UFI - Earnings call 2 2024

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Operator

Good morning and thank you for attending Unifi's Second Quarter Fiscal 2024 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] Speakers for today's call include Al Carey, Executive Chairman; Eddie Ingle, Chief Executive Officer; A.J. Eaker, Chief Financial Officer.

During this call, management will be referencing a webcast presentation that can be found in the Investor Relations section of unifi.com. Page non-GAAP that measures. with cautionary deck yourself and statements familiarize X slide of for Please I to Al now Carey. will turn the call over Al?

Albert Carey

going got. call believe to you allow about the to would Eddie a you morning, for bit company earnings about last a to Thank and and speak not that quarter little that and long-term this that right this A.J. we're thing through potential just X call. performance as I'm QX results, actions our the this it's only taking about begin telling Good to reach like the morning. the in say that us during by The are you. take few call it we've where be to some we our about is I'd you I'd we improve everyone, going joining minutes. thanks those of told

high category experience We the to the chain. continue in the softness apparel that supply and inventory in levels

However, in should our fiscal there through go sales, gradual balance XXXX. the pickup a as we that continue and signs of are of

the for next X So, months.

pre-COVID to solid industry sales, appear The the back be levels. to year pretty a of inventories much apparel has end had

taking we're crisis, last our volumes. going heard business our the the gone North don't the the We operational and months, we've category the and and the had if exactly looked significant and affecting very at underway. with into through associated the those, and done, those and it's issues and for that to XX what macro it's not we we a take America. organizational have found But our -- efficiencies deal our XX that's costs Now apparel in already to actions. are difficult last are as we think weaknesses XX right that that we've as a you to. waste we months, turn did been dive actually period. out structure opportunities and deep we've And We've some with are in costs with We the before, for processes can improving growth

QX. Now large dependent those some to savings profitability American category plan those on a improve improvement apparel take those and of in less priorities is in penetrating end-use both our Eddie's other More REPREVE portion profitability operations, on this reallocate the of our from product the and to invest intention to to innovation come for by further to become markets. November/December. of North of began progress end and actions on these effort completed trickling into most few profitability taken and A.J.'s in the comments, and front, We QX improvement the likely. this in be already were that far. this the probably substantial we've made QX, by actions of good so most should actions but on around We've headcount plan productivity taken A

the coming, QX, that will expect fiscal in a reflected be perhaps. mostly new results bit into but We even little the year

in as other organization Eddie to with add, a a and roles be in plans of responsible which gives plans, execution for - result along - of young for will that thing us like responsible developing we've several company I'd these be had now the they lot will those confidence after. we're these all going what were elevated our the leaders One They key of changes. to in

me our CEO, through let over you will right this. Ingle, take all details on to now, Eddie it who So turn the of

Edmund Ingle

good Al, Thanks, morning, and everyone.

to that apparel which quarter second in the to fiscal Al line mentioned, ongoing see our but As the talk supply and challenges we inventory chains. about results, expectations, in with its by the going were negatively were industry I'm continue impacted destocking

XXXX. will remain year normalization in we that calendar begin see However, demand optimistic to we

and costs are actions are we mentioned, profit strengthen quarter. in business these The control our meaningful operations of improvement efficiency of the impact improve company's as underlying the beginning actions take second to in show results. gross and performance order in Al initial the position we delivered As improve of continuing to in to to the proactive performance

an of you quarter, If to raw of essentially average lower period. due during overview sales to offset primarily by sales were in compared Higher to material in lower flat $XXX.X costs. turn the XXXX. million million the recorded the Slide second X for net second largely volumes We really $XXX.X prices quarter fiscal

performance in be Americas, of from we prior the end, our in expect business same the Americas mentioned as decisions though of primary our how competitors while nearing the the the saw attributed one below In the sales should this segment, region, to its stabilized for our of volume, calendar in to historical averages. levels customers. the benefit apparel global exits be share in has modest take position that optimal improvements apparel XXXX performance, mainly maintaining inventory And we've and meet remain ability we the we make in the us weakness underlying strategic at Our in continued to allowing more demand. destocking to In calls. time, needs can continue to

imports. we the In competitive dynamics with Brazil, by results face were we Though to our continue continue demand, positively volumes impacted mix. Asia, a sales diverse our apparel continued and to increased from challenges offset profit performance. pricing the rich while and gross see were In by sales strong improved partially unfavorable

