Q3 2025 Unifi Inc Earnings Call
Operator: Good morning and thank you for attending Unifi's 3rd Quarter Fiscal 2025 Earnings Conference. 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.
Good morning, and thank you for attending unify third quarter fiscal two I'd do it every five earnings conference call.
So they start for us it's being recorded and all lines have been placed on mute to prevent any background noise out there. The speaker's remarks, there will be a question and answer session.
Operator: The speakers for today's call include Al Carey, Executive Chairman, Eddie Ingle, Chief Executive Officer, AJ Eaker, Chief Financial Officer.
Speaker Change: Speakers for today's call include Al Carey Executive Chairman, Eddie Ingle, Chief Executive Officer.
Speaker Change: A J Aker Chief Financial Officer.
Operator: 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 that slide deck for cautionary statements and non-GAAP.
Speaker Change: During this call management will be referencing a webcast presentation that can be found in the investor Relations section of unified dotcom.
Speaker Change: Familiarize yourself with page two of that slide deck for cautionary statements and non-GAAP measures I will now turn the call over to Al Carey. Please go ahead.
Albert Carey: I will now turn the call over to Al Carey, please go ahead. Thank you.
Al Carey: Thank you.
Albert Carey: Well, good morning everyone and thank you for listening in on our call today. I started off by telling you about over the last few months We've been working on several initiatives to rationalize our assets and improve our profitability for our North American business. And the work is in flight right now as we speak. It will be completed by the end of our fiscal year, which is the end of June. So we're coming down the homestretch for another eight weeks.
Al Carey: Well good morning, everyone and thank you for listening in on our call today I'll start off by telling you about over the last few months.
Al Carey: We've been working on several initiatives to rationalize our assets and improve our profitability for our North American business.
Al Carey: And the work is in flight right now as we speak.
Al Carey: It will be completed by the end of our fiscal year, which is the end of June So we're coming down the home stretch for another eight weeks.
Albert Carey: The work includes, let me list five things to tell you about. One is we're closing our Madison, North Carolina facility in mid-June. and we've been moving the assets out of Madison into our other North Carolina facility in Yatkinville and in our facility in El Salvador, Central America. And they will pick up all of the volume that Madison has been doing. So we're going to see a much improved capacity utilization in these plants very quickly. The second item I wanted to mention is we are removing all the costs from the Madison facility. It's quite a big facility at 950,000 square feet.
Al Carey: The work.
Al Carey: The work includes let me list five things to tell you about one is we're closing our Madison North Carolina facility in mid June.
Al Carey: And we've been moving the assets out of Madison into our other North Carolina facility and Yadkin Ville <unk>.
Al Carey: And in our facility in El Salvador Central America, and they will pick up all of the volume.
Al Carey: Madison has been doing so we're going to see a much improved capacity utilization and these plants very quickly.
Al Carey: The second item I wanted to mention is we are removing all of the costs from the Madison facility, It's quite a big facility at 950000 square feet.
Albert Carey: And we're making additional cost savings in the rest of our North American operation business and those projects are completed by the end of June and will show up in the new fiscal year as savings. Our third activity is the sale of the Madison facility and that's expected to close soon. and that will provide us with proceeds that are going to allow us to make a significant improvement in our balance sheet and to retire some debt.
Al Carey: And we're making additional cost savings in the rest of our North American operation business and those projects that are completed by the end of June then we will show up in the new fiscal year as savings.
Al Carey: Our third activity as the sale of the Madison facility and that's expected to close soon.
Al Carey: And that will provide us with proceeds that are going to allow us to make a significant improvement in our balance sheet and to retire some debt.
Albert Carey: The fourth item I wanted to mention was we're seeing an improvement in demand in North America in general. But especially in the Central American region, and there are several large brands and retailers that have begun to move production into Central America, even before all these tariff discussions began. It seems like a good place to offshore and also to have a closer supply chain to the US. So now with the tariff situation that's going on, it's an even more compelling decision. And it provides some geographic facility for these brands and retailers and a little data point that's worth looking at.
Al Carey: Fourth item I wanted to mention was we're seeing an improvement in demand in North America in general.
Al Carey: But especially in the Central American region, and there are several large brands.
Al Carey: And retailers that have begun to move production into Central America, even before all these tariff discussions began it seems like a good place to offshore and also to have the closest supply chain to the U S.
Al Carey: So now with the tariff situation is going on it's an even more compelling decision and it provides us some geographic facility for these brands and retailers in it and a little data point, that's worth looking at I wouldn't make any promises on this but more than 50% of our business in Central America recently has been.
Albert Carey: I wouldn't make any promises on this, but more than 50% of our business in Central America recently has been reprieved. So this bodes well for the future. I would say we can expect something in that range or possibly better as we move forward. This is dependent on the new customer orders that come in from that geography.
Al Carey: Repreve.
Al Carey: So this bodes well for the future I would say, we can expect something in that range or possibly better as we move forward, but this is dependent on the the new the new customer orders that come in from that geography.
Albert Carey: And then the final one I'll mention is we continue to work on innovation, innovation that is very profitable for our business. And we have traction in both of the areas that we've been spending time on. And you should see that revenue start to pick up into the new fiscal year. in North America. We've mentioned before the products in outside of apparel category. and most notably, we've really got traction on military wear and also on carpet. So these orders are coming in now and they're going to build momentum and it's very positive for us as the margins are quite better than they are in our base business.
Al Carey: And then the final one I'll mention is we continue to work on innovation.
Al Carey: The innovation that is very profitable for our business and we have traction in both of the areas that we've been spending time on and you should see that revenue start to pick up into the new fiscal year.
Al Carey: In North America, the product, we've mentioned before the products in outside of apparel categories than.
Al Carey: Most notably we've really got traction on military where.
Al Carey: And also on carpet. So these orders to come in now and they're going to build momentum and it's very positive for us as the margins are quite better than they are in our base business and then in Asia. We have these repreve innovations that have been gaining traction small right now, but gonna be bigger into the new fiscal year and beyond and that's especially for these.
Albert Carey: And then in Asia, we have these reprieve innovations that have been gaining traction, small right now, but going to be bigger into the new fiscal year and beyond. And that's especially for these products that fall into the circularity segment, such as textile take back and thermal loop insulation. The circularity is a concept that is very, very interesting to young consumers and therefore to our customers. And we're going to speak about this more in the upcoming quarters. So both the reprieve innovation and the outside of barrel business are starting to pick up, but they have favorable margins and they'll also be a great opportunity to grow our business and unify down the road.
Al Carey: Products that fall into the circularity segment, such as textile takeback in thermal loop installation.
Al Carey: The circularity is a concept that is very very interesting to young consumers and therefore to our customers and we're going to speak about this more in the upcoming quarters. So both the repreve innovation and the outside of the barrel business are starting to pick up but they have favorable margins and they'll also be.
Al Carey: <unk>.
Al Carey: Great opportunity to grow our business and unify down the road.
Albert Carey: So that's a summary, we're optimistic. The work we've been doing shows some real light at the end of the tunnel. And I believe that it's gonna give us the opportunity to return to growth and also to have solid economics beginning in the new fiscal year.
Al Carey: So that's a summary were optimistic the work we've been doing that showed some real light at the end of the tunnel.
Al Carey: And I believe that it's going to give us the opportunity.
Al Carey: <unk> returned to growth and also to have solid economics, beginning in the new fiscal year.
Albert Carey: So with that, let me turn it over to Eddie and AJ. They'll now be taking you through the real meat of our Q3 presentation. And then there'll be further discussion about our overall business.
