高於我們在 2024 財年第一季財報電話會議上提供的 9,400 萬至 1 億美元的指導值。正如德里克（Derek）早些時候指出的那樣，銷售增長與單位數量和組合相關，排除上一年季度的海運附加費後，該季度的銷售額增長了11.7%，我們認為我們在2024 財年剩餘時間以及進入本財年都有可持續的增長勢頭。2025 年。

From a profit perspective, the company delivered operating income of $4.6 million for 4.6% of sales in the second quarter, which exceeded our operating guidance range of 2% to 4%. The meaningful increase in our operating income was driven by an expansion of our gross margin to 21.9% in the quarter compared to 17% in the prior year quarter.

從利潤角度來看，該公司第二季營業收入為 460 萬美元，佔銷售額的 4.6%，超出了我們 2% 至 4% 的營業指導範圍。我們的營業收入大幅成長是由於本季毛利率從去年同期的 17% 擴大至 21.9%。

Moving to the balance sheet and statement of cash flows. The company ended the quarter with $3.3 million in cash working capital of $100.5 million, and a balance on our revolving line of credit of $17.9 million. Our increased profit, combined with improved working capital levels allowed us to pay down our debt by 46% when compared to the fiscal first quarter.

轉向資產負債表和現金流量表。該公司截至本季末的現金營運資金為 330 萬美元，流動資金為 1.005 億美元，循環信貸額度餘額為 1,790 萬美元。與第一財季相比，我們增加的利潤以及改善的營運資本水準使我們能夠償還債務 46%。

Looking forward, we reiterate the sales guidance released with our preliminary results announcement on January 11, 2024. And while we expect one-time costs related to the closure of our Dublin facility, adversely impact GAAP operating income. We still expect to achieve our fiscal 2024 operating income guidance on an adjusted non-GAAP basis. When backing out the one-time costs associated with the facility closure. Specifically for the fiscal third quarter, we expect sales between $101 million and $106 million, which represents sales growth of 2% to 7%.

展望未來，我們重申 2024 年 1 月 11 日公佈初步業績時發布的銷售指引。雖然我們預計關閉都柏林工廠會產生一次性成本，但會對 GAAP 營業收入產生不利影響。我們仍預期在調整後的非公認會計準則基礎上實現 2024 財年營業收入指引。當取消與設施關閉相關的一次性成本時。具體到第三財季，我們預計銷售額將在 1.01 億美元至 1.06 億美元之間，即銷售額將成長 2% 至 7%。

Regarding profitability, we expect gross margin in the range of 21% to 22%. We expect gross margin to grow modestly throughout the remainder of the fiscal year and into fiscal 2025, driven by sales growth and continued realization of our cost savings initiatives. We will continue to prudently manage SG&A spending with a focus on investing in our growth initiatives and expect SG&A costs between $17 million and $17.5 million for the third quarter.

就獲利能力而言，我們預期毛利率在21%至22%之間。我們預計，在銷售成長和持續實現成本節約計畫的推動下，本財年剩餘時間和 2025 財年的毛利率將小幅成長。我們將繼續審慎管理 SG&A 支出，重點投資於我們的成長計劃，預計第三季的 SG&A 成本將在 1,700 萬美元至 1,750 萬美元之間。

Due to one-time costs related to the closure of our Dublin facility. We expect to incur restructuring costs in the third quarter between $2.0 million and $2.5 million, primarily related to employee separation costs and the transfer of equipment, and immaterial to other facilities. We are projecting GAAP operating income as a percentage of sales in the range of 2.5% to 3.5% for the third quarter. Excluding one-time charges related to the closure of our Dublin facility, we expect adjusted non-GAAP operating income of 4.5% to 5.5%, insistent with our previously disclosed guidance.

由於關閉都柏林工廠而產生的一次性成本。我們預計第三季將產生 200 萬至 250 萬美元的重組成本，主要與員工離職成本和設備轉移有關，與其他設施無關。我們預計第三季 GAAP 營業收入佔銷售額的百分比在 2.5% 至 3.5% 之間。不包括與關閉都柏林工廠相關的一次性費用，我們預計調整後的非 GAAP 營業收入為 4.5% 至 5.5%，與我們先前揭露的指導一致。

The most significant driver of variability in our forecasted guidance ranges are consumer demand changes, increases to ocean container rates resulting from the disruption in the Red Sea, and competitive pricing conditions, all of which will be largely influenced by external factors.

