Good morning ladies and gentlemen and welcome to the La-Z-Boy Fiscal 2022 Second Quarter Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Kathy Liebmann. Ma'am, the floor is yours. Thank you, Matt and good morning everyone. Thank you for joining us to discuss our fiscal 2022 second quarter results. With us this morning are Melinda Whittington, La-Z-Boy’s President and Chief Executive Officer, and Bob Lucian, Chief Financial Officer. Melinda will open and close the call, and Bob will speak to segment performance and the financials midway through. We’ll then open the call to questions. Slides will accompany this presentation and you may view them through our webcast link, which will be available for one year, and a telephone replay of the call will be available for one week beginning this afternoon. Before we begin the presentation, I’d like to remind you that some statements made in today’s call include forward-looking statements about La-Z-Boy’s future performance and other matters. Although we believe these statements to be reasonable, our actual results could differ materially. The most significant risk factors that could affect our future results are described in our annual report on Form 10-K. We encourage you to review those risk factors, as well as other key information detailed in our SEC filings. Also, our earnings release is available under the News and Events tab on the Investor Relations page of our website, and it includes reconciliations of certain non-GAAP measures which are also included as an appendix at the end of our conference call slide deck. With that, I’d like to now turn over the call to Melinda Whittington, La-Z-Boy’s President and Chief Executive Officer. Melinda?

Thanks Kathy and good morning everyone. Yesterday afternoon, following the close of market, we reported our fiscal '22 second quarter results, delivering very strong sales growth, as well as solid margin progress since Q1. We are delivering on plan and controlling the controllables, even in these times of significant widespread global supply chain disruption. Across the La-Z-Boy enterprise we delivered all-time record high sales of $576 million, with sales 29% ahead of the pre-pandemic fiscal '20 second quarter. Our business is much larger today than pre-pandemic and we believe our momentum is sustainable. We are poised to grow on this base of nearly $2.1 billion in trailing 12 months sales. Also, as expected, operating margins improved sequentially, as our delivered sales for the quarter reflected pricing and surcharge actions taken to offset unprecedented rising raw material costs. All in all, we are pleased with the momentum and growth we are experiencing during these challenging times. Looking forward, demand continues to be strong across the enterprise and our backlog remains at all time highs, even as we continue to increase capacity to service our customers and consumers. During Q2 of last year, businesses were just reopening and consumers were resuming furniture purchases. At the time, written same-store sales for the La-Z-Boy Furniture Galleries network were unusually strong, up 34%. Off that base, written same-store sales for the La-Z-Boy Furniture Galleries network decreased 6% in the fiscal '22 second quarter. However, comparing this quarter to the pre-pandemic fiscal '20 second quarter written same-store sales for the La-Z-Boy Furniture Galleries network increased an impressive 26% for a compounded annual growth rate of 12% across the two years. Similarly, while written same-store sales for our company-owned Retail segment decreased 7% versus the unusual prior year period, written sales increased at a compounded annual growth rate of 12% across the last two years. For Joybird, primarily an e-commerce business, it continued its strong growth trajectory, accelerating to write 56% more business this Q2 than in last year's second quarter and delivering an extremely impressive compounded annual growth rate of 40% across the last two years. As we focus on addressing this strong ongoing demand and accumulated backlog, we continue to make strategic investments to increase capacity and improve capabilities, and are producing more units than ever to serve our customers.

