Flexsteel Industries - Q3 2024
April 30, 2024
Executive Summary
- Q3 FY2024 delivered 8.2% net sales growth to $107.2M, above prior guidance ($101–$106M), with gross margin expansion to 21.7% and adjusted operating margin of 5.2%; GAAP EPS was $0.33 and adjusted EPS $0.67.
- Orders rose 12.3% YoY to $111.5M with backlog at $61.5M, supporting sustained momentum into Q4 FY2024 and FY2025.
- Q4 guidance: sales maintained ($107–$112M); GAAP operating margin lowered to 3.5–4.3% (non‑cash equity award revaluation); adjusted operating margin raised at the low end to 5.2–6.0%; FY2025 guidance reiterated.
- Strategic drivers: robust new product cadence (Charisma brand, Flex modular expansion, Zecliner sleep solutions), cost savings (Dublin, GA closure), and pricing discipline; e‑commerce softness persisted, while brick‑and‑mortar outperformed.
What Went Well and What Went Wrong
What Went Well
- Exceeded sales guidance and expanded margins: “We delivered strong net sales of $107.2 million…which exceeded our sales guidance…Excluding ~$1.5M freight surcharge impact, growth…was impressive at 9.9%”.
- Sequential margin improvement and cost execution: “Adjusted operating margin was a healthy 5.2%…strong, sequential margin improvement versus the prior quarter” driven by efficiency, cost savings, and portfolio management.
- Product and market expansion traction: “We showed the biggest lineup of new products…activating almost 90% of all the new products shown…Charisma brand launches; Flex collection expanded; Zecliner POS boosting sales 3x for users”.
What Went Wrong
- E‑commerce demand remained soft: Q3 e‑commerce sales fell 3.6% YoY; management noted double‑digit declines YOY in the channel broader context.
- GAAP margins impacted by restructuring: $2.6M charges tied to Dublin, GA closure lowered GAAP operating margin to 2.8%; adjusted margin reflects underlying improvement.
- Q4 GAAP operating margin lowered due to non‑cash equity award revaluation from CEO transition, partially offset by raised adjusted margin guidance; ocean freight cost increases also cited as a Q4 headwind.
Transcript
Operator (participant)
Please note, this event is being recorded. I would now like to turn the conference over to Mike Ressler, Chief Financial Officer for Flexsteel Industries. Please go ahead.
Mike Ressler (CFO)
Thank you, and welcome to today's call to discuss Flexsteel Industries' third quarter fiscal year 2024 financial results. Our earnings release, which we issued after market close yesterday, April 29th, 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 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. The press release available on the website contain 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 Jerry Dittmer. Jerry?
Jerry Dittmer (CEO)
Good morning, and thank you for joining us today. I would like to start by acknowledging what was in our press release yesterday, that I will be retiring from my role as CEO at the end of fiscal year 2024. I am honored to have served in this role and work alongside an incredible group of hardworking and dedicated individuals here at Flexsteel. I am proud of the foundation we have built and confident in the organization's ability to continue achieving long-term profitable growth. I would also like to congratulate Derek Schmidt, who will assume the role of Chief Executive Officer upon my retirement. Derek is a well accomplished leader, and I am confident in his ability to continue driving results and executing on both our near-term and long-term strategies. With that, I am very pleased to share with you our third quarter fiscal year 2024 results.
While headwinds from macroeconomic challenges persist in our industry, we continue to execute our strategic initiatives and delivered sales growth of 8.2% when compared to the prior year quarter. The increased sales, along with our commitment to operational efficiency and prudent cost savings, drove increased operating income when compared to same quarter the prior year, even with the addition of $2.6 million in restructuring costs related to the closure of our Dublin facility. While we expect the business environment in the near term to remain challenged, our team isn't deterred and remains intensely focused on continuing to profitably grow our business throughout the remainder of fiscal year 2024 and the long term. 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 on what we see ahead.
Derek Schmidt (President)
Thank you, Jerry, and good morning, everyone. First, I'd like to thank Jerry for his invaluable contributions to the company. Since joining Flexsteel almost 5.5 years ago as President and CEO, his leadership has been instrumental in transforming our 130-year-old company. Under his direction, the company has crafted an exciting vision focused solely on the residential furniture market, has strengthened talent and improved culture, and has accelerated investments in innovation and customer experience to drive long-term growth. Recently, Flexsteel was named by Newsweek as one of the most trustworthy companies in America, which is a true testament to Jerry's leadership. On a personal level, I'm also deeply grateful for Jerry's coaching, mentorship, and support over the many years we've worked together. He has established a foundation and trajectory for the company to continue to thrive for many years to come. Thank you, Jerry.
