Q1 2022 Unifi Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Unifi first quarter fiscal 2022 conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and that's recession you ask your question during the <unk>.
And you will need to press star one on your telephone if you require any further assistance. Please press star Zero I would now like Andy conference over to your speaker for today E. G. Acker Vice President of Finance. Thank you. Please go ahead.
Thank you Jay and good morning to everyone on the call today is al Carey Executive Chairman Eddie.
<unk>, Chief Executive Officer, and Craig <unk>, Chief Financial Officer. During this call management will be referencing a webcast presentation that can be found at unifi dot com and by clicking the conference call Link management advises you that certain statements included in today's call will be forward looking statements within the meaning of the federal Securities laws management cautions that these statements are.
On current expectations estimates <unk> projections about the markets in which Unifi operates these statements are not guarantees of future performance and involve certain risks that are difficult to predict actual outcomes and results may differ materially from what is expressed forecasted or implied by these statements. You are directed to the disclosures filed with the SEC on unify these forums.
10-Q, and 10-K regarding various factors that may impact. These results also please be advised that certain non-GAAP financial measures such as adjusted EBITDA adjusted EPS adjusted working capital and net debt may be discussed on this call I will now turn the call over to Al Carey. Thank you a J and good morning, everybody. Thanks for joining the call. This morning.
And we will be discussing unifies first quarter performance for fiscal 2022.
So I'll start with a couple of broad themes for the first quarter, then I'm going to turn it over to Eddie Ingle, Our CEO and then Craig Korea Tour <unk>.
CFO and they'll give you the performance review then we'll go to Q&A.
So the first quarter results were very good looking at it from both year ago comparisons and then to go back to two years ago comparison pre COVID-19.
Revenues were up 39% and versus two years ago. They were up 9%. So the pre COVID-19 time frame.
EBITDA grew 119% versus a year ago. This quarter. This year, and then up 62% versus two years ago. So both give us a strong start for fiscal 2022.
In fact, it gives us confidence to firm up our full year guidance and increase it modestly even after considering the impact of some of these micro and macro headwinds that we're looking at right now such as labor.
We're all material increases in supply chain challenges, so Craig and Eddie will take you through those details in the next few minutes, but here are four trends that we're seeing coming out of the first quarter. The first one is the diversity of our geographic portfolio is a strong positive for us. So this quarter, Brazil, and Asia had a very strong Q.
One North America came in right about what we forecasted but they could have done better.
The labor shortages in the U S kept us from producing to demand and we expect that that headwind is probably going to persist through quarter. Two and then the second half of the year, we expect to see some improvement in that trend.
And then I think you can expect North America to start contributing more to our growth.
The second trend coming out of the first quarter was repreve sales growth continues to build so if you look at repreve sales versus year ago first quarter was up 39% and then from two years ago pre Covid. It was up 27% I think customers right now are continuing to step up their commitments of recycled materials in apparel and footwear.
Auto.
And we've had numerous positive customer wins over the last quarter.
The third trend is productivity and the investment in Evo cooler technology, and our operation will provide strong long term productivity and we will begin seeing a little bit of that in the fourth quarter of this fiscal year.
Production on the current small scale that we rolled out is meeting our expectations in terms of efficiency and output.
And the fourth trend is labor and labor in the U S is a challenge right now.
Our manufacturing and HR teams have been working on the obvious fixes such as labor rate and benefits to make sure that we remain competitive in the marketplace. However, they've discussed discovered several longer term solutions by conducting frontline employee round tables in our plants.
We've asked our employees what can we do to make their jobs more fulfilling and to keep them with us.
A longer time.
And they've come up with several very interesting improvements that are pragmatic and they're being implemented everything from the quality of training and the amount of training to changing the way the work gets done.
We sometimes forget I think that the employees that are closest to the action can solve problems is probably better than anyone else in the company. So we will share more of this with you in the upcoming quarters. So all in all a good start for the fiscal year. There is still a great deal of work to do but were optimistic about the outlook.
So at this point, let me turn it over to our CEO, Eddie Ingle for a continuation of the presentation.
Thanks, Al and good morning, everyone.
Alan mentioned, our first quarter fiscal 2022 results surpassed our initial expectations.
And the strong results reflect the flexibility of our global business model, our strong presence in each region regent and the hard work and dedication of each and every one of our employees, who as we like to say it unify are working today for the good of tomorrow.