Thank you, Melinda and good morning everyone. As a reminder, we present our results on both a GAAP and non-GAAP basis. We believe that non-GAAP presentation better reflects underlying trends and performance of the business. Our fiscal '22 second quarter non-GAAP results exclude a $0.02 per share charge related to purchase accounting for acquisitions in prior periods and a $0.06 per share gain related to our business realignment, primarily due to a sale and leaseback of our facility, which are detailed in our press release and in the tables and the appendix section of our conference call slides. On a consolidated basis, fiscal '22 second quarter sales increased 25% to a record $576 million versus the prior year quarter, and increased sequentially from the fiscal '22 first quarter, reflecting continued strong demand and ongoing capacity increases, as well as the effects of pricing and surcharges. Compared with the pre-pandemic fiscal '20 second quarter, sales were 29% higher for a compounded annual growth rate of about 14% over the last two years. Consolidated GAAP operating income increased $54 million versus the prior year period and non-GAAP operating income increased to $52 million. Consolidated GAAP operating margin was 9.4% and non-GAAP operating margin was 9% up sequentially from the first quarter. GAAP diluted EPS was $0.89 for fiscal '22 second quarter versus $0.75 in the prior year quarter. Non-GAAP diluted EPS was $0.85 in the current year quarter versus $0.82 in last year's quarter. My comments from here will focus on our non-GAAP reporting unless specifically stated otherwise. I will now review our results by segment. Demand for product across all businesses remained strong. Starting with our Wholesale segment, delivered sales for the quarter grew 28% to $439 million compared with the prior year period, and increased 12% sequentially from Q1. Compared with the pre-pandemic fiscal '20 second quarter, sales were 25% higher for a compounded annual growth rate of 12%. Non-GAAP operating margin for the Wholesale segment was 9.1% versus 12.2% in last year's second quarter, primarily reflecting higher raw material and freight costs, start-up costs for new facilities, and labor challenges, partially offset by pricing and surcharges, fixed costs leverage on higher volume, and lower marketing spend as a percentage of sales. All-in we were pleased with the results and the progress made sequentially from the first quarter operating margin of 4.7%. Turning to the Retail segment, for the quarter delivered sales increased 19% to $192 million. Delivered same-store sales increased 17% versus the year ago quarter. Compared with the pre-pandemic fiscal '20 second quarter delivered sales increased 30% for a compounded annual growth rate of 14%. Again, demonstrating the strength of the La-Z-Boy brand, and our Furniture Galleries store system in this environment, as well as ongoing strong execution at the store level with sales metrics positive across the board. Non GAAP operating margin increased to a second quarter record of 12.5% versus 9.4% in the prior year quarter, driven primarily by fixed costs leverage on the higher delivered sales volume, as well as expense management. Sales for Joybird, which are reported in corporate and other increased 37% to $40 million versus the prior year quarter. On a two-year basis, compared with the pre-pandemic fiscal '20 second quarter, delivered sales increased an impressive 93% for a compounded annual growth rate of 39%. Reflecting the momentum Joybird is building in the direct-to-consumer marketplace as we continue to acquire customers and strengthen brand awareness through new digital marketing channels. For the quarter, Joybird increased both its web and in-store traffic, conversion and average ticket. Joybird is sustaining profitability and with a focus on accelerating disproportionate growth we will continue to invest in Joybird marketing to drive broader brand awareness and customer acquisition. Pulling all of this together, consolidated non-GAAP gross margin for the entire company for the fiscal '22 second quarter decreased 500 basis points versus the prior year quarter, primarily driven by significant increases in raw material and freight costs, start-up costs associated with the expansion of our manufacturing capacity, and labor challenges in our wholesale businesses. These items were partially offset by pricing and surcharges in our wholesale business. Consolidated non-GAAP SG&A as a percentage of sales for the quarter decreased 280 basis points, primarily reflecting fixed costs leverage and the higher sales volume, mainly in our Retail segment, as well as lower marketing spend as a percentage of sales. Our effective tax rate on a GAAP basis for the fiscal '22 second quarter was 26.6% versus 26% in the second quarter of fiscal '21. Our effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes. We expect our effective tax rate for the full fiscal '22-year to be between 25.5% and 26.5%. Turning to cash, year-to-date we generated $15 million in cash from operating activities. We ended the period with $297 million in cash and no debt and held $31 million in investments to enhance returns on cash. Year-to-date, we invested $59 million and higher inventory levels to protect against supply chain disruptions and support increased production and delivered sales. We also spent $33 million in capital year-to-date, primarily related to improvements to our retail stores, plant upgrades at our manufacturing distribution facilities, new upholstery manufacturing capacity in Mexico and technology upgrades. As a note, last month we entered into a new five-year $200 million unsecured revolving credit facility, which replaced our $150 million ABL facility. The new facility has a $100 million accordion feature allowing us to expand our borrowing capacity to support future growth. It also provides the option to request to extend the term, beyond five years for two additional periods of one year each. Borrowings under the facility may be used for general corporate purposes and working capital. As of today, we have no borrowing against the facility. Regarding cash return to shareholders, during the quarter, we continued to buy back shares, spending $15 million repurchasing more than 400 thousand shares of stock in the open market, leaving 8.6 million shares in our existing authorized share repurchase program. Year-to-date, we have returned $51 million to shareholders via share repurchase. We also paid $6.6 million in dividends to shareholders in the second quarter, and subsequent to quarter end, demonstrating its confidence in the company's long-term growth prospects, the Board of Directors increased the regular quarterly dividend by 10% to $16.05 per share. As we look to the future, from a capital allocation perspective, over the long-term, we will target to invest roughly half of operating cash flow back into the business via CapEx and M&A, and return the remainder to shareholders via dividends and share repurchases. Before turning the call back to Melinda, let me highlight several important items for the remainder of fiscal 2022. As noted, demand trends are strong across the business and remain significantly higher than pre-pandemic levels. With a high backlog and plans for a continued increase in capacity, as new assembly cells come online, we expect a strong year of shipments. Accordingly, we expect a continued increase in production capacity, particularly in Q4. Raw material and freight costs remain high, and global supply chain disruptions continue. Industry experts predict it will take multiple quarters before we see resolution of the West Coast shipping backups. Electronic chip shortages continue, which impact our power furniture. Across multiple areas, we expect to face continued supply chain disruptions with respect to having all component parts available to finished units and complete orders, particularly for our company owned Retail segment, which tends to disproportionately sell our higher-end products. Given the COVID related shutdown at Vietnam, we expect our casegoods business to experience a significant, temporary decline in sales, and margin in the third quarter, reflecting a delay in shipments, as manufacturing facilities restart there and product gets on the water. Finally, we will continue to monitor the escalating freight environment to determine if further pricing action is needed. Pulling all of this together, we are actively managing supply inputs and recognize that we will likely continue to experience uncertainty and disruption for the foreseeable future, particularly in the third quarter. Quarterly trends will also be impacted by our third and fourth quarters containing 12 and 14 production weeks respectively, compared to 13 production weeks in our second quarter. Recall fiscal 2022 will include 53-weeks of results. Taking all of these factors into consideration, we expect sales and margin in Q3 to be similar to Q2 and expect sales and margin to accelerate in the fourth quarter, to enable consolidated La-Z-Boy results to finish the fiscal year with a full-year, non-GAAP operating margin at or near double-digits. Finally, as we make investments in the business to strengthen the company for the future, including work related to our Century Vision strategy, we expect capital expenditures to be in the range of $75 to $85 million for fiscal '22. Spending will support updating our La-Z-Boy Furniture Galleries stores, updates to our plans and distribution facilities in Neosho, Missouri, new upholstery manufacturing capacity in Mexico, and investments and technology solutions across the organization. And now, I will turn the call back to Melinda.