Turning back to the business, like Jerry, I am very pleased with our third quarter results. We are competing well, gaining share, and growing the business in a challenging industry environment, where many industry participants continue to report double-digit year-over-year declines. The investments we've made in innovation, new product development, and customer experience enhancements are all paying off, and our strategies to pursue growth in new markets are working, and we see it in our results. We grew our top line by 8.2% in the fiscal third quarter, continuing the strong momentum from the second quarter, when we grew sales by 7.5%. As was noted in the earnings press release, when excluding the $1.5 million impact from the prior year's ocean freight surcharge elimination-...
Sales growth related to unit volume and product mix was a robust 9.9% in the quarter, further reinforcing our strong sales execution. While we expect sluggish industry conditions to persist for the next 6-12 months, we remain confident in our ability to continue our growth into the fourth quarter of fiscal 2024 and into fiscal year 2025, from both continued share gains in our core business and increasing momentum in our market expansion initiatives. Part of our confidence in maintaining our growth momentum stems from our success at the recent High Point Market a few weeks ago. While overall market attendance was solid and up 1% versus prior year's market, the number of customer appointments in the Flexsteel showroom was impressive and increased by 29% versus prior year's market.
A clear indication that our customers are leaning into Flexsteel as a preferred partner. In addition, we showed the biggest lineup of new products in my four years with Flexsteel, 36 new groups and 16 line extensions. When compared with recent markets, that lineup represented almost a 40% increase in new product introductions. Most importantly, based on positive customer feedback and commitments, we are activating almost 90% of all the new products shown at market, which is an exceptional success rate. A good portion of the new product was squarely focused on our core business, which gives us optimism that we can continue to gain share and modestly grow the core, even with persistently sluggish industry conditions. At the same time, we advanced all our market expansion initiatives at April High Point Market.
First, we launched multiple new collections under our new brand, Charisma, which is intended to reach younger consumers with lower priced, on-trend products. The product was very well received, and we've added both design and engineering talent this year to quickly expand the Charisma offering over the next 18 months. Second, we expanded our Flex collection with new hubs and other accessories to further improve its modularity and appeal to younger consumers. And for our independent retail partners, Flex is now available in custom fabrics produced in four weeks or less. Third, Zecliner, our proprietary sleep chair offering, was expanded with new fabrics and a new Zofa solution, which is effectively two Zecliners connected by a center console.
We continue to invest in powerful POS or point-of-sale materials, to help our retailers tell the differentiated Zecliner store story in store, as our customers who leverage our POS materials experience, on average, a sales lift three times larger than those who don't use it. We are also embarking on national, digital, and print marketing campaigns to broaden consumer awareness of Zecliner and to derive increased demand for our sleep solution to our customer stores. Fourth, we launched a broad set of compelling, on-trend case goods products with superior quality under the Flexsteel brand across bedroom, dining, and occasional. These are large product categories where the company is under-penetrated. We now have the design talent and advantaged supply chain to compete effectively in these categories and gain share.
Fifth, and lastly, we had highly productive business development meetings at market with multiple big box retailers and e-tailers, which included both existing and new potential customers. They value the Flexsteel brand, and we'll continue to pursue opportunities to expand our sales distribution where it is profitable and sustainable long term. While I'm excited about our top line growth and future growth prospects, I'm equally energized by our improved profitability, which is being propelled by four drivers. First, new products with higher margin profiles. We 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 a 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 of 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. The key takeaway is that our strategies are working, and we are growing and gaining share under challenging industry conditions. We must remain aggressive with our investments and pursuit of new growth to continue our positive sales momentum, and we have robust plans to continue growing through both our core markets and expansion into new markets. We are rapidly improving profitability with more gains expected in the fourth quarter of fiscal 2024 and into fiscal 2025. We are generating strong free cash flow and strengthening 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.
The future is bright, and I'm excited about what lies ahead for our organization.
...With that, I'll turn the call over to Mike, who will give you some additional details on the financial performance for the third quarter and the outlook for the fourth quarter of fiscal year 2024.
