Unifi (UFI) 2 Nov 232024 Q1 Earnings call transcript

Good morning, everyone. Thank you for tuning in Unifi's First Quarter Fiscal 2024 Earnings Conference Call. We do apologize for the technical difficulties and the late start, but we will be quick and I hope to answer your questions as quickly as possible. Today's conference is recorded. And you have the speakers for today as Al Carey, Executive Chairman; Eddie Ingle, Chief Executive Officer; and myself, A.J. Officer Financial Chief Interim and Treasurer. Eaker,

slide call, be found this Please to yourself of Al we'll call turn section reference can that familiarize that X Page presentation Carey. webcast with as on over unifi.com. I the a of During deck the Relations Investor

we're joining this discuss sharing be right Okay. on some we in Eddie Thank for the you, challenging how morning. Ingle, how this quarter forward, our I'll calendar to morning, Good it call A.J. then turn we're a XXXX. thoughts through managing I'll environment Thanks and also over preparing but everybody. the start better now, that, much by CEO. After we're will think

quarter again, sales as and consumer big apparel a If primary us profitability standpoint demand. impacted a were inventory plants, from also the the a orders to high you our at a look at levels once and slower issue. our But that's these results, is of by persistent it and of the lack for retail tough issue was

of has levels levels. say the the slower and than actually progress is thing. While encouraging in disclosures signs that our customers on are retailers based destocking of same by we've industry sector, customers we also U.S. about exact to in the And right from about and and showing are would thing bottom some destocking majority process towards inventory are industry, public others brands pre-pandemic back from a getting are that we've that talked a the are One the while quite that I our believe for inventories heard across moved the there at the time nearing this expected. pace our feedback

being conservative an to in buyers than while they past preserve more more the in to said, some apparel holidays. and interest start orders they to where they've upcoming be and up We're place as would the are at beginning for Some industry effort that are. to the levels orders the stock inventory they instructed approach now. All like has back a after have the their rates to plan are normalize, declining, that the looks taken smaller, retailers it have frequent and see cash that point,

this managing things our time control, on that and our that heads on cash important and a preserving working hard. I and as costs well During doing we're And organization focus as We're like is that. is tightly. CapEx. to are that morale we But good, our inventories can are very tell we're we're and would down, for closely our focused those you team's things managing

the as the new traction are called apparel. our in U.S. market We're We Beyond gaining customers share has market. with #X gaining the exited in competitor segment

in the new categories like as forward that REPREVE, have to additionally, interesting more moving contribute future. would very tell about We that we little we're our we innovations details on as bit on. which a growth. And several And long-term more have some soon we you to have will

XXXX business for difficult So time as against the believe on, we're better in control executing the future year. this going goes the see things substantially to and sustainability getting with consumer gets calendar this and environment. keep bodes our bigger in free only the of well business, we in We our

Ingle, turn to piece. back CEO. it So Eddie our over to like that's I'd my

Thanks, everyone. Al, and good morning,

nimble continued the we're recovery of of in this first the for business. quarter highlighted, expectations difficult results As And industry while conditions as our circumstances been customers. be meet managing to and we have create our to challenging in current time, the In it's been apparel positioned our I of below in over first the I'm and came as a we're will we same operations, able periods macro and believe by situation, headwinds. destocking while continue XXXX. navigating our recent the that flows last that note to significant remaining needs optimistic half the calendar facing positive the were adapting us to a nearing its at for environment we this industry bottom pleased the future and necessary increase several free begin quarters, to cash meantime, generate the across will

of the first quarter X to led in net quarter. we Slide of overview recorded and quarter, an sequential to weak decrease $XXX.X fourth performance marking levels for In compared to of an sales, demand the turning EBITDA lower-than-expected Continuation the the XXXX. revenue quarter. million Now during X%

focused we the time reengaging interest spending customers. with recapture effort in customer to During made a quarter, Central America,

was these based in our expect operations. Mexico-based shutting the and quarters. Americas the a market to direct new in Americas, on of share dynamics, production competitive plant coming the we standpoint gain its announced Now the one recently in it in efforts region, of a down From a Alpek competitive subsidiary ACRA, competitors and

in volumes result, As are sites. meaningful our a

We that see closure expect to opportunity. inventory to half as move from flushed market. been has the project out benefit this that through start large we'll of capture of We we first XXXX calendar the a of of the portion the the once

beyond and Brazil, continue Additionally, such volumes as XX-plus experiencing percent and in blowing at we soft capacity operating utilization. the orders currently In for are apparel record more. secure what in Americas, non-apparel we we new mattresses, calling to are markets

However, market, competitors demand our to been due to profitability the weak stay volumes pressures due at to has is dumping causing local pricing resulting Chinese their import continued us negatively lower in which from margin impacted levels.

