Unifi, Inc. New

Ladies and gentlemen, good morning. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to UNIFI's second quarter fiscal 2023 conference call. Today's conference is being recorded and 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 key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 once again. Thank you, and I will now turn the conference over to A.J. Ecker, Vice President of Finance and Treasurer. You may begin.

Thank you, Abby, 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, we'll be referencing a webcast presentation that can be found in the investor relations section of our website, unifi.com. Please turn to page two of that 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 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 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 net income, 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, everyone. And thanks for joining this call. I have a few remarks to kick this off and then I'm going to turn it over to our CEO, Eddie Engel. So as you can see, quarter two of 2023 has been a very difficult environment to operate in. And you saw that in the pre-release that we had a couple of weeks ago and also our materials for today. At this point, I think most of you have heard about apparel retailers and apparel brands that have had significant backlogs of inventory. you know, in their system and in their stores, and they've been trying to discount this inventory and clear it out all the way through the Christmas holidays. And this imbalance of inventory began all the way back in June of 2022, so it's been with us for a while. And this has very definitely had a significant impact on our volume and our profits in Q1, as we reported before, and then it's also persisted. This issue has persisted and actually worsened for Q2. Now there is good news. We have seen a pickup in the month of January in orders for our U.S. operations. And it looks like we should see a gradual improvement through the balance of this fiscal year and then a corresponding improvement in profitability as well. With regards to our Asian business, that same inventory backlog from U.S. retailers is having an impact on our China business because a great portion of our business there is for U.S. retailers. So it's had a significant volume decrease for our Asian business. This situation has continued all the way through Chinese Lunar New Year holiday. That ended last week. We expect to see some level of volume improvements coming very soon We'll know more in the next couple of weeks, but we do know that many manufacturers are opening up this week in China. While all of this has been going on, our people were busy working on several ideas. One was working with our customers on future volume increases, and I'll tell you there's a very definite increase from our customers for recycled material for their apparel, and it gives us optimism for our brand reprieve. This activity will show up in future sales, but I would say that the brand has actually gained momentum with our customers in terms of their interest all the way through the pandemic period and likely to continue right now. The organization has also been very hard at work on cost reductions. We've managed our inventories aggressively, and we've been able to reduce North American labor and headcount by a voluntary attrition strategy and holding positions open, and that gave us the opportunity to avoid excess costs. Additionally, the team has done a good job at generating cash even in this tough environment, and we have a strong balance sheet thanks to a new credit facility. You'll hear more about that from Craig. We do believe the worst is behind us, and we're going to see gradual improvements in volume and profits in the next two quarters. And we also see the fundamentals for our long-term business to remain in place despite all the turbulence that we have had over the last six months. In closing, I just tell you this, the Unify employees and the management team during this time frame have done a very good job and we're proud of them. Everyone's working hard to offset these challenges and they've kept an enthusiastic attitude even though most of the challenges we face are well beyond their control. So we are proud of them. So at this point, let me turn it over, turn the presentation over to Eddie Engel, our CEO, and he'll take you through the details of our performance.