have proactive and we operations: our expense continue evaluate performance structure business. efficiencies generate to across improve to identifying been to opportunities the and in Going

to provide those apparel and $XX announced the improvement plan the reducing optimizing calendar environment, We moving the put enhance anticipated position taking over to we have current further recovery benefit stronger This to actions a in which is in profitability a in expected night. profitability in plan us last new cumulative XXXX. In million demand will initiatives forward, year we profitability. leverage ongoing of aimed bolstered through recognition last spent the operations at proactive, costs strategic

and as quarter in the a on reduction this rate and March first XXXX. in a resources, by our of plan completed XXXX. $X.X in U.S. anticipate across The headcounts And administrative be costs, will allowed expense approximately primarily million has This variable our lower focused to this basis significantly ending part both reducing us resetting realigning run our production a we actions beginning These on in expenses fiscal result, quarter per functions. operating

business sales we've in these the with this processes, of are taken for difficult transformation aimed forward. our that very to While of growth plan and profile execution efficiencies. boost management enhancing and and second includes to confident believe The is plan at a realigning due foundation will of came Unifi a gross operating our substantial process. inventory profitability innovation. decisions, is approach streamlining the lead We our And we of margins robust going part changes future expanding to the resources the improvement

the apparel and essential of capabilities will us innovation segments. the our penetration will remains and unlocking market but is which on our markets completed, gross throughout of we not margin-enhancing to a Al million business explore core capitalize plan phase invest opportunities. potential. into This just bolster the at Innovation mentioned, market profits year. our new areas Once and revenue expect as to in new see to rest additional also that of the and increase profits, enable to our had strategy will our in savings, these reinvestment strategically leveraging improvement in We traditional $X our calendar annual cost promise growth

beyond opportunities. to emerging develop and well innovative brand as continue new expand will the of of apparel and we platform, categories, believe new make products significant REPREVE We resources our growth our as in both which allocate investments established areas in have that particularly to our initiatives,

with executive these and appointments to we innovation leadership these our I'm further In very proud drive our across is make has a leadership leaders onto announcements have made tandem and Unifi, promotion as operating growth a number the our team of well team realignment, our development deserved. been team at to priority focus on for of and strategic

So, these decisions maximize forward. growth profitability series profile and leadership to of going to and streamline our team realign operations important

to and have and financial our the separated driver the finance a abilities candidate. a strategy over financial clearly best of We the A.J.'s few been his sophisticated processes last brings our knowledge as with throughout is business has of team, and These of the expertise process skill our coupled are and robust operation sets, acumen. fortunate He accounting search him years. critical leader

President Next, brand had our throughout Meredith Boyd Chief Product our appointed development, and was XXXX, Vice Meredith has initiatives. customer direct innovation business Officer. where roles to and operations, she has joined she integral development appointed in product Unifi Executive and in industry our the where -- manufacturing sales and senior been progressively organization, held interactions, including

our product Innovation. of international Her Meredith the the served has For REPREVE Vice technologies. Technology been pivotal and has and X to that as value-added expansion years, Sustainability, the in capacity brand contributions and of President our growth last Senior

plant We business success will innovation, impact and international proven technology, all leverage Meredith's marketing lead having and development. by her

We expect change critical to to growth promote initiatives. this global organizational our be

for of back Unifi and President Brian in Inc. to on XXXX take Moore the at the Vice and in started President XXXXs. career of Brian Executive early Unifi his will Manufacturing, moved role Asia

footprint. are our recently, the Brian years, extensive of XX Most private Direct sales and and President Vice he the Brian's XXXX. experience equity has invaluable as world, about leadership to Unifi returning successful of operations served For Senior additional the Sales in beginning at and gained to Americas experience Operations. in

team to promoted President market our Corporate has their to affairs the over is of the and consume the and of Vice strategy, growth to tenure company. leader. leadership Sigmon, Greg government Counsel our Secretary, and leadership a each Executive sustainability central like continue each management has leadership functions. also I'd and board, This and refreshed to been more behalf commitment General responsibilities, On congratulate including to strategic innovation our will and exemplified with

