CULP - Earnings call 3 2024

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Operator

Good day and welcome to the Culp, Inc.

Third Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.I would now like to turn the conference over to Dru Anderson. Please go ahead.

Dru Anderson

Thank you. to for conference fiscal the welcome the to XXXX. and results company's third morning the call Culp review Good quarter of

will of the As this the me let company. financial contain call business, prospects we about forward-looking and state condition, statements start, morning's that

or risks historical the and regular could XX-K These are events fact. filings, performance the recent that company The forward-looking materially about uncertainties statements statements described by are from including XX-Q. most otherwise various statements are of indicated projections, expectations, and uncertainties. actual or Forward-looking beliefs because not company's differ that or and Form include future results statements of Form risks in SEC filings our on of the

not currently our that about do Additional results. presently and know consider be affect also risks we and business may operations immaterial financial or that to uncertainties we

to You update be addition, today, statement call, financial will Executive the and each to discussing such filed made are these an reliance turn undertake President the call comparable included go directly reconciliation at will non-GAAP GAAP tables website measurements. posted during Culp, culp.com.I on cautioned non-GAAP obligation of to and statements Please over Iv Chief is as now We yesterday not the the to measurements on forward-looking financial ahead. A the the press forward-looking company most in as included X-K, to release measurement exhibit statements.In and to today. Officer. revise company's no the only place speaks this undue financial of or to company's

Robert Culp

us quarterly everyone, welcome like with morning, and conference you investors. and joining to Dru, you, and would thank Culp good to you analysts call the I Thank today. for

quarter. Fabrics President the call Upholstery Fabrics our Mattress we year, the fourth President will review begin Bruno, results with some your and of will fiscal the today our take briefly for the Ken Joining Tommy then detailed of today me review then After Boyd are comments, our our and that, Chumbley, business.I'll call business will financial financial for this and business; the of questions. outlook Bowling, Officer; Chief I Ken on quarter

to are challenging of and sales sequential reported the core demand performance increased business in for consolidated quarter. operating and in furniture continued third improvement our pleased the environment We impressive our year, is over industries. revenue year-over-year the considering report Both bedding and segments which year

in last Culp of driven year. our our Fabrics was outlook Additionally, timing during some a have quarter sales XX, year, story better the the improvement quarter since months XXXX, our on for QX Chinese the Upholstery in the the period throughout Fabrics line was fiscal with year-over-year performance in first revised residential X quarterly Upholstery the customer short, announced first end residential consolidated operating for due executing products. fiscal January fabric of that achieved of the our demand Year for segment.In stronger both by been New we this increase and improvement in than improvement to sequential holiday

events grateful by transition Beth underway our and with an to savings.We mix driven to we Upholstery significant for fixed remained demand and Window, Mary together, sales, a of encouraged and a within somewhat of cost our for recent sales offset Chumbley are once hiring several time and Boyd are steady and sales, was partly lower improvement hospitality/contract Mary hospitality/contract solid sales residential by more in and well increase performance, factors business. successful transition orderly especially profitable Hunsberger. Beth the higher Fabrics, by our are leadership. business, Read have saw Fabrics working overall in in chain this supply due weather-related affected that While Also, primarily again segment in issues short-term January Upholstery operating

the also excited Las that new Point Vegas the planned of by market furniture the for at we High and are are previous fabric placements that We upcoming residential saw market. cadence

desire upholstery our continuing Our LiveSmart a products for portfolio fabrics from new confidence product product well as acceptance instills our are remains future. of the and for manufacturers of designs are received we see performance and to quite being popular.The our innovation

go-forward Additionally, our we that pressure due and segment. the remain pleased order other hospitality/contract events weather do in solid of demand hospitality/contract affected QX back Window, and our we outside to some incurred and with business, improvement expect from in Read we

are production sourcing and our Mattress supply capabilities to for we costs our segment, pivot we year-over-year focus line global performance, on significant service placements new margins are Fabrics to by driven to with in in improved optimize more furthering supply our raw Lastly, and and our chain options continued in best our establish a and within varied priced cover and operating with largely improvement material are fabric proper our costs. that sales current customers.In

we for the this launches this having both the in are year, products and quarter, success second well industry, have the However, business during hard we new these market initiative. internal are occurred to program some the production new noting driving and issues, cost for fabrics that to related win on to been the we with the covers, sewn certain profitable this weakness of quarter.As and compared as ongoing reflects segment, sequential primarily bedding startup efficiency and as results as

