UFI - Earnings call transcript Q3 2024

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Operator

Good morning, and thank you for attending Unifi's Third Quarter Fiscal 2024 Earnings Conference Call. Today's conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Speakers for today's call include Al Carey, Executive Chairman; Eddie Ingle, Chief Executive Officer; A.J. Eaker, Chief Financial Officer.

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

Albert Carey

Good Eddie much. and everybody, financials. review quarter the Ingle I'll for very our and turn business thanks general third A.J. the a his few you comments joining to and it call. morning, Thank for make over review then to of

look we're So quarter they they're these you results the third if at I continue the results, expect over but will right our forecasted. prior to we wouldn't results we quarter, are improved about happy where definitely say and that with improve.

revenues, X. than X million XX% So X. is quarter, $X our they're And than EBITDA looking quarter the last better quarter quarter greater the almost at

we've but So estimate be X up will go quarter I in our better back, guess still will our believe it X and I I'm prior that that quarter industry year. business is X describe best should are right and that way encouraged the quarter better to sales coming than and also here. hit the slow, from than bottom that be very business QX, also definitely is first the improving. now but

overall based some being no are saying are They're the believe green overall, anymore. That's inventories thing. we what conservative also seeing we're of ordering fears consumer on an hearing seen. the our opening saying restocking our But about management whole business the are issue issue that all up cash same inventory don't customers we from trends. partners. shoots and most that's about soft backups, for But of issue. they and are and That But longer

developments quarters. sales the grow Unifi, we about have ability profits me We optimism and into next give and our few our they at as several to progress

both and both in that's business. largest Brazil to share ceased is markets, seeing and have due set, one America we're that North The a Brazil America consolidating North market our gains both first our in helping operations, competitive and competitor

is out taken America improve into might or people complete. second costs moves Several The the in that successfully costs severance X. are definitely The profitability. next linger thing North our quarter will we've

particularly Third, improving our inventories, efforts outside are sales in North of optimism in begun the apparel. put leadership working on execution developing are at of have we progress on the And bit. mention especially that we have is America profit place on traction our I'd efficiencies little job transformation and a also in about more Eddie, under And for very is idea. gives good that innovation margins doing then team you'll collaboratively. that's made benefits, to new me with final hear REPREVE, a get together the in categories a management circularity item Fourth, business that and been

proud they've They're things proud XX days. happen, I'm results-oriented. results and very the of the to and XX last of very made making them in they're

the base -- X come the upcoming into and that July. begins we to and definitely progress, year business we'd So are business in our making business quarter in expect new in faster, to like improve summary, results back the fiscal see but we

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

Edmund Ingle

everyone. good and morning, Thanks, Al,

we results the As we in the believe see were move following apparel demand calendar expectations as environment December. third in industry with And we destocking to continue more financial results we Al inventory through that month-to-month optimistic cautiously of to in improvements to looking our just see XXXX was a ahead, continue remain we XXXX. begin the the apparel will normalized bottom in as line highlighted, our what really our quarter fiscal

Turning now to quarter. of the Slide X for an overview

quarter $XXX reported this we XXXX, was fiscal of increase of overall the quarter during XXXX. X% gain initiatives was of quarter consolidated improvement in the our begin sales to as to continued million net results by primarily in take market fiscal second up And sales transformation and in the driven the share the overall which initial sales, third hold. net compared the market During

our Our are beginning improvement to show also cost reset efforts saw line, margin sequentially. solid in and we bottom gross

we per the are initial see happy quarter $X.X of expenses million by to on XXXX. track We the some remain by of success, reduce to start and fiscal

current transformation making efficiencies streamlining sales maximize environment. great our inventory our in and in been for operating resources process, progress efforts, our As have improving to our sales our we management realigning

sales market the by and sales competitors at annual our same of our while Some success expected update million occur us in a gives profit improvement a improvement once our a in of confidence the plan the provide This I'll year. this gaining of additional business gross our inventory of reducing is remain U.S. end transformation track our in revenues time. growing successfully great transformation result fiscal to is include we now on on brief that see $X our each to profitability completed, which initial as segments. share from the the

exiting our segment, We a in the a market. In team as our result competitor capturing that the are in we modest a seeing and mentioned volumes. attribute previously part Americas this the growth region market we of improvement encouraging of through share

