Good day. And welcome to the Fourth Quarter Fiscal Year 2024 Earnings Results Conference Call [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mike Ressler, Chief Financial Officer. Please go ahead.

Thank you. And welcome to today's call to discuss Flexsteel Industries’ fourth quarter and fiscal year 2024 financial results. Our earnings release, which we issued after market closed yesterday, Monday, August 19th, is available on the Investor Relations section of our Web site at www.flexsteel.com under News & Events. I'm here today with Derek Schmidt, President and Chief Executive Officer. On today's call, we will provide prepared remarks and we will then 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. Press release available on the Web site contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. And with that, I'll turn the call over to Derek Schmidt. Derek?

Good morning, and thank you for joining us today. I am pleased to share with you our fourth quarter and fiscal year 2024 results. We continued our positive momentum in the fourth quarter, delivering 4.7% sales growth over the prior year period, near the top end of our guidance range. Despite continued weak demand conditions for our industry. Our fourth quarter results represent our third consecutive quarter of mid to high single digit year-over-year growth. I'm confident that our growth strategies are working. We are winning and gaining share and we are working aggressively to accelerate our positive sales momentum going into fiscal year 2025. Our strong execution over the past 12 months resulted in annual sales growth of 4.8%, which we feel is exceptional performance relative to the industry and the many industry participants who realized double digit declines during the same period due to challenging industry dynamics. Our strong performance in fiscal year 2024 not only reflects our team's intense and aggressive focus on growing the business but also the attractive returns from continued investments in innovation, new product development, customer experience and marketing, which are unlocking growth in our core markets and opening doors to new growth in expanded markets with long term potential. At the same time, we continue to improve our profitability. Adjusted operating margin was 5.6% in the fourth quarter up compared to 4% in the prior year quarter, and represents our third consecutive quarter of sequential quarter-over-quarter growth in adjusted operating margin. For fiscal year 2024, we grew our adjusted operating income to $18.3 million or 126% year-over-year improvement. The keys to our consistent profit improvement have been our sales growth, strong operational execution and efficiencies, robust cost savings and disciplined product portfolio management, all of which have strong momentum and will continue…

For fourth quarter, net sales were $110.8 million or growth of 4.7% compared to net sales of $105.8 million in the prior year quarter. As Derek mentioned, this marks our third consecutive quarter of sales growth compared to prior year periods and near the upper end of our guidance range of $107 million to $112 million. Sales orders for the quarter were $108.5 million or 17% above prior year quarter orders of $92.7 million. Sales order backlog at the end of the period was $59.5 million, an increase of $9.8 million or 20% above the prior year ending backlog of $49.7 million. From a profit perspective, the company delivered GAAP operating income of $7.6 million or 6.9% of sales in the fourth quarter. The GAAP operating margin exceeded our guidance range of 3.5% to 4.3%, primarily due to a 1 time gain on the sale of our former manufacturing facility in Starkville, Mississippi of $3.2 million. When adjusted for the impact of certain items, such as the gain on the sale of our Starkville property, as well as CEO transition costs and restructuring costs related to our previously announced Dublin Georgia plant closure, the company delivered adjusted operating income of $6.2 million or 5.6% of sales in the fourth quarter. The 5.6% adjusted operating margin was within our guidance range of 5.2% to 6% and a 160 basis point increase from the prior year quarter. Moving to the balance sheet and statement of cash flows. Company ended the quarter with a cash balance of $4.8 million, working capital of $95 million and a balance on our line of credit of $4.8 million. Increased profit and working capital efficiency allowed us to pay down our debt by another 66% or $9.4 million compared to the fiscal third quarter. Looking forward sales…

Thanks, Mike. While industry headwinds are expected to remain near term, I am confident in our team's ability to deliver exceptional results in fiscal 2025 and believe that our long term growth outlook remains promising. Our team's unwavering commitment to excellence, coupled with the foundational growth investments we've made and will continue to make, have positioned us to successfully drive attractive top line growth and even stronger earnings in fiscal year 2025. In summary, we're excited about the potential of the business in the new fiscal year and the long term growth opportunities for the company. With that, we will open the call to your questions. Operator?

[Operator Instructions] Our first question comes from Anthony Lebiedzinski with Sidoti & Company.

Thank you for taking the questions, and great performance in a tough environment for sure. So first, just wanted to see if you could parse out the growth from the core business versus new channels of distribution, and maybe you could just start with that and I had a couple of other questions as well.

I think, what's encouraging, Anthony, is that our overall growth was driven both by gains in our core business, as well as our strategic growth initiatives, those being the market expansion initiatives that I mentioned earlier. So I think, again, we're executing well. The investments we're making certainly around new product, development and customer experience, I think, are the key drivers in our core business. And then you're familiar with the initiatives that we have to address expanded markets. Things like Zecliner and Flex and Charisma and our big box entries. So again, what I'm really encouraged by is the fact that on both of those fronts we're making good headway and we're growing both aspects of the business.

So great to hear that there's balanced growth from this strategy here. And I guess just looking at the quarter, so the sales trends through retail stores versus sales to e-commerce retailers, there was quite a bit of a divergence there in the quarter. How do you see that shaping up here first quarter and through the balance of fiscal ‘25?

I think on the e-commerce front and being the industry expert, Anthony, this won't come as a surprise. But on the e-commerce front, it's -- the whole industry has been sluggish, but e-commerce has been especially challenging. Where we largely compete on that front is through our ready to assembled home styles business at lower price points. And that part of the market, I think, is significantly more challenging than the rest of the market. I think until we see some of those macro-economic factors like inflation, high interest rates, housing actually start to stabilize, I think that part of the market is going to continue to be pretty choppy. Again, on a positive note, we're doing extremely well on the retail front and I think that's going to continue to be a very positive catalyst for fiscal year ‘25 for our overall growth.

And then my last question here. So as far as from a cost perspective, so I know you mentioned the ocean freight costs and you put in a freight surcharge there. But other than that, I mean, is there anything else to call out from a cost perspective that we should think about?

So that's really kind of the one area in terms of kind of supply chain inflation that we're feeling now. We've implemented surcharges to mitigate that. And so far, we haven't seen a substantial impact to the volume, but we'll continue to monitor that situation quite closely. In terms of other areas of cost within the supply chain, we have wages within our distribution centers. There's a little bit of pressure there as well as within our Mexico operations. We would anticipate in the second half of the year the normal cost adjustment for the labor force down there. But other than that, we haven't been seeing too much on the inflation side.

This concludes our question-and-answer session. I would like to turn the conference back over to Derek Schmidt for any closing remarks.

In closing, I first want to acknowledge the passing of Bud Bugatch this week. As many of you know, Bud was a long time furniture and bedding industry equity analyst, personal friend and admired colleague and a follower Flexsteel and a regular participant on our earnings call. Bud will be deeply missed and may he rest in peace. I also want to thank all of our Flexsteel employees for their dedication and outstanding performance during the fiscal year. I'm also thankful for all of you for participating in today's call. Please contact us if you have any additional questions, and we look forward to updating you on our next call. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.