UFI - Earnings call transcript Q2 2021

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Operator

Good morning, ladies and gentlemen. And welcome to the Second Quarter 2021 Unifi, Inc. Earnings Conference Call. At this time, all participant lines are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. reminder, call a being As Instructions] this is conference recorded. [Operator the now to like would conference to I turn over Mr. your host A.J. Eaker, of President Vice Finance. is floor the Sir, yours.

A.J. Eaker

you, everyone. Thank good and Vince, morning,

today Creaturo, Executive President Eddie call On Executive Financial Vice Al Officer; Craig Executive and Chairman; the and Ingle, is Officer. Chief Chief Carey,

that will advises be in a current and conference on the difficult by presentation outcomes call, Actual results forward-looking are based you in certain guarantees implied can to which may included projections that be Management operates. and from what statements. statements these differ that this call the expectations, or Management During are risks the referencing be within management about forecasted not today’s the and markets is are estimates clicking securities call and/or will federal by performance statements expressed, of predict. webcast statements cautions meaning found unifi.com These statements future materially link. at these that Unifi certain of involve laws.

financial EBITDA, directed XX-K working may You and call SEC such and Unifi’s advised the turn on to disclosures please impact discussed certain with be adjusted adjusted this net results. the filed over XX-Q be that non-GAAP the will on Carey. that as now Also, various Forms these adjusted factors regarding I EPS, to may debt measures, capital are call. Al

Al Carey

will the will a performance And morning. the the fiscal broad and of and this the say then joining Thank then first what let’s I with, everyone you I the be of in you, follow provide we -- QX have brief themes seen the A.J. of thanks Q&A. and details my XXXX. will Eddie with Craig call me we will have in remarks for say and half

quarter recovery was to a So, COVID we this QX step forward. of do, from a have plenty work for very nice positive us, still a saw but was We the quarter as strong impact.

our then better year, below was year. were it expectations, internal and November revenue both December prior slightly revenues was While the prior and than our above

Our a year. year had our perform But upsides areas, normalize But still we particularly even adjusted double and also prior some EBITDA It than a was in we those some after Brazil items, had was from strong. performance versus few significantly very ago. segment. tailwinds better you we

balance inventory improvement, and to levels, details position and Our all shortly. sheet show take through debt of will in a Craig net cash very are you the good continues then that

we look half optimistic. into XXXX, you second the are of as So

recent in comment we certain aren’t cases plants. optimism the a consumption on entirely the or retail how financials. about might the broad our most to I performance. on quarter’s future However, and wanted create the believe that people two good for news we spike the it vaccines positives should But outside in some COVID impact are

of both the to think a these for and strengths that. year positive I then beyond will balance of our impact even the business provide

top place the bottom. leadership have we First, in from right team to

wasn’t the that who remember case. ago about you a of Some us year follow

value knowledge. top we and team well really now from and company our resilience to So are shown performance. significant bottom, beginning this work together time. industry in They to see of We amount leadership COVID brings during the continuity our have of

sustainable out environment that this environmentally for our positive especially feel think coming be consumers, who from and appears mix for to positive young second an up want of to also products customers from trend and consumers, this of shows our pandemic our acceleration do on The momentum on they REPREVE. something I

high to a of was quarter the and ago. XXs move maintained XX% now an has in XX% in trend its the and in REPREVE for mix sales our level last a QX, record year So upward

period, REPREVE story. tags product our in help XX you containing for the significantly. request and and that REPREVE the XX may recycled to affixed have gone We same action customers think. that so they closer, Additionally, getting during up closer the tell ago sustainability hang it’s a to XXXX. And have the than million we compares taking up dates customers for accomplished year goals that know we the tags really hang made These believe last are many tags, hang be months, for million shipped six are environmental that have on third. now things are a our of and our commitments they XXXX These that to

to public is policy, about of going go I that’s society definite or up a sustainability whether megatrend overall, So are the here, coming in pandemic. the from only you talking think, environmental or brands out

