Unifi, Inc. New

Good morning, ladies and gentlemen, and welcome to the second quarter 2021 Unify, Inc. Earnings Conference Call. At this time, all participants are in the listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchstone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. A.J. Ecker, Vice President of Finance. Sir, the floor is yours.

Thank you, Renz, and good morning, everyone. On the call today is Al Carey, Executive Chairman, Eddie Engel, Chief Executive Officer, and Craig Creatore, Executive Vice President and Chief Financial Officer. During this call, management will be referencing a webcast presentation that can be found at unifi.com and by clicking the conference call link. Management advises you that certain statements included in today's call will be forward-looking statements within the meaning of federal securities laws. Management cautions that these statements are based on current expectations, estimates, and or projections about the markets in which Unifi operates. These statements are not guarantees of future performance and involve certain risks that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecasted, or implied by these statements. You are directed to the disclosures filed by the SEC on Unified's Forms 10-Q and 10-K regarding various factors that may impact these results. Also, please be advised that certain non-GAAP financial measures, such as adjusted EBITDA, adjusted EPS, adjusted working capital, and net debt, may be discussed on this call. I will now turn the call over to Al Carey.

Thank you, AJ, and thanks for everyone joining the call this morning. I'll be brief in my remarks, and I'll provide you with, let's say, the broad themes of what we've seen in the first half of the fiscal 2021, and then Eddie and Craig will follow me with the details of the Q2 performance, and then we'll have a Q&A. So, Q2 was a very positive quarter for us, as we saw a nice recovery from the COVID impact. We still have plenty of work to do, but this quarter was a strong step forward. While our revenue was slightly below prior year, it was better than our internal expectations, and then both November and December revenues were above the prior year. Our adjusted EBITDA performance was very strong. It was double versus a year ago. But we had some tailwinds, and we also had some upsides in a few areas, particularly from our Brazil segment. But even after you normalize those items, we still performed significantly better than prior year. Our balance sheet continues to show improvement. Inventory levels, cash, and net debt are all in a good position. And then Craig will take you through the details of that very shortly. So as you look into the second half of 2021, we're optimistic. However, we aren't entirely certain about the most recent spike in COVID cases and how it might impact retail consumption or our people in the plants. But we believe the good news on the vaccine should create some optimism for our future quarters performance. I wanted to comment on two broad positives that are outside the financials. I think both of these strengths will provide a positive impact to our business for the balance of the year and then even beyond that. First, we have the right leadership team in place from top to bottom. Some of you who follow us remember about a year ago that wasn't the case. So from top to bottom, our team brings significant amount of company and industry knowledge. They have really shown resilience during this COVID time. They work well together, and we're now beginning to see the value of leadership continuity in our performance. The second positive trend appears to be an acceleration of momentum on environmentally sustainable products from our customers and also from consumers, especially young consumers, who I think feel that they want to do something positive for our environment coming out of this pandemic. And this shows up on our mix for Reprieve, so our sales mix for Reprieve has maintained an upward trend, and it's moved now to a record level of 37% in Q2. It was 35% in the last quarter and in the high 20s a year ago. Additionally, the requests for our reprieve hang tags have gone up significantly. These hang tags, you may know, are affixed to the product containing reprieve, and they help tell the recycled story. And in the last six months, we shipped 45 million hang tags, and that compares to 33 million a year ago during that same period, so it's up a third. We believe that many of our customers are now taking action on sustainability commitments that they've made for 2025. These environmental goals are things that have to be accomplished for our customers, and the date's getting closer, 2025, closer than we really think. So I think overall, the environmental sustainability is a definite megatrend that's only going to go up from here, whether you're talking about brands or public policy or in society coming out of the pandemic. So in summary, I'd say Q2 was a very solid quarter with some real nice momentum. Now, before I turn it over to Eddie, I'm pleased to announce the addition of Emma Battle to our board of directors. We just announced it yesterday. Emma has extensive marketing background, general management, and strategy experience. And she's had experience with companies like PepsiCo, Hanes Brands, Red Hat, and she's an independent director at Bassett Furniture. And today she's the founder and CEO of MarketVigor, a marketing company. I can tell you that Emma brings a skill set that's very complimentary for our board, and we're delighted to have her on the Unifi team. So with that, let me turn it over to Eddie Engel, our CEO.