Thanks Bob. I'm extremely proud of our organization, and our business partners for delivering these strong results in very challenging times. The team is doing a great job navigating the uncertain environment and is setting us up for strong business growth as we move forward, both in the near-term and as we execute our Century Vision. The best is yet to come for La-Z-Boy Incorporated, as we deliver profitable growth and long-term value for all stakeholders. We thank you for your time this morning and I'll turn the call back to Kathy.

Thank you, Melinda. We'll begin the question-and-answer period now. Matt, please review the instructions for getting into the queue to ask questions.

Good morning, everybody. Thank you for taking my questions.

Good morning, Bobby.

I guess first, I wanted to just touch on maybe the last comments about the guide, and it will kind of intertwine with what's going on in Vietnam. It looks like if you kind of do deliveries per week of production, being similar in 3Q sales would imply the production, the weekly delivery stepping-up a little bit, sequentially. So maybe can you just talk about that sightline and the confidence in being able to get the weekly delivered revenue per week of production to step-up a little bit sequentially, and then, update us on what is going on there in Vietnam, understanding different capacity challenges with COVID and shutdowns, but is it opening back up now and good confidence in what's going on there, and all that around them?

Thanks, Bobby. On the sequential growth of our business on a production week basis, we continue to bring online new cells in our Mexico facilities, and continue to work on increasing production on U.S. plants. And despite only having 12 weeks of production in Q3, our expectation is we'll be able to get out the same amount of sales and that's how we've been planning and we've been working against and that's why we're providing those comments. The Vietnam piece is one that we've been watching very, very closely. It's been down since sometime in July, it is now starting to come up that our biggest challenge is the fact that everything that we had ordered from them in July is all pretty much gone. We received that and we're now shipping that out. It's going to take a while to fill up that supply chain and start getting product on the water coming over here. And that's why during Q3, we expect to see some pressure on the casegoods business and on our overall business as it relates to paying for that product, paying for the freight before it comes over and not being able to actually realize the sales until later in the quarter and into Q4.

