Unifi, Inc. New

Good morning, and thank you for attending Unified's third quarter fiscal 2024 earnings conference call. Today's conference is being recorded, and all lines are being placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Speakers for today's call include Al Carey, Executive Chairman, Eddie Engel, Chief Executive Officer, A.J. Ecker, Chief Financial Officer. During the call, management will be referencing a webcast presentation that can be found in the investor relations section of Unify.com. Please familiarize yourself with page two of that slide deck for cautionary statements and non-GAAP measures. I will now turn the call over to Al Carey. Al?

Thank you very much. Good morning, everybody, and thanks for joining our call. I'll make a few general comments and turn it over to Eddie Engel for his review of the third quarter business and then AJ to review the financials. So if you look at our third quarter results, they're right about where we forecasted. I wouldn't say that we're happy with these results, but they are definitely improved over the prior quarter, and we expect the results will continue to improve. So looking at our quarter three revenues, they're almost 10% greater than quarter two. And the EBITDA is $5 million better than the last quarter, quarter two. So I believe that we've hit bottom in quarter one and quarter two, and we'll go up from here. I'm also encouraged that our quarter four first estimate is that the business should be better than Q3, and it'll also be better than prior year. I guess the best way to describe the business right now is that our industry sales are coming back, but still very slow, but definitely improving. That's what we're hearing from most of our customers and our partners. They're all saying about the same thing, but they also are saying that inventories are no longer the issue. You know, that whole issue of restocking and inventory backups. We don't believe that's an issue anymore, but we are seeing conservative ordering for the business based on cash management and some fears about soft overall consumer trends. But overall, opening up, green shoots are being seen. We have several developments at Unify, and they give me optimism about our ability to grow our sales and profits as we progress into the next few quarters. The first one is that we're seeing market share gains in both North America and Brazil due to a consolidating competitive set. Our largest competitor in both markets, both Brazil and North America, have ceased operations and that's helping our business. The second thing is we've successfully taken out costs in North America that definitely will improve our profitability, The people moves are complete. Several severance costs might linger into the next quarter or two. Third, our sales transformation efforts are improving our profit margins in North America with efficiencies and execution benefits, especially in the management of inventories. And you'll hear more about that in a little bit. Fourth, we have begun to get traction on business categories that are outside of apparel. And we also have made progress on developing innovation for Reprieve, particularly on a circularity idea. And then the final item I'd mention that gives me optimism is the new leadership team that's been put in place under Eddie is doing a very good job at working together collaboratively. They're making things happen, and they're very results-oriented. I'm very proud of them and proud of the results they've made in the last 60 to 90 days. So in summary, we'd like to see the business, the base business come back faster, but we are definitely making progress and we expect to improve our business results in quarter four and into the upcoming new fiscal year that begins in July. So with that, let me turn the presentation over to our CEO, Eddie Engel.

