Good morning, and thank you for attending Unifi's First Quarter Fiscal 2025 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; and A.J. Eaker, Chief Financial Officer. 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. I will turn the call over to Al Carey.

Thank you, and thank you, everyone, for joining our call today. Those of you who have followed our quarterly earnings over the last two years know that the macroeconomic headwinds have been stubborn, not just for us but for our entire industry. And until recently, high levels of apparel inventory have been quite a problem and then slow consumer sales have held down our revenues and our profits. Now that has continued in Q1 and even very recently, but we believe that trend is now improving when we begin our new calendar year of 2025. We're finally seeing some green shoots in the form of customer orders and in interest for our new innovation. And while it's not all the way back to what we want to see yet, we are going to see substantial improvements for half two of our fiscal year or the first half of the calendar year. So Q1 revenues, that you'll hear more about in the next few minutes were about as expected. They were up 6% over a year ago. And our EBITDA was also about as expected at $3.3 million, and it's significantly over last year, as last year was a very depressed level. So you can expect half two will step up in both revenues and in EBITDA well above the first half of this fiscal year. Now the improved outlook is coming from four areas. The first one is the REPREVE innovation. It's being enthusiastically received by customers around the world, especially Textile Takeback on our product called ThermaLoop. These products will begin to show up in our sales initially in Q4. The second area that's given us some reason for optimism is we've got traction in our Beyond Apparel business segment, especially in home and carpet segment and military and…

Thanks, Al. And as Al just mentioned, our results for the first quarter were in line with our expectations, exhibiting our continued progress towards repositioning our business for future growth. However, some of our customers were recently impacted by Hurricane Helene in late September, which resulted in their operations being curtailed for a short period of time. While Unifi's US operations were fortunate enough to not experience any material impact from the hurricane, this curtailment in operations from some of our customers did result, unfortunately, in a portion of sales being pushed out into the second quarter. The devastation from the hurricane is heartbreaking, and we are all hoping for a fast recovery for all those who are impacted in our local communities here in North Carolina and elsewhere. With that said, I will now provide an overview of the quarter and some other operational highlights on Slide 4. During the first quarter of fiscal 2025, we reported $147.4 million in consolidated net sales, which is up 6% year-over-year and down 6% sequentially compared to the fourth quarter as a result of typical seasonality. Our improvement in net sales on a year-over-year basis was largely driven by our Brazil segment, which has continued to deliver strong results. Our Americas cost reset efforts, as Al mentioned, are continuing to progress as planned, which is helping us offset some inflationary impacts. Some of those savings are already evident in our year-over-year SG&A spend. We are also continuing to see the benefits of our sales transformation, which is demonstrated by the significant year-over-year improvement in gross profit during the quarter. We recently took a few steps to strengthen the balance sheet, which AJ will provide more details on shortly. These efforts will allow us to continue to strategically invest into exciting new product…

Thank you, Eddie. I would first like to express my sympathy for all families impacted by the recent weather events, and I sincerely hope everyone receives necessary help and relief as soon as possible. Our first quarter was another step in the right direction for Unifi as we were able to successfully meet our financial expectations for the quarter and continue to actively take steps to position our business for growth and stronger profitability in fiscal 2025 and beyond. To help sustain this momentum, we are remaining focused on our plan to keep our variable expenses across both production and administrative functions low, which will help create both cost savings and increased profit that we will reinvest in the key areas of our business that will enhance our revenue performance and drive margin expansion, including the REPREVE and Beyond Apparel product initiatives that Eddie just touched on. Transitioning now to the financial results. On slide 7, you'll see our consolidated financial highlights for the quarter. Consolidated net sales for the quarter were $147.4 million, up 6% year-over-year, but seasonally down 6% sequentially versus the fourth quarter. The improvement in net sales on a year-over-year basis was primarily due to higher sales volumes in all segments, certain favorable pricing and material cost dynamics and the continued benefits from the previously announced initiatives. Turning to slide 8. In the Americas segment, net sales were down 5% sequentially and up 6% year-over-year. On a sequential basis, sales were down due to a mix of both seasonality and the recent weather impacts. On a year-over-year basis, our results were largely in line with our expectations. We are pleased to see the year-over-year gross profit improvement from our cost containment efforts and higher production activity. Slide 9 displays our Brazil segment highlight, which experienced net…