These some Our impact they macro strengths in ramp we affect expedite and competitive long-term some improving and schedules global profitability rather up. pressure inherent to push in are a costs meet But flexing production our current there difficult internal the across not market, we are cases, deadlines, position are and and is as platform. impacts, that accelerated results. our market quality

products pricing desired cost CHF lower still margins lingering operating addition, due improper hangover elevated has that also In to from levels. at previous than are legacy some at

offerings we majority work working new maintaining just faces more Fabrics to needs while support some continued encouraged Our SKUs products, of and capital Mattress for while on innovative borrowing and largest level do our borrowings, segment facility.So remerchandise customers target customers. strategically our credit called and million sales to maintained enter initiatives continue to in are strategic we our management, week in a quarter, to the expenditures tradeshow placements solid million still our Las We occurring mattress as domestic pleased and to chance give daily newest a quarter in for were present our that new the Fabrics quarter with critical we to some is do.We outstanding have opportunities. or customer operating mentioned, We and to availability financial team the our us We we replace sales ISPA, new future team as Mattress under profitable and business. have with Vegas sheet with ensuring business, $XX.X Mattress during the allowing capital the next is have within $XX.X by and on efficiencies. vast enhance the Fabrics which prudent supporting attention of these in no now, we to balance I support the onboard but focus management a will working improvement of our growth fourth cash, implement our the ended market,

to ago, drive As optimistic long-term new potential to this focused are winning we for growth I a diligently about are moment placements we margins, revenue mid- and business. discussed and increase on

our industry quarter, Year an However, of during has few the first demand while further impact our in of we both the Fabrics of weakened in knew quarterly Upholstery weeks than would fourth revenue, the New backdrop businesses be the to Chinese timing expected much segment. especially

need keep Mattress expect in our quarter in unpredictable.We trying quarter. that our trajectory note efficiencies progress for fourth and term growth February QX market in currently startup for March products and support. remain But remain midterm. and of of to some Fabrics low the remainder us demand, means ascertain and do of businesses, the to of sequential not the consumer to third internal to affect the is end altering view not that performance but important level we the to we both during impact near Also, is are in also in macro at what operating production are the confident industry will certainly our April. the It We of relating the of new our our we our position that

As of of a our be face QX return that these various of delayed now ongoing. current end is challenges, our we In our these profitability to our will from can operating headwinds, the the Macroeconomic expect consolidated we aspects attention result into managing the control. of fiscal XXXX. on business

evaluating the valued current clear the term, are customers.X strategic to demand actions align supporting to in the With course, points still we global with levels, size and also platform while, to us. adjust our of right our very consumer of uncertainty are demand near

demand, match this losses. year, we been adjust uncertain, the step intended in is demand continued near-term progress profitability volume capacity that costs tolerate understand X and our fiscal we QX. we levels We a our and to of must back expect months we and first operating cannot in had making through but First, and

this to and Mattress is more mid term. business to is business. And ability repeat specifically in manufacturing which especially Chinese to Upholstery I quarter We our fiscal and Year.Second, profitable competitive year sequentially, and I'll degree again, American Upholstery profitability including we financial call confident growth support business reduction year currently and product then and our not trajectory and market renewed that year remain wavering driven potential cut on and positioned need mainly same long some with possible Fabrics growth leverage covers will accessory to space New will for Mattress macro business. advantages, we of when innovative of XX% management for our the finding steps North our adjust up are with our the demand conditions results consumer and Fabrics, to solidly growth on by are come our fourth the likely solidly-performing and reduction timing 'XX.Importantly, committed for have profitability designs, more our review both our not of restoring for over in on the are Fabrics year. we financial to we to our to the turn capacity. Therefore, to or revenue our consolidated fiscal across platform, segments both to fiscal This 'XX, back capacity, in are some we future offerings, in Fabrics, over outlook taking see review and pressure a and who fabric the the costs products synergies our improve.I'll position quarter, creative that are level focus to and our of we the revenue opportunities our in and all global And recovering reviewing sourcing the now actions in and will sewn solid business, well Ken,

