Unifi, Inc. New

Good morning, and thank you for attending Unify's fourth quarter fiscal 2024 earnings 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. Speakers for today's call include Al Carey, Executive Chairman, Eddie Engel, Chief Executive Officer, AJ Ecker, Chief Financial Officer. And during this 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. And now I will turn the call over to Al Carey. Al, the floor is yours.

Thank you. Thank you, Kathleen. Good morning, everybody, and thank you very much for joining us on the call today. I'm going to start with a brief but broad overview of our performance for Q4, see a couple of insights that come out for us, and then I'm going to turn it over immediately to Eddie and AJ, who will provide you with the real details of the quarter. So the first insight was this broader textile and apparel industry sales are coming back a lot slower than we expected, but they are improving. And while the inventory to sales ratios at the retail level and for these brands are now close to the norms and at pre-COVID levels, the customers are still very cautious about building back inventories, and they're watching their cash, and they're keeping an eye on what I'd call a sluggish consumer trend. But retail sales for apparel and furnishings for the first half of the year were growing at about low single digits. And, you know, if you factor in inflation, they're probably flat to slightly down versus a year ago. Our sales for the quarter, for this fourth quarter, are better than the previous quarters of 2024, and they're better than last year's Q4. Our EBITDA was $5.9 million, and it's substantially better than the last three quarters, and better performance is attributed mostly to these. quarter two and quarter three cost reductions that that we told you about last time so most of those cost reductions are now fully in place now the second insight to the quarter was we are seeing improved market share in North America despite the sluggish sales come back and we're very close to booking sales in the new categories that we've told you about before which are the beyond apparel categories and those categories include home military automotive and industrial applications. And these sales will start to offset the low performance of apparel. And also they'll give us improved mix as the margins on these products are a good bit better than the base apparel sales that we have. And the third insight is that we've been working on innovation all through this period. And we now have introduced to the marketplace just this week our textile take-back introduction, our new revolutionary insulation products, and additional layering of our reprieve platform. And these products have been under development for several quarters, and they're going to generate sales in calendar 2025. We won't see any of that in the next couple of months, but they will begin in 2025 and in 2026. And two of these products are very interesting, in particular the ones that address the customer demand around circularity and also around reducing carbon footprint. So if I had to say how we feel about the first half of 2025, it will show improvement versus prior year, but it'll be a gradual, slower comeback. Then the second half should show a more dramatic comeback. And I'd say we're feeling cautiously optimistic as we look out over the new fiscal year. And we really believe that soon enough, these customers that we have are going to have to start replenishing their inventories. They're also going to have to start preparing for the spring selling season. And I believe those inventories right now are quite low, and they're below pre-COVID levels. So we're going to continue to manage costs very tightly during this period. We're going to preserve cash until all this opens back up. And I think when it's all over, we'll be a better company than we were before all this. So let me turn it over right now to Eddie Engel, our CEO, and he'll take you through more of the important details of the quarter. Eddie?