environment improve to position once pricing operating Our should China's occurs. start

been labor has To pricing demand we operations with actions costs. these mitigate our efficiency. the Our This have the and manufacturing been deliberate to input hampered optimize our help protect material resources. made to margins raw our pricing overall align we've lower of maximize the boost needs pressures, and to resources of meet adjustments current productivity environment, includes and aligning by some profitability temporarily

demand costs challenging while we profitability to committed products continue an on recovery note the a despite the and of balance remain relates the in business We disciplined to brand platform. positioned healthy manner. capital our to we're controlling our generation essential innovative to will resources categories, the our strong and believe strategically forward in ensuring costs new controlling maintain order as landscape. focus important going continued that by to as sheet, develop growth we new invest during across especially cash our to to in REPREVE potential evidenced innovation levels It's meet quarter efficient is management our our it flow capabilities to are the Our expansion into positive

marketing. X Slide to Turning to REPREVE discuss and

slowdown XX% China sales, percentage sequential a year-over-year and REPREVE overall be demand of recover, marking net a ongoing we sales the sales. by first to as will increase REPREVE apparel a quarter a impacted of to We the as economic see sustainable the confident productivity. represented negatively for and in During REPREVE our environment and fibres leader remain the begins of space. quarter, China in in rebound believe the branded as in continue that

as On during marketing Volcom, our a is on and flagship brand elevating Neal the focus by with the remains our Leveraging through front, marketing and and vital Toms, partners our mix others initiatives. BXB brand, Luschek evidenced BXC partnerships quarter. of REPREVE

remains the globally need the with is we pass of at new the mill momentum trade On to I very, where REPREVE of will now through build our also A.J. strong. call number support discuss will launches. move shows the they QX, our the to partnerships mix results. on the with critical. quarter, established a partners And to front, story to our BXB as product a very we our financial new over continue marketing we textile with combined in cost, interest tell exhibited Providing take-back cutting-edge over

Thank you, Eddie.

year-over-year on for We Slide each net sales results beginning Let's quarter. the the move first comparison profit and provided into financial with X. gross

for from As expected, prior material demand sales pricing net associated apparel year, weak in raw resulting decline primarily than from lower and lower were the the costs. the consolidated environment XX.X%

maintained on with in part helping from our a profile, to aggressive profit The of gross selling to mentioned segment product sales Brazil impact on thanks pressure contributed weakness. saw the impacted continue line imports in the broaden price call, Asia the average the chip pricing Brazil Unifi's Americas which perspective, coming out pipeline, gross overall with net pricing pressures on is limit pressures margin in X, the Americas, again Slide The innovative As flake to the pricing together volume from lower and which competitive profit. connection China. From the prices the on sales in for strong production segment, unfavorably segment overall to volume in selling portfolio Chinese also this segment. last expanded and

fiscal declines heavily. impacts of were change weaker the Brazil in which across of modest in profit, a In Turning sales conveys partially sequential to Asia Brazil, a Slide increases in gross absorption XXXX QX and Americas, gross year-on-year offset in the pressures Slide segments. very volume specifically comparison. weighed chip-and-flight to and both that by for volume profit by fixed segments, the Americas is offset was X in pricing the the pricing sequential sales. cost within mix There similar mostly X was

X. Eddie. highlights to cover position back on a before balance I to Now moving liquidity will our the sheet few Slide and passing on call

asset-backed complement significant a we cash on our our recall to ago, providing year global you facility, liquidity refinanced As successfully credit hand.

reduce enabling recovery the us on focus confident in debt in the when operating now to we its to remains we business CapEx our positive for industry this net are demand a Furthermore, and spend cost in able our growth to During call Accordingly, that pass flows rebounds working the as until limit profitable demand. apparel produce environment. and more I'll continue we quarter cash is well normalize. flows to the back cash and free pronounced quarter, apparel chains produced were Eddie. there management supply we positioned industry opportunities controls, realizing weak capital

Thank you, A.J.

of against quarter commercial the executed quarter today. main made Slide call capacity to developments start turn initiatives year. we like have initiatives. some moment the turn take summary our during of the the fiscal XX strategy of of markets initiatives the we've we a during the session, in the Starting in and Americas the some respective which We've a across many Q&A for I'll each. operational our initiatives review to in commercial provide go-forward business the of the I'd with ways implemented at to for our But we Before and over discussed with these a the XXXX already to

on and commercial are optimizing process. growth the focused We

Americas Our to the in to chip forward. and and continue have will experienced going pursue adoption, our we diversify have opportunity and efforts this flake revenue sales portfolio through successful strong been

improve apparel those newly our markets. our a in customers' mentioned ways the opportunities capitalize us are better customers. on the process and to develop continue for on evaluating our believe front, growth to opportunity business the exit and commercial We better Further, our Additionally, and of also efforts implemented potential experiences experience. competitor beyond us we sales excited attack we about and our enhance the help for are These outcomes I sales process supports market. should the from Americas earlier constantly

commercial our is the creation value side. customer to our we their that drives more to which ways most value needs the engagement evolving believe customer will on can. allocating This increasing and time. constantly deliver relationships, Lastly, turn them enhance We're over in understand better to an time ongoing to process frequent identify we that

taken the to existing organization careful our we our in eBilling navigate have that in our clear, diligent of not demand sure normal, we have which headcount, attrition return we quarter, headcount productivity when the the conditions XXXX. continue will a through automation, as need labor believe is first efficiency resulting manage the that our environment. attrition priorities. but in this process. done environment. and make through that Americas, know been maintain approach this so benefits significantly to market to to a actions We've we continue From adjust calendar especially want valuable, to and managed hiring The the start because half flex and from will during to challenge operational a have to I we improved we including Moving standpoint installations

want our will of for with us. to I aligning production on customers' the our quarter. activities, how production during a our key Some our to this initiatives executed our on working cash And focusing well area critical This other reiterate through improve flows remain initiative focus attention effective operational team capital include planning.