Kenneth Bowling

Thanks, Iv.

the credits. new Upholstery same Fabrics savings to year higher share included and foreign Mattress favorable million compared as third related $X.X for were fiscal $XXX,XXX Upholstery This The operation partially improvement. SG&A cost $X.X reported or fixed factors per expense our the partially Fabrics bad Mattress compared from for more expenses.Importantly, These net diluted for offset points the quarter quarter, the loss period. $X.X prior an with personnel results, and net prior provision quarter. for for our compared quarter of the China, Upholstery for highlights the compares $XXX,XXX the and million by certain Fabrics operations included million, with of loss profitable period $X.X by was product cost, for the segment, mostly sales million exchange incentive prior tradeshow operations production $X.X rollouts, in Fabrics $XX.X the driven in as Fabrics rate improvement financial restructuring-related wage year the segment. for offset a were launches quarter. million Starting mix and to expense up SG&A with and both well of new million up higher the in operations the sampling inefficiencies relating period. associated last year with basis XX.X% to and sales share, inflation expense. favorably with in XX% fiscal was loss compensation quarter compared higher the from key the year by with segment. quarter the was diluted XXX startup $X a certain operations year margin Net higher with during the period expense cost, a from during loss lower the compares for of for the product in this $X.XX period are previous third in Here included travel for and an from a of The consolidated for increase restructuring the sales more increase loss per period, debts, or the $X.XX due prior third to drivers loss which year which X% this company million Gross

to Importantly, expense, a from SG&A improve the negative EBITDA with of million was effective negative compared a negative for the rate ending year fiscal comparable as for we a regard XX.X% period. the adjusted prior for compared conditions the will X.X% demand with that $XX.X we for as our believe rise, significant million and negative period ago. XX-month EBITDA of year to the tax leverage with for The quarter income period increased $X.X was third year a this business QX sales.Adjusted products get same

at an between be and with loss in China by our that earnings income to continues we for taxed quarter payments year. the company's approximately U.S. our the to of of U.S., for current rate compared tax million generated income mix cash subsidiaries impacted U.S. a $X.X the higher expect operating Based foreign the rate income effective on this while was tax Our assumptions, fiscal

only payments income our of current our this take a year management's variety a of be segments. projections affected tax factors over at by look fiscal can for course let's and Importantly, cash the estimated year.Now business the are

Sales reduction and repricing for Fabric and increase current driven Mattress that year's new XX.X% segment, better product launches the mostly of pricing line as year's product were SKU sales sales sales, startup a sales quarter in was placements priced inefficiencies with coming cover cost third upholstery million, as extent offset are with from quarter. quarter. the quarter SG&A New quarter during third partially the of were and $XX rather lesser year more production some unit for by rationalization the residential products. mostly underperforming in up by compared Fabrics period, the of Year compared fiscal holiday, were to $X.X For last with Upholstery average expense third up for driven which This prior the this some sewn fabric in case, loss the period. X.X% Chinese last quarter higher $XX.X the year was last operating customer primarily than mix for new resulted segment, by year million, the improvement improvement Operating quarter In each cost. the fell historical higher prices. third This products the the a the quarter fabrics period.For favorable a driven the third SKUs and compared to selling to in loss along reflect relating to losses in prior was during current fourth in million, well demand this substantial significant a the has timing fabric the compared $X.X year, higher than in certain for by higher price million with residential to

was primarily that The resulting winter operations and the business. reasons weather to our in exchange accounted sales and year a chain compared associated supply sales significant due again issues key year lower period short-term However, affected a than favorable a of was quarter.Operating Upholstery during improvement more XX% profitable improvement for rate Operating $XXX,XXX approximately for to significantly loss sales, quarter an were third fixed year. more of in million from in prior the period. this volume, China, offset the turning the factors Fabrics sales to cash higher mix with costs We X.X%, fiscal the with quarter the the last $X.X quarter, third third total of our impact million for SG&A Window the sheet. expense $XX.X hospitality/contract restructuring during Read business production the of by quarter. for events moderately and lower and Notably, were reported as business period.Now lower sales hospitality/contract third segment's previous sales balance and debt prior margin the These up were the the outstanding higher the for for operating no hospitality/contract investments partially actions. the end of compared foreign of income of