discuss Slide X to REPREVE to marketing. and Turning

by percentage sales. of XX% current challenges second a in a and of marking quarter, adversely net China general the and REPREVE During as apparel have been a sequential economic of REPREVE represented year-over-year sales, downturn production. in the affected increase quarter Sales

improvement once We position REPREVE REPREVE in the demand. fibers expect sees a remain conditions leader industry. apparel as fully demand in a sales brands We economic confident for the sustainable and rebound in and China in

special results. on up the I to and our at Open. once Peter Now front, those debut a that are REPREVE such the we brand, over an into REPREVE. events, now open will WM pass a apparel covered presence Millar be nationally team convert of flagship part upcoming again marketing Phoenix to at event. discuss a Millar elevating this to like to bottles remains and honored week, at Peter the edition the have financial Phoenix call year's A.J. XXXX collected will last brand to on collection focus thrilled the WM with water will collaboration The our announce that WM events exciting We're

A.J. Eaker

Thank Eddie. you,

this achievements and with Meredith. promotions successful chart Brian, a the leaders, path to recognize environment. results to than more to global forward including like despite for scheduled seasonal Greg weak look I'd and QX, Unifi. a continue shutdowns, and working results, and better a our we of quarter these closely we were financial the team, discuss the as esteemed entire and I Before in profitable I demand usual operate our The

to the slides, the includes to next and we costs, addition million provision joint $X.X following recorded cover related the which financial results recognize of several the severance operating restructuring In million market, that million in $X.X for of of in unprofitable $X.X our to $X.X we'll our venture on customer an U.S. bad impacts: difficulties dissolution debt million costs. unfavorable

raw continue brand Asia REPREVE seasonally in selling programs, although strong sales Chinese net have provided year-over-year. growth year, and helping key strong was The Consolidated segment has profile from sales Volume second for in continues the Brazil current we the segment, the on fiscal a were and year-over-year prices. customer the maintain in several X, stabilize impact Slide and to weakness. pricing primarily flat imports decline on as gross material sales which each impacted margin quarter. is a started profit volume to comparison from which pricing, to with net net pressure costs lower for remained by offset Beginning to the the

material Slide profitability. improved overall on cost perspective, provided costs for lower profit X, gross management efforts the a From and raw variable

unfavorably However, Americas, weak with combined the to the and gross seasonally continued in lower apparel demand profit. selling volume price environment pressures the Brazil impact in

normal volume Brazil level sales to and X the quarter a holiday for generally were the domestic volume Slide of segments. the seasonally we first Sales impacted to achieved holidays. despite flat, for similar the Turning sequential a although dollars impact compared in period by comparison, Americas

balance make quarter I'll sheet Slide back and on X now increase before for the gross profit an a to cost closing a Brazil segments. his displays management from variable Eddie in Americas on commentary. Slide and basis comments sequential the liquidity few our X benefited as call passing position

and continued of earlier, the on During from as from to by increased $X.X continued capital prior quarter due working focus to environment. net the weak quarter, million management $X.X Eddie controls, million you've debt year-end, needs previous business we primarily and from capital the the and and the demand heard cost working the

Our CapEx anticipated in in of demand levels first $X quarter await recovery million second the those spend mirrored the we lifted. apparel are as outflows the before in quarter industry

will You began March additional pause pause we XX-month we extended XXXX, recall XXXX, on purchases December this machinery in for texturing and an that in XX our an beginning months.

I actions back by earlier. apparel through now the positioned profitable industry call remain business the slides presentation its make Eddie some is to for take will especially when the outlined the normalize, recent confident last and to that our and to chains and the well Al comments. opportunities continue We of Eddie final supply realizing pass growth with us

Edmund Ingle

Thank like strategic ongoing turning you, and to the industry, necessary adapt XX we'll challenges the the current to environment attention the in your actions Unifi position A.J. apparel to to and long-term turn I'd Slide over to continue for have Despite session. taken, success. the our before Q&A also we take, to call

place the enhancing opportunities steadfast remains and innovation volume the in capture to expand on are in we XXXX. focus innovative our driving we positioned opportunity beyond We first horizon, Americas, the a as portion believe we this has and and expect to REPREVE profitability meaningful significant apparel growth Our market share, half a this and and initiatives. efficiency, gain on global move through of of taken already calendar particularly our -- seizing the

resources a growth would our and in of team, horizon the strength going industry anticipated position alignment us forward. new the leadership apparel appointments recovery strategic the to combined The in and the on put of with

in implement deliver potential, stakeholders. we to growth to continue are and our in invest we As our value to measures confident cost-saving high with areas ability