我們預測指導範圍變化的最重要驅動因素是消費者需求變化、紅海中斷導致的海運貨櫃費率上漲以及競爭性定價條件，所有這些都將在很大程度上受到外部因素的影響。

Regarding our cash flow outlook in the second half of fiscal 2024, we expect improved profit and further inventory reduction to be a meaningful source of cash. Near term priorities for cash remain reducing debt, resourcing, new innovation, and funding modest capital expenditures. Mainly related to cost savings initiatives and continued modernization of our IT systems.

關於我們 2024 財年下半年的現金流前景，我們預期利潤的改善和庫存的進一步減少將成為有意義的現金來源。近期現金優先事項仍然是減少債務、資源配置、新創新以及為適度的資本支出提供資金。主要與成本節約措施和 IT 系統的持續現代化有關。

For the third quarter, we expect capital expenditures to be between $1.0 million and $1.5 million. We expect debt levels at the end of the third quarter to be in the range of $12 million to $17 million. And by the end of fiscal 2024, we expect debt levels in the range of $0 million to $10 million. The effective tax rate for fiscal 2024 is expected to be in the range of 30% to 32%.

我們預計第三季的資本支出將在 100 萬美元至 150 萬美元之間。我們預計第三季末的債務水準將在 1,200 萬美元至 1,700 萬美元之間。到 2024 財年末，我們預期債務水準在 000 萬美元至 1,000 萬美元之間。2024財年的有效稅率預計在30%至32%之間。

Now I'll turn the call back over to Jerry to share his perspectives on our outlook.

現在我將把電話轉回給傑瑞，分享他對我們前景的看法。

Thanks, Mike. While we remain cognizant of macroeconomic factors, which could impact our current outlook, I am optimistic about our ability to continue to gain share and confident we can maintain our profitable growth trajectory, both in the near and long term. We have great momentum and are well positioned to successfully deliver improved earnings and an even stronger balance sheet over the remainder of fiscal year 2024, and into fiscal year 2025.

謝謝，麥克。雖然我們仍然認識到可能影響我們當前前景的宏觀經濟因素，但我對我們繼續獲得份額的能力感到樂觀，並相信我們能夠在短期和長期保持獲利成長軌跡。我們勢頭強勁，並有能力在 2024 財年剩餘時間和 2025 財年成功實現盈利改善和資產負債表更強勁。

With that, we will open the call to your questions. Operator?

這樣，我們將開始回答您的問題。操作員？

(Operator Instruction) Anthony Lebiedzinski, Sidoti and company.

（操作員說明）Anthony Lebiedzinski、Sidoti 和公司。

Yes, good morning and thank you for taking the questions. So first, nice job in a tough environment for sure. So you guys talked about -- a lot about the market share gains in your core business. Just broadly speaking, is it are you doing more business with your existing clients or are you signing up new accounts? I mean, it's just wanted to get a better sense as to where those share gains are coming from.

是的，早上好，感謝您提出問題。所以首先，在艱難的環境中幹得好是肯定的。所以你們談了很多關於你們核心業務的市場佔有率的成長。簡而言之，您是在與現有客戶開展更多業務還是在註冊新帳戶？我的意思是，它只是想更了解這些份額收益的來源。

Anthony, thanks for the question. This is Jerry. Yeah, a lot of our growth is in our core strategic accounts and in our in our core business. Obviously, we're still out signing up new folks at all times, but most of it has come from us going deeper and getting more placements with our core accounts.

安東尼，謝謝你的提問。這是傑瑞。是的，我們的許多成長都來自於我們的核心策略客戶和我們的核心業務。顯然，我們仍然一直在招募新人，但其中大部分來自我們更深入的工作，並透過我們的核心帳戶獲得更多的展示位置。

That's very helpful. So the unit volume increase certainly is even more impressive than your total sales gains. So I guess in terms of your guidance going forward, how should we think about the split between unit volumes versus pricing?