We continue to be grateful for the daily contributions our employees make to our company and to our customers.
Their commitment to unify has allowed us to continue operating a strong business, while navigating the recovery so I thank them for that.
On slide three we provide an overview of the quarter.
And as I've said, we are executing very well driving growth improving at how resilient our business model has become.
Q1 revenues were up 6% sequentially slightly ahead of expectations and up 39% on a year over year basis.
Alongside our focus on meeting customers' expectations, the growing demand for our core products and product lines in each region contributed to the increase revenues, which of course naturally translated into significant year over year profit growth.
Despite Q1 exceeding our initial expectations, we had to navigate several cost headwinds in input constraints.
Hiccups in the supply chain from global logistics stoppages, and domestic labor shortages placed even more pressure on each business segment.
Despite these difficulties our team's quick actions ensured no meaningful disruptions to our lines of business.
A breakdown of our execution as well as some of the challenges we faced during Q1 by region.
In Brazil the <unk>.
Volatility remained post the regional shutdowns that impacted our business in April and May period.
In fiscal Q1, the volatility in the market was driven by the rising freight costs from China. The uncertainty in the exchange rate and the rising cost of textured yarn in Asia, all of which is increase the local market price protection John.
The situation has been compounded by inflation concerns, which are increasing at a pace not seen in several years.
Early indications are this may have some impact on demand.
However, this may actually result in customers consuming more locally produced yarns, which would help.
Help us gain market share.
This is something that will remain on our radar as we move through the rest of the fiscal year and we will keep you updated on this.
Despite all of this as you can see we had another excellent quarter in Brazil.
In the U S and Central America during the quarter, we continue the process of catching up with raw material and other cost increases through proactive selling price adjustments.
We have additional work to do in this area as we can already see that polyester and not on raw material prices are rising as a result of the recent increase in crude oil prices.
While this is a very painful process. It is something our customers are facing too.
US theyre, having to pass on their input cost increase to their customers.
In the U S specifically like many other businesses.
Also face labor challenges we.
We see this as an opportunity to become a bedroom employer and are allocating more resources into training and retention.
Fortunately the elimination of the federal subsidy at the beginning of September that's once again brought more people into the workforce and we are taking advantage of that.
It should be noted that the impacts of Covid are still being felt primarily in our manufacturing plants, resulting in us having to quarantine and number of employees.
Unfortunately, we have also lost a few of our employees to the virus and our thoughts go out to their families and friends.
Lastly, we have experienced a few delays in the supply.
Extended lead times of certain products, but nothing that is truly disrupted the business.
And in Asia, we experienced a very positive starts to the quarter. We continued sales increases with continued sales increases in our repreve brand and other value added products.
As you are aware there are some concerns that the Chinese central government level around energy consumption and air pollution levels and this place some pressure on the business at the very end of the quarter.
We are seeing minor caution from customers and suppliers, who are battling COVID-19 lockdowns in energy caps.
This situation remains volatile and introduces some uncertainty for the short term.
We do expect to overcome these challenges in the next few months as the demand is usually strong leading up to the lunar new year, which this year is at the very beginning of February.
Stepping back to the consolidated business.
It's great to see the progress we have made towards our fiscal 2022 and longer term goals in the face of these multiple headwinds.
We remain committed to maintaining a solid financial position and our current balance sheet provides a strong backbone for us to execute on our growth focused capital allocation priorities.
On the financials, we continue to observe a growing number of customers shifting their commitments to making product using recycled material.
During the first quarter, we shipped more than 23 million of hang tags to brand customers.
You will note that on slide four products made with Repreve fiber comprised 37% net sales.
Consolidated net sales increasing from 36% in the first quarter of fiscal 2021.
This growth is regional and is primarily in our Asia U S and Central American revenues are.
Pre momentum into new textile sectors and multiple brand adoptions across Europe has been very strong.
Last month encountered protected fabrics, a traditional workwear and industrial textiles company from the Netherlands began marketing its text texture pro line of workwear using inhibits taking repreve inhibit taken repeat further beyond traditional fashion textiles and into protective where.
This is the first time, our multi functional repreve inhibit value added combination is being used in flame retardant workwear to add in a sustainable twist to a highly durable products.