several highly morale the We to Brazil forward region continued in by market our our are performance that segment, In are quarters. share growing look we they hearing from customers upcoming XX% XX% and from improve, the has the has increased encouraged quarters. over also to last as to

we've that imports. market competitive We despite from able dynamics Brazil pricing are continuing in unfavorable share to gain pleased been

our anticipate remain XXXX. see our in segments we both remain results near the and in confident chain financial in continue the our We we local we'll we are market. Brazilian move in impact that as to begin experiencing fiscal increased supply full market Americas term, competitive While pressures to from the imports in of the the competitive Brazil share position into

evaluating recovery sequential are seeing consistent by on impacted February the New segment the a we and the basis. our were In norm, as Year is of a when signs in Chinese results region in the Asia,

have a in in calendar look those initiatives late we Asia, sharing and the will believe growth as and forward help XXXX number to road. the proactive we down We process us XXXX of accelerate in

now Slide X on Turning to for an update REPREVE.

sales, During decrease compared driven the Chinese was XX% quarter, seasonal the the typical impact of REPREVE represented to a of second Year. X% that New quarter primarily the by

of percentage the sales, decline a increase the $X.X actually basis. REPREVE experiencing million sequential Despite in by did sales on net

a branded sustainable market. its sales improvement Looking ahead, we performance in an see due both the position demand leader will the fibers as that REPREVE believe for in to brand we and

achievements future to now In shares goals. on released we that Turning mission, late and impactful X. updates sustainable Slide February, snapshot our innovative waste reduction our sustainability

in Included T-shirt targets equivalent to pioneering T-shirts transform billion report worth X.X XXXX. recycling into the the in of was equivalent metric we which textile debut textile fiscal waste to and by the of set products yarn of textile our ambitious new

included In and target, other our sustainability of our snapshot target as by such gas by also addition this goals, XXXX. several to XX% emissions X X the reducing greenhouse Scope

on X Slide now to an Turning update our efforts. marketing for

additional XXXX execution was Phoenix WM dedicate collaboration performance to quarter successful of premier REPREVE reach of our third technologies. Open. boost highlights of our WM resources continue Peter the with and We and the presence brands, the our Millar to The and

world collects the the sustainable of bottles PET Phoenix most is golf and large-scale in one Open events of all WM the event. The the at

million in used showcased The social at and that items company television, was a part print and something it collaboration about sold economy, And be special [indiscernible] waste is apparel for product custom bottles taking in were into important collection an XXX and and circular a media, which to really February. is Unifi from our generated made is in of Peter tournament the highlight X what turning exciting addition style recycled covered create helped the to role on impressions. taking was this useful. over might nationally collaboration a platforms be Millar apparel digital

will to New Awards Champions turning REPREVE X. of annual City. Later month, seventh hosting Now our we be Sustainability Slide in York this

be recycling efforts through or achieved more brand million will and transformed both plastic XX brand products REPREVE expand the the milestone as impact and XX awards of XX or upcoming retail to new The bottles bottles and have transformed who that new into plastic recycled have helped through to have more industry collaborations well as partners the awards XX billion plastic launches. pioneers performance that product recycled million our use fibers. presented XX REPREVE The Unifi through textile partners our of over celebrate bottles

do work and Lovesac will be celebrating Bedding. Inditex, Armour, continuing such year, We the to good to planet forward our to like discuss [indiscernible] reduce to in the and inspiring with to Serta A.J. that, future we negative the would With key over while Under quarter. industry these partners and now be as I pass financial our impacts of same. our Nike, look This results Simmons for call others to to stewards environmental brands

A.J. Eaker

you, good morning, Thank everyone. and Eddie,

quarter strides due challenges industry the faced The destocking make our to supply apparel in continue its overcoming impact and another right direction inventory third as step we to in chains. for Unifi was in businesses the negative the the

that quarter-over-quarter and and Al Eddie this is gross we profit out improvement. inventory which have sequential have destocking period, by we're cautiously noted, both growth optimistic moved As revenue evident of

improvement Our recently benefits implemented progress highlights profitability the quarter-over-quarter of our plan.

