Flexsteel Industries Lytham Partners Fall 2026 Investor Conference

All right. Hello everyone, and thank you all for continuing to join us throughout the day here at the Lytham Partners Fall 2026 Investor Conference. Again, my name is Robert Blum, managing partner here at Lytham Partners. Up next, Derek Schmidt, Chief Executive Officer, and Michael Ressler, Chief Financial Officer at Flexsteel, will be taking us through the company's slide presentation. As a reminder, the company trades under the ticker symbol FLXS on the Nasdaq. Derek and Michael, thanks so much for participation today. The floor is all yours.

All right. Thank you, Robert. Good day, everyone. I'm Derek Schmidt, President and CEO of Flexsteel Industries. Before we begin our discussion today, we would like to remind you that our dialogue does include forward-looking statements that are subject to risks and uncertainties as outlined in our Safe Harbor statement and SEC filings. We encourage you to certainly review those materials, as our actual results may differ materially from what we discuss today. From an agenda perspective, I will first provide a high level overview of our company and our strategy. Then Mike Ressler, our CFO, will then cover the components of our investment thesis as well as our financial outlook. To start, I would like to first summarize our investment thesis, which is really based upon five elements.

First, I think you will see today that we have got a demonstrated track record of gaining share and feel like we are well positioned to benefit from a potential industry recovery. Second, you will see that we have got a differentiated operating model, and it is really anchored around a deep understanding of the consumer, which drives relevant innovation, which is then brought to market effectively through what we believe is an advantage execution model. I think you will also see that we have successfully driven margin expansion over the past several years, and we feel we have got a clear path to continue that improvement in the years to come. You will also see that we have got a relatively low capital intensity model and a disciplined working capital management, which has enabled us to drive strong, consistent free cash flow generation. Lastly, you will see that we are also disciplined capital allocators.

We allocate capital productively when we can generate returns above our cost capital, and where we have excess cash, I think we have demonstrated that we will return capital effectively to shareholders. Mike will actually dive in a little bit deeper on each of those slides, but wanted to give you an overview. I think this next set of charts clearly outlines in a visual manner what we have talked about. The chart on the left hand with the green bars shows that we have got 11 consecutive quarters of growth. If you were to look at the industry during this same period of time, you will see the majority of these periods were actually negative from an industry perspective. We have gained share. We feel good about our capability to do that going forward.

Growth has slowed here recently, largely due to the uncertainty due to the Iran war, certainly some inflation from higher diesel, from fuel costs, et cetera. We feel good about our growth trajectory going forward. At the same time, you will see the blue bars. Over the last four years, we have meaningfully expanded our operating margins. When you put together the share gains along with that margin expansion, we believe we have driven some attractive shareholder returns. You can see the results in terms of share appreciation over the last year, three years, and certainly we are committed to continuing to put up great results and create value for our shareholders. If you start to think about a company from a high level view, on the left-hand side, you will see our financials. A little less than a half a billion of sales is what we finished last fiscal year.

USD 34 million in adjusted operating income at 7.5% operating margin. We generated meaningful cash, almost USD 50 million in free cash flow. Strong balance sheet. We ended the period with USD 17 million of cash on the balance sheet, no bank debt, and feel good about certainly our financial strength and our ability to continue to navigate what I think in the short term is going to be a difficult industry environment. Although we are only a half a billion in sales and this industry is USD 120 billion plus, we are a top 10 manufacturer. It gives us certainly economies of scale that create an advantage. We are widely distributed throughout the U.S. through roughly 2,700 different storefronts, and we will talk to you about the expansiveness of our sales distribution.

We will also talk about our operating model, and the fact that the way we support our supply chain is a hybrid kind of formula that consists both of our own manufacturing capabilities as well as very strong partners that we source from. In terms of thinking about our business and what it looks like, I am going to share perspectives from three different dimensions.