這非常有幫助。因此，單位銷售的成長肯定比總銷售額的成長更令人印象深刻。因此，我想根據您未來的指導，我們應該如何考慮單位數量與定價之間的差異？

Yeah, I think. Anthony, it's Derek. Going forward, -- so in the third quarter, as we -- let's break pricing out between the surcharge impact and then just kind of normal pricing. So on the third quarter, there's about $2 million of impact of the ocean freight surcharge elimination. And then that comparison goes away in the fourth quarter from what we are assuming in terms of pricing is status quo likely for the remainder of the calendar year. The only caveat to that is, as you're likely aware ocean freight container rates have gone up substantially. They've actually almost doubled since the beginning of December. So if they stay at that at that rate we will have to consider on certainly, turning back on some type of surcharge mechanism. But all that aside, we would expect that on the majority of the go-forward growth is related to the unit volume and mix and not pricing.

是的，我想。安東尼，是德瑞克。展望未來，在第三季度，我們將在附加費影響和正常定價之間劃分定價。因此，第三季海運費附加費取消的影響約為 200 萬美元。然後，這種比較在第四季度就消失了，與我們對日曆年剩餘時間的定價現狀的假設不同。唯一需要注意的是，您可能知道海運貨櫃費率已大幅上漲。自 12 月初以來，它們實際上幾乎翻了一番。因此，如果他們保持在這個水平，我們將不得不考慮，重新啟用某種類型的附加費機制。但除此之外，我們預期未來成長的大部分與單位數量和組合有關，而不是與定價有關。

Understood. Yes. And Thanks, Derek. And I was going to ask about the ocean freight costs. So those have gone up certainly from the bottom here on. Okay. But at this point, you have not passed along any higher surcharges because of the Red Sea conflict, so. Okay, understood. All right.

明白了。是的。謝謝，德里克。我想問一下海運費用。所以這些肯定是從底部開始上升的。好的。但目前，你們還沒有因為紅海衝突而徵收更高的附加費，所以。好的，明白了。好的。

And then I guess just wanted to dig in a little bit deeper in terms of the gross margin improvement. Obviously, very strong year over year. Maybe if you could just parse out maybe go over the puts and takes as to what drove that. And I know you talked about some cost savings initiatives obviously you have a fixed cost leverage. Is there as well. So maybe if you could just go over some of the details behind the gross margin improvement and your confidence level about being able to sustain that?

然後我想只是想更深入地了解毛利率的改善。顯然，逐年強勁。也許如果你能解析出來，也許可以回顧一下看跌期權並了解是什麼推動了這一點。我知道您談到了一些成本節約舉措，顯然您有固定的成本槓桿。也有嗎。那麼，也許您可以回顧一下毛利率改善背後的一些細節以及您對能夠維持這一水平的信心水平嗎？

Anthony, this is Mike. Yes, I think as Derek, highlighted that, we have four key drivers of the gross margin improvement. One, cost savings. So we've taken some actions to reduce structural costs in the prior year. We did we took a distribution center offline, which lowered our structural cost. In addition, on the cost savings side, we have some pretty strong operations team that are executing sales initiatives on both in our sourcing, manufacturing and then also in our logistics and distribution network. We feel like those processes are sustainable here going forward.

安東尼，這是麥克。是的，我認為正如德里克所強調的那樣，我們有四個毛利率改善的關鍵驅動因素。一、節約成本。因此，我們在去年採取了一些措施來降低結構性成本。我們確實將配送中心下線，這降低了我們的結構成本。此外，在節省成本方面，我們擁有一些相當強大的營運團隊，他們在採購、製造以及物流和分銷網絡中執行銷售計劃。我們認為這些流程在未來是可持續的。

The second thing Derek mentioned was the introduction of new products and using product lifecycle management to improve profit on a go forward basis. So we're leveraging our cost savings initiatives as well as our value engineering activities to continue to bring out new products. You know that have a better margin profile than the legacy products we have that are we are discontinuing.

德里克提到的第二件事是推出新產品並使用產品生命週期管理來持續提高利潤。因此，我們正在利用成本節約計劃以及價值工程活動來繼續推出新產品。您知道，與我們即將停產的傳統產品相比，它的利潤率更高。

And then the third piece would be the volume leverage as we were real thoughtful about reinvesting back into our structural costs. So that way, we get the leverage on our sales growth initiatives.

第三部分是銷售槓桿，因為我們非常認真地考慮再投資回我們的結構成本。這樣，我們就可以利用我們的銷售成長計​​劃。

And then lastly, we've just been able to be more on strategic around our promotional activities on as it relates to moving -- forward moving inventory and things like that.