So with that let me turn it over to Eddie and a J they'll now be taking you through the real meat of our Q3 presentation and then there'll be further discussion about our overall business. So.
Eddie Ingle: So, AJ. Thanks, Al.
Al Carey: Jay.
Al Carey: Okay.
Al Carey: Thanks Al This is Eddie alright.
Eddie Ingle: This is Eddie.
Eddie Ingle: Before I begin my prepared remarks, I'd like to recognize Tom Cottle, who died last Friday after a protected illness. true unified champion. built a 40-year-plus career at Unifi, rising to become the president and COO before his retirement in June 2021. He was a loved and respected leader of Unifi in the textile industry and will be missed by all.
Speaker Change: Before I begin my prepared remarks, I'd like to recognize Tom Caudle, who died last Friday after a protected illness. He was.
Al Carey: True unified champion.
Al Carey: It's a 40 year plus career at unify rising to become the President and C. O O before we'd see retirements in June 2021.
Speaker Change: He was a loved and respected leader of unify in the textile industry and will be missed by all so on behalf of all of those at unify and many other industry leaders I'd like to take the time to pass on our deepest condolences to his wife and his family.
Eddie Ingle: So on behalf of all those at Unifi and many other industry leaders, I'd like to take the time to pass on our deepest condolences to his wife Anne and his family. Turning back to the call, as Al just mentioned, our results for the quarter were in line with our expectations. driven primarily by improved performance in our America segment due to the positive traction we have experienced with our Beyond Apparel and Reprieve Fiber initiatives and the ongoing recovery, as Al mentioned, of our business in Central America.
Speaker Change: Turning back to the call as Al just mentioned our results for the quarter were in line with our expectations.
Speaker Change: Given primarily by improved performance in our Americas segment due to the positive traction that we have experienced without beyond apparel and we're pre fiber initiatives.
Speaker Change: The ongoing recovery as al mentioned of our business in Central America.
Eddie Ingle: Before I dive deeper into the dry reservoir results, I'd like to start by providing an update on both our U.S. manufacturing transition that we announced back in February and the ongoing situation with tariffs. We recently announced that we have entered into a real estate purchase and sale agreement to sell our Madison, North Carolina manufacturing facility for $53.2 million. which will help reduce our outstanding debt and enhance our financial position once finalized. AJ will provide greater details on the sale and the cost of this transition shortly, but we are very pleased with this outcome, particularly with how quickly we were able to reach an agreement.
Speaker Change: And before I dive deeper into the right into the drivers of our results I'd like to start by providing an update on both our U S manufacturing transition that we announced back in February and the ongoing situation with tariffs.
Speaker Change: We recently announced that we've entered into our real estate purchase and sale agreement to sell our Madison, North Carolina manufacturing facility for $53 $2 million.
Speaker Change: Which will help reduce our outstanding debt and enhance our financial position once finalized.
Speaker Change: Hey, Jay will provide greater details on the sale and the cost of this transaction shortly but we are very pleased with this outcome, particularly with how quickly we were able to reach an agreement.
Eddie Ingle: This sale marks a significant step in our efforts to optimize our business and improve our balance. The Madison facility has been operating below capacity for an extended period of time now and with the planned ceasing of operations set for mid-June, our remaining yarn facilities in North and Central America will begin operating at much higher levels of capacity. This improvement in utilization is anticipated to meaningfully enhance our liquidity and margin performance without having to sacrifice any sales volume or ability to grow over the next few years. As we have previously noted, we will continue to consider additional steps to improve both the strength of our balance sheet and our financial performance to ensure that we remain well-positioned to pivot to growth in the near future.
Speaker Change: This marks a significant step in our efforts to optimize our business and improve our balance sheet.
Speaker Change: The Madison facility has been operating below capacity for an extended period of time now and with the plans.
Speaker Change: King of operation set for mid June our remaining yarn facilities in North and Central America will begin operating at much higher levels of capacity.
Speaker Change: This improvement in utilization is anticipated to meaningfully enhance our liquidity and margin performance without having to sacrifice any sales volume or ability to grow over the next few years.
Speaker Change: As we have previously noted we will continue to consider additional steps to improve both the strength of our balance sheet and our financial performance to ensure that we remain well positioned to pivot to growth in the near future.
Eddie Ingle: Turning now to what the recent tariff announcements will mean for our business. While there continues to be a fair amount of uncertainty regarding how this tariff situation will play out, there are several areas of our business that could benefit and others that could be negatively impacted. For instance, in our America segment, we do believe that if the tariffs on China and some other nations stay in place... Our business in the U.S. will be poised to benefit from the improved competitive environment given the increased cost of importing garments and textile-related goods. Furthermore, our recent efforts to adjust our footprint and maximize the value of our remaining facilities in the Americas put Unifi in a great position to capitalize on a potential increase in demand.
Speaker Change: Turning now to what the recent tariff announcements will mean for our business.
Speaker Change: While there continues to be a fair amount of uncertainty.
Speaker Change: Regarding how this tariff situation will play out there are several areas of our business that could benefit and others that could be negatively impacted.
Speaker Change: For instance, in our Americas segment, we do believe that if the tariffs on China and some other nations stay in place our business in the U S will be poised to benefit from the improved competitive environment, given the increased cost of importing garments and textile related cuts.
Speaker Change: Furthermore, our recent efforts to adjust our footprint to maximize the value of our remaining facilities in the Americas, but unifying a great position to capitalize on a potential increase in demand.
Eddie Ingle: In Brazil, in the medium term, we do not anticipate that we'll see any minimum volume impact from the tariffs, given that our commercial activities take place within the country of Brazil. While there is a possibility that near-term dumping in the region could increase as a result of the heightened tariffs on Asia-related countries, we do believe that our strength and value-added positioning in Brazil should help mitigate the large majority of that risk.
Speaker Change: In Brazil in the medium term, we do not anticipate that we'll see any meaningful volume impact from the tariffs given that our commercial activities take place within the country of Brazil.
Speaker Change: While there is a possibility that near term dumping in the region could increase as a result of the heightened tariffs on age related countries. We do believe that our strength in value added positioning in Brazil should help mitigate the large majority of that risk.
Eddie Ingle: As for our Asia business... The impact of the recent tariffs continues to remain uncertain. If the current tariff levels remain in place, we do anticipate that our results in the region could be negatively impacted. That said, as many of you know, we operate an asset-light model in the region and in multiple countries in Asia. We are working on several options to mitigate risk as we gain more certainty on the path forward and determine which levers to pull. To sum up, while the global tariff situation remains very fluid, we are monitoring the situation closely and believe that we'll see some pushes and pulls which we hope would end up being net neutral to positive for us over the next few years.
Speaker Change: As for our Asia business the impact of the recent tariffs continues to remain uncertain.
Speaker Change: If the current tariff levels remain in place, we do anticipate that our results in the region could be negatively impacted that.
Speaker Change: That said as many of you know we operate an asset light model in the region and in multiple multiple countries in Asia.
Speaker Change: We are working on several options to mitigate risk as we gain more certainty on the path forward and determined which levers to pull.
Speaker Change: To sum up while.
Speaker Change: While the global tariff situation remains very fluid we are monitoring the situation closely and believe that we'll see some cost pressures on poles, which we hope would end up being net neutral to positive for us over the next few years.