Cut it chose repreve inhibit for quality reliability reputation traceability and transparency and we've been excited to help them tell their sustainable and fame retard story through a variety of co marketing mediums.
<unk> strength in the Turkish market continues with a new line of denim by Maggie genes.
<unk> launched a nature of a nationwide TV commercial that showcases their adoption of recycled polyester in the new line of genes.
Other reason adoptions by European brands include French brands jewels in the German brands <unk> <unk> and.
<unk> Street, one owned by CVR fashion group.
One of indexes brands Massimo duty has continued to rollout products using repreve.
In the U S. We continue to see strong co marketing in the menswear segment.
<unk> has launched a new line of suit separates and a variety of fits under the name Smartwatch Repreve suits.
And I know from talking to.
Employees, and having direct conversations with them, it's a pad moment when they walk into kohl's or JC penney's or go online and see this iconic U S brand shad out their sustainability story just based on Repreve.
Going outside of the apparel market our placements in the global homes. Good sector continues with a new launch of several CD mattresses in Canada that feature Repreve.
Now turning to our operating segment performance during the first quarter I'll provide some high level comments before Craig walks you through more specific details.
Strength in our polyester and nylon segments persisted in the first quarter and benefited from strong sales momentum with robust customer demand.
Our commercial and manufacturing teams have done a tremendous job navigating the headwinds I mentioned previously and we remain optimistic about the sales mix and pricing dynamics going forward for this segment.
The Asia segment demonstrated another strong quarter in volumes increased due to pull through on new and existing customer programs.
Shutdowns and uncertainty in Vietnam in Southeast Asia have not impacted us perhaps as much as other companies since it's a smaller part of that business.
While we do anticipate some soft spots in China based on new temporary shutdown mandates related to managing energy levels there.
This is a still running and the demand for sustainable yarns has never been higher.
I am confident that the team's continued focus on meeting the ever increasing sustainability and value added demands of their customers what helped us weather these challenges.
As mentioned by their financial performance. The Brazilian team has continued to do an exceptional job during.
During the first quarter, the strong price mix performance increased sales over 50% from the year ago quarter, driving more than 100% increase in gross profit dollars.
Looking forward, we continue to anticipate that degree of moderation in profit from this region with the full year gross margin settling just below 20%.
Before I turn the call over to Craig I'll provide a brief update on our current trade actions.
Last week the U S Department of Commerce announced its final determinations that imports of polyester textured yarn from Indonesia, Malaysia, Thailand, and Vietnam are being unfairly so below their fair value in the U S.
The financing dumping duty deposit rates range from 2% to 56% and are currently in effect.
The next step in these trade cases will be the U S International trade Commission's final determination, which is scheduled for November 30th.
With that I would call the call over to Greg Craig. Thank you.
Thank you Eddie and good morning, everyone I'd like the rest of the team I am very pleased with our first quarter fiscal 2022 operating results and wish to thank our employees for all their efforts and achievements in the just completed quarter.
Beginning with our consolidated results, we were able to achieve revenue and gross profit performance ahead of our initial expectations for the quarter from the August 2021 earnings release, and we generated significant increases in operating income earnings per share and adjusted EBITDA when compared to the first quarter of fiscal 2010.
One.
The remainder of our financial statement metrics were generally consistent with our expectations as it relates to overall SG&A spending our effective tax rate and the amounts outlay for capital expenditures and working capital associated with our investments in the business and our strong sales performance.
Turning to slide five of the webcast presentation.
Consolidated net sales increased 38, 5% from $141 $5 million to $196 million primarily.
<unk>.
This recovery, we have seen over the last five quarters of sequential sales growth.
For the polyester segment the single digit volume change was muted partially by the labor pool challenges al and Eddie mentioned earlier the.
The price and mix change demonstrates the selling price adjustments that have been made over the last several months in response to rising input costs, although we have not fully normalize the portfolio for todays cost levels.
In Asia sales volume growth again demonstrates new and existing customer programs that continue to be successful on the platform.
Higher pricing associated with raw material costs was offset by a greater mix of lower priced products.
In Brazil momentum surrounding higher pricing and market share continued to benefit revenues as pricing was up over 50% driving a significant change in quarterly revenues for that segment.
And nylon exhibited stability with much higher sales and production volumes to start off fiscal 2022.
Turning to slide six.