最後，我們剛剛能夠圍繞我們的促銷活動制定更多策略，因為它涉及移動 - 向前移動庫存和類似的事情。

The one thing I'll add, Anthony, is I think we know the magnitude of impacts from those four levers will change over time. And I think in the near term, as Mike alluded to operationally, we're executing really well, lots of cost savings from that. And I think the pricing [discipline] has been a bit of really big profit level in the near term.

安東尼，我要補充的一件事是，我認為我們知道這四個槓桿的影響程度會隨著時間的推移而改變。我認為，正如麥克在營運方面提到的那樣，短期內我們的執行情況非常好，因此節省了大量成本。我認為定價[紀律]在短期內已經達到了相當大的利潤水平。

As we look at the quarters ahead and the years ahead, what are going to be the main drivers of gross margin improvement going forward are going to be the product lifecycle management. So as we've explained again, we've raised the hurdle rates on new product as that becomes a larger and larger amount of our portfolio that's going to raise the overall margin profile. And then I think the of the operating leverage from growth. So again, I think the mix of drivers will evolve here over the coming quarters and coming years. But we still feel confident in terms of our ability to continue to expand margins.

當我們展望未來幾季和未來幾年時，未來毛利率改善的主要驅動力將是產品生命週期管理。因此，正如我們再次解釋的那樣，我們提高了新產品的門檻利率，因為新產品在我們的投資組合中的數量越來越大，這將提高整體利潤率。然後我認為成長帶來的營運槓桿。再說一次，我認為驅動因素的組合將在未來幾季和未來幾年內持續發展。但我們仍然對繼續擴大利潤率的能力充滿信心。

Understand. and thanks for that. Thank you for that. And then I guess so, as far as the Dublin, Georgia facility closure here you mentioned that it's going to result in annualized cost savings of the bottom end of that is $4 million. But I noticed that you didn't change your guidance for fiscal '25. Is this just a function of you guys trying to be conservative? Or I'm just wondering if you're going to be reinvesting those savings elsewhere? Or how should we think about that?

理解。並為此表示感謝。謝謝你。然後我想是的，就喬治亞州都柏林工廠的關閉而言，您提到這將導致年化成本節省底端為 400 萬美元。但我注意到你們沒有改變 25 財年的指導方針。這只是你們試圖保守的結果嗎？或者我只是想知道您是否會將這些儲蓄再投資到其他地方？或者說我們該如何思考這個問題？

Anthony, this is Mike. So when we built our fiscal 2025 on guidance ranges, we modelled out several different structural cost change scenarios, and we still feel good about what we've put out there for fiscal 2025 guidance range on both top line as well as from an operating income perspective.

安東尼，這是麥克。因此，當我們根據指導範圍制定 2025 財年指導範圍時，我們模擬了幾種不同的結構性成本變化情景，我們仍然對我們在營收和營業收入方面為 2025 財年指導範圍制定的內容感到滿意看法。

We had several scenarios, even though we had not made decision in terms of closing Dublin, at the time we provided '25 guidance, there was multiple options to drive manufacturing efficiency which, as Mike said, we built into that fiscal year '25 guidance. I think we'll be in a better position here at the end of this fiscal year. Early next to determine if there's potentially additional savings beyond on what we've estimated that would meaningfully change our fiscal year '25 guidance.

我們有幾種情景，儘管我們尚未就關閉都柏林做出決定，但在我們提供“25”指導時，有多種選擇可以提高製造效率，正如邁克所說，我們已將其納入該財年“25 」指導中。我認為到本財年結束時我們將處於更好的位置。接下來儘早確定是否有可能超出我們估計的額外節省，這將有意義地改變我們 25 財年的指導。

Understood. Well, thank you very much and best of luck and I'll pass it onto others.

明白了。嗯，非常感謝您，祝您好運，我會將其傳遞給其他人。

Thanks, Anthony.

謝謝，安東尼。

Thanks, Anthony.

謝謝，安東尼。

Budd Bugatch, Water Tower Research.

巴德·布加奇，水塔研究。

Good morning, Jerry. Good morning, Derek, and congratulations to you, Mike and to you, Derek as well. A couple of questions on the order book if I could. Can you talk a little bit about the quality of orders in terms of the product vitality, how much of that new business? I know you said most of it's coming from existing strategic accounts, but I curious as to what you're seeing in terms of new placements, increased penetration in those accounts, and with the new product versus old product?

