UNIFI INC Q3 FY2025 earnings call

• Initiatives to rationalize assets: Closing Madison, NC facility in mid-June, moving assets to other facilities, removing costs from Madison, selling the Madison facility soon, and seeing improved demand in North America and Central America. - Innovation: Traction in REPREVE innovations and outside apparel categories (military wear, carpet) with better margins. - Marketing efforts: Global launch of INTEGRATE, broadened REPREVE Takeback, launched REPREVE with CiCLO, co-branding with key partners, REPREVE Champions of Sustainability initiative, and media coverage. - U.S. manufacturing transition: Agreement to sell Madison facility for $53.2 million, expected to improve balance sheet and cash flow, with cost savings from consolidation.

In the Americas Segment, net sales were up 3% compared to the prior year, but gross margin declined by 350 basis points due to inflationary pressures and transition costs. The Brazil Segment continued to perform well with full capacity utilization despite dynamic costs and pricing. The Asia Segment saw net sales and gross margin decline by 12% and 150 basis points respectively due to macroeconomic pressures. REPREVE represented 31% of sales in the third quarter.

• Sale of Madison facility expected to close on May 15, with net proceeds to repay roughly one-third of debt and $3 million annual interest savings. - Anticipate significant cost savings from manufacturing consolidation, fully materializing in calendar 2026. - Forecast for Q4 net sales and adjusted EBITDA improving sequentially, with return to EBITDA profitability and positive free cash flow expected by late 2025 assuming no protracted global recession.

• Uncertainty in tariff situation impacting Asia business, with potential negative impact if current tariff levels remain. - Macroeconomic pressures in Asia affecting sales mix and pricing. - Inflationary pressures and transition costs affecting margins in the Americas Segment.

Q: What was the FX impact in the Brazil Segment?

A: The FX headwind in the Brazil Segment was about $4 million in the quarter and about $11 million in the nine months, which were a few percentage points on total sales.

Q: How much better are the margins for Beyond Apparel categories like military and carpet compared to base business?

A: Margins are at least twice as good as the base business.

Q: What's the impact of the de minimis rule exemption ending?

A: Expect could be a downturn in Asia business by 10% to 15% until tariffs are finalized.

Q: When will cost savings from facility consolidation start to be seen?

A: Some cost savings expected in Q1 2026, but fully realized on a run rate basis later in the calendar year.

Q: Any contingencies for the Madison facility closing on May 15?

A: Main contingency is adequate power output, with no hiccups expected.

Q: What percent of Asia revenue is from China?

A: Not disclosed as a lot of products sold go out of China but aren't disclosed.

Q: What are the fastest growing categories for REPREVE?

A: Performance apparel market in Central America, with near shoring driving growth; also packaging and other Beyond Apparel markets like automotive, home furnishing are opportunities.