Good morning, and thank you for attending Unifi'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 Ingle, Chief Executive Officer; A.J. Eaker, Chief Financial Officer. And during this call, management will be referencing a webcast presentation that can be found in the Investor Relations section of unifi.com. Please familiarize yourself with Page 2 of the 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, 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 seeing a couple of insights that come out for us. And then I'm going to turn it over immediately to Eddie and A.J., 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 then 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 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 performances 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…

Thanks, Al. And as Al just highlighted, we do believe that in most aspects of our business, Unifi 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 to be able to respond quickly to an uptick in customer demands 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. 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 4 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 Americas 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…

Thank you, Eddie. As both Al and Eddie noted, we've continued to make great strides towards improving our business, and we are well positioned to pivot to growth and stronger profitability as we move forward. Our focus has remained on keeping our variable expenses across both production and administrative functions low, and we've already begun to see a sustainable reduction in those expenses. As we've previously noted, we plan to reinvest these cost savings and increase profits in the key areas of our business that will drive innovation and margin expansion, such as the two new REPREVE fiber products that Eddie just discussed. Turning now to our financial results. On Slide 8, you'll see our consolidated financial highlights for the quarter. Consolidated net sales for the quarter were $157.5 million, up 6% sequentially versus the third quarter or 4% year-over-year, driven by our beneficial pricing actions, continued market share gains and some demand normalization in conjunction with improvements from our profitability improvement plan continuing to materialize. This greater performance also led to our gross profit seeing an improvement of more than 100% sequentially, marking our third consecutive quarter of gross profit improvement. Turning to Slide 9. In the Americas segment, net sales were sequentially flat and down 4% year-over-year. which, as Eddie noted, was primarily driven by a slowdown in spending and customers pushing out a few orders. However, with that said, the Americas segment did experience a significant gross profit improvement which was driven by improved productivity in the region following holiday impacts in the third quarter of fiscal '24. Slide 10 displays our Brazil segment highlights, which experienced net sales growth of 9% during the quarter on a sequential basis and almost 19% year-over-year. Our Brazil segment has continued to benefit from our ability to take price in…

Thank you, A.J. Let's now turn to Slide 13 to discuss our forecast for the first quarter of fiscal 2025. As we look forward, we're having more positive conversations with our customers about their needs and destocking is clearly behind us and most of the industry, which will help as we anniversary some of the impacts of this unusual period. And looking specifically at the first quarter, we expect to see our positive momentum push forward as we begin our new fiscal year. More specifically for the quarter, the first quarter, which, as a reminder, is historically one of our slower quarters from a sales perspective due to seasonality, we are expecting the following, net sales between $147 million and $153 million, which at the midpoint would be roughly a 10% top line growth year-over-year. We expect adjusted EBITDA to range between $1 million and $3 million, a significant improvement over last year's EBITDA loss. And we also expect to continue to keep a disciplined eye on capital expenditures and believe CapEx for the quarter will come in between $3 million and $4 million. Then in terms of our fiscal '25 outlook, I'd like to provide a little more context on Slide 14. Our underlying momentum is rebuilding. So in fiscal 2025, we believe we'll see a return to more normal conditions, which will support top line growth in excess of 10% year-over-year. Further, we believe the proactive decisions we have made to control our costs and streamline our business will continue to show up in stronger profitability results next year. We expect EBITDA to be positive in every quarter of the fiscal year and see a path to a significant increase in gross profit, gross margin and adjusted EBITDA. Lastly, we've budgeted to keep capital expenditures contained, and we…

[Operator Instructions] And you first question comes from the line of Anthony Lebiedzinski. Your line is now open.

Hi, good morning, and thank you for taking the questions. So certainly nice to see the improvement in sales and profitability during the quarter. As you pointed out, Brazil showed the most improvement from a top and bottom line perspective. Just wondering what is your confidence level as far as being able to sustain that type of improvement going forward?

Specifically in Brazil, we actually feel very confident in the demand signals we're getting. We expect to run full throughout the fiscal year. There will be some margin pressure as the raw materials inputs normalize and our margin is going to catch up with the new higher input costs. But for the most part, we do expect to remain strong and have much better [indiscernible] performance in Brazil this year versus last year.

That's great to hear. And just a follow-up as far as the raw material costs. Are you seeing that in all regions? Or is this specifically to Brazil that you referenced to?

It's specifically in Brazil due to the supply chain that we have. Most of the inputs come from Asia and the freight cost international container costs have risen significantly, which has given us a pricing opportunity.

Understood. Okay. And then as far as -- in other regions, what are you seeing from a cost perspective of raw materials?

Raw materials have been predominantly for the most part, flat.

Got you. That's good to hear. Okay. And then -- so in your conversations with your top customers in the Americas, obviously, your largest region, what are you hearing from them as far as when we could see improved results?