QX a I’d nice was some solid So, in momentum. very real with quarter say summary,

experience. like turn companies before announce over experience she’s an and just management in am the her complimentary Red had independent a Board announced I Now, I you the it very CEO our and to to addition Eddie, Emma Board for can company. it brings MarketVigor, are Founder I yesterday. pleased today, set to and with Hat, And has of on PepsiCo, to that she’s delighted that’s Bassett we she’s marketing strategy tell team. of Unifi the our We Directors. director Emma marketing general have extensive of Furniture and background, a skill and Hanesbrands, Battle Emma

let over me Ingle, Eddie turn to CEO. that, So, our with it

Eddie Ingle

and Al, everyone. morning, good Thanks,

results reflection As and our our the both our Al global second initial and of model. and strong mentioned, quarter business presence our of they our employees resilience a expectations are fiscal outperformed XXXX

and is The global our revenues and to levels. adapt our market efficiencies expansion focus for work revenue normal strong REPREVE QX quarter our drivers other business more I am their products, especially results to their Before have improvement gross I and its to possible their without our dedication us XXX-basis-point segments from on Key model XX% contributions. more want many innovative in by occur. quickly pleased to approaching as business, the and margin of QX to customers. speak of quarter, This hard continues dedication the our -- the would of quarter us The opportunities. maintain I been meaningful not put well further cost, increase business place pre-pandemic report pandemic have with the new very positioning and volume three, protocols an thank health Brazilian operations, to continued flexibility in and personally allowed during provided us continued allow were up year-over-year, overview innovative outperformance and on volumes share the of quarter. and to the On beginning components slide for safety across all and second as to the performed capitalize the that we at the normal segments well and geographies. the recovery. in employees we all

interest contribution includes and years. sales, contributed for of to Now opportunities, sales. in multiple quarter. solutions co-branding profits to hard previous despite increase Unifi The sales in so to since REPREVE which represents to and/or best to our XXXX now sustainable a the Fiber fibers. and profitability quarterly our REPREVE challenging the its in This continues net dedication grow consolidated REPREVE’s XX% adoptions XX% continue compared new achieving customer demand a new quarter environment, XX best record June is work team’s and second

four. shown Additional slide details about Fiber REPREVE on sales are

will ongoing our market to be manufacturing sustain efficiencies the pursuing QX organization and the find drive across that results platforms, it’s productivity new short-term, these has in to COVID while clear will our While enabled share hard time crisis the to and opportunities in intact. It’s I we everyone business performance when for the am remain certainly underlying forward arise. our on they assume an current exciting momentum looking company as building long-term,

growth on fiscal our Yarn acquisition Nylon to Lastly, towards Shortly capital quarter portfolio. work the priorities. made balance sheet our strengthening execute after focused we the allowed strategic Products, has allocation ended, Fiber and Inc.’s us of second

strengthen similar was to efforts we important months its in capabilities. transaction, of transaction our size forward prior committed Services, is the this Texturing Nylon the step to and just segments three an to While LLC

excited operations. Fiber our are addition and business to quick process about as We a expect Carolina to this portfolio Yarn North transitions our Madison, customers the seamless integration and and of

with Disney. to with Now we exciting today, starting discuss highlights have our brand several partnership

t-shirts And resin chain REPREVE are through a of launched we had Also, is another an available were shirt Nordstrom. Polo to faces garments. made Disney April at follow our and retail customers ability consumer supply Orlando expansion towels a Unifi and REPREVE Aramark WORKWEAR. story to durable, yarns. operations. relevant the market Parks season, in economy from Orlando signage, circular into holiday collected promptly is REPREVE. online Disney launched on launch has These success displaying the our t-shirts stores, since program at the recent For Turkey work a business their sustainable to has bottles REPREVE XXXX and developed a with It looking and online with for made point-of-sale. continues of plastic Parks their process towel into

represents market that Hugo some momentum Hugo in in remarks, sustained and extension sizeable relationships in able REPREVE how sustainability these And and Al Another a product brands leading the clients footwear activewear strengthen humbled offer. transparent, tags of also Then hang on is the partners we the international with in brands. opportunities Boss of recognize home XXX% goods with strong Hilfiger sampling -- to small we REPREVE sustainable increased both has REPREVE REPREVE and impressive driving is items for example the an inspired are space. activity This quality, with among brands their This launched placements. REPREVE excited expand of and his Hilfiger athletic shipments and is and utilizing in swim customers. brands. list there further are have the co-branding. Boss, at that a continues to is Tommy seeing increase build ingredient retailers helps we and the provide leverage to global This co-branded growth Tommy mentioned representing story

some strong the more the production to before for second details. benefited five to Sales on raw signs through this And sales the quarter up quarter. efficiencies benefited and Now, new and mix. pricing meaningfully optimistic comments slides demonstrate Volumes sales position first and and we continues you improving quarter, material region to you provide and our were segment. dominated in recovery customer segment and from and The position. Asia normalize -- the primarily of ability were high to quarter. results we by can and demands levels. have continue The unfulfilled which first and from by dynamics were stability. record to to specific supply six performance market from on along going better where capitalize a able Polyester further of we unique segment the a segment the the I a on our The is performance Craig discuss operating remain margin second were mix, existing the aided a will driven to conditions with forward Similar sales was our pull-through mix use strong presentation imports. programs Brazil, maintain margins during had a market capture takes business as and you compared volumes and richer level second quarter of seen, pre-pandemic chain

forecasting given profit moderation we recently. some The share Brazilian abilities market of it’s strong to Now are best the have they ahead, continues to our expand been work the how captured. in to their looking maintain team and solid region, growth the of local