Eddie Ingle: Transitioning now to an overview of the quarter on slide four. During the third quarter of fiscal 2025, we reported $146.6 million in consolidated net sales. which were slightly down compared to the prior year period, primarily due to the less favorable sales mix and lower sales volumes in the Asia segment and foreign currency impact.
Transitioning now to an overview of the quarter on slide four.
Speaker Change: During the third quarter of fiscal 2025, we reported $146 $6 million and consolidated net sales.
Speaker Change: Which was slightly down compared to the prior year period, primarily due to the less favorable sales mix and lower sales volumes in the Asia segment and foreign currency impacts.
Eddie Ingle: In the America segment, we saw an increase in net sales during the quarter compared to the previous year, driven by our Beyond Apparel initiatives and the continued positive momentum in Central America. Our Brazil segment has continued to perform well due to an overall stable to strong market for textured polyester, despite some pricing pressures from inbound Chinese goods and foreign currency impacts. We expect that this trend will continue in the fourth quarter.
Speaker Change: In the America segment, we saw an increase in net sales during the quarter compared to the previous year driven by our beyond apparel initiatives and the continued positive momentum in Central America.
Speaker Change: Our Brazil segment has continued to perform well driven overall stable to strong market protection polyester. Despite some pricing pressures from inbound Chinese goods and foreign currency impacts.
Speaker Change: We expect that this trend will continue in the fourth quarter.
Eddie Ingle: As anticipated, our Asia segment results experienced a seasonal impact from the Chinese New Year in February and continued macroeconomic pressure. As I noted earlier on the call, we're monitoring the tariff environment on a daily basis and we'll make adjustments to maximize our results once we have more clarity.
Speaker Change: As anticipated our Asia segment results experienced a seasonal impact from the Chinese new year in February and continued macro economic pressures.
Speaker Change: As I noted earlier on the call we're monitoring the tariff environment on a daily basis, and we'll make adjustments to maximize our results once we have more clarity.
Speaker Change: Turning now to slide five for an update on Repreve Jeremy.
Eddie Ingle: Turning now to slide 5 for an update on reprieve. During the third quarter, Reprieve represented 31% of sales, and they were in line with the previous year as we continue to experience the impact of macroeconomic pressures in China. However, we continue to believe that we'll see an improvement in our reprieve fiber business during fiscal 2026 as our recently announced reprieve take-back filament yarn and Thermalube products begin to gain traction with our customers.
Speaker Change: During the third quarter Repreve represented 31% of sales and they were in line with the previous year as we continue to experience the impact of macroeconomic pressures in China.
Speaker Change: However, we continue to believe that we will see an improvement in our repreve fiber business during fiscal 2026, as our recently announced Repreve takeback filament yarn and thermally products begin to gain traction with our customers.
Eddie Ingle: Moving now to slide 6 to highlight some of our recent marketing efforts. The standout of these efforts was the global launch of Integrate, the industry's most comprehensive multifunctional sustainable yarn that we unveiled at the Premier Vision Paris trade show, where it drew strong industry interest. We also broadened the impact of reprieved tape back, our circular recycling solution. This quarter it was featured in Wal-Mart's Joyce Fund socks and Faherty's All Day Short and was promoted through their online and social media campaigns. In April, we launched Reprieve with C-Clo, a technology that helps reduce microplastic fiber pollution by enabling synthetic yarns to break down more like a natural fiber.
Speaker Change: Moving now to slide six to highlight some of our recent marketing efforts.
Speaker Change: Stand out of these efforts was the global launch of integrates the industry's most comprehensive multifunctional stay sustainable yarn that we unveiled at the Premier vacant Paris trade show, where it drunk drove strong industry interests.
Speaker Change: We also brought in the impact of Repreve Takeback I've started a recycling solution. This quarter. It was featured in Walmart's Joy spun in socks and priorities all day short and was promoted through their online and social media campaigns.
Speaker Change: In April we launched <unk> with cyclo, a technology that helps to reduce micro plastic fiber pollution by enabling synthetic yarns due date breakdown more like a natural fiber.
Eddie Ingle: Also, our co-branding strategy has continued to strengthen, with key partners including H&M, Bass Pro Shops, Marmot, and Poodle & Blonde highlighted reprieve products across their channels. As an example, Bass Pro Shops is highlighting reprieve signage in all 163 of their stores and is also promoting the line digitally.
Speaker Change: Also our co branding strategy has continued to strengthen with key partners, including H and M bass pro shops, marmot, and prudent and blond highlighted repreve products across their channels.
Speaker Change: As an example, bass pro shops is highlighting repreve signage in all 163 of their stores and it's also promoting the line digitally.
Eddie Ingle: During Earth Month, we honored brand partners through our long-running Reprieve Champions of Sustainability initiative. Winners included Nike, Target, Walmart, Polartec, and Texong, with special recognition to New Balance, Swanese, Marmot, Malibu Sea, and many others. One of this year's winners, Marmot, plans to debut a Thermaloop insulated product in the fall and winter of 2025, which we are obviously very excited about.
Speaker Change: During Earth month, we honored brand partners through our long running Repreve champions of sustainability initiative.
Speaker Change: Winners included Nike target, Walmart Polo Tech and Tech song with special recognition to new balance Suwannee, Marmot, Malibu C and many others.
Speaker Change: One of this year's winter winters Marmots plans to debut a thermal loop insulated product in the fall and winter of 2025, which we're obviously very excited about.
Eddie Ingle: As we moved through the quarter, our media presence grew with broad coverage in high profile outlets including CNN Underscored, Harper's Bazaar, and Sports Illustrated Swimsuit generating strong brand visibility. Finally, over the past few months, we also received several significant accolades, such as reprieve being recognized by Fast Company for its textile-to-textile recycling efforts. Our Thermaloup product won multiple awards for circular innovation, including Just Dial Excellence Award and the SEAL Sustainable Product Award. Unifi was named one of Newsweek's most responsible companies and recognized by USA Today as one of America's climate leaders for 2025. Furthermore, the Association of Plastic Recyclers honored Unifi with the Recycling Technology Leadership Award.
Speaker Change: As we moved through the quarter, our media presence grew with broad coverage in high profile out that's including CNN underscored Harper's Bazaar, and sports illustrated swimsuit generating strong brand visibility.
Speaker Change: Finally over the past few months. We also received several significant accolades such as Repreve being recognized by fast company for its textile into textile recycling efforts.
Speaker Change: Thermal loop product when multiple awards for secular innovation, including just style Excellence award and the sale of sustainable product Award.
Speaker Change: Unify was named one of Newsweek's, most responsible companies and recognized by USA today as one of America's climate leaders for 2025.
Speaker Change: Furthermore, the association of plastic recyclers honored unify with the recycling Technology leadership Award.
Eddie Ingle: These milestones and awards underscore the recognition our commitment to innovation, circularity, and sustainability leadership is getting in the marketplace.
AJ: These milestones and awards underscore the recognition our commitment to innovation circularity and sustainability leadership is getting in the marketplace with that I would like to pass the call over to a J to discuss our financial results for the quarter.
Andrew Eaker: With that, I would like to pass the call over to AJ to discuss our financial results for the Court. Thank you, Eddie. As Al and Eddie mentioned earlier in the call, our third quarter results met our expectations as we continue to make significant progress in positioning our business for future growth and profitability following our recently announced transition. We remain committed to carefully managing variable expenses in both production and administrative functions. This disciplined approach aims to achieve meaningful cost efficiencies and enhance profitability, which will be reinvested into critical growth areas, particularly in our beyond apparel and reprieve fiber initiatives, which will strengthen our revenue performance and support sustained margin expansion.