When you look across our top customers in all regions actually, not just the apparel segment, they are telegraphing to us that our fiscal Q1, the July through September period is going to be a little slower than they had expected, but they are, I think, almost all of them are expecting an uptick in October. We have seen a significant improvement already in Central America, our business down there and maybe they're a leading indicator, but we do expect to see that business improve actually as to move the next -- through the next few months. In the US, specifically, there are some markets that we sell into that traditionally, they are slower in the summer. And as we move into the late September, early October period, things will get back to a more normalized higher run rate. But they're -- generally speaking, positive, it's very different from what it was this time last year.

Got you. Okay. So it sounds just like normal seasonality as far as what's impacting that, okay? Okay. And then in terms of the new product offerings that you announced earlier this week with the white dyeable filament yarn and ThermaLoop, just wondering how meaningful could these new products be? I know you talked about really calendar '25 as far as seeing a benefit, but just wondering if you could -- if there's any way you could put a number or just give more details as to what's the opportunity for those new products?

Well, I personally, I'm incredibly excited about what we've been able to bring to the markets. We've been asked for several years now, how do we make the supply chain more circular. And on top of that, there is pending legislation in the EU that will require inputs to recycled inputs content to be not just from bottles, but also from textile. So we believe we've hit the right note with a 50% content of Textile Takeback, but 100% recycled. We believe based on the messaging we've been getting from the brands that we are right on the sweet spots for them to be able to communicate. I've actually spent time personally talking to brands in Europe and in the US. And from -- based on their reaction and the reaction is different depending on the brand, but based on the some reactions of all these brands and retailers, we think we've hit on a nice balance of circularity and sustainability. Because some customers are based on our focus on carbon reduction. Some customers are based on fossil fuel consumption depletion, and this provides the answers to both. And I think what's really exciting, Anthony, is the fact that one of these products is a new product line for us, insulation and it allows us to call directly on the brands and we can get spec-ed in as a solution for providing a recycled content product.

Got you. Yeah. That sounds very good. So as far as -- I know it's hard to say for sure, probably as far as the timing of this pending legislation. But I mean, as far as what you know, what's the earliest that you think that you could actually see that going through because I think that, that could be meaningful to you guys?

I think in the second half of this fiscal year, the January through July period, we'll start to see -- we'll be sampling now, but we'll start to see meaningful production orders and really at the beginning of our fiscal 2026, 12 months from now, 10 months from now, it will be in our budget, and it will be visible from a revenue perspective and margin perspective. But we are planning for the next six months to fulfill the sampling needs of all the customers, so they can figure out how and when to put it into their programs.

Got you. Good. Okay. And then as far as the beyond apparel initiative, I know that's something you guys have talked about certainly in the past. As far as thinking about this going forward here, are you actually gaining some new customers? Are you actually seeing more purchase orders to come in? And maybe if you could just provide a little bit more detail on the apparel initiative. That would be helpful.

Yeah. It's -- we have talked about beyond apparel a lot in our calls really the last 12 to 18 months. We are seeing traction. We are seeing commercial orders. And I believe by the -- in the next call, we'll be able to outline some of the revenue impacts that we're going to see from these initiatives. Right now, I can't give specific details, but I'm very confident that by -- in the October call, we'll be able to outline the progress we've made and what that means to our business, but we are well on our way to making it part of our business. Thanks.

This is Al. I just wanted to add something to the Eddie's comments. I'd say that in fiscal 2026, we'll see an impact and probably a little bit in the end of this fiscal year. But the thing that's exciting is the products that Eddie is talking about, the new ones with Textile Takeback and the insulation, they have stronger -- significantly stronger margins than our base business. And then if you go to the beyond apparel, I know we've been talking about it for a long time, but one of the new pieces of information is to get qualified for some of these customers, boy, it takes a long time for qualifying the quality of your product, the timing and to get contracts signed. But those are happening. And that's another one that has significantly better gross profit margins than the base business that we're into today. So I think going forward, we'll be less dependent. We're still going to sell a -- want to be in the apparel business, but will be less dependent on it. And this new Textile Takeback is a real boost in the environmental sustainability story. So I wish these were going to show up this quarter. They won't, but they will be probably the end of the fiscal year.

Okay. That's great to hear, and I appreciate the comprehensive answer. So I guess my last question, just a follow-up, as far as the margin differential, any way you guys could quantify or give some more additional color as far as what the margin difference you think will be for the new products versus the legacy products?

Sure, Anthony, it's A.J. Thanks for the questions, and thanks for joining this morning. In general, we're seeing that as, in general, double what we see from our base business. Certainly, the base business is constrained, especially in the Americas right now with fixed cost absorption and not getting the full volumes in that we've been chasing for several months now. So those margins are naturally suppressed. But you've seen those in the past in the low double digits, somewhere between 8%, 12%, 15% that we've been able to perform in the better years. So with these new products as they have some innovation underlying those and we're able to really key in on what customers need with the new products, we're able to see double the margin there in many cases.

All right. Well, that's great to hear and I look forward to seeing the progress that you guys will be making this year. So, thank you very much, and best of luck.

Thank you.

Excellent. Thank you, Anthony.

[Operator Instructions] And that concludes our Q&A session and today's call. Thank you, everyone, for joining. You may now disconnect.