Thanks, Al. And as Al just highlighted, we do believe that in most aspects of our business, Unify has finally begun to turn a corner and the operating environment is beginning to get closer to returning to more normal levels. And over the past year plus, we've been working hard to reposition our business so as to be able to respond quickly to an uptick in customer demand and that the results of those efforts have already become apparent in our financials this quarter as we saw solid year-over-year revenue and volume growth and a significant improvement in our margins. Now we are also continuing to see strong momentum across our segments and we recently announced some exciting new product innovations which I will touch on in greater detail shortly. Turning now to slide four for an overview of the quarter, During the fourth quarter of fiscal 2024, we reported $157.5 million in consolidated net sales, which was up 4% year over year and 6% sequentially compared to the third quarter. This improvement in net sales was largely driven by our Brazil segment, which has been performing very well recently. In addition, our operations in China have also been continuing to build momentum and contributed to our strong performance during the quarter. We are continuing to see the benefits of our America's cost reset efforts, which is evident by the significant improvement in our gross margin and subdued operating expenses. We expect to see these efforts continue through the next few quarters as well, although it's worth noting that some of these savings will be slightly offset by inflation. With that said, we still believe we have driven sustainable efficiencies and cost discipline over the last year that our organization will continue to leverage into the future. Our sales transformation has also been progressing well, and we have continued to see the benefits of our transformation efforts with gross profit during the quarter experiencing a $6 million improvement on a sequential basis. This gives us confidence that our operating profit can continue to improve during fiscal 2025. I'll now provide a brief update on each of our business segments. In the Americas segments, while we are continuing to take market share, we did experience a bit of a slowdown due to some competitive shuffling and some customers pushing out orders for a few months. But we remain well positioned to take advantage of further improvement in the region, as our continued efforts on Beyond Apparel initiatives are helping to offset the weakness in apparel programs. Our Brazil segment, as mentioned earlier, was our strongest performing segment during the fourth quarter. The strong performance was driven by our ability to take price in the region operate at full utilization and we have continued to benefit from the capture of additional market share following our main competitor to exit the region. In our Asia segment, we are continuing to see signs of recovery and we believe that we'll see stronger performance in the region during fiscal 2025 despite a seasonally slower first quarter. Turning now to slide five for an update on reprieve. During the fourth quarter, reprieve represented 34% of sales a meaningful increase when compared to the previous quarter. This improvement in sales was largely driven by the positive recovery trends that have been seen in Central America, as well as a moderate recovery in Asia. Looking ahead, we continue to believe that we will see additional improvements in our pre-fiber business as we progress through fiscal 2025. This part of our business will be aided by the revenues we expect to see in calendar 2025 as we begin to see commercial activity due mainly to our recent innovation efforts from some new Reprieve product launches. On the marketing front for Reprieve, we also achieved several exciting co-branding placements this quarter, notably with Dolce Vita Footwear, part of the Steve Madden Group, incorporated Reprieve into its products. Kate Spade featured Reprieve in a pajama line for Costco Canada, and Teva launched an iconic version of their original universal sandal in a reloot version which contained Reprieve powered by our own textile take-back program. Now, as many of you are aware, if you've been listening to our calls over the last few quarters, our textile take-back program aims to increase circularity in the production of textiles by transforming fabric waste into a recycled resin that in turn is converted into a prefiber. Through this process, we are not only leading the transition for a more circular supply chain, but we're also helping our customers, such as the ones I mentioned earlier, meet their sustainability goals. Now, staying on the topic of textile take-back, I would like to spend some time reviewing some of the new innovative Reprieve products that we just announced earlier this week that are harnessing our textile take-back program and already have the ability to be offered at scale. First, on slide six, you'll see some highlights of our new white Reprieve filament yarn powered by our textile take-back process that we will be showcasing at the Intertextile Shanghai Apparel Fabrics Convention next week. The new form of a pre-filament yarn is made of 50% textile take-back waste and 50% recycled bottles, which is the world's first 50% textile waste filament yarn with a tracer and U-truss verification. The new offering is white, dyeable, and available at scale now. On slide seven, For our second new product announcement, you can see that we've launched a totally new product offering, but still based on polyester fiber called Thermaloop, which is an insulation solution that is designed for home goods, outdoor gear applications, things like sleeping bags, and apparel such as winter jackets. What makes Thermaloop so unique is that 50% of the fibers used to make it are from textile waste. And we are launching this new product offering in black. The Thermaloop products were launched as 100% recycled contents. What is even more exciting is that the Thermaloop padding product is the first of its kind to have a reprieve recycled polyester low melt fiber, which allows our customers to provide a wider range of sustainable offerings. Both Thermaloop and our new form of reprieve filament yarn will be sampled by our customers throughout fiscal 2025. We believe we will begin to see some revenues and volume benefits from our new filament yarn in the second half of fiscal 2025. And we'll begin to see the growth benefits from the thermal loop throughout fiscal 2026, supporting additional growth moving forward. Before I wrap up, I would also like to note that our Beyond Apparel innovations are continuing to grow, and with conversations progressing with a number of customers in key end markets, and we are hopeful that we'll be able to further discuss these in the near future. With that, I will now like to pass the call over to AJ to discuss our financial results for the quarter.