Thank you, A.J. Let's now turn to slide 12, please, to discuss our forecast for the second quarter of fiscal 2025. More specifically, for the second quarter, we are expecting net sales between $140 million and $145 million, adjusted EBITDA to range between negative $4 million and negative $2 million, as a result of the current economic environment in China and the typical seasonality of the holiday period in the Americas and Brazil. And lastly, we are continuing to keep a disciplined eye on capital expenditures and believe CapEx for the quarter will come in between $4 million and $5 million. Let's now transition to slide 13 to discuss our outlook for fiscal 2025. We are reiterating our outlook for fiscal 2025. And as a reminder, this includes our belief that we'll see a return to more normal conditions, which will support top-line growth of 10% year-over-year. We also continue to believe that the proactive decisions we have made to control our costs and streamline our business will continue to show up in stronger profitability results in fiscal 2025. Additionally, these -- despite the softness across global markets, we continue to expect a significant year-over-year increase in gross profit, gross margin and adjusted EBITDA. Finally, we are budgeted to keep capital expenditures contained, and we remain on track to see capital expenditures of around $12 million for fiscal 2025. Moving on to slide 14, you will see the key areas of focus, which support our pivot to growth. As we have touched on today, we have continued to take proactive steps to sustain the momentum that we have experienced over the past few quarters by strengthening our balance sheet to provide us with the liquidity we need to reinvest into our product portfolio to help support both innovation and growth. We are excited about the opportunities that lie ahead of us, not only for our REPREVE Fiber business, but also for our growing beyond apparel initiatives such as those highlighted earlier. This gives us confidence that we are well-positioned to support our customers' needs with an innovative product portfolio of sustainable solutions while also creating value for our stakeholders with improved financial results. Lastly, I would like to once again say thanks to the dedicated Unifi employees worldwide for their hard work that they do each and every day. Thank you. With that, we would now like to turn the call open for questions. Operator?

Our first question comes from the line of Anthony Lebedzinski with Sidoti & Company. Please go ahead.

Good morning and thank you for taking the questions. So I have a few questions. I guess, first, we'll go through the different segments. So as far as the Americas segment, obviously, you called out the impact of the severe weather and the storms. And I'd like to also share my sympathy for those impacted as well. But is there a way for you guys to maybe put a dollar amount as far as what you think as far as what the sales impact was because of the storms late in the quarter?

Sure, Anthony, it's A.J. Thanks for the question, and thanks for the care for North Carolina and the others impacted. We do see that the impact to Q1, the September quarter was approximately 1% on a consolidated basis and therefore, around 2% specific to the Americas segment. Unfortunately, some of those impacts did linger into the second quarter. So at this point, we're seeing a similar impact in the second quarter as we still have some direct and indirect customers for which the damage and the impact has lingered into this quarter, and they're still trying to ramp-up sales and operations to get back -- get the supply chain back to where it needs to be.

Understood. Okay. So hopefully, that gets better sooner than later. So -- and then moving on to the Brazil segment. Obviously, very impressive performance there, especially with the gross margin, 23%. How should we think about your ability to sustain those strong margins going forward?

Yes. Welcome, Anthony, to the call. Thanks for the question. I would say that it was -- Q1 was an exceptional quarter for us, and Q2 is generally our weakest quarter from both a revenue point of view and a margin point of view, due to the holiday at the end of the quarter. But we are confident that in the second half, we will get back to what would be considered normal margins and gross profit levels. The volume down there is still very strong. We're still running full. As Al mentioned earlier, the capacity we put in place down there has been very helpful, especially since our largest competitor, as we mentioned on earlier calls, exited the market about a year ago.

