Unifi (UFI) 24 Aug 232023 Q4 Earnings call transcript

Good morning, and thank you for attending Unifi's Fourth Quarter Fiscal 2023 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; Craig Creaturo, Chief Financial Officer; and A.J. Eaker, Treasurer.

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

I will now Carey. turn the call over to Al

to you, environment fourth everybody, in morning, couple of like and you you a Thank dialing about telling when for the of Eddie turn to and take to I've ever unusual we're because, have I most I'll earnings CEO. operating quarter thank Unifi’s our that, to minutes And call. that Ingle, the I'm then in it doing over I'd say, it's the one good done seen.

So drives you've look our and very and low because EBITDA a in because getting numbers they you QX. to for depressed And that's level throughput leverage of seen QX, to the not we sales needed similar volume fixed we're that which can the America, see assets. remains EBITDA North

Now because have most your probably I with are And fully what QX on going QX, saying, is of weak. you appreciate and that business? been QX

Let we'll details. work me backwards and then answer, the into to the cut

been down, starting for Inventories still down, fall been come have until massively last at scarce. them today. high working they The on high apparel. has retailers retail yarn are but They're ordering

they're after of just I'd still and inventories. conservative begin probably it say, How inventory start time cautious how and back But you what October don't of to time heavy I the at orders the going Probably retailers, a they calendar uncertainty. partners. into will So we especially, when retail the be year. Unify? be will be There's around frame. hear of ordering know. will ask, they flowing amount may will out the ordering fair to when will back fast back? came the troubled When come That's out? first as Probably done end a of big it listening from be our

been on trends the last a down in off asking apparel? you in X% for is, may they've sales The what whole be other year. quarters, They've units. question the about And been X

My So makes a their important they're great on the over housing, $XX,XXX the last money who all spending consumer, a consumer fuel, there? of what's that their income. going year, basics of observation XX And average has probably the months, again, spent higher portion is at food, prices. on

the allocated to called experiences, So apparel. seems travel be that money entertainment, like things have and less is they discretionary income a leaving to left and lot primarily for things

of a some to steady soon. the can level. year back our that, for and half the the we certain the be rebalancing seeing of XXXX already Now rest. some begin. that see We're And to rebalance expect services we X then fiscal of there'll that in same a state At normal here inventories beginning feel goods time will between and happening, that's more

the mills I of So And probably you a partners, gave thing. follow our that majority it's our think customers, majority that the our saying that say compilation is you the accurate same speaking can to this of and marketplace. I are the synopsis analysts because

the improved and the any in X the some feel chain, terms this? this So first, there we first. now green orders the beginning year of volume answer of we all for around shoots later, time the October filling in pain last And is for see We began difficulty of the but good we're front supply can summer. frame. situation Since to and Unifi typically the yes. at And we're news catch is tailwind

Also, XX during didn't the waste we the crisis. months, last

long company initiatives run. better Our in teams going have to been our working on are that the several make

and apparel categories is also than higher that you packaging. such in These outside the on begun categories auto, are that get much a business building thing The we apparel, are to they industrial margins and our to mention current portfolio, categories have sales to categories sell I'd of we have first that as incremental traction home, today.

costing cost, profitability allows that very people utilization our for sales collaborate operations that The second our to is our also have our at working thing teams share. closely on capacity can pricing looking and an inputs, capability been we optimize improve activity-based true so and better market

innovations. REPREVE, several And I'll We've benefits developed but premium material. on offer always mention that allow consumer third. use a a product REPREVE They to us recycled offer

now what's current would very this going can I of I'm going. So I way feel proud things teams they've worked optimistic environment, that and our difficult of would the other when through our be it side the than the company is and on, the pandemic. about journey we where see kind say that And given stronger we before say are on lot to get we all going when it, that this. And back a I we was started believe of

who Ingle, the So you me our backdrop, through it performance. with of our will that to over Eddie details let take CEO, turn

and Al, Thanks, everyone. morning, good

brands inventory Our the fourth pressures supply mentioned, continue demand and levels. as across continued chains, quarter weakness, retailers textile, their Al and as apparel to efforts of the reflect results normalize their

thank challenging while for commitments I'm and globe. them work. very for grateful Now a the across fiscal everyone once I And Unifi team again, year, want hard their been on it's the to unwavering

capturing then move the suffering, environment, that opportunities to presently alongside supply textile and destocking space the others continue and we chain in as share we towards While normalcy. through regions retail is the globally, in each of we our recognize market charge for see business the of