早安，傑瑞。早安，德瑞克，恭喜你，麥克，也恭喜你，德瑞克。如果可以的話，請教幾個關於訂單的問題。您能從產品活力方面談談訂單品質嗎？新業務有多少？我知道您說過大部分來自現有的策略客戶，但我很好奇您在新的展示位置、這些客戶的滲透率增加以及新產品與舊產品方面看到了什麼？

Yeah, so at the highest level of bug, a lot of them are getting new placements on the floor. We do have obviously, our Flex and zecliner products are doing very well. And those obviously are also driving a big piece of that.

是的，所以在最高級別的錯誤中，他們中的許多人都在場上獲得了新的位置。顯然，我們的 Flex 和 zecliner 產品表現得非常好。這些顯然也推動了其中很大一部分。

Yeah. The other color that I'll add, but is that on we actually measure internally what our sales, the percentage of our overall sales from new products, we measure new products over the last kind of three years and it that's close to 25%. So we feel good that we are driving a relevant new product that's resonating with the market, and we would expect going forward, that new product would make up at least 25% of our overall sales, if not more going forward.

是的。我要補充的另一種顏色是，我們實際上在內部衡量了我們的銷售額，即新產品占我們總銷售額的百分比，我們衡量了過去三年的新產品，接近 25%。因此，我們感覺很好，因為我們正在推出一款與市場產生共鳴的相關新產品，我們預計未來該新產品將占我們總銷售額的至少 25%，甚至更多。

And Derek that's pretty much a classic definition of product vitality there. So when you look at that on a weighted or a continuing moving average, how has that changed over the last 12 to 18 months?

德瑞克（Derek）這幾乎是產品活力的經典定義。那麼，當你從加權平均線或持續移動平均線來看，你會發現過去 12 到 18 個月發生了怎樣的變化？

It's definitely increased we've been more aggressive around launching new products and that's trajectory will continue.

我們更積極地推出新產品，這肯定有所增加，而且這種趨勢將持續下去。

Okay. So if you looked at it basically on just on a one instead of a one year basis instead of a three would be higher than 25% would be the that weighted -- that moving average -- is that the way to read that answer?

好的。因此，如果您基本上僅以一年而不是一年為基礎來查看它，而不是三年，那麼加權後的移動平均值將高於 25％，這是閱讀該答案的方式嗎？

Well, it's difficult to compare one, I mean, one year versus three year because you've got a lot more product in the three-year. But if you look at that three year percentage what it is today and if you were to rewind and go back 12 months ago, it was lower than the 25%. So again, and we do expect going forward that number to increase throughout time. Does that help?

嗯，我的意思是，很難比較一年和三年，因為三年內你會得到更多的產品。但如果你看看現在的三年百分比，如果你倒回 12 個月前，你會發現它低於 25%。再說一次，我們確實預計這個數字會隨著時間的推移而增加。這樣有幫助嗎？

I think so. I always try to put numbers to things. I know you – the color is qualitative and the numbers are quantitative. And that's definitely a weakness of the analytical community, wanting to be more quantitative and wanting numbers. I'm also curious as to the change in the composition of costs and how to look at maybe something like a contribution margin going forward with taking Dublin out and the facilities left, what's the variable cost structure look like the MLO and D&T components of cost on a normalized basis. And what does the fixed cost component look like?

我想是這樣。我總是嘗試用數字來表示事物。我了解你－顏色是定性的，數字是定量的。這絕對是分析界的弱點，他們想要更多的定量和數字。我也很好奇成本組成的變化，以及如何看待隨著都柏林撤出和留下的設施而產生的邊際貢獻，可變成本結構是什麼樣的，例如成本的 MLO 和 D&T 組成部分在標準化的基礎上。固定成本部分是什麼樣的？

Yeah. It doesn't change, meaning that mean that meaningfully from what we've shared previously with you Budd. But if you look at the composition of the $4 million to $4.5 million savings from Dublin, a little less than $2 million of that is from structural cost reduction, the rest of it is, you know, efficiencies around variable costs.

是的。它不會改變，這意味著我們之前與您分享的內容是有意義的，巴德。但如果你看看都柏林 400 萬至 450 萬美元節省的組成，其中略低於 200 萬美元來自結構性成本削減，其餘部分是圍繞可變成本的效率。

So looking at the =- you had, I think and correct me if I'm wrong, my memory is I'm old and my memory is faulty, but I do believe you told us a couple of years ago that I think that the target gross margin was in the low 20s. We seem to be there. What's that? What's that looked like going forward?