Craig. increase Nylon business. sales it for sales segments the and I the for a sign encouraging this is to being sequential our year-over-year, turn segment performance modestly With will expectations Despite more down over that, the level. quarter Lastly, met positive affecting balanced in

Craig Creaturo

Thank the you, the navigate of I strong our just fiscal liquidity Eddie, cash changes rest second good our results XXXX am second Like quarter recovery and team, highlighted of morning, pleased and to and very this with from with position. Eddie fiscal everyone. for the first ability completed which to prior has quarter the provide the commentary the few as the the year. quarter normal pandemic. compared of to completed to impacts period just same quarters past quarter the will our not our been in this on of I due meaningful year, the

again. meaningful that the seven we manner the of shown a presentation eight in businesses such pleased recovered on significant So that slide the information and are are

Let’s seven. mix down year raw prior Polyester a richer than sales were lower a decrease but comparison on slide the just X.X% in sales segment start sales. with costs X.X% drove were volumes material by generate to offset partially net and prices a

of currency the currency against while impacted raw some the translation significant generating nearly to by U.S. overall weakening due the while higher an For the to sales X.X%, dollar. the the foreign sales, foreign negatively XX.X% translation strong volumes lower segment of in lower dollar. the net after decrease impacted real X.X% costs growth segment, Brazil renminbi levels pricing Asia pricing, due helped volumes, material outperformed of offset U.S. unfavorability favorable considering net from strengthening against the to the

stability, Nylon with Lastly, signs of prior just X.X% following segment below showed year, mix the revenues changes. sales the

gross lead eight, a margin the raw richer the to slide Asian margin. efficiencies, from again also exhibited from gross segment pricing sales dollars as rich sales and more to gross mix, completed Polyester segment year overview improvements market outperformance gross The improvement, with the both of by an XX.X%. on favorable Moving sales level year-over-year benefited material The sales XX.X%. during The exhibited a profit doubled a from achieving prior and strong its and profit on benefited as margin the material improvements share segment Brazil with raw higher of Nylon of driving mix along gaining sourcing a segment a quarter. achieving and to gross percentage just profit operational every manufacturing and segment pricing gross The increase. environment,

million overall, Unifi as percentage gross was profit of XXX-basis-point gross a margin For in $XX.X increase sales. and

the XXXX you and to improvements first significant income As gross down and compared income year-over-year the extensive in XXXX. Slide net fiscal generating move pretax the strong XX and EPS, our comparisons first with statement, of of half to show our driving expectations, increases. remain further operating consistent profit that income half nine fiscal SG&A led for income, the sales

analysis. providing We but they available these those specific for use prepared you are on in not are remarks, during slides commentary

an sheet and challenged debt of is strong year by continue to positions leverage us as pandemic. demonstrated Further Moving capital health our global slide on have around With availability on components flows. XX. our cash sheet allowed on metric, in commitment by zero the had generating borrowings $XX XXXX. maintaining of on and balance XX, diligence million great equity Unifi’s to debt to to our December which ABL working progress improvement the balance net has revolver, during financial the our we

opportunity to We -- America slides occur debt Eddie will in closing repurchases new the had now presentation call back technology further in reduction Americas. turn have and to the appropriate balanced we allocation share acquisitions allocate for take will the last to capital two some a I comments. through the and at and can capital of to final us times. continue With approach, make texturing the

Eddie Ingle

the brief far Indonesia, presentation the to India short, agencies I taking on In the the relevant calendar now XX normalization of recent investigations XXXX, Craig. this trade some the have there’s half slide and over provide expectations will will with of to that of investigation a our Thailand back petition U.S. of for reasonable indication around the you, Thank textured for turn slide fiscal began activity after and presentation determined will these anti-dumping XXXX. they surge majority updates into developments. as of first XX effect round thus to Consistent turn calendar a spanned material China and of Vietnam. from polyester I to respective investigations we expect context provide to We Malaysia, update injury. an occur for occur. imports, and imports of we provide yarn the XXXX