Speaker Change: Thank you Eddie as Alan Eddie mentioned earlier in the call our third quarter results met our expectations as we continue to make significant progress in positioning our business for future growth and profitability. Following our recently announced transition we remain committed to carefully managing variable expenses in both production and administrative.
Speaker Change: <unk>. This disciplined approach aims to achieve meaningful cost efficiencies and enhanced profitability, which will be reinvested in our critical growth areas, particularly in our beyond apparel and repreve fiber initiatives, which will strengthen our revenue performance and support support sustained margin expansion.
Andrew Eaker: Moving on to the financial results on slide 8, you will see our consolidated financial highlights for the quarter. Consolidated net sales for the quarter were $146.6 million, down 2% year-over-year. The decrease was primarily driven by lower volumes on a weaker sales mix in Asia and unfavorable foreign currency effects in Brazil, but was partially offset by improved volumes in the Americas, as Eddie mentioned.
Moving onto the financial results on slide eight you will see our consolidated financial highlights for the quarter consolidated net sales for the quarter were $146 $6 million down 2% year over year. The decrease was primarily driven by lower volumes on a weaker sales mix in Asia and unfavorable foreign currency effects in Brazil, but was partially offset.
Speaker Change: By improved volumes in the Americas as Eddie mentioned.
Andrew Eaker: Turning to slide 9 in the Americas segment, net sales were up by 3% compared to the prior year due to the benefits of our recent sales growth initiatives and an improved environment. Gross margin in the Americas segment experienced a decline of 350 basis points during the quarter. driven primarily by inflationary pressures and transition costs related to the manufacturing footprint reduction.
Speaker Change: Turning to slide nine in the Americas segment, net sales were up by 3% compared to the prior year due to the benefits of our recent sales growth initiatives and an improved environment gross margin in the Americas segments experienced a decline of 350 basis points during the quarter drew.
Speaker Change: Driven primarily by inflationary pressures and transition costs related to the manufacturing footprint reduction.
Andrew Eaker: Slide 10 displays our Brazil segment highlights, with the segment seeing continued strength due to our strategic position in the region with full capacity utilization. While costs and pricing are dynamic in this region, the Brazil operation continues to perform well.
Speaker Change: Slide 10 displays our Brazil segment highlights with the segment seeing continued strength due to our strategic position in the region with full capacity utilization, while cost and pricing are dynamic in this region. The Brazil operation continues to perform well.
Andrew Eaker: Finally, on slide 11, Asia saw net sales and gross margin decline by 12% and 150 basis points respectively. due to the continued challenges in the region for both sales mix and pricing dynamics stemming from macroeconomic pressures there.
Speaker Change: On Slide 11, Asia saw net sales and gross margin declined by 12% and 150 basis points respectively.
Speaker Change: Due to the continued challenges in the region for both sales mix and pricing dynamics stemming from macroeconomic pressures there.
Andrew Eaker: I'll now briefly discuss our U.S. manufacturing transition and the expectation of improved cash flow and leveraged positions.
Speaker Change: I will now briefly discuss our U S manufacturing transition and the expectation of improved cash flow and leverage position. We are pleased to have reached an agreement to sell the Madison facility for $53 $2 million at this time, we anticipate that the sale will close on may 15th and once the sale is finalized the net proceeds from the transaction.
Andrew Eaker: We are pleased to have reached an agreement to sell the Madison facility for $53.2 million. At this time, we anticipate that the sale will close on May 15th, and once the sale is finalized, the net proceeds from the transaction will be used to repay roughly one-third of our outstanding debt, which will result in a $3 million annual interest savings. Going forward, we expect significant savings from the consolidation of manufacturing activities across North and Central America, providing a $20 million reduction to cost of sale. This reduction is comprised of approximately 60% labor, 15% utilities, and the remaining 25% to overheads associated with oversight and upkeep relating to the facility that will inherently cease.
Speaker Change: Action will be used to repay roughly one third of our outstanding debt, which will result in a 3 million dollar annual interest savings.
Speaker Change: Going forward, we expect significant savings from the consolidation of manufacturing activities across north and Central America, providing a $20 million reduction to cost of sales disruption is comprised of approximately 60% labor, 15% utilities and the remaining 25% to overheads associated with oversight and uptake.
Speaker Change: Relating to the facility that will inherently sees from a run rate perspective, we expect these savings to fully materialize in calendar 2026. After the transition of activities has fully settled into our business lines and labor productivity has stabilized.
Andrew Eaker: From a run rate perspective, we expect these savings to fully materialize in calendar 2026 after the transition of activities has fully settled into our business lines and labor productivity has stabilized. As we have noted several times, we expect to complete this transition with no loss in revenues or disruptions in customer service.
Speaker Change: As we have noted several times, we expect to complete this transition with no loss in revenues or disruptions in customer service.
Andrew Eaker: As a result of this transition out of the Madison facility, we have already incurred a total of $1.3 million in restructuring costs. Throughout the remainder of calendar year 2025, we will incur additional restructuring expenses from this manufacturing transition, primarily as a result of the relocation of equipment, abandoning equipment. a total of which we expect to range between $6 and $8 million. We will continue to provide additional updates on the progress of this transition and the associated cost savings benefits as the process advances.
Speaker Change: As a result of this transition out of the Madison facility, we have already incurred a total of $1 3 million in restructuring costs throughout the remainder of calendar year 2025, we will incur additional restructuring expenses from this manufacturing transition primarily as a result of the relocation of equipment abandoning equipment.
Speaker Change: A total of which we expect to range between six and $8 million.
Speaker Change: We will continue to provide additional updates on the progress of this transition and the associated cost savings benefits as the process process advances with that I'll now pass the call back to Eddie to make some final comments.
Eddie Ingle: With that, I'll now pass the call back to Eddie to make some final Thank you, AJ.
Eddie: Yeah. Thank you AJ now, let's turn to slide 13 to discuss our forecast for the fourth quarter of fiscal 2025.
Eddie Ingle: Now let's turn to slide 13 to discuss our forecast for the fourth quarter of fiscal 2025. For the fourth quarter, we are expecting net sales and adjusted EBITDA improving sequentially from the third quarter of fiscal 2025, primarily driven by the further recovery for the America segment and then, of course, moving beyond the Chinese New Year period. Continued Restructuring and Transition Expenses, Primary Equipment Relocation and Abandonment Costs between $6 million and $8 million.
Eddie: For the fourth quarter, we are expecting net sales and adjusted EBITDA improving sequentially from the third quarter of fiscal 2025, primarily driven by the further recovery for the Americas segments, and then of course moving beyond the Chinese new year period.
Eddie: Continued restructuring and transition expenses primary equipment relocation and abandonment costs, let's say, you said of between $6 million and $8 million.
Eddie Ingle: As we have highlighted today, the sale of our Madison Manufacturing Facility marks a significant step for our business. I want to once again point out the key takeaways of this transaction and the elimination of the yarn production at this site. First, upon closing of this transaction, we will immediately repay $50 million of debt, reducing our leverage and providing the business with significantly more flexibility to invest in future growth and innovation. We will increase the utilization of our remaining manufacturing facilities in North and Central America substantially, which will allow for significantly improved fixed cost leverage. With higher utilization and more efficient operations in the American segment, we'll remove over $20 million in costs once the facility sale is finalized and all restructuring expenses are completed.
Eddie: As we've highlighted today the sale of our Madison Madison manufacturing facility marks a significant step for our business.