<unk> demonstrated significant gross profit and margin improvement despite labor inefficiency challenges in the current environment and some pricing lags.
The gross margin increase of 260 basis points is very commendable under today's circumstances.
The Asia segments volume growth led to a $2 $4 million improvement in gross profit as that segment continues its strong year over year growth trajectory and remains a significant component of the global commercial model.
In Brazil, our agility against competition and commitment to deliver high value to the market allowed us to maintain strong pricing levels and market share.
Gross profit and driving margin improvement of 910 basis points.
Lastly from a segment performance perspective on slide seven and eight.
Included a two year gap comparison for enhanced understanding of this just completed quarters performance.
Slide seven shows the consolidated sales increase of eight 9% from the same quarter two years prior.
<unk> by a healthy combination of volume pricing and mix across our segments.
Slide eight provides a gross profit overview for the two year comparison <unk>.
And here the polyester segment exhibited strength against the previously discussed headwinds.
The Asia segment exhibited a 430 basis point increase in gross margin with recent mix and efficiency gains.
And the Brazil segment exceptional performance as highlighted with the comparable doubling of gross profit.
Again, we are pleased with the progress made across our portfolio over the last several quarters.
Moving on to slide nine which provides a brief update on our balance sheet and capital allocation priorities.
We continue to have zero borrowings on our ABL revolver.
Which had an availability of $74 million as of September 26, 2021.
Under our balanced approach to capital allocation, we expect to continue to invest in the business to drive innovation and organic growth maintain a strong balance sheet and remain opportunistic with share repurchases and M&A opportunities.
Before I pass the call back to Eddie I'm pleased to announce that unify will be hosting an investor day event in February 2022.
That will be hosted by our leadership team at our manufacturing facilities in North Carolina.
We believe it's important for our investors to explore our world class facilities firsthand.
For those who cannot attend in person we will webcast the event.
More details will be released on this event in the near future.
I'll now pass the call to adding to take us through the last slides of the presentation and make some final comments.
Thank you Craig.
Conclude with slide 10 of the presentation and provide some context around our expectations for the remainder of the fiscal year.
You will note from the earnings release that we increased our fiscal 2022 outlook and the great start in Q1 gives us confidence in our team's ability to achieve our targets.
However, doing so will mean continuing to remain nimble as we navigate the numerous market dynamics. These.
These include inflationary pressures, particularly related to the cost of recycled inputs.
Energy shortages in Asia that have resulted in temporary slowdowns for several of our customers and suppliers.
Uncertainty related to the continued impact of the pandemic and ongoing labor pool constraints in the U S.
Again, our team has done a tremendous job navigating all these headwinds and I believe they will continue to do so.
We will keep a close eye on all of these issues as we progress through each quarter.
Looking forward, we are excited by recent trends in our <unk> and other value added products.
Our expectations remain positive on these developments and we will continue to be driven by our innovation and commercial teams and we anticipate them to grow long term.
Our strong performance during the first quarter reflects our regional focus global commercial model innovation pipeline and the upside potential.
Has even when stressed with challenges in the broader market.
For the second quarter that ends in December 2021, we expect net sales to range between $185 million and $119 million.
And after consideration for a seasonally higher SG&A level, some normalization in our Brazil segment profitability and recent increases in oil prices, we expect to achieve an adjusted EBITDA between 14 and $15 million.
For the full year fiscal 2022, we expect sales to suppress $750 million, representing a 12% or more increase from fiscal 2020 one's revenues, we expect adjusted EBITDA to grow from the fiscal 2021 level in a range between 65% and $67 million.
And our effective tax rate guidance remains in the range of 35% to 40%, while our capital expenditures will range between 40 and $44 million.
We will continue to focus on partnering with global brands and retail leaders, we want to position themselves using sustainable products.
As stated on previous calls, we believe the importance and demand for sustainability will only grow and consumer behavior attest to that we remain dedicated to innovating and repositioning the business to drive long term organic growth.
We will now open the line for questions.
Thank you at this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad once again Thats star one on your telephone keypad.
Our first question comes from the line of Chris Mcginnis of Sidoti <unk> Company. Your line is open.
Good morning, Thanks for taking my questions and nice quarter.
Great Chris.
I guess, just maybe to start just with the guidance can you just walk through I guess, obviously youre seeing inflationary pressures around raw materials.