our to You business to quarters, will have specific that able information outlook able the returning section the of more been visibility than past of earnings as from to normal the we couple for note more include provide levels. is we release were

to able that outlook still disclosures in before our we pandemic. are the an forward not looking near we specificity return However, future. to of are the to past But to gave the we outlook offer similar

the the to uncertainty into of persist demand half fiscal risk associated global the pandemic expect second with COVID-XX and year. We

progress will of XXXX, anticipate expectation sales fiscal such, as quarter. we incremental our a the during to the supports performance trends levels improve strong on pre-pandemic in continue to and quarter sequential net returning March Second basis,

encouraged expected are of the adjusted business in our EBITDA long-term. expect products REPREVE factors. and recent to value-added is by momentum, few We double-digit expectation over That the includes trends pre third XXXX. recent sustained by low fiscal continue a improve pandemic other percentage and this With quarter to trends

albeit Nylon from the impact record segments. in the and to the material petroleum raw Chinese of holiday due to Brazil the the Continued strong pressures tempered in increases impacts the by XXXX profits Asia domestic for Year Unfavorable gross sale New Unfavorable December of performance for shutdown seasonal cost and quarter. segments segments Polyester recent prices.

$XX upside and during given our of Lastly, $XX from million the has economic amounts related conditions. To second our to it should model the annual range believe during remains that the quarter, reflects to unique second momentum the quarter spend our the acquisitions. first in and CapEx quarter potential our with performance from million, I expectation excluding strong conclude, consistent business fall normal the

focus want sustainable to and themselves balance management organic using financial continue and growth to with Going repositioning business expand we to brand initiatives maintaining the that leaders forward, cost through on strategic drive position long-term sheets will innovating to and our strong our strong improvements gross opportunities products, position margin partnering diligent global M&A. drive to growth,

will line you. We the open for up Thank questions. now

Operator

your [Operator ahead. sir. Daniel question the CJS you, go Instructions] from Thank first Securities. have from line Please You Moore of

Daniel Moore

for Good the Thanks Thank you. morning, questions. gentlemen. taking

Al Carey

Dan. morning, Good

Eddie Ingle

Dan. morning, Good

Daniel Moore

maybe of kind in macro into the you what tipping you change months perhaps over I opportunities administration as have just little into your of co-branding want -- REPREVE, the for the seen of perspective, bit. point about rate aided talked by and from heading to for maybe nine ‘XX? with maybe being Do last change product numbers a and the you the dig a then see and start recent kind COVID do and

Eddie Ingle

Yeah.

the we mindsets it and of a they the communicate sustainability of consumers. moving COVID that call, call. last e-commerce brands are pandemic said their consumer As as there out there there’s to I to how the megatrend helps the acquire how megatrend that believe Certainly, also in a the is and to people has said do approaching, on we affected goods,

as environment far to and they the a today. it trying in difference. what But the the consumer the see as for they makes climate do we an So administration, do I don’t are general COVID of situation I is think think being indication can

are good are sustainable REPREVE for reflection products a good of environment. that definitely It’s moving people it’s that shipments and us. So towards

Al Carey

of products say environmental and add around would And would little a was I trajectory was there very And big in to have market. this. some appeared from of that so customers. customers that backwards chaos and first there that on hit, today, brands definite that much to heavily the and would you their merchants sustainable go change environmental crisis we if in the their when buyers Dan, and sustainability I the it focused COVID bit, all doing our are the talk because August, big maybe say

this I but continue to have they are companies most that also think, up. timeframe XXXX commitments because think believe on and coming they hit where right, going it’s up the big have going to is speeds they some I

Daniel Moore

Super helpful.

dig and bit, international, will import say, that I quarter be changes, maybe nature. would maybe raw some as a may There of the improvement -- look material Brazil, specifically, two? really is we the obviously to out next less much start sustainable then that pandemic competition with that in the And -- which a or permanent were, be walk exceptional. wouldn’t margin of lack I how the Okay. timing was into the us what is the through of gross due little just maybe factors they

Eddie Ingle

for are great Eddie. last I been react the down jump to got they mean, answering have They This a prepared in pandemic. They the were I -- to Brazil the years. has there. question. XX preparing team is start and will

but And their of last they If material year, XX% place. panic. of you QX back to kept lost they they go raw inventory in their didn’t revenues,

the and And back the supply Asia so when markets. the from they drops, business came imports able were to

