Flexsteel Industries, Inc.

Good morning and welcome to the Flex Steel Industries fourth quarter and fiscal year 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press store than two. Please note this event is being recorded. I would now like to turn the conference over to Derek Schmidt, Chief Operating Officer and Interim Chief Financial Officer for Flex Steel Industries. Please go ahead.

Thank you and welcome to today's call to discuss Flex Steel Industries' fourth quarter and fiscal year 2023 financial results. Our earnings released which we issued after market closed yesterday, Monday, August 21st, is available on the investor relations section of our website at www.flexsteel.com under news and events. I am here today with Jerry Dittmer, president and chief executive officer. On today's call, we will provide prepared remarks, and then we will open the call to your questions. 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 could cause actual results or outcomes to differ materially 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. 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. The 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. And with that, I will turn the call over to Jerry Dittmer. Jerry?

Good morning, and thank you for joining us today. I am pleased to share with you our fourth quarter and fiscal year 2023 results. We continued our strong momentum in the fourth quarter, delivering sales of $105.8 million, which was within our guidance range and represents sequential quarter over quarter growth of 6.8% compared to the third quarter. While we continue to face market headwinds in the form of pricing pressure and slowing consumer demand, we are executing well and our growth initiatives are adding meaningful revenue to offset these challenges. Our growth initiatives, along with a continued focus on operational efficiency and controlling costs, enabled us to expand our gross margins and deliver operating income for the quarter of $4.2 million or 4%, which was in the upper range of our guidance. While economic uncertainty and market headwinds will remain a challenge in fiscal year 2024, I am encouraged by the positive impact of our strategic priorities and excited to continue our momentum in fiscal year 2024. Looking back on fiscal year 2023, it was a very challenging yet exciting year. Coming off a year in 2022 of record high sales due to post-COVID demand, we were faced with slowing consumer demand, which was compounded by a glut of retail inventory that was ordered to meet expected post-COVID demand but backlogged due to supply chain disruptions. At the same time, the industry experienced pervasive price reductions as many manufacturers and retailers quickly dropped prices in response to lower ocean freight and other cost inputs, forcing others to follow suit. The imbalance between supply and demand further intensified pressure to lower prices in order to remain competitive, and while ocean container rates began to return to normal levels, fuel prices surged. Despite the significant decline in year-over-year sales caused by these challenges, our strong team of dedicated employees identified the obstacles early and executed plans to navigate them, which resulted in higher full-year operating income of $10.5 million compared to $6.6 million in the prior year. It was exciting to see the advancement of our strategic growth initiatives which included expanding our big box distribution channel, launching our Z-Cliner sleep solutions recliner and our Flex contemporary modular furniture solution, and launching the new Charisma brand. The impact of these growth initiatives created sequential quarter-over-quarter sales growth in the second half of the fiscal year, despite the challenges already mentioned. We continue to see near-term challenges due to competitive pricing pressure and a return of demand to pre-pandemic levels amid macroeconomic uncertainty. However, we are maintaining our commitment to our strategic priorities and delivering long-term profitable growth. With that in mind, we will continue to invest pragmatically in growth initiatives to drive sales and focus on operational excellence to drive margin expansion. I'll now turn the call over to Derek to discuss our strategic initiative and financial results, as well as our outlook for Q1 2024. I'll be back at the end of the call with some closing comments on what we see ahead.