Eddie: I want to once again point out the key takeaways of this transaction and the elimination of the arm production at this site.
Eddie: First upon closing of this transaction, we will immediately repay $50 million of debt, reducing our leverage and providing the business with significantly more flexibility to invest in future growth and innovation.
Eddie: We will increase the utilization of our remaining manufacturing facilities in north and Central America substantially which will allow for significantly improved fixed cost leverage.
Eddie: With higher utilization and more efficient operations in the Americas segment will remove over $20 million in costs. Once the facility sale is finalized and all restructuring expenses are competed.
Eddie Ingle: Further, we'll save an additional $3 million in annual interest expense. All of these savings will fall to the bottom line by late calendar year 2025, which should get us back to consistent EBITDA profitability, assuming we don't see a protracted global recession. stronger margins and profitability, we should also return to generating positive free cash flow which again will allow for improved investment and opportunities that will drive long term shareholder value. Most importantly, we'll still have plenty of capacity to support the exciting new innovation products we've outlined earlier, and we will continue to leverage the asset-light model in the Eastern Hemisphere that has contributed well to global growth and expansion.
Eddie: Further will save an additional $3 million in annual interest expense all of these savings will fall to the bottom line by late calendar year, 2025, which should get us back to consistent EBITDA profitability, assuming we don't see a protracted global recession.
Eddie: With stronger margins or profitability, we should also return to generating positive free cash flow, which again will allow for improved investment in opportunities that will drive long term shareholder value.
Eddie: Most importantly, we will still have plenty of capacity to support the exciting new innovation products. We've outlined earlier and we will continue to leverage the asset light model in the eastern Hemisphere that has contributed well to global growth and expansion.
Eddie Ingle: Over the next few months, as noted on slide 14, our focus will be on exiting our Madison facility and increasing the operating capacity at our remaining facilities to support our customers' needs with sustainable and innovative products that will help to create a more circular economy and position Unifi for future profitable growth.
Eddie: Over the next few months as noted on slide 14.
Eddie: Our focus will be on exiting our Madison facility and increasing the operating capacity at our remaining facilities to support our customers' needs with sustainable and innovative products that will help to create a more circular economy and position unify for future profitable growth.
Eddie Ingle: This is a pivotal moment in time for Unifi, and the management team is energized by the opportunities that lie ahead.
Eddie: This is a pivotal moment in time for unify and the management team is energized by the opportunities that lie ahead.
Eddie: With that we.
Operator: I would like to now open the line for questions. Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster.
Eddie: We would like I would like to now open the line for questions. Thank you.
Eddie: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster.
Anthony Lebiedzinski: Our first question comes from the line of Anthony Lebiedzinski from Sidoti and Company. Please go ahead. Good morning, everyone, and thank you for taking the questions. And, you know, certainly nice to see the continued progress. And it sounds like there's a lot of opportunity here with. closing of the Madison facility here to optimize the business.
Eddie: Our first question comes from the line of Anthony <unk> from Sidoti and company. Please go ahead.
Anthony: Good morning, everyone and thank you for taking the questions certainly nice to see the continued progress.
Eddie: Sounds like there was a lot of opportunity here with <unk>.
Anthony: Closing of the Madison.
Anthony: <unk> here to optimize the business so of course I guess.
AJ Eaker: So first, I guess just a quick housekeeping question, probably for AJ, as far as the FX impact in Brazil, maybe I missed it, but is there a way to kind of think about how much the foreign exchange headwind was for the Brazil segment? Yeah, Anthony, if you'll give me one second just to reference that, I'll provide that for you in just a moment. You can go with your next question and I'll come back. Sure. Okay. Thanks, AJ.
Anthony: Quick housekeeping question.
Anthony: A J as far as the FX impact in Brazil.
Anthony: Maybe I missed it but.
Anthony: And is there a way to kind of think about how much the foreign exchange headwind was.
Anthony: For the Brazil segment.
Speaker Change: Yeah, Anthony if you'll give me one second just a reference to that.
Speaker Change: Ill provide that for you in just a moment you can go with your next question and I'll come back to you.
Sure Okay. Thanks, a J.
Albert Carey: Al, you mentioned the carpet and military markets as an opportunity for beyond apparel, which you guys have talked about previously as well. But just thinking about what you said as far as the margins being better for that versus other categories, is there a way to put a number on that as far as how to think about that and what the you know, market opportunity is for that?
Al Carey: Al you mentioned the.
Al Carey: Carpet and military markets.
Al Carey: Opportunity for beyond apparel achieved.
Al Carey: You guys have talked about previously as well, but just thinking about the.
Al Carey: You said as far as the margins being better for that versus other categories is there a way to put a number on that as far as how to think about that and what the.
Al Carey: Market opportunity is for that.
Albert Carey: We don't have a we don't want to put out a forecast yet because dealing some customer confidentiality But I would say the margins are at least twice as good as what we sell on our base business Okay. That's great to hear. Okay.
Al Carey: We don't have a we don't want to put out a forecast yet because the deal and some customer confidentiality, but I would say the margins are at least twice as good as what we sell on our base business.
Al Carey: Okay.
Al Carey: Great to hear Okay. So and then the same thing on carpets.
Albert Carey: And then the same thing on carpet. Okay, that sounds very promising. Okay, gotcha. Okay.
Al Carey: Okay.
Al Carey: That sounds very promising okay.
Al Carey: Got you Okay, Okay and then.
Anthony Lebiedzinski: And then Eddie, I know you gave a tariff overview. It sounds like it could be a net positive. I know there's a lot of moving parts.
Al Carey: Eddie.
Al Carey: You gave a <unk>.
Al Carey: Overview of it sounds like it could be a net positive I know, there's a lot of moving parts, it's still a fluid situation but.
Eddie Ingle: It's still a fluid situation, but just wondering, you know, so with the, just to kind of, I guess, maybe kind of related to this, but with the administration also ending the de minimis rule exemption, how should we think about the impact on your business from that? I think you put both the de minimis exemption for China and Hong Kong, which happened today, and the tariff, the extreme tariff of 145% that's in play with China today, sort of altogether. You can see companies like Timu and Xin increasing prices by 300%. For us, we've looked at our business overall, we've looked at what's, where we sell into China, and much of our product that we sell in China actually ends up in fabric form and that fabric gets exported to the different regions.
Al Carey: So just wondering so with the just to kind of I guess, maybe kind of related to this but.
Al Carey: The administration also ending the de Minimis rule.
Al Carey: Exemption, how should we think about the impact on your business from that.
Speaker Change: I think you've put both the de minimus exemption for China, and Hong Kong, which happened today.
Al Carey: And the tariff currently.
Midstream tariff.
Al Carey: 145%, that's in play with China today sort of altogether.
Al Carey: Can see companies like <unk> and <unk>.
Al Carey: Increasing prices by 300%.
Al Carey: Us.
Al Carey: We've looked at our business overall, and we've looked at what's where we sell into China and much of our product that we sell in China actually ends up in fabric form and that fiber gets exported into the different regions.
Eddie Ingle: So most of the other countries that we sell to are experiencing a 10% tariff, which is quite manageable on top of the normal duties that exist for synthetic materials, synthetic carments coming into the country. So I would say... and the overall impact of De Minimis and tariffs lumped together, and I would say as we move through the next few months and we get more clarity of what the administration is going to do, we'll have much more visibility. But right now, we expect there could be a downturn in our business in Asia, maybe by 10 or 15 percent, but it's really hard to know until we get all of the tariffs finalized.