Mike Ressler (CFO)
Thanks, Derek. For the quarter, net sales were $107.2 million, slightly above our guidance of $101 million-$106 million, provided during our second quarter fiscal 2024 earnings call. We carried our positive growth momentum from Q2 into Q3, and delivered growth in both our core business, as well as growth from our market expansion initiatives. Sales orders for the quarter were $111.5 million, reflecting growth of $12.2 million, or 12.3% compared to the prior year quarter. Our healthy order backlog of $61.5 million at the end of the third quarter, along with strong order trends, give us confidence that we have sustainable growth momentum throughout the rest of fiscal 2024 and into fiscal 2025.
From a profit perspective, the company delivered GAAP operating income of $3.0 million, or 2.8% of sales in the third quarter, in line with our previously disclosed guidance of 2.5%-3.5%. When excluding the $2.6 million in restructuring charges related to the closure of our Dublin, Georgia facility, adjusted operating income was $5.6 million, or 5.2% of net sales. The meaningful increase in our operating income was driven by higher sales and gross margin expansion. Gross margin improved to 21.7% in the quarter, compared to 18.8% in the prior year quarter, a result of our team's relentless focus on cost savings, operational execution, pricing discipline, and product portfolio management.
Selling, general, and administrative expenses decreased to 16.5% of net sales in the quarter, compared to 16.7% of sales in the prior year quarter. The decrease was due to leverage on higher sales, partially offset by investments in our strategic growth initiatives and higher incentive compensation. Moving to the balance sheet and statement of cash flows. We continue to strengthen our balance sheet, ending the quarter with $4.6 million in cash, working capital of $96.2 million, and a balance on our revolving line of credit of $14.2 million. Our inventory optimization initiatives enabled us to reduce inventory by $8.6 million in the quarter, while maintaining exceptional service levels for our customers.
Our increased profit, combined with improved working capital levels, allowed us to pay down our debt by 21% when compared to the fiscal second quarter. Turning to our outlook. The company reiterates its full-year fiscal 2025 guidance. For the fiscal fourth quarter, we reiterate our sales guidance of $107 million-$112 million. We project GAAP operating margin in the range of 3.5%-4.3%, which has been updated to reflect non-cash charges related to the revaluation of equity awards associated with our CEO transition and retirement. We expect adjusted operating margin in the range of 5.2%-6.0% of net sales, reflecting an increase in the low end of our previously disclosed guidance range of 5.0%-6.0%, following our strong Q3 performance.
Looking at gross margin, we expect gross margin in the fourth quarter to land between 21.5% and 22.0% of net sales, with cost savings from the Dublin plant closure of $0.4 million-$0.5 million, offset by higher ocean freight costs. We will continue to prudently manage SG&A spending, with a focus on investing in our growth initiatives, and expect SG&A costs between $17.5 million and $18.0 million for the fourth quarter, excluding restructuring charges and non-recurring stock compensation expense related to the revaluation of equity awards. Most significant drivers of variability in our forecasted guidance ranges are consumer demand changes, supply chain disruptions due to global conflict or political instability, and competitive pricing conditions, all of which will be largely influenced by external factors.
Regarding our cash flow outlook, in the fourth quarter, we expect free cash flow in the range of $5 million-$11 million. Near-term priorities for cash remain reducing debt, resourcing new innovation, and funding modest capital expenditures, mainly related to cost savings projects and business system updates. The fourth quarter, we expect capital expenditures to be between $0.2 million and $0.4 million. We expect debt levels at the end of fiscal 2024 to be in the range of $4 million-$10 million. The effective tax rate for fiscal 2024 is expected to be in the range of 30%-32%. Now, I'll turn the call back over to Jerry to share his perspectives on our outlook.
Jerry Dittmer (CEO)
Thanks. 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. With that, we will open up the call to your questions. Operator?
Operator (participant)
Thank you very much. We will now begin the question-and-answer session. To ask a question, you may press Star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star, then Two. We will pause momentarily to assemble our roster. Today's first question comes from Anthony Lebiedzinski with Sidoti & Company. Please go ahead.
Anthony Lebiedzinski (Senior Equity Analyst)
Good morning, and thank you. So first, congratulations, Derek, on your pending promotion, and congratulations, Jerry, on your pending retirement. So first, I guess, question here, so in terms of your top line, it came in above your guidance, as Mike had alluded to. So I guess first, what drove the outperformance? And then, you know, maybe if you could just share more details as far as growth in your core business versus sales coming from your growth initiatives, like the big box expansion, Zecliner, et cetera.