million fiscal For negative the negative respectively. from year, and of first cash $X.X were $X X months free this operations and flow flow cash million,

the expected, affected company's were flow Mattress from plan. strategic Fabrics cash investments As losses to during and free operating operations the and period by planned capital mostly expenditures, transformation the flow and related cash

being of will the the to the turn on a have Importantly, $X.X the as quarter solid share capital, year fourth positioned for support this spending cash your projected fourth be this million cash inventory, Capital current program. our capital $XX.X current not facility. quarter, million to quarter We payback maintenance million year, Based for year approximately not and we Iv? $X.X improving million any total components general growth which fiscal did and receivable, under end in during leaving to then expenditures the job this of respect both $X current fiscal during expect preserving year expectations, $XX.X focused domestic activity our quarter do of segments Fabrics repurchase of quality have under discuss third expected to in on that, done of consisting on borrowing we the of available the $XX.X call is opportunities.With shares of the working availability liquidity the Iv this fiscal future key repurchase any months Mattress repurchase CapEx for first expectations, remain questions. million mostly were are of credit in for managing year, share business. the over fiscal accounts to take this fiscal million The this accounts payable. and is focused company we and will X year million.With I'll and in our asset-based efficiency outlook quick and to of $X on to as third center fiscal projects on the liquidity, be and Based range $X.X depreciation million. of

Robert Culp

to guidance you, fourth the uncertainty only Thank of Due financial in quarter this are for Ken. macroenvironment, we providing year. the the fiscal

but the quarter We demand timing to upholstery sales which fiscal to the expect the sales of quarter the XXXX. of net partly Chinese is weakness fourth in quarter company's third due to Year especially that This environment to the year to to pressure expected primarily residential fourth for be more of fourth year, both as segments, consolidated New in this compared fabrics the falls as the business. in industry last holiday, quarter in the business due compared lower is the

the consolidated this year that expect We operating loss fourth $X is loss for million operating of the quarter fourth of fiscal to fiscal comparable last in year. the quarter

While as conditions are demand trends pressuring consumer over to term industry mid these levels. return normalized we and conditions believe to certainly levels near-term more bottom long will represent improve demand, macro the spending

are strong our We in both this positions positioned when with market well occurs. businesses

are in both to headwinds, some committed and restore are However, these of face XXXX.So year cost evaluating, actions of the to fiscal that, questions. our we align with our we'll capacity to in strategic and businesses we and demand take in profitability with

Operator

Instructions] with Bugatch Budd Water Tower from Research. [Operator comes first Our question

Beryl Bugatch

on keeping sheet balance the troubling First, difficult congratulations during time in times. good and positioning this

significantly. much mattress that? you price. that. I for credit about pretty I we all that all third the up think that Is quarter to sure like just to So sales make understand way Is deserve the were think would

Robert Culp

are We're as and let hard Yes, proper to making and well. to new is how about it big in pricing at our driving really this factoring in Tommy certainly costs. I'll Iv, very win actual we comments business Budd, deal a comment

improving margins. yes, our we're So,

for anything more when execution different? lion's proud environment it but and you an a Tommy, is better, We'll weak that. And just pay increase. primarily We're in price are so say is of of would our price margin. dividends share volumes a

Tommy Bruno

Budd, seeing an on. our I XX% ASP. Yes. think We're No, that's about increase in spot

So it's primarily mix. and a of price little bit

Beryl Bugatch

prefer? in you favorable think book you at quantification give have I you at not there like pricing. may would left than maybe Tommy, prices out programs sales legacy are still or the some And, mattresses would are you that the margins for us of at there less a what Can

Tommy Bruno

we think a of probably we of expectations. I as get about our need our initiative in part to book to our to with our margins, order have third a Yes, optimize improve in that line

Beryl Bugatch

think you will And how take? long do that

Tommy Bruno

quickly. major than SKU. to individual that a it make to long we're going know that make far. ultimately, it priority But address how We're are going will conversations that it don't faster to go something exactly by I is has Those by take. so very customer,

Beryl Bugatch

X would investors think a How But kind year year, that? about as should of that X think quarter, X about quarter, you situation. X

Tommy Bruno

than will X first would get I year, it of a in I think I but addressed a more quarters, quantify no quarters, would within assume. lot the

Beryl Bugatch

Okay.