underlying and actions byproduct environment, external has and at third performance in decline modest million high While look QX, $XXX factors which make In the of add. you recorded we sales, the believe and of through difficult was performance our overall a to might compared few operating a taken. I not strategic unexpected, a net presentation, We I'll our when on level. a quarter challenging market which X is Slide we've stabilized a some at a comments

of see material these volatility low have One year calendar quarters, experiencing currently increases prior we last that in factors the the pricing. the costs X in in input for that of seen raw a did of are is period erratic we and any not

a result, position catalyst quick recovers. solid a and pricing in stability this a when standpoint, will rebound we're for a demand As from serve performance in as a

challenging of levels. been prices, Bell us, stabilizing XXXX have bottom normal in have for really seasonally calendar which also been to

a play to our in quarters in As And are Central will for pay has reduction price and REPREVE the opens U.S. costs and pre-products. America. with demand coming business relief this for U.S. up the welcome important been the advantage we as and our yields input a the the recycling bottoms reminder, the associated in the to bell segments process the Americas most

costs perspective, maximize taken several including drive efficiencies measures. productivity an across several From operations have we business, managing actions our the diligently cost containment through to and

of reoriented will new sheet. have during our few We I year. through mention highlight to capital should period, I a that a to hope be also about spend And also which on actions our talk as able we innovative position few are to cash fiscal preserve balance the off products move backing and this our minutes. we developing bolster not in further solidify to these liquidity we

driven with by at attributes to much consumer responsive that REPREVE the now Our demand the focus core technologies that performance on more with commercial the are opportunities we're innovative pairing of is seeing.

and REPREVE X Slide discuss marketing. to Turning to

all improvement presales. of China's quarter, the sales million view Any or XX% of our were a all slowdown is at XX% $XX.X our in reduction and to and sales This it of sales by ongoing the on of $XX.X million sales China commercial preceding sustainability primarily an conversations. compared REPREVE fourth driven economic textile we based During quarter. will drive rebound do exports, not review as a in commensurate in

marketing. to Moving

outreach, drive We a tours] Angeles an in meaningful has resulted to in metrics. coverage on globally. including and our event Los Ongoing influencer continue REPREVE increase media [fan internal awareness based media in

tailored execute for launch U.S., from with the this Brazil markets. local China. REPREVE specific in ranges we of continue the Beyond partnerships And to to initiatives in brands marketing

shows material During particularly, particularly waste, shows high we innovative was at across received. sustainability was our solution Takeback, a for well of in And QX, interest trade globally. textile tackling all exhibited and Textile variety

we both and momentum on 'XX, and sustainability close opportunity. the are now the happy and well industry marketing made actively is front we consumers, as XXXX, on who are Now that REPREVE, with look positioned on to on building very to focused out this in the fiscal progress forward capitalize

call pass Craig for his earnings And to his I last XX, I XXXX, finance a for take July before helped on a This to call. is the his has moving team. another Craig filing he great review, to partner thank as for SEC to been So CFO our well-rounded us will build Unifi. a be has want service me financial opportunity. Craig moment pursue and in noted to we

all for the and you in. thank you've Craig, for So that work put

A.J. as Beginning our serve next interim week, Eaker CFO. will

veteran in addition have great XX have had A.J. experience like Unifi, as industry who and A.J., to public financial firm, company X years to well. fortunate us audit a are big to his we team We a has and a at support of with strong service almost

to pass now over the call I'll you. Thank Craig.

a to say allowing Eddie. for to to you last Directors of part for will both team, you, the good X well and someone leadership as long you for thank of be CFO as team and the valued use the rest Thank member years. I want me has make spot a Board been the Al a in leadership of of Unifi betterment change. is Unifi Unifi. and A.J. the his to who abilities a We're of the he

own normal, be make will of his some so we time during financial today A.J. give than this call. commentary comments to shorter My can

beginning with move results Slide into X. financial Let's the

comparison gross year-over-year fourth and the net provided for have quarter. We each on sales profit

from the consolidated in to XXXX, the decline lower XXXX primarily demand XX.X% fiscal net weak sales environment from resulting expected, and were fiscal As pricing. QX associated QX

which to quarter line lower prices Eddie, selling will and in the enhancing segment. contributed this Fortunately, you Flake average product the hear the Americas for in are the from also sales Chip segment, expanded portfolio as the