keeping as fiscal anticipated, track and beginning operating has are in As expenses expenses and both to on variable Eddie stated $X.X per approximately functions on to our and million production plan earlier, our reduce administrative progressing we remain we the focus by low, been 'XX. quarter continuing across

cost As and business cost a and reinvest into profits these from sales opportunities. transformation to plan promise increase our our of areas additional margin-enhancing revenue reminder, savings and that we strategically both reset

will quarter sequential financial approximately with results. the following periods to for higher X% December. and consolidated on holiday $XXX shutdown net November the On basis sales now in were X, you a Turning Consolidated financial our the volumes quarter. sales Slide our highlights million, for see up

gross in This led improvement commensurate to profit. a

primarily to Turning the the and both Eddie. sequential earlier sales sales Al higher by gains XX. to and improved Slide a on volumes segment, basis due share by mentioned seasonally In net XX% recent Americas

All sequential profit gross of a further efforts. to that bolstered in was recent improvement our cost-saving this by led

and competitive our both due to a XX the and higher from primarily volumes, gains imports. pricing profit on sequential share market pressure segment Slide Brazil experienced relief displays Slide basis highlights, increases net XX. gross On which sales modest seasonally sales

negatively due volumes lower was segment and Asia gross expected which Year, impacted lower to profit. the accordingly, quarter New during the Our Chinese drove sales as

and portfolio the products REPREVE technologies. strong remains Fortunately, with value-added

sheet Before back passing XX. for balance I'll commentary, briefly now to our Slide discuss on Eddie the call closing some

than to free million. the periods. growth year-to-date less the be the and back prior slides accordingly. on During CapEx on controls, realizing a sheet lower maintenance management our the year $XX take continue final focused current business opportunities, positioned capital the and to the the better expected manage we cost years, cash than continues and the fiscal for spend flow working allowing be some fiscal quarter confident of through to with that and profitable X is balance We call quarter, in focus comments. us remain and we to to will levels continue make pass situation now significantly last presentation Eddie I for well remain to

Edmund Ingle

Thank you, A.J.

Let's XXXX. to forecast discuss fourth fiscal Slide now turn to quarter the XX for our of

volatility. expected fourth and and is capital $XXX million; EBITDA the $X $X $XXX net to and the expecting demonstrate sales million quarter, For million; million expenditures $X between between and million we tax continued between are million; effective rate $X adjusted

Moving on to XX. Slide

As bottom evidenced of industry. was growth, that the the quarter-over-quarter are December by we apparel destocking optimistic the in inventory recent cautiously our financial

fiscal that deliver We we value last on areas continue The fourth as but line will only sequential drive we months, see the an the also our not over been quality in we morale basis will Unifi, confident conversations questions. we us our the the to believe open brand our the and in we've net XXXX. for quarter increase Thank that growth to only not strong invest in across remain that, pivot shareholders. customer in in confidence sales cost-saving and choice the few the gives With now of a for of position that having business improved a globe, you. but of and the will growth implement and partner for customers also will measures year

Operator

Lebiedzinski [Operator a Anthony do Company. for is from now line your question open We & of questions. Instructions] floor the have with Sidoti The

Anthony Lebiedzinski

on based see sales, to improvement the your looks continue Nice in which sequential should guidance. like

was Easter could So much Chinese first, that your Asia far guys Year you And talked New I this comment on going wondering, much how about fourth the do to know Can impact sequentially. hurting year? if contributed that to -- to shift sales? just about Or guess as quarter? ballpark also have how hurt to also that you as the as that what's don't earlier may Just over it's have revenue think estimate, how that? we maybe

Edmund Ingle

QX Well, percentage thing. my do up several versus I'll just QX, was Year-over-year, points. China

million and U.S. [indiscernible] but business the that and So event that we segment, Americas, year-over-year. such we from of the would but a over there, there. revenue last less have seen otherwise a down America, Brazil, course, few than have dollars in But because sequentially, our Central quarter, couple Easter Chinese New of a was days Year also of a big was still improvement which that did it's from might fiscal it's in And anticipated. impact,

A.J. Eaker

couple really for quarter dollars a of New the of to -- from Year. on Anthony, you a holiday in this combine segments, to the with around of when Easter Chinese couple million Indeed, Eddie's comment. impact it's each those dollar tack million

Anthony Lebiedzinski

All right.

guys Okay. And forward, I what's as more And volumes know do you pricing. this in we guidance? details any how about in generally talked pricing fourth you contemplated think volumes share then and Can far each your and region? quarter going about about as