We price that manage make sure effectively. are to also we points the able

and and revenue is, needs were thing there, growth and the is -- the market gross expect that to we market it had view we didn’t quarter had because a the into was do levels margin. that that We optimize was a certainly So taper of -- to the product. we that it’s from off available total There in able and coming gross the translate in materials record the panic, great gross grown both profitability inventory profit, we quarters. in team we point margin both But share. have profit in

expect that share we maintain quarters. market We go the next through few to as

Al Carey

excellent down And by operational to some do them Dan, market share. of I ability as the the competition little gross that I that would our We that they have that front a we were the in margin performance, Brazil put caught -- and can just think before gain we that’s for bit why I add QX recover, caught in think manage XXs. and that, team opportunities will really some of high the ways excellent expectations in from are in the again, go

You our that XX%-ish. was gross will in recall QX margin about

it something back QX, there we completed very how this think is in they just performed proud nice toward will trend got quarter? some that of are again but we we So and definitely that gains have

Daniel Moore

for maybe puts it’s sustainable Excellent. like? and talk more anything for And of looking gross But margins years, we takes, about quarter. and similar that Polyester, one for margin in -- and the looks just at excess level multiple seen are a recognizing the what have again question

Eddie Ingle

Yeah.

the have took lot first I in that. force months during a the in us to that out not of us downturn April, the The think the business we the and pandemic cost last few to June Polyester had might courage XX business take do out allowed months, really pandemic. we the May, our costs before over in to

and of level maintained come then has our have back. cost since lower We business consistently a

our our have cost the and So managing same products. increased have better also because been expand we to able of been a we time we at doing margins mix have job

the that the in doing the few our line got and has a have have the raw the to stable allowed with been re-maximize we So have we six and mix have the fact months that Polyester healthier, years much that’s over relative for in costs much materials what roughly managed product we to been gross us segment. more profit fact attractive last

Daniel Moore

Maybe opportunistic. maybe Excellent. of your in one just and expect Do Nylon the space about as obviously the kind pipeline more and for alluded we just talk prepared small That’s of you. remarks. more generally? to the last you acquisition me on it’s just M&A Thank in

Eddie Ingle

Well, we the that are said. two as those -- did, acquisitions small they we

to We seen current slightly to the by in expect get if EBITDA $X our increase higher somewhere $X revenue, million quarter million fourth have margins that in we business.

that to So there help in the capabilities we if us do coming new as opportunities mergers are our on that expect acquisitions, that out far with small But that dock existing to in quarters. to easy and can as our integrate infrastructure. there are fit

certainly those opportunities specific but this We present nothing do to opportunities. time. out see out on We talk some for looking at are there,

Daniel Moore

more. All Thanks. time to right. Well, a great thank a you and and look lot forward hearing for your quarter on congrats

Eddie Ingle

Thanks.

Al Carey

Thank you.

Operator

you. Thank

go of next You McGinnis line from question ahead. Company. the Please have from your Chris & Sidoti

Chris McGinnis

taking questions and… and for Thanks great quarter morning. congrats Good my on a

Al Carey

morning. Good

Chris McGinnis

… really impressive.

Al Carey

you. Thank

Chris McGinnis

Good morning. obviously on just goals to strong about the a changing how maybe customer it which just how maybe closer talk and little landscape’s you this relationships? teams Can early with you bit just competitive -- very landscape? up. Could will just talk Can the picking maybe sustainability, You touch are be the on maybe is that in XXXX about the developing you little that bit? a appears that’s

Eddie Ingle

achieve many publicly by in the buy know XXX% our are to are we have years, -- their plus they transparent, example, want recycled XX it’s mentioned, it something unique they brand have that we for many going about a Al People declared like to that when not Adidas, get of we building and apparel companies that products as content REPREVE fact company. these It’s last XXXX. over there’s they are that. traded been the So for trouble traceable, global.

from. here the we team the get So U.S. products be wherever to the wants company to can globally the firm from in developed moved and then product particular that sourcing

competitors are in offer that we and I think So that. traceability certain We and trust as that and do unique is this have. competitive open not transparency

So very place. think special in we I are a

in in We through significant these to that are Asia expect XXXX, growth seeing growth what they we because have do. continue Asia, declared want the and brands

have get the find them. they where inputs really company deliver to those those and to solid right opportunities brands inputs to right and Now the to

Chris McGinnis

capacity just you in thoughts this vein, begins REPREVE guess, from Can now, And you just talk about the and around a -- the growth? to that continues whether just put you for are position chain? that execute Just Great. to similar your out change as built expansion and your I could pick how that on supply up, just to as grow here. does

Eddie Ingle

Yeah.

So we in so…… asset an light do model, have Asia

Chris McGinnis

Yeah.