Robert Culp

We've this I time, well on love Budd, comment been the legacy would think, a with this we for sales. dealing some we just very business. maybe are respected I and and

likely we're thing something the just So responsible take want customer But obviously to that's base. in strategic things starting but to right be to to face actions have our have faster. about demand, to trying right as that. some way, to think do to by We pressured we're we're to customer accelerate we and do the need do the going of our the

Beryl Bugatch

Culp I concur that on with that. espoused nothing view respected, expect in Yes, terms way you is of I totally so would the the different

How are particular through those close inefficiencies for startup to new products. about of challenges? being talked we the You the

Tommy Bruno

QX Hey, through XXXX. the QX, be beginning very end expect by primarily of of I Budd, it's just continue that Tommy. the we very I would would the beginning of would QX. to of it expect not beyond at that

Beryl Bugatch

in seen And antidumping before, an Culp's volume through intermediate gone well. Okay. refresh Iv, some term? we've obviously as business that the we've Shouldn't go and mattress the travails through help

Robert Culp

Budd, would agree you. Yes, I with

favor, positioned we weak more demand. us. confident it we're in I playing We state But we're advantages think consolidation. to believe, level, for demand be business. think are winning to we can grow around fair just of or know I get our -- that for whether talk our that mid- think share, last. think to potential so in industry do current our and the to we've interesting the volume current we're But our tried are antidumping in the been a and than think won't an there's But that remarks improvement. obviously, by are flex we lot trying long-term that surprised timelines thing to just to just well. the that about We there it's face very we arms the the dynamics which We

Beryl Bugatch

think at And as that of or of mattresses but is, Visco you about demand step that know of back there the share? surprise, back in terms to are the and any we structural think develop? got issue century on are terms Is in are the industry? structure there, and turn the some has changes there winning that change the going industry the is start BedInABox I anyway, of types had that you for in of the going where different something on like

Robert Culp

necessarily opportunities Yes, dramatically, in I fabric that unique note there's did products growth fundamentally don't by that sale. But aren't that are anything the know we different, in remarks, we seeing yard Budd. traditional our

a whether So a or be roll accessory product that becomes pack cover bed. that fabric a cut-and-sewn

all And those don't some of assets. our flex American unique of North necessarily opportunities

a have those. sourcing reach changed, of have not to it's may the be impact so really that a and way nature. fundamentally that's in and manufacturing different. it any capabilities all and through traditional to attack and and positive But Now, but to a different, our deter market. platform we little sourcing fabric omnichannel We manufacturing strong players but ability and cover There's we worldwide, maybe may ecommerce supply our way our little doesn't changing it players, players and

normalized demand in So good we're that confident position. with some really

Beryl Bugatch

Okay. What's the you long you to And decisions? as looking right-sizing timeframe One, last idea will business. talk the take those when that X Any things how for that? about, make at me.

Robert Culp

don't we time just decision long. that for have Budd, be to

can't as losses. said, we operating So, further tolerate we just

business be demand too is environment. to and in good performing too strong Our this

capacity in So or operations environment, changes And synergized make table, and this quick. in reductions want be current whether they reviewing we those immediate all cost we're We possible near management. at the the demand looking we're Everything's ASAP. to to term. it or actions, do on the have

Beryl Bugatch

is you cut And might risk there Okay. a too that far?

