Executive Summary

Revenue declined 3.5% year over year to $62.99M, but gross margin expanded 260 bps to 26.8%; operating income turned slightly positive at $0.01M and net loss narrowed to $1.58M ($0.11) from $2.41M ($0.16) in Q1 2024. Bold positives: gross margin expansion and positive operating income.
Cost actions and operating efficiencies drove margin improvement; soft surfaces and premium products outperformed, while hard surface lagged amid tariff uncertainty.
Liquidity strengthened with a new $75M revolving senior credit facility; availability stood at ~$12.0–$12.3M, subject to a $6M minimum excess availability requirement.
Near‑term narrative catalysts: tariff risk prompting industry price increases, continued margin focus, and product initiatives (Step Into Color, TRUCOR/Fabrica wood) that support mix; sequential sales early in Q2 tracked ~10% above Q1 levels despite soft demand.

What Went Well and What Went Wrong

What Went Well

“Despite the lower sales volume, our gross margins in the first quarter were favorable to prior year at $16.9M or 26.8% vs. 24.2%,” driven by cost reductions and operating efficiencies.
Operating income improved to ~$0.01M vs. a loss of $0.86M in Q1 2024; net loss from continuing ops narrowed to $1.58M ($0.11) vs. $2.41M ($0.16).
Strategic progress: successful major trade shows and 25 new carpet styles; hard surface pipeline expanded (TRUCOR PRIME X/WPC, Boardwalk SPC, SPC tile/stone visuals), supporting premium mix and future growth.

What Went Wrong

Net sales fell to $62.99M (−3.5% YoY), with hard surface products trailing amid tariff uncertainty and weak remodeling/housing backdrop (low existing home sales, low consumer confidence).
Selling and administrative expenses slightly above prior year ($16.87M vs. $16.37M) due to higher employee benefit costs and professional fees; interest expense remained elevated at $1.49M.
Working capital intensity increased sequentially: receivables up $4.6M (seasonality), combined accounts payable and accrued expenses up ~$11.0M to replenish inventory ahead of expected Q2 demand.

Financial Results

Metric	Q1 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$65.254	$64.388	$62.990
Gross Profit ($USD Millions)	$15.809	$13.958	$16.902
Gross Margin (%)	24.2%	21.7%	26.8%
Operating Income ($USD Millions)	$(0.857)	$(5.197)	$0.011
Net Income – Continuing Ops ($USD Millions)	$(2.410)	$(6.737)	$(1.582)
Diluted EPS – Continuing Ops ($USD)	$(0.16)	$(0.47)	$(0.11)
Selling & Administrative ($USD Millions)	$16.372	$18.541	$16.874
Interest Expense ($USD Millions)	$1.532	$1.600	$1.493

Results vs consensus (S&P Global):

Metric	Q1 2025 Actual	Q1 2025 Consensus
Revenue ($USD Millions)	$62.990	N/A*
Diluted EPS – Continuing Ops ($USD)	$(0.11)	N/A*
EBITDA ($USD Millions)	N/A in filings	N/A*

*Values retrieved from S&P Global. Consensus data not available for DXYN due to limited coverage.

KPIs and balance sheet/CF:

KPI	Q4 2024	Q1 2025
Cash & Equivalents ($USD Millions)	$0.019	$4.795
Receivables ($USD Millions)	$23.325	$27.940
Inventory ($USD Millions)	$66.852	$66.741
Accounts Payable ($USD Millions)	$14.884	$26.036
Accrued Expenses ($USD Millions)	$15.057	$14.945
Current Portion of LT Debt ($USD Millions)	$53.818	$57.912
Long‑Term Debt, Net ($USD Millions)	$28.530	$26.742
Capex ($USD Millions, quarter)	$2.100 FY; $— Q4 disclosed	$0.074 (quarter)
Revolver Availability ($USD Millions)	~$12.2 (post‑closing)	~$12.0 (subject to $6.0 minimum excess)

Segment breakdown: The company discusses soft surfaces and premium products outperforming hard surfaces, but did not disclose numerical segment revenue or margin details for Q1 2025.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Capital Expenditure	FY 2025	Not specified in prior quarter releases	~$2.5M planned	New/initiated
Cost‑Reduction Plan	FY 2025	“Exceeds $10M” (initiated in 2024 commentary)	Continuing actions with cost focus; plan remains >$10M	Maintained
Inventory Strategy	FY 2025	Reduce to reflect demand	Inventory managed at lower levels; slight sequential down; continued reductions	Maintained
Liquidity/Facility	3‑yr term	New $75M facility closed Feb 2025; availability ~$12.2M	$75M revolver in place; availability ~$12.0M (subject to $6M minimum excess)	Maintained operational detail
Demand Commentary	Q2 2025 (early weeks)	Soft environment into 2025	First 5 weeks Q2: slightly behind YoY, ~10% above Q1 sequentially	Directional update

