Unifi, Inc. New

Ladies and gentlemen, thank you for standing by and welcome to Unify's third quarter fiscal 2022 earnings conference call. At this time, all participants' lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, A.J. Ecker, Vice President of Finance. Thank you. Please go ahead.

Thank you, R.J., and good morning, everyone. On the call today is Al Carey, Executive Chairman, Eddie Engel, Chief Executive Officer, and Craig Creatore, Chief Financial Officer. During this call, management will be referencing a webcast presentation that can be found in the investor relations section of our website at unifi.com. Management advises you that certain statements included in today's call will be forward-looking statements within the meaning of the 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 with the SEC on Unified's Forms 10Q and 10K 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 it over to Al Carey.

Thanks, AJ. Good morning, everybody, and thanks for joining Unify's third quarter conference call. After a few comments about the state of the business, I'll then turn it over to Eddie Engel and Craig Kreator, who will fill you in on the Q3 performance for the company, and then we'll move to our usual Q&A session. I'd say most of us on this call are operating in some of the most turbulent times that I can remember, and experiencing some of these macro headwinds, such as pandemic inflation, and labor shortages. And now there's a whole new round of challenges, such as the war in Ukraine and the COVID lockdown in China. But I would say despite all of this, our team at Unify has remained agile in trying to work around these challenges. That's why I'm happy to see that our Q3 revenue is right on our forecast of $201 million. And our adjusted EBITDA of $12.2 million is also a little better than forecasted, and we had to offset some new costs that came in over the course of the quarter. The $201 million on Q3 revenues are going to allow us to deliver the full year of $800 million plus on revenues, and that's a significant milestone for us at Unified. You'll recall back in Q3 that we were working on two pretty significant challenges that was in North America. One was getting pricing to offset the raw material costs And then the second challenge was the labor shortage that we had in North America. While both, I would say, still are a challenge, we've seen improvement in Q3, and going forward into Q4, we'll see more improvement as well. These lockdowns in China began to be a headwind at the end of third quarter. They're going to continue to impact us in the fourth quarter, but the underlying mid- and long-term demand trends are very strong for our Asia business. So we feel positive about that when the lockdowns finally end. In Brazil, while we're seeing some margin normalization that we spoke to you about last quarter, we're really happy with the current performance in the region, and we expect strong demand and market growth opportunities, and reprieve begins to become more of a factor in Brazil, which it hasn't been in the past. On reprieve, it continues its growth We were at 36% of our mix in the quarter. We're at 38% year-to-date, and I think this is driven by the increased attention to sustainability and recycled products from our customers. Many of our customers now are looking at us as a very good partner to help them deliver their sustainability targets. Most of them have significant targets that have come due in 2025. So this trend is not only going to continue, but I think it probably accelerates in the upcoming quarters. So as I look out over the next quarter, yes, we do have our work cut out for us with the China COVID lockdowns, but we have a lot to look forward to in Unify. Our labor situation in North America is getting better. We have been able to pass along pricing. Our reprieve momentum is good. And despite Asia lockdowns, that market has very strong demand, and we think that's going to come back fairly quick. And all of this makes us feel confident about our future. And as we take a look at our goals that we laid out during Investor Day, we continue to be very optimistic about that. So I would say we're beginning to see some positive momentum building. So with all that, let me turn this over to Eddie, who will now take you through some of the details of our quarterly performance.