Now turning to the last Slide XX.

is net between Our fiscal million and the million follows: sales demonstrate adjusted between the and of and capital $X quarter million, tax forecast third million, $X for as continued $X between is to million minus $XXX $XXX million, $X XXXX volatility. EBITDA effective rate expected and expenditures

deliver XXXX, a sequential look ahead, we in that are and we expect we quarterly improvement our cautiously revenue As remain rebound and optimistic earnings calendar markets positioned on to to basis.

and in as confident stakeholders. and our partner strategy questions. We the for choice across we are a for right customers have open very brands the we believe to globe, of you. With drive our long-term will to the position Thank now we value that, short- line and

Operator

first Lebiedzinski comes Our Sidoti. from of Anthony Instructions] line [Operator the from question

Anthony Lebiedzinski

and So, their on first, others to A.J. promotions. congratulations well-deserved

Kind maybe, lower the is, So, pricing I But, guys think better in just And wanted your quarter that. get and -- the could to of know if should as longer-term X you perspective? I about a happened dynamics. what's specific volume on question a I to second and issues from of about understanding how you a third talked the first little volume a basis? guidance quarter. pricing we be in more costs guess, bit these what just impacting embedded material

Edmund Ingle

polyester but on Brazil, sell the is the we Yes, pricing, say, -- to seek I'll very QX obviously for to impacted by call in as the I'm in find of Americas holiday by and Thanks are in thanks China. both us Brazil. take opportunities Anthony. environment significantly strong and for call, Christmas to that, they we the the the And impacted as the today. mentioned outside seeing Chinese of seasonality joining volumes, pleased textured was we

in significantly do in we to QX it not any So, from but Brazil, volumes and stronger see to expecting get somewhat, improve expect quarter to get pricing seasonal and the continue through the will impact. as move improve away we're we

pricing needs about And come and getting to as will the the been coming in we that pressure, excited by structure. in happen slowly very still the as mentioned call. we're of some the the very went should that have I And materials an We've that improve. end -- Asia, reacting the moved be have the of raw have competitor this of what price stable. in should we dynamic been process, see -- In driven raw which did have about. the out customers back of region really volumes am quarter, because all will by In the are as be of it's of a excited down. QX inventories and destocking QX which materials under primarily to we brands average the been on but we our improved eliminated Pricing the the U.S., the really mix, volumes end through improvement our

So, quarter our but through to improved going certainly margins are more importantly, slightly, the quarter. improve expected our move be is the through as we volume move we to as

Anthony Lebiedzinski

Eddie. for you Thank those details,

as announcement I as So, about plan. guess far your cost improvement your

So, beyond have a moving while. for apparel about guys talked you

invest markets new So, the opportunities, in that apparel? maybe penetrate? opportunities, some fruit as you what's in think in about as look plan vertical beyond wasn't and to margin accretive low-hanging you prior longer will guess, take far plan moving growth Maybe to could talk which you maybe as I this here

Edmund Ingle

Yes.

but What opportunities expect quarters. on to disclose about segment in Investor and And very apparel to say, talking the home, here even we're I coming Day, much are grow in automotive and can mattress. back we going the been X at have in years exact focused not there beyond we We seeing are to our while ago. segments the we X the details, liberty particularly U.S., that

new was new to the going role, additional was in challenge taking the these -- areas. get and of leadership And right, beyond targets the certainly, growth to apparel are settled their REPREVE, we the as focused the in growth made you're with in which more these leaders done be we going that results But be organization have now changes create funding innovation, targets. hearing that innovation those getting about the our are in getting And that. the and coupled on the markets costs these and and of very we Part to dollars have is an opportunities.

opportunities organizational available fuel be these changes, the growth with initiatives. for to going for monies the along So, additional are these

Anthony Lebiedzinski

good. Sounds

reductions, your headcount the Or targeted reset kind in Okay. -- as in it the it -- that was Or facilities? far office in the of And then across more the as or so, mostly and cost more was just is corporate cuts? board?