所以，看看你的=-，我認為如果我錯了，請糾正我，我的記憶是我老了，我的記憶有問題，但我確實相信你幾年前告訴我們，我認為目標毛利率在20 多歲以下。我們似乎就在那裡。那是什麼？未來會是什麼樣子？

Yeah, from a gross margin perspective, certainly we're striving or aspiring to 23% or more kind of in the mid long term. And --

是的，從中長期來看，從毛利率的角度來看，我們當然正在努力或渴望達到 23% 或更高。和--

(multiple speakers) there's mid-long term have a two years -- three to five --

（多名發言者）中長期有兩年－三到五年--

Three to five years.

三到五年。

All right. And if I and I do I read the guidance right that's for 25 years, you're saying that you're going to have no debt. Is that the way to read that? I'm just trying to make sure I understood the table.

好的。如果我和我確實閱讀了指導意見，那就是 25 年，你會說你將沒有債務。這是閱讀的方式嗎？我只是想確保我理解了這張桌子。

Yes, that's correct.

對，那是正確的。

So you do want debt down to zero. And once debt to zero, what's the use of cash look like? What's your thought process?

所以你確實希望債務降至零。一旦債務為零，現金有什麼用呢？你的思考過程是怎麼樣的？

Yes, in terms of capital allocation, but also I laid out earlier in the call, you know these pursuits to expand our penetration in new markets. We would look for value-enhancing acquisitions that would accelerate our penetration into one of the one of those three areas, either help us address the needs of younger consumers, expand our product category penetration beyond the living room, or expand our sales distribution beyond the independent retailer.

是的，在資本配置方面，而且我在早期的電話會議中也闡述過，你知道這些追求是為了擴大我們在新市場的滲透率。我們將尋求增值收購，以加速我們對這三個領域之一的滲透，要么幫助我們滿足年輕消費者的需求，要么將我們的產品類別滲透到客廳之外，要么將我們的銷售分佈擴大到家庭以外的領域。獨立零售商。

So the areas that we've kind of talked about in terms of acquisition priorities with the potential outdoor company, a direct to consumer company or a company with a modern, mid-priced lifestyle brand. So we would expect to start to potentially accumulate some cash on the balance sheet and more proactively look for value-enhancing acquisitions.

因此，我們已經討論了潛在戶外公司、直接面向消費者的公司或擁有現代、中等價格生活風格品牌的公司的收購優先事項。因此，我們預計將開始在資產負債表上累積一些現金，並更積極地尋找增值收購。

And that takes you out of manufacturing or into retail or into or out of furniture.

這會讓你離開製造業、進入零售業、進入或退出家具業。

No. We're squarely focused on residential furniture, certainly in the midterm we do not desire to be in retail ourselves on. So this is again, this is leveraging our core competence, and bringing in new capabilities within furniture wholesaling for lack of a better term.

不。我們完全專注於住宅家具，當然在中期我們不希望自己從事零售業務。所以，這又是利用我們的核心能力，並在家具批發領域引入新的能力，因為缺乏更好的術語。

Okay. All right. Thank you very much. Congratulations on the quarter and best of luck for the balance of the fiscal year and beyond then.

好的。好的。非常感謝。恭喜本季度，祝福本財年及以後的財年一切順利。

Thanks, Budd.

謝謝，巴德。

Thanks.

謝謝。

(Operator Instruction) This concludes our question and answer session. I would like to turn the conference back over to Jerry Dittmer for any closing remarks for you.

（操作員說明）我們的問答環節到此結束。我想將會議轉回給傑瑞·迪特默（Jerry Dittmer），讓您發表閉幕詞。

All right. Thank you. In closing, I'd like to thank all our Flexsteel employees for their dedication and outstanding performance during the quarter. And thanks to all of you for participating in today's call. Please contact us with any additional questions, and we look forward to updating you on our next call. Everybody have a great day. Thanks.

好的。謝謝。最後，我要感謝所有 Flexsteel 員工在本季的奉獻精神和出色表現。感謝大家參加今天的電話會議。如有任何其他問題，請聯絡我們，我們期待在下次通話時向您通報最新情況。每個人都有美好的一天。謝謝。

The conference has now concluded and thank you for attending today's presentation. You may now disconnect.

會議現已結束，感謝大家參加今天的演講。您現在可以斷開連線。