Eddie Ingle

in lot So in to as to to demand Central in able the market be meet are by the run expect enough years. American meet and pace we driven that where We here aggressively being growth the around don’t Asia, as we be increased capabilities assets will coming and not issues -- into a of U.S. any we place able have to enough might it we forecasting the in growth the the REPREVE while is the

potentially have But virgin expect And CapEx to year is very market then to much meet next do some of this now a Brazil meet right have some we in increasing demand demand. market. lastly capability enough fiscal to Now this in still region. we that

interest in our to supply using is that we now an seeing meet chain. the be supply chain sustainability consumers in Although, there we Asian are that will and indications

Chris McGinnis

for that Thanks color. Great.

can issue, similar impact. size a the if and trade on what of on you it? the way wondering Just on I can was little to had on I’d appreciate any you the just or on just last Is do bit China more kind India color provide touch it impact put question that is Is that ‘XX. and impact there and you a the think

Eddie Ingle

duties put after Well, the those in China imports India and were from place.

because we were the event, and not from XX% pick we think for the some about There practically was as to for China as XXX% roughly -- those India up and duties from but did about I much imports zero. volume countries that dropped about two that get four Indonesia, is With we the countries these duties April. will hoped question anti-dumping Vietnam we anti-dumping in about they and this and but whether now it’s know had the be Malaysia, Thailand. will not much talked will that how

So of the it’s up are that for meaningful it’s are we quite to pick in the how optimistic company certainly, going But much going to volume we be I that. think exactly to because hard U.S. predict

Chris McGinnis

Great. Thanks my good in quarter a for congrats questions. Great. on QX. Again luck taking and

Eddie Ingle

you. Thank

Al Carey

Thanks, Chris.

Operator

Thank you.

Rodriguez question line Marco another have of You Stonegate Capital. from from the

open. now Your line is

Marco Rodriguez

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

Al Carey

Hi, Marco.

Eddie Ingle

Hi, Marco.

Marco Rodriguez

a drill little the more question we on you surrounding little can amounts taken detail the could if gross specific sustainability out I about the bit more that in talk operating was follow-up maybe margins the of Hi. of might if any perhaps quantify efficiencies. if dollar a that wondering been that? you terms a and I into prior kind wondering about was bit can and have that of

Craig Creaturo

I like think, -- to the we operations. Marco, we completed just did things the of the quarter, feel manufacturing our we throughout integrity right protect

felt Eddie like of kind protocol We during did we manufacturing the We still locations those manufacturing of to adding of could able we people. same up the more were higher a all running. mentioned, are the and proud volume. safety be that and accomplish like we level very, time as we things And feel a of at few throughput to quarter very keep and

workforce. really skilled bit To do credit to to efficiencies, So us try to productivity caught a trained and it’s hard quantify and again fair little a that. for it, really amount we our of

a bit a on was, especially had run other higher thing of so well, QX. going U.S. I here favorable a that just the products bit that the the that remarks the generating as were little think on because of the bit types mix touched we profitability sales little from was the during in prepared in more plants we through

those really main the and So of taken we been like are careful that have the very items we in costs business. the being are think out feel I

we a in of Probably, volumes pretty trying the to for the is will remainder we back believe projection add area. and need really maybe being to are the leap year. bit we the some overall, organization start of prudent of add kind costs and sales can. But levels costs As that some we to fiscal not we into we SG&A of those that especially additional into as increase best higher let catch the little costs our will the

to want Eddie, you do that? add So, to

Eddie Ingle

No.

it’s think I okay.

Craig Creaturo

Okay.

Marco Rodriguez

very helpful. That’s Great.

impact? can so kind the out in you terms price ask items gross the most of mix, the them impacted that you the brought can least impact and in the to saw the question from surrounding efficiency, of Maybe if in that, rank maybe operating you quarter quarter, if I And another the positively instability. that margins

Al Carey

you will I of question. a bit a broader answer. maybe Good give

noted. you we think we through see and the see that going to to the each continuing reaching percentage not only pooling that quarter I XX% REPREVE are sustainability the up

whether protection, I REPREVE be it products be continues store an can area that not we the of think to other for seeing the enhanced UV management, think also there. wanting features also only be whether features add really I the the are on of sustainable it a that emphasis whether we additional but plus it’s nature and lot customers, features, of our

products the REPRIVE those there think and of -- that’s customers. our that something value types to I adding and the else,

foreseeable I continues and think grow that to content the in well. as the through that way we to be that expect of future again