And labor, but I guess when you look at even from this quarter you just posted can you just talked about.
Down in the profitability and then also I guess timing of when do you think you can get that pricing through.
And then a second question just related to that is just what the increase in reprise pricing.
Are you seeing any pushback in terms of adoption. Thanks.
Sure.
Yes, Chris I think that this is Craig for the full year, we were very pleased to move that full year guidance up part of that is built on what we're seeing or what we saw what we were able to achieve and in the first quarter, but also a refined look at the balance of the last three quarters of the fiscal year. So we're pleased to be able to do that for the upcoming <unk>.
Second quarter.
Do continue to expect.
<unk> returned to normal profitability or closer to normal profitability for our Brazil segment that has been included in our forecast.
As we said in the intro to the forecast in the press release, we do have some headwinds that are out there. We're fortunate that the supply chain issues and challenges that many companies face really did not impact us during the first quarter, but we know thats out there we do have some.
Continued cost challenges and cost changes that we are.
Moving on and cost adjustments pricing adjustments with our customer thats out there as well and we know that seasonally that December quarter, usually is a little bit lighter a quarter. It does include a normal shutdown period that will happen right at the very last week of our fiscal fiscal quarter by the way the calendar breaks this year. So I think we were.
We were able to give some specific guidance on sales and adjusted EBITDA for the quarter and we feel like we've taken into consideration the headwinds and <unk> that we're seeing in the market today.
On the recruiting part and I'll, let Eddie answer that part of your question I think Chris. Your question is both around pricing and then also repreve pricing generally speaking if the U S where we have the challenges around the price adjustments that are necessary, we do have.
Quite a bit of our business that are index. So we generally will lag a quarter as the raw materials increase, especially in our polyester segment.
But.
It's going to take.
A couple of moments to for all of those price increases to get through the system as I said on the call earlier it is a very painful process.
Our business, especially in Central America, as apparel base and these programs that our customers take.
In the past they've made price commitments for quite some time.
But we are we're making the difficult decisions and we're passing on these raw materials and cost increases as necessary, but it will take us a few more months to get it all through.
On the <unk> pricing.
That's that's been a bit more challenging than the Virgin because of the cost, especially in the U S. With <unk> has gone up much faster.
On the Virgin raw materials, but we are getting our price increases.
Margins being squeezed a little bit right now, but as we move through this quarter, we expect that to.
Fully be realized any any cost increases that we need.
Yes.
Okay. Thank you very much for taking my questions and good luck in Q2 and jump back in the queue. Thank you. Thank you.
Thank you next question comes from the line of Daniel Moore of CJS Securities. Your line is open.
Yes, good morning, thanks for taking the questions.
I wonder if it's possible to quantify the impact of you mentioned labor shortages on the polyester revenue.
And was there any measurable corresponding margin impacts given lower absorption in the quarter.
I would say, it's difficult to quantify but I will say that we have baked.
The cost increases into our into our model.
It's interesting as both Alan and I talked about.
It's a new it's a new world four four.
For employees right now and it's a new world for employers and we realized that we have.
Been lacking of some of our training efforts. So we are going to spend more money on training and retention.
Feel like our our benefits and pay package are appropriate and so our job is at.
The HR level in manufacturing that was to be the employer of choice in the areas that we work in North America and.
I don't I don't think it's it's an easy task as talking to someone can change overnight, but certainly we are on the right track, but the costs that are built into our model are there. So.
I don't think we're going to see any surprises in Q2 for that.
Helpful and maybe can you provide a little bit more color.
You mentioned in press release moderate headwinds in poly from import competition.
And.
Related to that in terms of the tariff impact do you still expect to achieve a full $20 million revenue benefit either in fiscal 'twenty, two or on a run rate yes.
Yes on a run rate of in fiscal 'twenty. Two we do expect to see that we are as the lease.
This process has gone through.
We had our hearing a few weeks ago and as we said the final determination will be November <unk>, we are expecting to pick up that volume.
As described in the full.
<unk> 2022, so no issues there certainly would be were a bit disappointed that one of the.
Specific.
Importers.
From one country had a low eight 2%, but on average it's going to be somewhere around 16%. So we feel good that it's going to make a difference and it gets us back on a on a fair playing field.
Very good maybe one or two more just on input costs.
Obviously this as you know.