Robert Culp

And always problem we capacity. it. think have needing I about. to of will something more love that's the Budd, We'll would find

don't I front that far. might to of any And our really cutting strong us. touching ways anticipate in and think do was we I to as that, demand have that So I manufacturing sourcing on be too capabilities, react

be worried I'm but we'll that, So careful. not about

Beryl Bugatch

they somewhat some And inventory normal to look metrics days to your the right at our it? terms look company way don't back pre-COVID right Maybe outstanding. that over-inventory company least levels the do, the Ken, have like problem, in now. doesn't. are at inside not We Is an really of at of customers but

Kenneth Bowling

think that's fair. I Yes,

day, every both and line year to with done look committed are that think it day, over in have keeping at divisions line fantastic at And I of inventory in job last X.X every with again, getting we inventory at demand. the a we look we demand. inventory. They look

I with weeks I for now, and think, we months. the Boyd, Tommy, we're right in that coming what we line think expect So feel

Beryl Bugatch

luck Okay, on I'll let the others have a Good quarter. crack.

Operator

Company. The Lebiedzinski from Anthony & with next question Sidoti comes

Anthony Lebiedzinski

and great year-over-year the improvement in to and certainly operating And sheet strong and remaining sales certainly, sequential the metrics see balance nice well. to see as

follow as far guess up I right business and just the first, as So taking the sizing to of actions.

does quarter, actions understanding better else your restructuring or of or that? get for that include a wanted to So any does just guidance the anything fourth

Kenneth Bowling

Anthony, this does No, it is not. Ken,

are As not that, include any actions. potential does Iv those middle of it the in planning of but we for said,

Anthony Lebiedzinski

clarifying for thanks Yes, Understood. that.

I suppose. be potential upside, could there So

take products nice perspective. you've what costs get at certainly, job, done line pricing to then curious cost to you're point as of this seeing and with And Okay. from a in just your going a forward,

various to whether those or place, the puts just not forward. think price that over increases sustainable go whether going you've could you your If cost and takes regards put in structure you the and are in

Kenneth Bowling

this, Anthony, Ken.

And raw a stable. things material very carefully. from think, obviously we're are monitoring that think I I standpoint,

labor, I that think, as as far part of it, be to well. as seems steady that demand,

with So we first product. think, able, for But variances, the that. cost our of with to good customers to are. as right, every We've deal day right I feel being make all, getting the working sure the we're pricing, our as about right price far far as we we got which as have

Anthony Lebiedzinski

That's hear. great to

Okay.

not in you're terms you're do getting able to like able that of being pushback significant So along. that. to It pass sounds

Robert Culp

on things it, products generally. are I We're properly. that passing things with The new just overcharging, developing we're prices. developed wouldn't being on the we're call new prices not current items we're pricing right not

Anthony. to pricing, We not trying the Yes, offer having we're adjust drive price. to to better remerchandise. an of thing, uncompetitive have either business new Some on just running but or that alternatives We're things that's we products. pushback are a a not

Anthony Lebiedzinski

That great. sounds

also you you in efficiencies, to at far share to that off quality, as that, mentioned projects do projects especially CapEx, your increase regards then expect And when details you're you any improve Can and that as those focusing for Okay. on pay CHF. Culp?

Tommy Bruno

it's Anthony, implemented Tommy. QX. efficiencies being would and benefit of will online And in the in of those XXXX that see come seeing those end as now majority middle start to of to XXXX. from QX QX of are projects really start starting Most as and we the to early of the then expect probably

Anthony Lebiedzinski

to more you're share how to cost the you get to as you possible savings doing give potential us And and think is what about some it examples as or for efficient? now

Tommy Bruno

doing we expect waste can starting formation Yes, the about in in our fabric of terms improvement X% of well say to middle against a and as we're would of accordingly. profit XXXX our measure I eliminate most monitor materials, gross as our those I would price that chemical so goods raw of projects to initiatives. the our helping are

Operator

I Iv the closing for session. back question-and-answer any to to would turn our conference over remarks. concludes This Culp like

Robert Culp

thank again, much, We you very operator. forward interest participation for to before. updating great on you day. next our Thank and or your to your And in look everyone Culp. Have you progress a quarter

Operator

The conference concluded. for has attending now today's you Thank presentation.

may disconnect. You now

Culp (CULP) 7 Mar 242024 Q3 Earnings call transcript