Jerry Dittmer (CEO)
Yeah. Thanks, Anthony. Thanks for your comments. As for Derek and I also. You know, it's... I'll go first. As you know, our core business is actually performing quite well, and I'll let Mike comment on that. But if you take our growth initiatives, you take our, you know, what Derek talked about, our Charisma, our Flex initiative, our Zecliner, which is our health and wellness initiative, Case Goods, which isn't even hitting the top line yet, per se, our big box and retail-e-tailer initiative, all these things are clicking quite well, and you have to take the pool of all of this together, and it's really encouraging, you know, where the company is going, especially when we see, you know, an almost 10% sales increase. And our belief is that we can continue this, you know, going forward, too.
Mike Ressler (CFO)
Yeah, Anthony, I would just add, so in terms of your question on, you know, how much of the growth is coming from the core versus kind of our initiatives, so of the $8.2 million, over $7 million of that is coming from kind of our growth initiatives, which includes the Flex, Zecliner, and then, like, the strategic account penetration. But there still was over 1% growth in our core market with retail and our—in our existing product categories. So, you know, we are growing in the core, you know, in a challenging market, but we're also getting the benefits of, you know, those growth initiatives.
Anthony Lebiedzinski (Senior Equity Analyst)
Perfect. Okay, that, that's great to hear. And then, just wondering, you know, just sticking to the top line here. So in terms of your sales channels, you, you talked about the sales growing, and outperforming in the brick-and-mortar, versus e-commerce. How do you see that dynamic playing out near term and longer term? Just curious about that, and then whether or not, as far as, you know, how to think about margin profile to those different sales channels. Is there anything different or more or less kind of the same?
Derek Schmidt (President)
Yeah, Anthony, I'll start. This is Derek. So in terms of kind of near term, I mean, we're performing exceptionally well at retail. And so even if you think about some of the items, the growth initiatives that Jerry mentioned, you know, like Zecliner, like Charisma, again, we're having really nice success kind of within our traditional independent retailers, which, you know, as you know, are vitally important to our business. So we believe in the near term, we're gonna continue to build upon that strong momentum within retail. But in the longer term, we've talked about, you know, we want to position our brands everywhere consumers want to buy furniture.
And so longer term, we would continue to expect that we would expand in the big box, e-tail, other sales channels that we believe are relevant long term, for furniture purchasing. In terms of kind of the margin impact of that, we believe over the long term, you know, all these channels should have a similar margin profile. Maybe in the near term, they're a bit different, but longer term, we believe, again, profitability, we should be indifferent between the channel mix.
Anthony Lebiedzinski (Senior Equity Analyst)
Got you. Yeah. Thanks, Derek, for that. Then, so, yeah, you've done a nice job with the improvement of your gross margin, for sure. Can you talk about your confidence level about your ability to further improve on that in fiscal 25 and beyond?
Mike Ressler (CFO)
Anthony, I'll take that one. So yeah, we feel really good about kind of where we're at right now. We've had a lot of success with our cost savings initiatives and kind of transformed kind of our product portfolio, which has much better profit, you know, profiles than what, you know, the legacy products are that, that we've retired. But we feel that we have positive, you know, processes and structure in place that we're gonna be able to continue to maintain and even expand our gross margin, once we start to get the benefit of some higher sales.
Anthony Lebiedzinski (Senior Equity Analyst)
Got you. Okay. And last-
Derek Schmidt (President)
Just to reinforce, Anthony.
Anthony Lebiedzinski (Senior Equity Analyst)
I'm sorry.
Derek Schmidt (President)
I mean, near term, I mean, we talked about the drivers being fourfold, right? The cost savings, the new product portfolio mix, you know, pricing discipline, and then the sales operating leverage. I think on a longer-term basis, we still feel confident that we can expand margins. The drivers will narrow, though, to primarily product mix, higher margins on new product, and then continued sales, operating leverage. So...
Anthony Lebiedzinski (Senior Equity Analyst)
... Mm-hmm. Gotcha. Okay, and then lastly for me, so as you look to pay off your debt by next year, can you talk about, like, how your capital allocation priorities may change? And would that perhaps involve doing any acquisitions?