The remarkable period in terms of the sharp and sustained prices in oil.
If they were to reverse course, given the pricing action you've taken would you expect to.
Given most of those back.
And just remind us what percentage is on index. Just wondering if you could see any potential benefit over time there.
Yes, I think we have changed our pricing model over the last seven eight months, we've had two and because of the increased input costs beyond the raw materials.
I don't think we're going to get back to the prices, we had before or the <unk>.
Margins, we had before we're going to do.
Generally speaking as raw materials go down we have to give up.
Some of that cost, but we won't be able to give up all of those prices increases that we had because of the fact, our costs are basically higher analyst talking specifically here in the U S.
So I don't I don't see us having to give back all of those and I do think there's an opportunity for us to gain some margin.
The crude receipts if it should do so we are seeing crude.
Record highs.
Last week or so.
But who knows how long it's going to stay stay up there in that increase in crude is translating into higher petrochemical costs and we are.
We are going to have to push through some more price adjustments in this quarter for Virgin Poly answer.
Got it and then just talk about you mentioned everybody kind of looks at the oil prices, we don't see the bell bottles as much but availability you still feel pretty comfortable with availability there.
And obviously youre doing.
An exceptional job of pushing those price increases through but just talk about what youre seeing on that front.
Yes on the <unk>.
Bottle side against the U S. We haven't had issues getting bottles.
We have to pay for them, but we haven't had a supply issue at all.
Generally keep enough inventory to wear.
We give ourselves enough cushion to where maybe there's a week, where there's some bad weather or logistics.
The logistics issues were covered so we're not we're not worried about the supply models right now.
Okay, and then lastly for me.
It sounds like the initial adoption of the Evo coolers is going really well.
Maybe talk about that and what that can do from you for you from a margin and labor efficiency standpoint, as we look out beyond the next few quarters.
Yes, it's a little early to describe that we will be I think as we get it.
A solid base of machines in place, we'll be describing what benefit that's going to be more detailed but all I can say is that when you put a new technology and sometimes you have to push.
Hard to make that technology work I will say that we're very pleased with what we've purchased and very confident that it's going to bring a lot of benefit to us as we move through the fiscal year, especially as Don mentioned in Q4, we'll have enough machines that we must be able to.
Really confirm what we think we're seeing right now.
Are you confident in the technology.
Alright look forward to that update next quarter in February thanks, very much youre.
Thanks, Thanks, Tom Thanks, Jim.
Thank you next question comes from the line of Vishal.
<unk> of Northland Your line is open.
Yes, thanks for taking the questions and congratulations on strong quarter in what is a difficult environment.
I was wondering if you could talk a little bit about <unk>.
Sort of the exposures you have in Asia in terms of customer locations and <unk>.
Places, where the people you work with.
Manufacturer.
Which countries are you most sensitive to.
Well much most of our business today, So in Asia, Our Asia segment is in China.
And while there have been these.
Cutbacks in production because there's some energy.
Comps by region and by city.
We've been able to work through that equity hit us at the very end of September.
So it wasn't really impacting Q1 and Q2.
The first.
First two weeks of October maybe saw some some slowdowns a bit but we are still confident that as we go through this quarter.
And as the Chinese government does increase the.
Seeing the price ceiling for energy, which brings more people back into producing energy and as more coal plants are starting back up because it's worth their while we do see the energy issue abating as we go through the quarter so for.
For us it is mainly about China and.
Vietnam is a part of our business, but Vietnam seems to be now back to normal production levels. It will take a couple of weeks and after the old employees to come back, but we do see.
That issue that was COVID-19 related non energy related in Vietnam going away. So.
For us again, China, but we don't see any issues there right now.
Okay and it is primarily the energy.
Rolling blackouts that are impacting you and not the COVID-19 lockdowns that keep on popping up in China.
Covid Lockdowns really are impacting our customers who are trying to get stuff out.
Of the country.
<unk>.
The COVID-19 shutdowns or at the ports and Thats, where we saw the backlog happening.
Got it. Thank you and then just shifting to Brazil for a second.
Could you tell me.
Maybe a sense of what.
So.
Percentage of Repreve in Brazil.
Brazil is what part of the mix isn't there.
As we've said before.
Brazil is at the very early stage of building, it's repeat business. We're excited about what we're seeing in the marketplace some of the big brands.