Al Carey: Most of the other countries that we sell to are experiencing a 10% tariff which is quite manageable.
Al Carey: On top of the normal duties that exists for synthetic materials synthetic arms coming into the country. So I would say.
Al Carey: And the overall impact of de Minimis and tariffs.
Al Carey: Together and I would say as we move through the next few months and we get more clarity of what the administration is going to do we'll have we'll have much more visibility, but right now where we expect there could be a downside in a downturn in our business in Asia, maybe by 10 or 15%, but it's really hard.
Al Carey: To know until we get all of the tariffs finalized.
Anthony Lebiedzinski: Gotcha. Yes. So I know it's still a moving target with respect to that. So we'll stay tuned. Okay.
Speaker Change: Gotcha, Yeah, yes, so I know, it's still a moving target with respect to that so we'll stay tuned okay and then.
Anthony Lebiedzinski: And then so just to piggyback off of that, as far as just on the Asia segments, obviously, that's predominantly China. If the tariffs kind of stay in place like this for an extended period of time, is that kind of what you're saying? You think, you know, 10 to 15% decline or I don't know, is there any way to put some additional color on that as far as? Yeah, it is hard to, we've done the analysis, but just to remind you, Anthony, we do have this Asset Night model that is distributed across Asia, and many of our customers actually buy yarn from us in Turkey, in India, directly in Vietnam, Indonesia, so all those countries have a 10% tariff right now, so the reciprocal tariff is being negotiated with each of these countries, as far as our understanding, and we expect, right now, it is time for the administration to take a more measured approach as they move forward and negotiate country by country, so as long as the tariffs stay at, the reciprocal tariffs stay at the current levels, yes, we are confident that we are the downturn in our revenues in the Asia model, because of our Asset Lights.
Speaker Change: <unk> is also so just to piggyback off of that as far as just on the Asia segments, Obviously, that's predominantly China.
Speaker Change: If the tariffs stay in place like this for an extended period of time is that kind of what you say, you think 10% to 15% decline or.
Speaker Change: Is there any way to put some additional color on <unk>.
Speaker Change: Yeah, Yeah. It is hard to say.
Speaker Change: Typically we've done the analysis, but just to remind you Anthony we do have this asset light model that is distributor cross across Asia, and many of our our our customers actually buy yarn from us in Turkey in India directly in Vietnam, Indonesia. So.
Speaker Change: Which which all of those countries have a have a 10% tariff right now so the reciprocal tariff is being negotiated.
Speaker Change: Each of these countries as far as our understanding and we expect.
Speaker Change: Right now at this time too.
Speaker Change: The administration to take a more measured approach as they move forward and negotiate country by country. So.
As long as the tariffs stay at.
Speaker Change: Reciprocal tower stay at the current level, yes, we are confident that we are.
Speaker Change: The downturn in our revenues in the agent model because of our asset light.
Anthony Lebiedzinski: business rebuilds should be in that 10 to 15% range. But we'll have more visibility on that in the coming. Absolutely. Okay. Thanks for that.
Speaker Change: The business, we felt should be.
Speaker Change: In that 10% to 15% range, but we'll have more visibility on that in the coming months.
Speaker Change: Absolutely okay. Thanks.
Speaker Change: Thanks for that and then.
Anthony Lebiedzinski: And then, you know, thinking about the cost savings from the facility consolidation, Will we see some of that already in the first quarter of fiscal 26, or do you think it will take longer for that to materialize? Thanks, Anthony. It's AJ.
Speaker Change: Thinking about the cost savings from the facility consolidation.
Speaker Change: Will we see some of that already in the first quarter of fiscal 2000 subs. So you think it will take longer for that to materialize.
Speaker Change: Yeah. Thanks, Anthony it's a J I'll start with follow up from your earlier question for the FX impacts primarily in Brazil, that's about $4 million in the quarter and about $11 million in the nine months. So a few just a few percentage points on total sales for each period.
AJ Eaker: I'll start with a follow-up from your earlier question for the FX impact primarily in Brazil. That's about $4 million in the quarter and about $11 million in the nine months. So just a few percentage points on total sales for each period. And moving into the cost savings, we certainly expect some of those cost savings to hit in the first quarter of fiscal 26. We do not see the full run rate being realized yet until later in the calendar year, just as we stabilize all of the transition activities, get labor in the position that it needs to be in Yadkinville, and have everything fully transitioned.
Speaker Change: And moving into the cost savings, we certainly expect some of those cost savings to hit in the first quarter of fiscal 'twenty six we do not see the full full run rate being realized yet until later in the calendar year, just as we stabilize all of the transition activities.
Speaker Change: Get labor in the position that it needs to be and Yadkin Bill and have everything fully transition. So do expect to see some of that in this calendar year, but not fully realized on a run rate basis until late.
AJ Eaker: So do expect to see some of that in this calendar year, but not fully realized on a run rate basis until later.
Albert Carey: Anthony, the one biggest item, this is Al, when we close down the facility, we're moving new people into Yackerville to handle the new volumes that they have. And the hiring is going well, we're training people, but it takes a little while for them to get up to speed. And we see improvements every single week, but they're not operating at full out great performance until they've probably had three or four months under their belt. So that's the one item that we're working on the most. Understood. Okay.
Speaker Change: Anthony the one of the biggest item this is al.
When we closed down the facility where move in new people into the Yadkin Ville to handle the new volumes that they have and the hiring is going well we're training people on but it takes a little while for them to get up to speed and we see improvements every single week, but theyre not operating at full out.
Speaker Change: Great performance until APAC, they probably had three or four months under their belt. So that's the one item that we're working on the most.
Understood, Okay, and lastly for me so I know we've talked about beyond apparel, you reference a copy of the military.
Anthony Lebiedzinski: And lastly for me, so I know we talked about beyond apparel, you referenced carpet and military. Previously, you guys had also talked about some other vertical markets like automotive and home furnishings. And obviously, there's a lot of macro economic concerns and tariff concerns.
Speaker Change: Previously.
Speaker Change: You guys had also talked about some other.
Speaker Change: Vertical markets like automotive and home furnishings, but obviously theres a lot of macro economic concerns and tariff concerns, but after we get past some of this noise here do you still see that as an opportunity to move beyond apparel.
Albert Carey: But after we get past some of this noise here, do you still see that as an opportunity to move beyond apparel? Thanks for the question, Anthony. Certainly, the areas that we talked about, you're right, automotive, home furnishing, but I'll also add the packaging market in there, too, where we sell a lot of our pre-resin into that market. We are excited about the carpet and military opportunities, and military also, the area that we're selling into is also the tactical street where the people use at a more frequent rate. So we're excited about these things, these markets, beyond those two.
Speaker Change: Yes.
Anthony: Thanks for the question Anthony certainly.
Anthony: The areas that we talked about you're right automotive home furnishing, but I'll also add the packaging market in there too where we sell a lot of our pre RASM into that market and we are excited about.
Speaker Change: The carpeting and military opportunities in military you also.
Speaker Change: The area that we're selling into is also the tactical Street.
Speaker Change: Where that people people use.
Speaker Change: On a more frequent.
Speaker Change: Right. So we're we're excited about these things these markets beyond those two.
Albert Carey: I think packaging, for me, is the most exciting one that I think we have a lot of opportunity to develop.
Speaker Change: I think packaging for me is the most exciting one that I think we have a lot of opportunity.
Speaker Change: <unk>.