Mike Ressler (CFO)
Yeah, Anthony. We regularly review, you know, our capital allocation strategy with the board. Near term, you know, we wanna continue to pay down debt, and we'll continue to, you know, make a dividend a priority. But then we've talked about, you know, beginning to accumulate cash for potential value-enhancing acquisitions. You know, but any type of acquisition, it needs to align kinda with our strategy, and it needs to create shareholder value. And if, you know, in the event that we're not able to, you know, identify an investment that creates value, our, you know, our board will look at, you know, methods to return capital to shareholders.
Anthony Lebiedzinski (Senior Equity Analyst)
Got it. Well, thank you very much, and best of luck.
Derek Schmidt (President)
All right. Thanks, Anthony.
Operator (participant)
Thank you. The next question comes from Budd Bugatch with Water Tower Research. Please go ahead.
Budd Bugatch (Senior Research Analyst)
Good morning. Jerry, congratulations on your retirement. I can tell you it's not all that it's cracked up to be. Derek, congratulations to you on your ascension to the leadership role. Congratulations on your performance. After... I do have a few questions. Last quarter, I think, Derek, you said to me that you were striving for 23% Gross Margin, was still your aspiration in the mid to long term, over 3-5 years, and you've made some significant progress to that. My next question goes to, how about the same for SG&A? It looks, you know, at the current level at 16.5%.
The leverage on the increased sales, excluding the restructuring charge, was really just under 20 basis points. What and it looks, therefore, it looks like that most of that's variable. What are we missing here in terms of SG&A? Where are the opportunities?
Derek Schmidt (President)
Yeah, I think in terms of SG&A, long term, we aspire to get SG&A between 15% and 16%. So again, longer term aspiration is an 8% operating income, which in order to get there, is a 23% gross margin and a, you know, an SG&A in that kind of mid-15% kinda range. In terms of current SG&A, I mean, there's two things maybe pushing it up a little bit higher. Number one, you know, we talked about our independent retail channel is doing exceptionally well right now. I mean, we're growing the business. And that does come up with a higher variable SG&A load because of sales commissions, because of co-op to our retailers.
And heavier SG&A, but, you know, it's more than paid for by an attractive kind of gross margin. And then because of our performance is exceeding expectations, we are accruing a higher incentive payout for this year. Longer term, we're gonna continue to prudently invest in our growth initiatives, but we believe our top line will grow faster than SG&A, and we'll continue to see SG&A as a % of sales decline as a result.
Budd Bugatch (Senior Research Analyst)
So I'm still a little bit confused as to where the opportunities are on SG&A. How do you get that to that mid-15 or low 15% range to get to your 8% op margin?
Derek Schmidt (President)
Yeah, but we've taken actions this year that will materially reduce SG&A going into next year. And so again, that's organizational structure and talent. I won't go into the details, but again, those are already actions that have taken place and will be realized in fiscal year 25.
Budd Bugatch (Senior Research Analyst)
So, just to continue to make sure I understand, that's people costs or kinda structural like, you know, structural costs like insurance and rent and stuff like that? Or how do... What's the balance between the two?
Derek Schmidt (President)
Largely people costs.
Budd Bugatch (Senior Research Analyst)
Gotcha. Okay. Looking at the top line, can you give us maybe a little bit more color in terms of some numbers as to how e-com is doing? I saw the differential. I wasn't quite sure that I saw the penetration of your customers who are primarily e-com based, versus your big box guys, the Costcos. What do we look like in terms of that? How do we think about upholstery versus case goods? What's the penetration of the sales line?
Derek Schmidt (President)
I think you're asking two questions. One is, what does the profile look like within a product category mix? And so if you think about, you know, overall from a company perspective, we grew this quarter at 8.2%. If you break it out into categories, and I'll use sourced soft seating was up double digits. Manufactured soft seating was up double digits. Case Goods was down pretty substantially, but we're in the process of resetting that business. As you saw at April High Point Market, we've come up with a very fresh, compelling line of new Case Goods, and so we believe longer term, that's gonna be a growth lever.
But in the near term, it is weighing on the overall portfolio growth. And then e-commerce in our Homestyles brand has been down double digits. And that largely mirrors what we're seeing in the external environment. So we've heard from our large customers, Amazon, Wayfair, that we're competing consistently or better than the categories that we participate in. So the overall message is, you know, the really the core of our business, which is sourcing and manufacturing, soft seating, is doing exceptionally well. And we're gonna continue to invest in that, and that largely will manifest itself in terms of kind of new product introductions as well as new forms of innovation.