Understood. Yes, thanks, Eddie. And then as far as the Asia segment, so the gross margin here was roughly 11%. Typically, that's been -- historically, it's been about a mid-teens gross margin business. I understand the challenges in China. But I mean, do you expect to get back to those types of margins at some point in the future?

Anthony, certainly, we did see the lower margin come through in the Asia segment this period. A couple of the stronger programs were pushed out into second quarter and beyond. Of course, the impacts there are certainly unfortunate to the overall industry and show through in our results. But from a mid-term, long-term perspective, we certainly see Asia as continuing to be the growth engine and continuing to contribute strongly to consolidated margin and be margin accretive to the entire business. So long-term, we certainly do still expect them to return to some of those recent levels.

Hey, Anthony, this is Al. There's one particular line of product. I can't mention which one it is, but very profitable, very profitable line that had to be pushed out. So that had a big impact.

All right. Yeah. Thanks, Al and A.J. for that. And then it's nice to hear the traction that you're gaining from Beyond Apparel. You talked about those lines being -- having better margins. Can you give us a sense as to how much better are the margins for the markets beyond the apparel segment?

Thanks -- good question. Yes, I would say that they are significantly better, primarily for two reasons. We're providing an innovative product that performs better at our customers, but also because of the fact that we are replacing, in some cases, a product that was very, very challenged from a performance perspective. So I think we're able to offer value to the customer, which allows in turn to create value for our company. So we're seeing better margins on both of these. And I would say maybe 30% better than our normal product gross margins.

That's good to hear. And then as far as the new product introductions that you talked about, the textile take back and Thermal loop. So it sounds like you've done some trade show appearances. Do you plan to do more of those? And kind of as far as just the investment behind or marketing, do you plan to do more of that as well, whether it's back half of fiscal 2025 or maybe fiscal 2026? How should we think about just the brand management or marketing perspective?

Yeah, great question. We do know that we have to invest in the promotion of these products and the promotion landscape comes in many forms of course, social media is bigger now than it has been. But we also see the importance of trade shows. We did a show in Europe 2 weeks ago, which was very well received. The 2 products. We're going to do another one in -- coming up in Portland, Oregon. So we do feel that need to get in front of the brands to show them the actual fabrics that we're making and insulation that we're making so they can touch and feel it. I will say that, on top of that, we've got a road show where we're bringing technical people with marketing people and what we call our brand sales team going to these brands to really help educate them and see how they can utilize this new product offering to help them get their sustainability goals. So, it's a three-pronged approach, and we are investing some money to make this happen. We're not going crazy, but we do recognize part of this is in education. Part of this is actually physically getting out there and spending time with the brands.

Makes a lot of sense.

Some of these -- Anthony, some of these -- this is Al. Some of the companies that we're working with are the very big brands. And yes, we will spend money to get this out into the public. But I'll tell you, when they decide to put their shoulder against these products, their capability of marketing is extreme. They're very strong, and we -- they will -- many of them will be doing that.

That's great to hear. And then lastly for me, as far as the cost reduction efforts, can you talk about like, I guess, what inning are we in, in terms -- just to use kind of baseball terms maybe as far as what have you done so far? And what is yet to come here as far as just the profit improvement plan and how you think about efficiency savings?

Sure, Anthony. We're very pleased with the progress we've made so far on some of the cost savings initiatives and some of the sales transformation. Of course, as volume sales continue to increase with our expectations, as we've outlined throughout the call, that sales transformation will take further hold. We do see ourselves a good halfway through many of those efforts, but we are not stopping with one single plan and one single initiative. We're continuing to reinvigorate and focus on those to make sure that all production and administrative functions, again, are where they need to be based on business levels and continuing to reduce those costs necessary and focus on the commercial efforts that Eddie just outlined.

A.J., Anthony's baseball analogy, what would you say fourth inning?

Yes, somewhere around the fourth or fifth inning probably makes sense right now.

Got you. Assuming it doesn't go to extra innings. Well, thank you very much guys. Definitely appreciate it and best of luck.

Thank you, Anthony for your time.

Thank you, Anthony.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.