Albert Carey: heard a lot of the brands pushing out some of their sustainability targets. The 2025 targets are now being updated to the 2030 targets. Some of these brands are getting some flak for extending it out, but what we're seeing is they're not dropping their sustainability targets. They're just trying to move them out primarily because it's just hard to become more sustainable, and I think there's a greater realization of that. The good news is they're not backing off on their targets. They're just trying to move them out, so we see a lot of opportunity not just to move into these new brands and beyond apparel, these markets and beyond apparel, but also to move these markets into more sustainable footprint.
Speaker Change: Hurt a lot of the brands pushing out some of their sustainability targets interact to 'twenty. The 2025 targets are now being updated to the 2030 targets in some of these brands are getting some flak for extending it out but what we're seeing is they're not dropping their sustainability targets that are just trying to move them out because.
Speaker Change: Because it's just hard to move.
Speaker Change: To become more sustainable and I think theres, a more a greater realization of that but the good news is we're not backing off on their targets.
Speaker Change: Trying to move them out so we see a lot of opportunity not just to move into these new brands and beyond apparel.
Speaker Change: These markets and beyond apparel, but also to move these markets into more.
Speaker Change: Sustainable footprint, we expect quite a bit of our.
Anthony Lebiedzinski: We expect quite a bit of our Military Carey, Anthony Lebiedzinski, Edmund Ingle, Andrew Eaker, Unifi Inc, Andrew Eaker, Edmund Ingle, Andrew Eaker, Unifi Inc, Andrew Eaker, Unifi Inc, Andrew Eaker, Unifi Inc, All right, well, that sounds good. Well, yeah, thank you and best of luck. Thanks Anthony, take care.
Speaker Change: Military business for example to move into our Repreve nylon.
Speaker Change: Business and that's exciting to us and you know when we had that champions of sustainability event, we had a lot of brands there.
Speaker Change: Hanesbrands give them traditional.
Speaker Change: Textile companies, but we also had Malibu C.
Speaker Change: We were we're selling repreve, our ocean into their packaging for their their cosmetics.
Speaker Change: So a lot of exciting things happening in the beyond apparel not just in the growth of that market, but into moving repreve into that area.
Speaker Change: Alright, well that sounds good.
Speaker Change: Thank you on the best of luck.
Anthony: Thanks, Anthony take care.
Operator: Thank you.
Speaker Change: Thanks.
John Basher: Our next question comes from the line of John Basher from Pinnacle. Please go ahead. Good morning. Thanks for taking my question and congratulations on the quick sale of the plant. I guess you mentioned that it's anticipated closing May 15. Are there any significant contingencies that have to be overcome by then? I assume they have the buyer has financing in place, but are there, what might any contingencies be between now and May?
Speaker Change: Our next question comes from the line of John <unk> from Pinnacle. Please go ahead.
Speaker Change: Good morning, Thanks for taking my question and congratulations on the quick sale of.
Speaker Change: The plant I guess, you had mentioned that it was it's anticipated closing on may 15th.
Speaker Change: Are there any significant contingencies that have to be.
Speaker Change: Overcome by then I assume they have for the buyer has financing in place but.
Speaker Change: Are there what might.
Any contingencies to be between now and may 15th.
John Basher: Good morning, John. Thanks for the question. The main contingency in the contract is just adequate power output. So we're working through that right now and have no hiccups expected there. So still expecting to close around May 15th.
John: Good morning, John Thanks for the question.
Speaker Change: The main contingency in the contract is just adequate power output. So we're working through that right now and.
John: I have no hiccups expected there so still expecting to close around may 15th Okay. Good to hear.
John Basher: And in terms of the $6 to $8 million of additional restructuring costs. That's in the fourth quarter or that's between now and calendar year end? Thanks, John. The majority of that will occur in the fourth quarter. Some could certainly leak into the first quarter, just depending on the timing and the overall workload that's required to move machines around. Again, that's primarily machines being moved around. But generally, we expect that to be wrapped up in the next few months.
John: And in terms of the six to 8 million of additional.
John: Restructuring cost that's in the fourth quarter or that's between now and calendar year end.
Speaker Change: Thanks, Jon the majority of that will occur in the fourth quarter.
John: Some some could certainly leak into the first quarter, just depending on the timing and the overall workload that's required to move machines around again, thats, primarily machines being moved around.
John: But generally we expect that to be wrapped up in the next few months.
John Basher: Okay. And is that cash or non-cash or how does that break? primarily cash, primarily cash. Okay, good.
John: And as that cash or noncash or how does that breakout.
John: Primarily cash primarily cash.
John: Okay. Good.
John Basher: Kind of a broader question, I was just curious at what point do you start to disclose the profitability of Reprieve? We hear lots about it and you give us the sales number, but from the outside, we really have no idea. of what the profitability is once you embed all the marketing costs and the trade shows and all of that.
Speaker Change: Kind of a broader question I was just curious at what point.
John: Do you start to disclose the profitability of Repreve.
Speaker Change: We hear lots about it and you give us the sales number but from the outside we really have no idea.
Speaker Change: Of what the profitability is once you embed all the marketing costs in the trade shows and all of that so I'm just curious.
John Basher: So I'm just curious how the board thinks about additional disclosure on the reprieve, which would certainly help outside investors with their disclosures. Sure, thanks for the feedback, John. We're certainly proud of what REPRIEVE accomplishes, especially over the last several years. You can note that REPRIEVE is a material component of the Asia segment. So in general, that gives you a pretty good idea of the margin basis there.
Speaker Change: How the board thinks about additional disclosure on the Repreve, which would certainly help outside investors.
Speaker Change: With our decision making.
Jon: Sure. Thanks for the feedback Jon we're certainly proud of of what Repreve accomplishes, especially over the last several years.
Jon: Note that Repreve is a material component of the Asia segment. So in general that gives you a pretty good idea of the margin basis, there, but right now the current risk reporting structure will stay for the foreseeable future.
John Basher: But right now, the current reporting structure will stay for the foreseeable future. You say a material component of the of the Asia. What are you telling us there that Could you elaborate on that? Sure, we've disclosed in the past that reprieve is 80% or more of overall ASIA segment cells, so we would consider that the largest component of the overall ASIA cells and margin profile. So, without the reprieve, the Asia margins would be higher. Not necessarily. We have Reprieve along with Value Added Technologies, so there's a good strong mix in that segment. So certainly a mix within there that we have not broken out, but we are proud of that Asia segment margin, whether it's on Reprieve or Reprieve Plus with Value Added Technologies.
Jon: When you say a material component of it.
Jon: Is.
Jon: What are you telling us there.
Jon: Could you elaborate on that.
Jon: Sure we've disclosed in the past that Repreve is 80% or more of overall Asia segment sales. So we would consider that the largest component of the overall Asia sales and margin profile.
Jon: Okay, so without a reprieve the Asia margins would be higher.
Jon: Higher.
Jon: Not necessarily we have repreve along with value added technologies. So there is a good strong mix in that segment.
Jon: So certainly.
Jon: Our mix within there that we have not broken out, but we are proud of that Asia segment margin, whether it's on repreve or repeat plus with value added technologies.
John Basher: and John, this is Al. We could probably do a better job of telling you more about that. Over the last couple of, I'd say, 18 months, our business has been difficult and there was no real discussion about margins. But, you know, as things come back here in China or in Asia, we have reprieve base. We have reprieve plus, I would call it stage one and it goes, you know, this is another level and there's another level. There's four levels and they increasingly get better margin. And let us think about a way to, you know, get that into the marketplace.