Note: The company does not provide revenue/EPS guidance ranges; commentary is directional on demand, tariffs, and costs.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024 and Q4 2024)	Current Period (Q1 2025)	Trend
Macro: housing/remodel	Weak demand tied to high rates; existing home sales down; premium mix stronger; expectation for improvement into 2025 as rates fall	Industry still weak; soft surfaces and premium outperform; sequential sales early Q2 ~10% above Q1	Mixed: demand weak, sequential uptick
Tariffs on imports	Watching reciprocal tariffs; ~81% of LVF imported; potential 10% tariff; competitors largely exited China; price increases likely	Uncertainty around announced tariffs; industry players have announced price increases; minimized China exposure; working with suppliers to mitigate	Rising uncertainty; mitigation ongoing
Product initiatives	Step Into Color, Premier Flooring Center, digital tools; extrusion startup supports nylon supply and cost	25 new carpet styles; hard surface launches (PRIME X WPC, Boardwalk SPC, SPC tile/stone visuals); continued simplification/branding	Continued expansion; premium emphasis
Operations/efficiency	Facility consolidation; cost reductions; extrusion operational; inventory reduction plans	Margin improvement from cost reductions/efficiencies; capex light; inventory managed lower while maintaining service	Improving margins; disciplined spend
Financing/liquidity	Refinancing needed; subsequent closing of new $75M facility; availability ~$12.2M	New $75M facility in place; availability ~$12.0M subject to $6M excess	Liquidity secured

Management Commentary

“Our gross margins in the first quarter were favorable to prior year at $16.9M or 26.8%... The improvements are primarily the result of our continued focus on cost reductions and operating efficiencies throughout the Company.” — Daniel K. Frierson, CEO
“Low consumer confidence was further impacted by the uncertainty around the announcement of tariffs… several industry players have already announced price increases.” — Daniel K. Frierson, CEO
“Sales for the first 5 weeks of the second quarter are running slightly behind the year ago period, but sequentially about 10% above the first quarter level.” — Daniel K. Frierson, CEO (Q&A)
“We were pleased to announce closure on a new, three year, $75 million revolving senior credit facility with MidCap Financial… [provides] secured future financing.” — Management
“Selling and administrative expenses were slightly above the prior year at $16.9 million… Interest expense was $1.5 million… Our debt increased by $2.3 million in the first quarter… driven by operating needs.” — Management

Q&A Highlights

Buyback status: Management ceased the stock buyback program in the latter part of last year.
Industry consolidation: Little consolidation among manufacturers/distributors; some churn at smaller retailers in a challenging environment.
Mix dynamics: Premium products outperform across categories; Fabrica brand “done exceptionally well,” consistent with downturn behavior.
Liquidity clarification: Availability ~ $12.3M inclusive of $6M excess availability requirement (i.e., $6M + $6.3M).

Estimates Context

S&P Global consensus coverage for DXYN appears limited; Q1 2025 consensus EPS and revenue were not available, preventing beat/miss analysis versus Street. Actual results: revenue $62.99M, diluted EPS (cont. ops) $(0.11).
EBITDA was discussed operationally but not provided as non‑GAAP guidance in filings or call; Street estimates unavailable.
Implication: Sell‑side models likely need to reflect improved gross margin trajectory, stable interest burden, and modest capex, with continued caution on topline given macro/tariff uncertainty.
Values retrieved from S&P Global.

Key Takeaways for Investors

Margin story improving: Gross margin expanded 260 bps YoY to 26.8% on cost actions and efficiencies; operating income flipped to positive. Focus near‑term on sustainability of margin gains amid weak demand.
Demand backdrop remains soft, but sequential signs are constructive: Early Q2 sales ~10% above Q1 despite YoY softness; monitor weekly trends and tariff pass‑through timing.
Tariff risk is an immediate narrative driver: Industry price increases are being announced; DXYN’s minimized China exposure and supplier coordination mitigate cost pressure, but hard surface categories face greater impact.
Liquidity secured with $75M revolver and ~$12M availability; watch covenant performance and working capital needs as inventory/service levels are balanced against demand.
Mix and product innovation underpin share gains: Premium soft surfaces (Masland/Fabrica) and targeted hard surface launches (TRUCOR, Fabrica wood) support brand strength and pricing.
Cost discipline should continue: Capex planned at ~$2.5M for FY25; ongoing cost‑reduction plan (> $10M) and facility efficiencies support margin resilience.
Actionable: In the absence of Street consensus, frame the trade around margin momentum vs. topline headwinds and tariff developments; catalysts include tangible price pass‑throughs in hard surface, sustained gross margin >26%, and sequential demand stabilization.

Note: The company did not issue formal revenue/EPS guidance. Estimate comparisons rely on S&P Global data; consensus values were not available for DXYN this quarter. Values retrieved from S&P Global.

DIXIE GROUP INC (DXYN)·Q1 2025 Earnings Summary