Unifi, Inc. New

Good morning. My name is Brianna and I will be your conference operator today. At this time, I would like to welcome everyone to Unify's fourth quarter fiscal 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. I will now turn the call over to your host, A.J. Ecker, Vice President of Finance. You may begin your call.

Thank you, Brianna, 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, Unify.com. Please turn to page two of the slide deck for our cautionary statements. 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 Unify 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 FCC on Unify'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. Lastly, I direct your attention to slide three and remind our audience that we changed our segment reporting to align with recent organizational changes. In the fourth quarter of fiscal 22, Unify performed its annual segment evaluation and determined that three geographic segments best represent the composition of the business and the management approach under U.S. generally accepted accounting principles. Accordingly, Unifi is now reporting the Americas, Brazil, and Asia segments. You may find quarterly and annual historical financial information using the updated segment methodology on slides 11 and 12. I'll now turn the call over to Al Carey.

Well, thank you, A.J., and thanks to everybody who's joining the call this morning. I'm going to take just a couple of minutes to tell you how we're viewing our business at the start of our new fiscal year, and then I'll turn it over to Eddie and Craig. They're going to take you through the details of our performance for quarter four and how the full fiscal year of 2022 ended. So we'll start with the quarter, quarter four. We had very good revenue growth for the fourth quarter. We achieved $218 million in revenue, which is a little better than what we expected. That's 18% growth above a year ago. But that's despite Asia being down by 17% due to the COVID lockdowns that took most of the quarter. That means the rest of our business was up 30%. The quarter four performance allowed us to push the total fiscal year sales above $800 million. And that's the best sales performance this company has had in many, many years. And Craig will talk about that a little bit later on. Quarter four performance had two highlights. One is reprieve continues to be a success with our customers and also our ability to cover cost increases with pricing. So that's the top line. On the bottom line, we had EBITDA of $12.2 million for Q4, which is right in line with what we were talking about in our forecast. We would have liked it to have been better. But we were required to cover the downsides that came at us in the quarter, which was the China COVID lockdown, which was no small thing. And then the spike from raw material pricing that happened in the middle of June, which didn't give us much time to react. So essentially, we had a very strong revenue growth, top line, and a respectable bottom line. And if you took those two surprises that we had that were beyond our control, if you took those out of the profit picture, we actually would have had a very strong profit performance. So let me move to quarter one. All of us have heard comments from the retail community about the high levels of inventory that are out there and have built up. So we surveyed some of our customers. We had about 15 of them. We covered mills, brands, and also retailers. And there are a couple of common threads that we heard from those people. One quote kind of captures it all. customer of ours said, six weeks ago I was asking you to ship me whatever you could get. Now I've got too much inventory and I have to move it. And that's kind of the theme that went through all of the 15 that we spoke to. They've seen some slowdown in apparel sales as their consumers are dealing with inflation on gasoline and food and other what we call necessities. And this little bit of a downturn started in about Memorial Day and it's unclear how much the decline will be seen in apparel volume or how long it will last. We have seen a decline in volume in North America as a result of this dilemma that's going on. It'll make it difficult to give a precise forecast on volume for the first quarter or the second quarter because I think the retailers and customers don't have a good forecast. There's still a lot of uncertainty but we definitely see it in the first quarter, and probably we'll be updating our guidance more frequently as a result of this marketplace issue that's going on. One other moving development, fast-moving development, is with all of this going on, we're seeing very definitely cost reductions on our raw materials that began in August. Now, this could be good news, and it could offer an opportunity to recover some lost profits from this lower volume, and we have a number of initiatives that we're working on to capitalize on the opportunity, and Eddie will provide you with some perspective on this when we speak about this later in the presentation and in the Q&A. Let me just make one comment on the longer term. While our team is focused on getting beyond this long tail of COVID that causes a few challenges, the top focus we've got in this company is to be focusing on the execution of the strategy we presented at the February investor day. That is the most important thing. And the short-term issues I described a minute ago are not going to slow down our delivery of our goals in 2025. In fact, I think we're making very good progress on some of the key initiatives that make up that strategy. First of all, reprieve momentum continues with our customers. You'll see a lower mix because of China in the quarter, but we are in a very good spot with reprieve. EVO cooler technology is now getting some scale, and I think you'll be able to, it's performing better, above our expectations, and I think in the second half of the year, productivity will show up as a result of that new technology. And we've made improvements in labor. We've spent the money to do it. We're not done yet, but I'm encouraged with the progress we're making on labor. Also, Brazil and Asia's future outlook remains bright, and then we've got this raw material cost decrease that's coming at us. Those are some of the positives. We're optimistic about the future. I don't see the short-term challenges having an effect on the long-term view. This long tail of the pandemic certainly has caused some challenges, but they're very definitely going to diminish as the year goes on. So with that, let me turn it to Craig and Eddie to take you through more of the details, and right now I'll turn it over to Eddie.