Okay, and then Bob to that point, I mean, do you find that customers mostly, that's casegoods products usually people are ordering a combination of products. So are you just able to just subset and say, hey look, certain products will be delivered in 10 weeks, certain products are going to be delivered in 16 weeks, because there's that lull in getting the casegoods over from Vietnam? Is that how it's getting handled with the customer?

It's certainly about communication. We also did a pretty good job of getting ahead of some of this, as things were starting to shut down again, investing in some inventory. So we've been able to maybe stave off some of that lull knowing that things were shutting down and be able to provide price a little bit longer than maybe some businesses have been able to. And then get ahead of being able to restart that chain as quickly as possible. And as you said, communicate on timelines, so that people, you know, our goal may be in these crazy times, you can't deliver as quickly as you'd like, but you can at least communicate to what the realities are and deliver on those.

Okay, and then my second question is kind of on the comments of cash flow generation, and 50% back into business and 50% to the shareholders, clearly, investments in inventory, and then the COVID benefit last year impacted the current trailing cash flow from operations. But if we go back before that, and we think about some of the working capital metrics of La-Z-Boy, are those working capital metrics still the right range to use when we think about getting back out into a normal environment? So we look at what that business historically kind of generates on the balance sheet from a cash flow perspective and that's like a good proxy to take forward when you think about your 50/50 split and distribution cash flow.

Yes, Bobby, they are absolutely. The one challenge will be okay, so when is that go back to there, Bob? And that's really a function of what happens with the economy. What happens with consumer demand and those types of things, but yes, over time we will revert back to what you saw before.

Okay, yes, I wasn't going to make you predict when normal was quite yet Bob.

Don't worry, I wasn't going to, can’t even try to.

And then, when did you reference the acquisition in the UK, just maybe any quick comments on the current acquisition environment either for independent galleries or bolt-ons like that UK acquisition?

The UK acquisition was a long-term supplier for our business that became available, presenting a great opportunity to strengthen our supply chain for a significant portion of our international operations. We believe there will be synergies from this acquisition over time. We have also mentioned that when dealers express interest in selling their businesses, and if they align well with our portfolio, we would consider those opportunities. Recently, we announced new stores in Alabama and Tennessee that we will close in Q3, which will help our investment there. Additionally, we will continue to seek more opportunistic items, although non-furniture gallery opportunities may take longer to develop as we work on enhancing our own capabilities to maximize future endeavors.

Thank you so much for answering my questions and best of luck here in the remainder of the calendar year.

Thanks, Bobby.

I appreciate your time.

Hi, good morning, Melinda, Bob and Kathy, and congrats on the strong results here.

Hi, Brad.

I wanted to ask a little bit more about the cadence of the written business. When you compare the cadence of the business on a two-year and three-year basis, it really stands out that this is particularly tough for you. Trends did accelerate on a two and three-year basis. I was hoping you could provide more insight into whether there had been any pull forward of orders into the prior quarter due to price increases or any changes in how promotional you were being because of limited inventory. How should we think about the run rate of the underlying demand and what levers you may be pulling going forward to sustain demand and capitalize on the current environment?

I will begin, and then Bob can chime in. In response to your question about anything unusual in the quarter, I would say no. Overall demand remains extremely strong compared to pre-pandemic levels. When comparing to the previous year, keep in mind that we were effectively shut down, and many of our retailers were as well during Q1, just starting to recover from the worst of the pandemic closures. Consequently, Q2 was disproportionately strong, marking the start of a significant focus on home and nesting. Last year's Q2 experienced a notable increase of around 30%, even 34% for the entire Furniture Galleries network. That could be considered the unusual quarter, reflecting nearly two quarters' worth of demand in this new reality. Moving on to this year, we are pleased that we continue to perform at robust levels and believe we can maintain that momentum.

Sorry, go ahead, Bob.

