Unifi, Inc. New

Good day and welcome to Q3 2023 Unify Earnings 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 star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the star 1 again. For operator's assistance throughout the call, press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome AJ Aker, Vice President of Finance and Treasurer, to begin the conference. AJ, over to you.

Thank you, Connie. 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 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 Unifi'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 it over to Al Carey.

Thank you, AJ, and thanks to all of you joining the call this morning. I'm going to start with a few comments about the Q3 trends, and then I'll turn it right over to Eddie Engel, our CEO. So if you remember back at the end of Q2, we said that we believed that we got the worst behind us at that time, and we believe that's true. The U.S. sales have improved, and that's compared to the previous quarter. And additionally, we've made some improvements in our cost containment activities, such as SG&A and plant labor and raw materials. And this has allowed us to have an improvement in our U.S. gross margins compared to the prior quarter as well. It was interesting, though, to look at the timeframe of January through March at retail. And we were able to look at about 16 categories that are sold at retail, everything from apparel to food to electronics. And no doubt, apparel unit sales are declining January through March, but no more than most of the categories. All of them are declining mid-single digits. But if you add to that the fact that inventory levels are still high in apparel, they are improved, but they're still high. And we see that there's apparently less deep discounting during the same timeframe. So if you add these three factors together, it explains why the apparel business has not come back more robustly than what we're seeing right now. It also explains for us why our Asian business has not opened up bigger. Because most of our Asian sales, as most of you may know, are shipped into U.S. retailers and U.S. brands. So all of that being said, it's realistic to assume, though, that there'll be a gradual improvement in sales trends going forward. I'd also like to mention that as the business opens back up, reprieve sales should pick up even faster at our large customers because they are very definitely still focused on their sustainability goals. We have very favorable discussions with our customers about the future expansion of Reprieve. You just don't see it in the numbers today, but we will at some point in the near future. Finally, I'd say our teams have done a very good job of preserving cash, and our balance sheet is solid. So if I had to say how we feel about the quarter, I'd say solid progress. Still headwinds for the apparel markets today. and we expect a gradual improvement going into the next few quarters. So I'll turn it over to Eddie at this point.