Al Carey: And John this is al.
Al Carey: We could probably do a better job of telling you more about that over the last couple of I'd say 18 months, our business has been difficult and there was no real discussion about margins, but you know as things come back here.
Al Carey: In China or in Asia, we have Repreve base, we have repreve plus I would call. It stage one and it goes you know there's another level on another level, there's four levels and they increasingly get better margins.
Al Carey: Let us think about a way to.
Al Carey: Get that into the marketplace, but our constant effort is to move from Repreve, plus which gets a bit commoditized.
Albert Carey: But our constant effort is to move from Reprieve Plus, which gets a bit commoditized as time goes on, and then you move up to these other stages of Reprieve with the highest level being the textile take back and the Thermaloop stuff that we've just launched. But there's other things in between. that are also more profitable than the base reprieve.
Al Carey: As time goes on and then you move up to these other stages of Repreve with the highest level being the textile takeback in the thermal loop stuff that we've just launched.
Al Carey: But theres other things in between.
Al Carey: That are also more profitable than the base for <unk> okay.
John Basher: I would encourage you to have a deeper discussion at the board level to provide some type of margin analysis on the reprieve. Clearly help investors and perhaps clearly help the stock price. You got it. Thanks for the feedback, John. Take care. You too.
Al Carey: I would encourage you to have a deeper discussion at the board level too.
Al Carey: Provide some type of margin analysis on the reported business, which would.
Al Carey: Clearly help investors and perhaps clearly help the stock price you got it.
Al Carey: Thanks for the feedback John take care.
John: Thanks, Bob.
Randy Barron: Our next question comes from the line of Randy Barron from Pinnacle. Please go ahead. Hi guys, good morning. Can you hear me? Good morning, Randy. We're here, you fine. Great, AJ.
John: Our next question comes from the line of Randy Baron from Pinnacle. Please go ahead.
Randy Baron: Hi, guys. Good morning can you hear me.
Speaker Change: Good morning, Randy we're here you found.
Great Hey, Jay.
Randy Barron: This has been a super comprehensive Q&A, so most of my questions have been answered, but I just have a couple of administrative ones and maybe one or two high level. Just to follow up on that last question, that focused more on the reprieve breakdown in Asia. I'm really curious on that slide 11, roughly speaking, what percent of the Asia revenue is China today? We don't disclose that. because a lot of the, like I said in the call, a lot of the product that we sell actually goes out of China, but we don't.
Speaker Change: This has been a super comprehensive Q&A. So most of my questions have been answered, but I just have a couple of administrative ones and maybe one or two high level.
Speaker Change: Just to follow up on that last question kind of that focus more on the group III breakdown in Asia I'm really curious on that slide 11.
Speaker Change: Roughly speaking what percent of the Asia revenue is China today.
Speaker Change: We don't disclose that.
Speaker Change: Because a lot of the like I said in the call a lot of the products that we sell actually goes out of China, but we don't disclose that.
Randy Barron: Okay. You've said that the transition in America is going to be done by the end of the fiscal year. Is that also roughly, it sounds like it is, but is that also, I just want to make sure, is that roughly when all the cash costs are going to be complete? Yeah, I think we had a similar question earlier, Randy, some of that cash costs would leak into Q1, just based on the overall workload and timing of the machine moves, we don't expect anything to leak past Q1. And again, we expect the majority of that cost, again, primarily cash to be incurred in this quarter, the fourth quarter.
Speaker Change: Okay.
Speaker Change: You've said that the transition in America is going to be done by the end of the fiscal year is that also roughly it sounds like it is but is that also I want to make sure that roughly when all the cash costs are going to be complete.
Speaker Change: Yes, I think we had a similar question earlier, Randy some of that cash costs would leak into Q1, just based on the overall workload and timing of the machine moves we don't expect anything to leak past Q1, and again, we expect the majority of that cost again, primarily cash to be incurred in this.
Speaker Change: <unk>.
Speaker Change: <unk> fourth quarter.
Randy Barron: Okay.
Speaker Change: Okay.
Randy Barron: And then just two very high-level questions as I hop back in queue. One is, you talked, the reprieve kind of over 50% of the pies is super exciting. I'm curious if you could just riff a little bit and give some anecdotes about, you know, is it coming from one customer in particular who's pushing?
Speaker Change: And then just two very high level questions as I hop back in Q1 is you talked the repreve kind of over 50% of the pie is super exciting I am curious if you could just riff a little bit and give some anecdotes about is.
Speaker Change: Is it coming from one customer in particular, who is pushing you mentioned some of the logos during the script, but like just give us some sense of the fastest categories of vertical applications growing and then just more broadly at a high level is there anything else that unifi can sell and congratulations on this recent successful completion. Thanks so much.
Albert Carey: You mentioned some of the logos, you know, during the script, but like, just give us some sense of the fastest categories, the vertical, the application that's growing. And then just more broadly, at a high level, is there anything else that Unifi can sell and congratulations on this recent, you know, successful completion. Thanks so much. Yeah, Central America is an interesting market because it generally feeds a lot of the performance athletic wear business, so you have the normal big brands like Nike or retailers like Target and Wal-Mart getting a lot of their supply chain for near-term, quick-term, What we're seeing, what was described earlier, is this idea of near-shoring, you know, when right after the de-stocking phenomenon happened, business did move away back to China.
Speaker Change: Yes.
Speaker Change: In Central America is an interesting market because it's.
Speaker Change: It generally feeds a lot of the performance athletic wear.
Speaker Change: Business. So you have.
Speaker Change: No.
Speaker Change: You have the normal big brands.
Speaker Change: Like Nike or retailers like target and Walmart.
Speaker Change: I'm getting a lot of their supply chain for near term quick turn.
Speaker Change: And what we're seeing what was described earlier this idea of near shoring.
Speaker Change: But after the Destocking phenomenon happened.
Speaker Change: It didn't move away back to China, but because of the tariffs and method.
Eddie Ingle: But because of the tariffs, and as Alec pointed out, even before the tariffs, the performance athletic companies had decided to move some of their supply chains back. And I guess they were fortunate because they were a little bit ahead of some of these announcements. So basically, it's performance apparel market right now.
Speaker Change: I would point out even before the tariffs.
Speaker Change: Performance Athletic and companies have had decided to move some of their supply chain backend and I guess they were fortunate because they were little bit ahead of some of these announcements.
Speaker Change: So basically its performance apparel market.
AJ Eaker: Regarding the second question, I'm going to hand it over to Sure, in terms of other assets, we've done a great job with the warehouse that we sold last year, continuing to shore up assets that do have additional value, looking forward to closing on the Madison facility. At this time, we don't have other assets slated for sale. We're continuing to evaluate the balance sheet, of course, our footprint to look for additional opportunities. Nothing to announce at this time, but that will remain of consideration for all of us as we move forward. Thank you. Thank you, Randy.
Speaker Change: Right now regarding the second question is on one hand, it over to making sure in terms of other assets. We've done a great job with the warehouse that we sold last year continuing to shore up assets that do have additional value looking forward to closing on the Madison facility. At this time, we don't have other assets slated.
Speaker Change: For sale, we're continuing to evaluate evaluate the balance sheet of course, our footprint to look for additional opportunities nothing to announce at this time, but that debt will remain of consideration for all of us as we move forward.
Speaker Change: Thank you.
Speaker Change: Thank you Randy.
Speaker Change: Okay.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining, you may now
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].