with segment fiscal like in selling by maintained volumes Brazil. impacted most lower driving it competitive profile, utilization average and but but was exports connection Brazil in to thanks throughout to margin their a innovative apparel XXXX, driving maintained countries Chinese segment from sales The pipeline. volume pricing weakness, pricing imports, down in Unifi's The strong levels part levels lower Asia of experienced the strong China prices the pressures

segments, Asia with the and X, pressures gross From the a in negatively price gross Slide profit in selling on Brazil, the profit. along pressure volume Americas impacted perspective,

stability Turning from was see to QX occur X sales expected sequential XXXX. fiscal of We to for QX comparison. that Slide can to the the

the On performance flat during segments noted the was period. X-month generally sales whole, the across

yarn factor. and segment flake declines volume sales, that offset cost were carry fixed which a Americas mostly experienced lower by Although absorption chip

the the lower cost covered. fixed on yarn demonstrates weaker in characterized by concept in X predominantly which the absorption is based change we Slide sales gross profit, Americas just

A.J.? A.J. to call the pass now will I

Craig. Thanks,

support. move any a impairment life remind in outside and was profit, the I'll we connection longer particular today's but incurred in this highly impairment asset of The specialized than an from fully away original segment carried returned environment quarter that results. As the operating charge a was useful analysis, was fourth for income, we noncash nontax and in everyone would investment gross segment with recorded below which

Now high-level facility global liquidity the asset-backed have cover let's in our passing to cash Slide we position complement significant sheet spend XXXX, back credit will call on to on and continue balance X, to our liquidity where a pleased discussing refinanced closing Eddie commentary. the moment points for our We're his available before to October where have hand. I

much CapEx business supply in is and environment cost remains the on our flows an positioned capital control XXXX normalize. until demand amenable. opportunities elevated has we've by working flows around for ability spend environment, apparel our more made critical we're delaying and that to when and fiscal cash its in Accordingly, free produce been the realizing confident profitable impact immediate well cash industry growth diligence suppressed operating chains the Our

I will through Eddie and some back to final call the presentation take of to the pass comments. us make slides the last now

new of Thank have initiatives you, commercial and A.J. I'd our we the to operational Americas some in business. review implemented a key like moment to take

we to expect normal the and see environment see from we initiatives through beyond recovery fiscal some the are as profit Those of We the can move and increase to costs, normalize. more become levels in new we volume manufacturing benefit in already fiscal revenue beginning seeing our commercial the our Slide today. XX. continued financial on as reduce and As we move this we're reflective results year operational year, outlined growth through initiatives to our expect

And this the around as commercial center initiatives the commercial you and slide, growth can see process. improving from

drive within look of As portfolio. growth the near-term business opportunity could diversify we challenge reality our of longer areas where face we the a really demand environment, and in hard we for volumes

of nonwovens, diversification preferred expansion [indiscernible] The films phase such into packaging of business, markets. the and specialty the our commercial was

mostly REPREVE resin feedstock meaningful to has while for a traditionally Unifi that seen flake had we responsible to have REPREVE time, been for some I'm quite Now pleased business. selling the and wins team products And as has this here. say these some initiative our

resin ever continue revenue In Americas and will our before. REPREVE the more quarter, products. than of strong and yarn were with flake this fourth the REPREVE mix pursuing high-quality quarterly opportunity sales we represented along And sales

addition, Apparel finding margin-accretive. that new to there our business, improve call are we've support continued be we Unifi efforts In Further, and build Beyond what a which customers' are to sales we implemented our experience. processes

It's long we well them. customers in to detail that long-term some with Lastly, more now our to to other of more find we we are like that feel we which value. implementing I'd bring changes can on to so our way priorities. will road, are ways operational value spending a drive time

Despite CapEx are of the lower and our results hours. significant energy positively labor Evo these impacting new pause underlying installations, towards in a are spend use faster the and speeds, benefits in number place, with fewer already machines

key our manage include other or conservatively while headcount to operational times continuing our lead not sacrificing of Some initiatives long-term quality performance.