Edmund Ingle

in pricing Yes, our and upwards is here responsive It's slightly jump say strategy regions. targeted. and it's I'll all

that's hit We of each each pricing. volumes uptick with increase increase our regions, driving the some also segments. of primarily X are And business seeing X what's in the in in revenues

Anthony Lebiedzinski

Got you.

in aimed efficiencies transformation sales And then processes. you've said terms improving Okay. the initiatives, are which at and of

right? we a were those of So baseball in, seeing So inning what you are game, in terms if in guess benefits? I

Edmund Ingle

the sales transformation. QX, third the I as would in -- We was very that as inning we're starting. say far the in it much

as move into benefit So quarter we'll following and quarters. X more this then see lot we into a the

Albert Carey

how out that's managing Anthony, slow-moving benefits inventories we and SKUs we're real us also see improve mix. some from helping taking

Anthony Lebiedzinski

That's helpful. Okay.

but having growth, just customer are could on beyond to that. as it's expand further groups pivot So you maybe most guess prepare probably which with, apparel, would to engagement you the I you

Edmund Ingle

weeks. Yes. in The -- some a I the matters will X of particularly Central that said, as uptick that apparel to we're you homes, also up. that we in the X now last growth and picked impacted, add and this made in America the significant automotive is quarter Americas apparel beyond by businesses in just in in But these in has

they supply brands the retailers are We differently months were ago. seeing chain X and just utilize the American Central than what

uptick So us for that a positive in here Americas. the is

local tightened chain brands Of back, which now the to some up course, destocking and been the running growth the dividends. now, us reorder investment biggest really has us in we're because we are indicative there And China, full is from have made seems that our and the the all Brazil is out has not the as of seeing simply purchased as competitor customers down as value supply to in of really be are right to and people went it accomplished. business are have chain and started the paying gravitating of starting past operation towards come the there the that that supply may to

Anthony Lebiedzinski

Understood.

just cash then And flow. to gears switching your Okay.

you lower of So have certainly as the guys CapEx delayed Evo machines. the benefited you've installation from

given So I going how 'XX? Or guess know guidance I about mode would in maintenance think think just to directionally, you your a in haven't we kind on And but Will thoughts we you that. I of still do CapEx? about love largely how fiscal get stay do that? forward, yet,

A.J. Eaker

mentioned, CapEx the environment. have do and months, cash And It's capital several controls, what across Anthony. lowering A.J. the help like to proud over you demand been working bringing the I'll of business to cost serve levels down especially liquidity Certainly lower able inventories. management, in start teams Sure, there. last

So very continue progress. CapEx happy maintaining with expect levels that We levels. commensurate to do business with

working the are business the capital turns, more consider the But this and see cost as in are management we today and at term, the capital we still very to and as more, appropriate in you we modest return-focused. projects heavily see that especially short inventory seeing will expenditures and expect So those focus continuing at rebound recovery, levels here time, remain Americas continued modest controls. to on the that

Anthony Lebiedzinski

you. Got

Okay. And then just a follow-up.

inventory that In that a as share to is be? terms where turns, like guys have yet? something you goal think could ready the in you still of you're to Or mind not

A.J. Eaker

as Sure. We is turns There primarily their the -- the inventory Americas. is in left Asia as initiative chains. a focused far little in do and Brazil to supply

X experienced inventory towards we Americas, in the had And the we've is of more marching Americas the the are around X%. the to a much some in consistent what that at constrained range levels, in certainly that levels last with level very with positive year certainly couple obviously, levels we turns had demand per of of we more turn years. positive So turns better over in X% years

Edmund Ingle

I'll the of place we that us is quickly. turns, products put increase have health we're improving in the bringing the And of running to just add just inventory we inventory as dramatically, as that on

Albert Carey

and down turns we're high really inventory goals think and we significantly -- down. go have aged there. we So But we for can continuing to get

Anthony Lebiedzinski

All good of luck. and that's luck helpful. with right. very Well, everything, And best

Albert Carey

Thank you.

Edmund Ingle

Anthony... you, Thank

Operator

you. session This call. concludes Q&A today's today's and Thank

now may disconnect. You

Unifi (UFI) 9 May 242024 Q3 Earnings call transcript