<unk> the U S and Western Europe are starting to.
Get sort of pressure from their customers down there in Brazil, It's a tiny part of our business right now, but we are going to build that business and invest in the marketing down there and pushing that.
In fact, it won't be a push it would more be a pole for us as we move through the next few years, but it's a tiny part of the business right now.
So lots of opportunity that's how we see it.
Got it okay. That's it for me thank you.
Thanks, Scott Thanks, Scott.
Thank you.
Next question comes from the line of Marco Rodriguez Stonegate capital. Your line is open.
Good morning, everybody. Thank you for taking my questions. Good morning, good morning.
Hey, guys I was wondering if maybe.
May have missed this on the call I apologize if you addressed it but just kind of given all the supply chain issues that everybody was experiencing can you sort of talk about what sort of thing.
You might have as it relates to your orders in <unk>.
If youre seeing any extra ordering from customers in the attempt to them to kind of get ahead of the curve given the holiday season.
Yes, it's a good question definitely we are seeing people ordering.
Again in the U S more yarn then they.
Perhaps need.
Just to try and make sure they.
Get everything they need we are being very careful about making sure if somebody traditionally take.
Taking a ceremony on we're only making for them what we know they can actually consume.
I don't think overall.
I mean Christmas.
Season is already done and dusted.
Product manufacturing point of view anything we're seeing now we're making now whether it's in Asia, or Brazil, or the U S is more going to be sold for Q1 of next year because the supply chain is that long.
But we don't see in an area really that being an issue.
Got it very helpful.
And then kind of circling back on the earlier question, the new texturing equipment.
Pretty early days.
But just kind of given again the supply chain issues that are out there is is that on schedule or anything you're going to be delayed do you think because again supply chain issues and just getting the more you need it.
I would say that were slightly delayed but nothing that is meaningful.
Some costs, we are having to air freight over.
But we're not.
It's actually we've been pleasantly surprised with the work that our supplier has done to mitigate the supply chain issues I think they've been very proactive, Oregon has been very proactive in making sure that we get priority.
Obviously this order has been out there for a while so they've been able to schedule.
Containers, because we are on the east coast I think is less pressure than there might be if we were on the west coast, but right now we don't have any meaningful delays in any of the startups of the equipment.
Got it.
And then in terms of the performance that you had here in the quarter, obviously above expectations pretty much across the board can you maybe talk a little bit about what surprised you guys are the most.
I think.
Mark of the continued Brazil performance.
Being <unk>.
Higher than what we expected that's been a repeating theme that we've seen over the last several quarters.
We were continued to be.
See very good strength in Asia, especially for free product.
That continued to be ahead of where we expected.
Did.
Slightly overachieve, where we thought we'd be profitability in North America, but I think it was kind of in that order I think Brazil was the most upside versus what we had expected and then followed by Asia and then followed by North America.
And I'd say a lot of the labor.
The labor issue is.
It's not just us it's across every industry. It's across every business that I can think of and but I would say that it is.
Has affected us more in North America than I would've expected.
Got it.
Sort of segue into my next question just on the labor.
You had some nice comments in terms of.
Sitting down with your employees and trying to figure out a way that you guys can become.
The leader or the place to basically work.
Can you maybe talk a little bit more as far as.
Those additional costs, because you kind of give us a sense maybe year over year.
Or versus some normalized environment, what sort of additional costs are going to be necessary and it'll be kind of a permanent picture of your your.
Operating structure going forward.
Yes, like I said, Nicole I don't think.
We're going to have additional costs in fact, I think we're going to end up saving money because when we reduce the turnover our productivity improves when we improve the training we get too.
Higher productivity sooner.
I think actually in fact, what we're doing today.
It's going to help our cost long term rather than hurt them.
To the quake.
Frank about it.
Got it very helpful. Thank you guys appreciate the time.
Youre welcome. Thanks.
Thank you there are no further question at this time and I would like to turn the call over to.
Management for closing remarks.
Thank you Jason and thank you everyone for participating today, our next earnings release for the second fiscal quarter ending December 26 is tentatively scheduled for Wednesday January 26, after the close of market with a conference call to follow the next morning Thursday January 27th at 830, a M eastern time. Thanks.
Ken for joining the call.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect have a great day.
Okay.
Okay.
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Yes.
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