Marco Rodriguez

it. kind the in will. sustainability if another more just you to if clothing, I bring question can up then Got to And movement trend of run the

clothing can bit kind talk kind mind with had you nature pandemic there when have something comments of conversations of the customers sort have very you -- would just of are helpful? really thoughts comparison coincided brought that? be the the about ability out perhaps about of that will last some quite assume have in which You as to easily world surrounding if seems by shift the that starts little more of shopping of it that’s today, of call, I would change come currently? to consumer, mind kind I a bit and for indicated your with with as more us And to a these bit where shift sort this become of down if walk an to you well is before thinking you have will, just your you a can through more a and online wondering may if shopping. you how any But little online your expectations, in Thanks. some permanent if maybe if online was surge the normalized? are sustainable a if

Eddie Ingle

certainly up Well, was that the don’t the around And And an think purchases I accelerated the June, -- don’t sustainability impact of megatrend and lockdowns that’s megatrend people online, as we people Eddie. -- in as our a our And with experienced we this where onto to environment. is this the saw to on buying in change. increase going biggest as April, e-commerce, I their retail online, business pandemic is into opened when think talked also business. but about we the May, first

think environment. money shop make bit right move products, retail, at want extra and online, retail thing to towards but people the that buying a maybe whether sustainable yes pay will for little continue the for step people we to at and I it’s the to more believe or themselves do

I to we think it’s REPREVE. why retailers the a are their and going the a way story in seeing growth for brand with sustainable like tags. It’s co-brands to not this is the brands and hang and change so

meet trends, trends and excuse the earlier, So brands big we well me, commitments macro and a bode help said their the I them macro fit are like and the think Wal-Mart, they sweet goals especially I us trusted. and sustainable our and have, in in the future transparence that’s, there to Target way for like that spot retailers, are retailers really retailers traceable future

Al Carey

Marco, is Al. this

and and think on am to the sell story happened normally comments. business lucky. you pandemic how our or in the here product we experience couple by to what’s years From from will where close And a e-commerce with Eddie’s materials. you seconds small consumer, they to us that in have, recyclable hang store retail I to at a stay it maybe think I at I years. I our that athleisure, for especially And time go at apparel expect or today. to the retailers pretty least add backwards accelerated five really if the much of tag to, speaking is do are a get the But is consumer has mix the look e-commerce to more wanted will Just but e-commerce amount,

However, see order, call get an trend. chance sustainability a they when online and we they very up a to our read story about positive

being e-commerce see for a us an I So positive. ad

Marco Rodriguez

to just And some as your can debt of you with about maybe balance here it. decisions the historical of environment. sheet, the then question the levels thinking and just perspective if have to from cash prudent here, you your Obviously, Got But balance capital that sheet balance start excess kind issued sheet us last versus and quick of on that be can given discuss maybe we kept a just talking norm. just you allocation if a to walk just there levels things about be cash in would helpful? normalize terms the

Craig Creaturo

Yeah.

in are we Again, on revolver. a borrowed nothing think Marco. I have good a spot, we

We our doing are quarterly payments. debt term

have technically capital And still we the consideration that higher of are We that that of repurchase the last in think open I ready share noticeably the QX acquisitions an two some of here. a We for we embark QX we capital the upon did program from like quarters. feel gives spending. Board. I deployed guess have level beginning and to

be spending done first we fiscal million. in of guidance from million In year flow range million the note the so half have our $XX cash today only And the for year. for the $X our full capital for we to a will $XX noted that

equipment strategically talked So regions, specifically touched calls. that next-generation an that are we we and have in know that’s in all the some to U.S. we going and and prior most before really equipment also in for important very but where area in on invest Brazil equipment, texturing

going things think we think do done overall activities attention capital I think ready more be to I But to up bit as thoughtful balanced ramp But this again future approach spending a dollars little bit more little areas. will and get taking that be have and are So to that’s we capital there. and kind a to I well. we of allocation some spending good on we continue think we we in will M&A are certain

Marco Rodriguez

Understood. Thank very you appreciate guys much. your I time.