production on effective example, activities, close our the the many working our X the production customer of during to capital attention demand in there for we and marketplace. customers, like shut Following of down real week planning the and July for staying focusing out through

discuss XX the Slide our presentation September to for expectations upcoming the to of turn quarter. let's Now

continued Our effective expected the significantly we the the in first first not is business on sales XXXX and about the in fronts, of profitability forecast just-completed fiscal segments. performance to tax the includes any our expecting for of fourth quarter. tax -- as that And volumes quarter are our rate. same change are volatility Sales

prudent down, trend clear benefit to continue a of will measures expenditures A.J. Capital earlier. that our spending mentioned

environment back half through calendar full the to the anticipate much and XXXX plan demand XXXX, year. the move As very the fiscal is for year we our towards improve in fiscal of weighted fiscal

in value and We across and as have the short- choice our our strategy the believe customers stakeholders. and to are we we drive partner confident the brands position right for of globe, long-term to

we the that, line for With questions. now you. will Thank open

Lebiedzinski from our And Sidoti of question line comes Instructions] & [Operator Company. first from the Anthony

going hear been Al, luck and to and it's was a continuing work look great with So and to forward with UFI synopsis of Eddie the I of at first, Craig, the you you it work to of pleasure A.J., the to best the forward. beginning your And call. rest And team. also

I up to one you about said. first I So guess, the of follow wanted points

green you positive You're recent some the business. share the market seeing in some release, about in talked And shoots development. also

that, other So well. a and few wanted with start I to I'll off questions have as

talking still of we're and all shoots in green that we're I'll shoots we're interest product making we're about, Yes, to in the Anthony. in teasing call, green very we're of challenging. that. this take getting about And new Like that this said, launches that, here lot we sort where out us of marketplace, we're it's a been environment the at talking

markets industrial, new Al about, we're key launching. auto, are and already packaging the The seeing focus we in they ours. interest that are space, And products lots home, in talked of the of that home a

a REPREVE out in mattress yarn which leading REPREVE our ChillSense, climate is control Ocean We some placement and have Our brand and there.

flake, consumer. show we are And plus that are that interest by starting in seeing had we're opportunities resin growth call opportunities REPREVE that so and really the are the what the these to alongside -- REPREVE we've REPREVE these

on year. go fiscal more through the as we that So

customers, up, spoken -- of to big are all say many would most I'll they'll the how orders and they're add know that just to lining I indicating begin. don't We've Anthony, them it. will I be.

has new we'll I retailers interest earlier. a of little lots made Beyond I on they to big inventory. fair themselves and a But Eddie then think this business in talked don't high it space. back but some of there's of expect We're in ordering these I Apparel. new with But think just luck, last into that some new that about, October some maybe been want that calling and, amount in there's errors seeing products -- get Eddie start year,

energizing see in about it's it. to and there that finally So happen excited something we're

to follow most so segments, then And near-term have Awesome. listed out ones just quickly you that as as up think ones the far Apparel, the which potential? of Beyond the you that

the see we're mentioned, be We business. as to interest home also that's we're part to seeing both October. expecting significant starting now, that -- of on about talk that and And Right significant the Al in do the space. side able value-added regular in Yes. volumes and

So But REPREVE the home it packaging next also market give to able earnings to is we're seeing specifics. answer of our by space that the and resin. a call, more briefly, be lot the question of in because your we'll interest in

it. Got

Okay. All in new it some you products REPREVE. have sounds right. And like other

So it's to great hear.

mentioned as that if that and sales give you -- adoption. the you're to but just Flake, profile Chip that part talk far As about of you seeing speaking, specifics, strong what's maybe product? broadly your and out don't know is want like you of what margin I Can

we're not cosmetic it that into just selling space, X the the The profile What's selling some above It's to gross packaging pleased the specialty our with relates and space margin We're margin that. is into view. space from healthy. into fact about as normal profit market, actually also nice quite nonwoven we're very it a point into users. film is profile of the end

So diverse. it's very

really that the can and about all story sustainability is innovation bring. we And the

trust new can that verify recycled our the in tracer verification in interested is very also are users it have a end system that materials. we these of fact there some and And

been the seems on story on, the to well really side. side. plays we've So out translating nicely fiber that REPREVE over to working to be the it packaging That

we in they're one business. yarn these well playing our at product of X,XXX surprising. very new And tell the thing, markets. of purity playing have because level it are we that resins I people, a into our other meters perform at these the It's minute. high make is And our attributes yarn a design to we clarity resin,

it. Got

in pricing, but and down it the was then the And Brazil, Okay. Americas terms up Asia. in in of

you the here like how on near forward Would part pricing. as see to that Chip do we dynamics going far increases. as But is of think your do as far that and I the get how term Flake -- that. as thoughts

Brazil, depressed very by In the Yes. products, imports really the driven that are coming competitive from pricing of China in.

are We but there, normal some We once weeks, opens really opportunities in yet. to raise days last seeing, returns it's levels to down the just back as still the prices expect, very do supply sales early that few China will to mostly and higher prices In pre-COVID in talked They're Brazil. higher the of by resin the in that it's reactive up. result driven pricing, packaging the space. packaging or about we Americas, in production