A.J. Eaker

relate Hey, Anthony, on some comments terms the so vast of facilities those well corporate are as have -- U.S. corporate the -- of very we as the certainly took it's earlier to A.J. Thanks reset of for the the in our those cost the reductions impacts to central to office question salaried. of duties majority some and We that manufacturing

Anthony Lebiedzinski

Thank Understood. you, A.J.

then, Okay. just And switching gears.

looking a a market being obviously, A post-COVID So, -- been market lot has lot is REPREVE the the high expected. talked -- as recovery that at you about slower penetration. so of as far than would Asia REPREVE the have China it's have most people

you here forward? seeing What's wondering far? there your guys are going expectation Just What if you China. on comment could so

Edmund Ingle

Yes.

discussions before, know as see Europe brands. with Anthony As said a a to - to feeder several and - the our Western in for U.S. as -- business in you for we Asia us we -- calls I

the Chinese had to the have market polyester, and So, the economic still is the to that markets -- has are But separate occurring reached Brazil have normal with for caused environment has difficult impacted -- beginning inventory as we come and try that's environment levels, Asia our find of their environment operation. it their is we've China. -- textured other retailers business in somewhat a sort from brands which these challenge and back, see particularly that

as of the -- should China Now China. Brazil. in have quickly, for their And economic that done, some what have increases, capacity they and pricing improve utilization and economy their should in as we recovers happens will they normally business methodology, it improve also modify that China very

that and the at for well as are, the to see of economy I you So, us a at wait and Chinese we're or industry. as and lot somewhat government it, should hearing, but less are also mean, been finalized the are the looking benefit as there, China. we doing now has kickstart that more destocking that things are still in people try

Anthony Lebiedzinski

Got you.

period and restocking in green of guess, shoots like inventory mean, or guys we've yet? not I sounds Okay, terms seeing, obviously, in are been it you I prolonged some destocking. of this

Or hope in seeing are signs you there quarter? we next there restocking? actual actually the So, to or yet, be of are

Edmund Ingle

you of is be because we will signs, are retailers the because orders, past. different, are than -- brands interest tell in seeing the frequent that orders, whether lot would the to little more there We trying I rates but a or normally it's see the smaller more a

So, That they last I particularly, not the they in tell will the how get think to back a cautiousness have through brands Asia changing over several improve is retailers quarter. as business, months, inventory. in you, having we the there's I to move excess But the sell. seen

-- we Chinese do in Year New following -- growth rest that continue into don't happening the February, the to year. our Lunar we fiscal move to the March see we as expect So, and of but is the

whatever brands getting they call, respond be demand. they're cautiously a we and way for inventories we're the I react that do, in the So spike very to they But ready the but cautious we just be and it about little ready, be we're retailers consumer what seeing. the are they we're to to think going it's or We'll how back have and optimistic to going about like ready, are growth said whether they cautious. -- still normal, to

Anthony Lebiedzinski

Sounds good.

that. on follow-up quick a just and Okay,

and -- you are these you you get? margin guys you Is for those orders, pricing seeing to that are get making dealing guys deserve sure orders? the you're how smaller more that just with as frequent So, it

Edmund Ingle

pricing to this of part as the transformation, to -- match value giving. There's we Yes. sales are our we're continuing

on stable -- the because the is we're move And that their a for as much quarters, perspective. a want see have to more the the X not people longer we demand that value more targeted changing profitability are to in point would the market of case, we pricing view of Since -- that's So, product. as the past, has that pricing and margin changed our we reacting, through in programs. we're next are going based benefit and bringing from our to

Albert Carey

the of . that. One things .

Anthony Lebiedzinski

Sounds good. Iâ€™ll. . .

Albert Carey

is Al. This

Anthony Lebiedzinski

go Sure, ahead.

Albert Carey

on and And want low positive that's throw more of low we've that close In efficiency most to items, taken there, us those effectively low times, a the are just very I And mix this comment. margin. of line volume, to one XX% margin too. move, out line items were that gets contributing run

after So, that A.J. some forever, around have of and his went these finally, been team and items it.

Operator

and ladies you, Thank gentlemen.

we no for conclude at now participating, questions may thank further you you conference will As this and today's we We call. disconnect. time, have

Unifi (UFI) 1 Feb 242024 Q2 Earnings call transcript