Thanks Al, and good morning everyone. As Al just highlighted, Our third quarter fiscal 2024 results were in line with our expectations as we continue to see month-to-month improvements in our financial results following what we believe was really the bottom of the apparel inventory destocking in December. And looking ahead, we continue to remain cautiously optimistic that we will begin to see a more normalized demand environment in the apparel industry as we move through the calendar 2024. Turning now to slide four for an overview of the quarter. During the third quarter of fiscal 2024, we recorded $149 million in consolidated net sales, which was up 9% compared to the second quarter of fiscal 2024. And this overall increase in net sales during the quarter was driven primarily by continued improvement in the overall market and the initial results of the market share gain as our sales transformation initiatives begin to take hold. Our cost reset efforts are also beginning to show in our bottom line, and we saw solid gross margin improvement sequentially. We are happy to see some of the initial success and we remain on track to reduce expenses by 2.5 million per quarter by the start of fiscal 2025. As for our sales transformation efforts, we have been making great progress in streamlining our sales process, improving our inventory management and realigning our resources to maximize efficiencies in our current operating environment. Some of the initial success in our sales transformation include gaining additional market share from our competitors and successfully reducing our inventory in the US while growing revenues at the same time. This gives us great confidence. We remain on track to see a $6 million annual improvement in our gross profit as a result of our sales transformation once the profitability improvement plan is completed, which is expected to occur by the end of this fiscal year. I'll now provide a brief update on each of our business segments. In the America segment, we are seeing a modest and encouraging improvement in our volumes. We attribute part of this growth to our team capturing market share in the region as a result of a competitor that we previously mentioned exiting the market. We are also highly encouraged by the growing morale we are hearing from customers as they look forward to the upcoming quarters. In our Brazil segment, performance has continued to improve and our market share in that region has increased from 12% to 18% over the last several quarters. We are pleased that we've been able to gain market share in Brazil despite continuing unfavorable pricing dynamics from competitive imports. While the pressures we are experiencing from competitive imports remain in the near term, we continue to remain confident in our competitive local supply chain position in the Brazilian market. We anticipate that we'll begin to see the full impact of our increased market share in both the Americas and Brazil segments in our financial results as we move into fiscal 2025. In Asia, we are seeing signs of a consistent recovery, and as is the norm, our results in the region were impacted by the Chinese New Year in February when evaluating the segments on a sequential basis. We have a number of proactive initiatives in process in Asia, and we believe will help us accelerate growth in the late calendar 2024 and 2025 as we look forward to sharing those down the road. Turning now to slide five for an update on reprieve. During the quarter, reprieve represented 31% of sales, a 6% decrease compared to the second quarter that was driven primarily by the typical seasonal impact of the Chinese New Year. Despite experiencing a decline in the percentage of net sales, Reprieve sales did actually increase by $1.1 million on a sequential basis. Looking ahead, we believe that we will see an improvement in reprieve sales due to both demand for the brand and its position as a leader in the branded sustainable performance fibers market. Turning now to slide six. In late February, we released our sustainability snapshot that shares impactful updates on our innovative sustainable mission, waste reduction achievements, and future goals. Included in the report was the debut of our pioneering T-shirt equivalent metric, in which we set ambitious textile to textile recycling targets to transform the equivalent of 1.5 billion T-shirts worth of textile and yarn waste into new products by fiscal 2030. In addition to this target, the sustainability snapshot also included several other goals, such as our target of reducing our scope one and two greenhouse gas emissions by 30%, by 2013. Turning now to slide seven for an update on our marketing efforts. We continue to dedicate resources to boost the presence and reach of our premier brand, Reprieve, and additional performance technologies. The highlight of our third quarter was our successful execution of the collaboration with Peter Millar and WM at the 2024 WM Phoenix Open. The WM Phoenix Open is one of the most sustainable large-scale golf events in the world and collects all of the PET bottles at the event. The Prix was showcased in a special edition apparel collection made from recycled bottles used to create three custom-style Peter Millar apparel items that were sold at the tournament in February. The collaboration was covered nationally on television, digital, and print media, and social platforms generated over 200 million impressions. This was an exciting collaboration for Unifi to be part of and really helped highlight the important role our company is taking in a circular economy, which is about taking what might be a waste product and turning it into something useful. Turning to slide eight, later this month, we will be hosting our seventh annual Reprieve Champions of Sustainability Awards in New York City. The awards celebrate both the industry pioneers who have helped Unifi achieve the milestone of recycling over 40 billion plastic bottles into new products through Reprieve, as well as our efforts to expand our impact through new brand collaborations and upcoming product launches. The awards will be presented to 37 brand and retail partners that have transformed 10 million or more recycled plastic bottles and 64 textile partners that have transported 50 million or more recycled plastic bottles through the use of Reprieve performance fibers. This year, we will be celebrating key brands such as Nike, Under Armour, Inditex, Rothy's, Lovesac, and Sirius Simmons Bedding. We look forward to continuing to work with these partners to reduce negative environmental impacts and be good stewards of our planet and future while inspiring others in our industry to do the same. With that, I would now like to pass the call over to AJ to discuss our financial results for the quarter.