So yarn much are are stable. pretty business, the -- the more prices

hear. lately? competitive there seen you good then Brazil, any to changes That's environment of have terms Okay. in And in the

but opportunity move We more -- the still in have X have our volumes about bring talk we'll this on did to through October the selling, from of end able impact calendar they year. that And -- and there, as the in call. be Yes. again, that's we competitor that so actually I are for some market. And do -- us think expect away out that the to looking we're inventory move increased

Got it.

if was term, I and in But this look year. good what margins to to I than years little X%. we to the 'XX pass operating the then higher then back 'XX, reported about fiscal bit certainly, That's a should closer you just for to And longer think back mean profitability? Okay. were those back So revenue hear. how

how we that being some maybe us guys just out. do how know see walk well do returning done. profitable you So think EPS through about as headcount kind you've about you I do profitable? talked how -- or like But this playing EBITDA could you guys if of to reduction just you

biggest profitability. definitely Volume's will Sure, our that back to Anthony, A.J. get here piece it's us

our long spoken as of aware profitability very initiatives last of few growth much as the underlying further about over a the we the in efficiencies think last the that both other over still term, that as much we've across couple to manufacturing contribute recovery that that lean completed they're very as of Evo well You're you space our we years, structure. and as will we've SG&A where years the installations path to from the much drivers well. and facilities are found the of we believe When well

do still confident does that couple that last that, to underlying feel So the about drivers rely on we years. of over talked profitability path we've the

wanted this Al. I just to is Anthony, to that. add

mix, a as then As become the of helps that Beyond Apparel categories part bigger well. our

Got it.

as Okay. debt, you And year, that then refinanced as was which last far terrific. your obviously,

I to assume I sure make wanted anytime an Now compliance your just see with in issue well soon? covenants. your's that debt you that that's not that,

Yes, still again. A.J. Absolutely a Anthony, in it's debt perspective. from compliance

the As positioning next great very this well a ago, year both us we as environment in into of as head providing to able we the just under you refinance growth as that mentioned, years. us were couple runway favorable for constrained facility

with to have that at that On liquidity. haven't global had that, still point. And assist we of this we can balance institute help significant top extreme cash measures we of a any

and from compliance So still feeling a the remaining quite liquidity. both comfortable perspective

it. Got

you Okay. repatriate the And can that? think that? of up. then I is If know about majority the follow easily should U.S. to just how Or needed, vast quickly outside your like cash we

Anthony. Sure,

to cash in that repatriate and repatriate relevant. from still in note almost still applicable connected was those we million believe are the those refinance that of with processes, You'll we did our Part fiscal completed. Asia. $XX procedures We operations 'XX,

forward, in subsidiaries. still as those needed, would be repatriating, that move from we believe everything fine just of we As terms

Chris Instructions] from Neuberger Berman. the [Operator next comes of from question line Your Reynolds

treaty been -- your the positive? an on a just company still as production, area. you the a is long-term how And CAFTA A question you. perhaps seeing Are on produce a maybe you apparel integrated trend Caribbean update apparel benefited for sort with customers that's that of that cut in for question your of that's reshoring

our Yes. interesting legislation benefit The us occurred. for all USMCA, location, mentioned, that and CAFTA, you this in destocking as before really X was NAFTA major was also very us pieces what of now

Our volumes growing America in Central were significantly.

El from We Salvador, was that. who benefiting in really have great and operation

most very the than retailers like of getting -- can biggest that seems sporting whole product they're America made get -- from still I yarn entry benefit in the what forceful part or sorting we're But conversations Mexico, these how us. also the impacted an agreement destocking interested out It of of process has these we in we're other regions. which more increased brands that compliant Central think Central America, but around retailers has seeing to and

bottom Reshoring it's So still away. not is gone happening. line,

this because see destocking just phenomenon. it You can't of

Okay.

a upfront in about question exposure know that opportunities? or new in question Just market? different limited that I are one into that follow-up on salesperson moving asked some to new to you of to you’re investments categories had evade make home to a hire there before some capitalize Do on these was of you’ve a sell the you auto these into. marketing there And past. need have

on -- the mentioned, A.J. super SG&A managing We’ve the last our over as Yes. job years. done

revenues business declined. Our

new U.S. in hiring into to growth on your in point, can Asia some are, we the However, here that the accelerate help us both those and markets. talent investing

disconnect. call. for thank and participation, conference We And you this now also concludes your may question-and-answer ends our and today's you period