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

Our forecast that fiscal consistent XXXX for sales the profitability completed second first quarter the include generally with performance is quarter. of just and

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

of work questions. their Now this through employees Unifi efforts all for close now period. we difficult we open hard I that, to move will and With the as for want thanking our line by

line from comes the Your Sidoti. first question from of Lebiedzinski Anthony

So managing first, job demand as environment. observation. your a far in flows guess Overall, cash a just I nice quick tough a as

on being able congrats to So that. do

So pricing. my as first far question, as

that about of transforming talked on of about So far basis. XX% process. the down, was pricing sales the you I one execution as the guys slides, as year-over-year a believe, component doing something In

So maybe can in that? will your do certainly like ago? through you And year help walk the I improve happened to a how what pricing you with quarter us just versus new said, think with initiatives on

as there's there very that well difference price. question. a Sure, The you're year-over-year We labelled effect mix, need as certainly seeing for mix Anthony, start it's off in price to much that customer A.J. as well I'll the comment material on activities. the we And and other That's Eddie for sales I'll our pricing the costs can. let align raw some aligning commercial as then value. with with also of

Yes.

As are And about careful very one having our in making react of support sure process. we in activity-based we're customers the is we this call, demand initiatives and mentioned the at situation, to have main being area time. this to we last we costing the

specialty more really cost evaluating commodity make make yards? items. the to these volume yards, the what high-running what it we're does So type us cost is And to

turn, orders for our so we to And accordingly. opportunity and customers price giving the place we're adjust can our in larger

right our long bring right way that our at the a certainly now. something are the make go, to process So on business. We're to protect to focusing through it's this going but sure we're we we same customer time, value

far could benefits as as Understood. guys opportunity And you far as you far could way be calendar the the as change guys that maybe in that as Any competitive 'XX? spoke as you then dynamics quantify what in for about.

Mexico that areas we year. lot better majority being Yes, we apparel million well for of was out in to It going U.S. the about we several XX in was are roughly that Mexico. beyond apparel. like here. talked is and than very was the we're was to pick that up service of customers and we're out actually a beyond business positioned A reasons. going believe the the business mattress now And up to that That confident GBP automotive, product right of being produce of exported

are about a a the the like built of relationships of able we're some up the new support in new of several in expect that be see We beginning as pick of signals said the developments. we'll exits. from calendar months our call, this this getting our customers base. lot don't last the have business with really the very as to these but lot to inventories We from repeated market until competitor as year confident positive we've And learned customer we

sales you chip revenue, going flake of terms And think the that? opportunity how is and what's much kind from of then the in coming And forward? of your

the portfolio, see portion start not a that. we in much sales there. It's that right but modest, significant lot interest beyond and charge some still we of again, Anthony, apparel a terms the to portfolio of currently, now. continue a We've a of consumption. sales to not the of nontextile with product I'll do to But But customers applications portion use of significant of and external something balance towards. continued with internal just

we the fewer we to And a what it price excited add to involved. put a steps yard is of point that, lower there's about our are obviously because drive continuation it than I'll is But our the have our especially in attributes And quality in marketplace. we that sustainable our more out in very REPREVE do resin up nicely. some resin, taking believe the chip, is products market

year. calendar. through move a have expect continue the through growth quarter-over-quarter, So we move as we This as while year-over-year, this do big we fiscal did we to year, that jump

maybe for and And business streamlining I good longer you some some at But then consolidation, perhaps obviously, current the demand a environment opportunity there and cost facility so facilities do is in of again, kind as the opportunities. at a mean is you maybe lot the you U.S. fixed perhaps of think not the lot of, have moment. term here an look do

context do think environment retailers term how the this we're more you So orders. longer far you in And in? that new as also as of about placing this that may be mentioned careful

that? are what on understand, thoughts to just So your longer-term

Good question.

the minute. we I last are will from lot Central destocked the they the a at sharp see especially until retailers, we all, normal. time. are they to in comes, and our sort that But to view, point what gets going already as fixed mean of waiting does increase reduce on be of expect of order. work when a America But in But the the the be First last of to looking cautious costs. demand think more fixed what around cost around back do they minute all a to finally trying done We've inventories consumer are demand, that

very what and accordingly. all going And fiscal we're demand we're marketplace be diligent looking the the and out there through at adjusting the real about in we every year, are We options. move at is looking to as

to this now There I call. further turn the back This time. conference no questions the concludes at today's over are will presenters. call

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