On the case goods side, like I said, you saw a really compelling lineup of new product here at High Point Market. And then in terms of the channel mix, you know, Costco continues to grow at a modest pace and is profitable. And then independent retail is doing exceptionally well right now. So, that's kind of the dynamics of what's going on within the business. Is that helpful?
Budd Bugatch (Senior Research Analyst)
It is very helpful. And independent retail, is that primarily same location, same store, same client base, or is there a growth in new clients, new retailers, new dealers, that is accounting for a substantial portion of the growth?
Derek Schmidt (President)
The largest portion of the growth is we're gaining additional placements within existing retailers, especially at what we consider our largest, most critical strategic accounts. So, we believe that from a distribution standpoint, we're fairly well aligned with who's who across the industry. Now, it's just a matter of continuing to gain share, and we're realizing that in terms of additional floor placements within their stores.
Budd Bugatch (Senior Research Analyst)
Are you seeing those floor placements, too? And you talked about the case goods, and that's really critical for case goods is to get it placed on a floor. How do those placements look year-over-year or into your goals?
Derek Schmidt (President)
Yeah, so again, we just came up with a fresh lineup of really good-looking product. We have activated virtually all of that product shown at market, which again, we make the decision what to activate, what and what not to activate based upon retailer feedback and commitments. And so most of that product here has already been. They'll go through their first cuttings. Product will arrive, you know, this fall. So, I mean, that's when we'll start to realize some of the sales there. But feedback was very strong. I mean, basically, we had multiple customers indicate, you know what? Clearly, Flexsteel's back in the Case Goods business. So we're strategically committed to that category.
We're putting talent and resources behind it, and we'll continue to bring forth, I think, a aggressive and compelling new product introduction.
Budd Bugatch (Senior Research Analyst)
Okay. I remember when Flexsteel got into the case goods business. And so you, you're correct, though, it will ride. Typically, we don't see new case goods introductions, particularly with the sourcing situation in the industry, the way it is now, with relying so heavily on overseas sourcing, that gets into the product results until really just about the end of the, by the time we go to market in October, we'll start to-
Derek Schmidt (President)
Right
Budd Bugatch (Senior Research Analyst)
... see that stuff hit the floors in, at that time. Is that the right way to think about it? So we're really looking at a next year kind of impact.
Derek Schmidt (President)
Exactly. Yep.
Budd Bugatch (Senior Research Analyst)
Gotcha. Okay, well, congratulations to you, Derek. I look forward to our continued conversations, and, best wishes to you, Jerry, on, that, on your retirement. I suspect you'll find a lot to do.
Derek Schmidt (President)
Thanks, Bud.
Jerry Dittmer (CEO)
Thanks, Bud.
Operator (participant)
Thank you. The next question is from John Deysher with Pinnacle. Please go ahead.
John Deysher (Research Analyst)
Hi, good morning. Thanks for taking my questions, which, most of which have been answered. Just a couple of minor ones. What was the backlog at the end of the quarter, please?
Mike Ressler (CFO)
The backlog ended at $61.5 million, which was growth over, you know, which was about $6.5 million dollars growth over where it ended at the end of Q2.
John Deysher (Research Analyst)
Yep, solid improvement. What were e-commerce sales this quarter versus a year ago, please?
Derek Schmidt (President)
Yeah, they—we, we don't share absolute numbers, but that, as I indicated in the last, in Bud's kind of question, I mean, they were down double digits. So again, that's reflective of, I think, what we're seeing externally, in that channel.
John Deysher (Research Analyst)
Down double digits from a year ago or from the prior quarter?
Derek Schmidt (President)
No, from year-over-year.
John Deysher (Research Analyst)
Year-over-year, down double digits. Is that correct?
Derek Schmidt (President)
Correct.
John Deysher (Research Analyst)
Thank you.
Operator (participant)
Thank you. This concludes today's question and answer session. I would now like to hand the call back to Jerry Dittmer for any closing remarks.
Jerry Dittmer (CEO)
Thank you. In closing, I want to express my gratitude for the privilege to serve the Flexsteel family. I am proud of our collective successes. I believe the best is yet to come, and with Derek's leadership, he will propel the organization to new heights. I have no doubt that Flexsteel will continue to flourish, thanks to the passion and commitment of all our employees and partners. Everyone, have a great day. Thanks.