Just written sales in Q2 in absolute dollars were consistent in Q2 versus Q1. So we didn't see a drop off in consumer demand. Again, it's against a base that was completely distorted due to COVID. And that's why we gave the two-year look of a 12% compounded annual growth rate, which we believe is a very strong indication of a healthy business, a healthy and growing business.

Got it, that's helpful Bob, thank you. And, Melinda question we've asked pretty regularly is just around pricing and how the consumer has responded to the price increases you put through. Can you just give us an update again on kind of how much prices are tracking up for you? And you know what data or analysis you've been able to do to make sure that that's still going to be palatable and we're not going to be seeing material push backs here?

Yes, at this point, since pre-pandemic, with the pricing we took over the summer, we're up like most in our industry up into the high teens in overall pricing. And, there's no doubt there is an elasticity to that. But that pricing is all out there in the market now and again reflected in kind of these written orders that you're seeing today. So thus far, the consumer continues to be interested in investing in their home.

That's really helpful. Thanks so much.

All right. Thanks, Brad.

Good morning and thank you for taking the questions and certainly impressive results for the quarter. Just wondering if you guys could quantify perhaps the costs or the startup costs for the new facilities, how much of a drag was that on the margin?

We're not quite specifically calling out the basis point drag on the margin on that. That's been it's changed and it's morphing over there, over the period as new ones come online and then the old ones get more efficient, et cetera. So our preference right now is not to provide that information.

It will be hard to isolate what that number was honestly.

Okay, that's fine. No worries there. So just curious, so once you have all the manufacturing capacity open, you're about to open another facility in Mexico, I believe in January. So just wondering how much capacity will you have once everything is fully operational? And then I guess the second part of that question is that when demand perhaps normalizes at some point, and what is your ability to flex that down if needed?

By the end of this fiscal year, the final plant will be operational, although it may not yet achieve the efficiency levels we anticipate. We expect to see increases in efficiency in Mexico as our team there becomes more skilled at furniture production. This added capacity will allow us to start addressing our backlog. Currently, despite our efforts to enhance capacity, we are only maintaining our backlog without making significant inroads into it. As a reminder, we are operating in a six to seven-month backlog situation. The capacity we are adding is planned, and once the additional capacity is fully operational later this quarter and into the next quarter, we will be in a position to begin working through our backlog. This will lead to stronger sales than what we are experiencing now. That's why we're forecasting an increase in sales in Q4, which should carry into Q1 and Q2 of the next fiscal year. Regarding what happens when things return to normal, that depends on what "normal" means. Currently, we face a substantial backlog while the market seems to be holding steady rather than declining. We'll need this capacity to continue serving the market. The initiatives we are pursuing as part of Century Vision will help us achieve a higher growth rate across our business. We plan to utilize this capacity to manage that growth. However, if there were to be a decrease in demand, we have the flexibility to adjust by reducing overtime, shifts, and weekend work. We experience regular attrition in our plants due to the nature of the work, which provides us with options to slow production if necessary. Our focus remains on business growth, but our capacity management allows for easier reductions than increases.

It's always been important for our business to remember that this is an artisanal process where the final assembly of furniture is done by hand. This makes it a bit more challenging to assign a per unit capacity since it really depends on the people involved. While you can improve efficiencies and add extra shifts, the emphasis is on the workforce. Additionally, as Bob mentioned, it is generally easier to reduce capacity than to increase it, mainly because you can always utilize natural attrition if necessary.

Got it, okay. And then just as to kind of follow up, as far as the production capacity, I mean, what would you say is your ability to hire and retain workers and whether there's a big difference between U.S. and Mexico?

We have had to be agile, without a doubt. The majority of our manufacturing, which is primarily based in the U.S., is conducted at our largest plants. We have made significant investments in these U.S. plants over the past couple of years, including a complete renovation of our Neosho, Missouri facility. Currently, to expand our capacity to meet demand, we are finding more hiring opportunities in Mexico. As a result, much of the near-term expansion has been driven by our operations in Mexico.

Got it, okay. All right. Well, I think that's all I had. Thank you and best of luck going forward.

Thank you.

Thank you, Anthony.

Thank you. There are no further questions in the queue. I will now hand the conference back to management for closing remarks. Please go ahead. Thank you, everybody for listening to our call today. If you have further questions, please give me a call, I will be available. Have a great day.

Thank you ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.