Al Carey

Marco. Thank you,

Eddie Ingle

Marco. Thanks,

Operator

you. Thank

your the Gus ahead. You from from of next Richard have question Please Northland. line go

Gus Richard

for wearing taking to bit, great a just and your the we Thanks the I jammies Yes. congratulations during down customers quarter. mix a given our are want locked and little talk about on question day. all

been mix we on? does start continue again, your positive have pandemic returns world would during the out impact the you shifts or seeing you there normal going As mix and to that expect appreciated. do any have help the to on that something Any approaching be

Eddie Ingle

home, see their we things be love them few as a to coming the expect There’s back positive look, had go of in that think expect will summer pop homeschooling. to worry we we the Yeah. the They haven’t quarters and a school. kids been to one they and sometime so that that kids about is back-to-school, clothing in and have at how

think casual. the general work as general especially as So I U.S. where far the more society becoming in is the

there’s workplace. leisure the every other days. still has casual towards many acceptable becoming in being things become some like more think at be will Fridays while wear Casual a happened, think will have I they I megatrend more casual the people be when to Nylon. suited that and kind material towards get office, of more the they is Polyester formal, And back wearing

we think we normal more the their I -- the So to people to is new attire. don’t as going benefit back go as office becomes to world world returns we it think us just in and to as the say, casual continue as

Gus Richard

sustainable sustainable, the just much rates is versus growing faster. materials two? And grow products then are How non-sustainable? growth the quicker of clearly will What is non-sustainable versus it. Got relative sustainable

Eddie Ingle

level, at depending rate a year on the a X% rate at of X% macro just growth. to the Well, of population production and -- grows very Polyester Polyester GDP at

virgin, ecosystem the faster a upside. it’s grow materials will at huge the recycled small there’s a part a such entire that the is right and that now, of So rate than

growth to hard put certainly number the going than exactly, So the on -- it’s be higher to a rate. but it’s normal much it virgin

Craig as we thing also up plus we other we mentioned have the to but and REPREVE, that, innovation. have earlier, I like is the that’s I’d think REPREVE bring that

resonates we through sell with So that these I performance more people products. brands are the and them the helps sustainability giving and attributes really think

with So water-wind is sustainability selling selling also being call sustainability what moisture brand. term, sustainability, water with anti-microbial, make sustainability a arm, we management no to we are are we with used the

lots there’s think just sustainability. opportunity of I beyond other

Al Carey

And add then, Eddie’s just comments. I to Gus, would

REPREVE our for us, to For products been say our want Unifi non-sustainable or a specifically, versus trade shout actions past why maybe speak or of recent kind limited. if have to you the virgin in the to bit

more the years. market those than been and had a we leveled several we give participate to So field have us over to past able the will that playing actions chance in really feel

virgin So complimentary would doing thing on say that’s sustainability just playing a of kind to for leveling field the I are material. is what we the

those two think together. kind I go of

Gus Richard

Got it. helpful. Thank Very you.

Operator

follow-up you. have question a ahead. go Daniel Please [Operator Instructions] Thank from Moore. You

Daniel Moore

QX. the Thank bit as you a digging little year Al, again. the outlook into ball your but of we just of for crystal think remainder question, about

is Chinese or early get of it’s seasonality typical at early kind other or sequential about into and this to both just topline visibility? talk do New some expectation a EBITDA from little Year, the improvement point of maybe Thanks. that these emerge little continued QX Just it we as be you expect things,

Al Carey

Yeah. Dan, good question.

more started with bit think so you kind that a were we give what to got and of assuming I glad have we I your QX we to specifics question and have am QX, I because to relative visibility the am on caught are saying able QX.

Daniel Moore

Indeed.

Al Carey

-- QX strong quarter that usually -- good that for QX is that us. And for a

and the probably I needed know you catching are going lot QX. things are on give I in more say absence to it I grow than a think cautious bit But would our that, we is of much geographies, still for usually expecting Year and you I remind you but Chinese QX all we for we pretty a do think a Asia of couple like expect which items segments will very not that Unifi. little give QX business to you is happen on than to too that know specifics all have feel other strong we good in quarter to of are I and soften a more probably New that. specifics we

Daniel Moore

Thank I why not. sure it. anything asked horizon color for should thinking be are again. that, on want make just the that we indeed you the there to we That’s isn’t perhaps I of

Al Carey

Sure.

Operator

you. showing management Thank time. like now I I the would no further at the team. this am to turn conference questions back to

A.J. Eaker

further questions Thanks, would everyone thank to for we like Vince. no With participating today.

great of have focus sustainability. a We have drive on the we wave a growing long-term growth platform here and to

We are looking forward to partnering of create a future. with sustainable all to you more

March fiscal all Thank Eastern joining of the next April Our earnings you the third call. for close a XX, market X:XX a.m. the XXXX, morning at release conference the call XX, Time. quarter scheduled XXXX, after is today’s ending next tentatively for for Wednesday, Thursday, XX, to follow with April XXXX

Operator

wonderful concludes this gentlemen, your you and Thank have day. conference. a and participation Ladies for today’s

disconnect. all may You

Unifi (UFI) 28 Jan 212021 Q2 Earnings call transcript