Unifi Q2 2026 Unifi Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 Unifi Inc Earnings Call
Speaker #1: Good morning you for and thank attending Unifi . S second quarter Fiscal 2026 Earnings Conference Call During this call , . management will be a referencing webcast presentation can be Investor found in the that section Relations of Unifi .
Speaker #1: Com . Please familiarize yourself page two of the slide deck for with cautionary statements and non-GAAP . Today's conference is being and all lines have been placed on mute recorded to prevent any background .
Speaker #1: After noise speakers will be the remarks , there a answer question and speakers are Our . listed session on page presentation three of today's and include carry Executive Chairman all Eddie Engel , Chief Executive Officer .
Speaker #1: Chief A.G. Ecker , Financial officer . I will now over to turn the Al please Carey , turn to four of the call You may begin .
Al Carey: Thank you. Well, good morning, everyone, and thanks for joining our call this morning. I'm happy to report that we're beginning to see results in our business that are coming from a major effort that began one year ago, which is essentially resetting our cost base in North America business. The closing of the Madison facility and the reduction of costs across the board have created clear operating improvements that are gonna allow us to make healthy profits on a much smaller sales level. Now, a couple of highlights, and A.J. will go into more details on these later on. We're pleased to see improved profit margins, improved free cash flow. We have dramatically improved our inventory turns, and it's probably best we've seen in recent history.
Al Carey: Thank you. Well, good morning, everyone, and thanks for joining our call this morning. I'm happy to report that we're beginning to see results in our business that are coming from a major effort that began one year ago, which is essentially resetting our cost base in North America business. The closing of the Madison facility and the reduction of costs across the board have created clear operating improvements that are gonna allow us to make healthy profits on a much smaller sales level. Now, a couple of highlights, and A.J. will go into more details on these later on. We're pleased to see improved profit margins, improved free cash flow. We have dramatically improved our inventory turns, and it's probably best we've seen in recent history.
Speaker #2: Thank you . morning , Well , good and thanks for joining our this morning call everyone , I'm happy to report that we're beginning to .
Speaker #2: see results in our business that are coming from a effort major that began one year ago , which is resetting cost base in essentially North America .
Speaker #2: our Business . The Madison closing of the the facility and reduction of costs board have across the created clear improvements that operating allow us to are going to healthy profits make much on a smaller sales level a of couple highlights will go , and AJ into more these on .
Speaker #2: details on see pleased to . profit margins Now , We're improved cash free flow . We have dramatically our improved inventory improve turns , and probably best it's we've history recent .
Speaker #2: Now, we're pleased to see improved profit margins. We've improved our cash free flow. We have dramatically improved our inventory turns, and it's probably the best we've seen in recent history. We have people in North America, and our plant efficiencies have come up—summertime, we have 25% fewer people in the way.
Al Carey: We have 25% fewer people in North America, and our plant efficiencies have come way up from the summertime, now that all the changes are behind us in our Yadkinville facility and, also the closing of the Madison facility. A.J. will take you through the details of these business results in a moment, but we finally have actions behind us now after a year of hard work and some difficult decisions. So that was a necessary step one for us to build our profitable business back here at Unifi. Now, step two is building a strong revenue growth, and it's clear from the results of Q1 and Q2, those in revenue levels need to improve dramatically. But don't forget, Q1 and Q2 of this fiscal year were largely impacted by the tariff complexity that started in about April.
Al Carey: We have 25% fewer people in North America, and our plant efficiencies have come way up from the summertime, now that all the changes are behind us in our Yadkinville facility and, also the closing of the Madison facility. A.J. will take you through the details of these business results in a moment, but we finally have actions behind us now after a year of hard work and some difficult decisions. So that was a necessary step one for us to build our profitable business back here at Unifi. Now, step two is building a strong revenue growth, and it's clear from the results of Q1 and Q2, those in revenue levels need to improve dramatically. But don't forget, Q1 and Q2 of this fiscal year were largely impacted by the tariff complexity that started in about April.
Speaker #2: the Now that all changes behind us in our Yadkinville are facility and also the closing facility . AJ will take Madison details of you through the business of the moment results in a , but have we actions behind us now after a year of hard work some difficult decisions .
Speaker #2: the Now that all changes behind us in our Yadkinville are facility and also the closing facility . AJ will take Madison details of you through the business of the moment results in a , but have we actions behind us now after a year of hard work some difficult of the that was So a necessary step .
Speaker #2: One, for us, build to business back here in Unifi, profitable now. Two is strong revenue, step growth, and clear it's from the results of building Q1 and Q2. Those revenue need to levels dramatically.
Speaker #2: those But forget Q2 of this a largely impacted by the tariff complexity that started in don't April . seen improvements in orders from many in early customers We've we're cautiously about the optimistic recent order trends that we're seeing .
Speaker #2: those But forget Q2 of this a largely impacted by the tariff complexity that started in don't April . seen improvements in orders from many in early customers We've we're cautiously about the optimistic recent order trends that we're seeing February into You recall may back in April , May time frame our revenues dropped last year , about and that's when the precipitously tariff , reciprocal were in the in placed that order created turmoil in apparel and textile supply chains and most of the customers deal with large place .
Al Carey: We've seen improvements in orders from many customers in early January, and we're cautiously optimistic about the recent order trends that we're seeing into February. You may recall back in about April, May timeframe last year, our revenues dropped precipitously, and that's when the tariffs, the reciprocal tariffs, were placed in order. That created turmoil in apparel and textile supply chains, and most of the customers that we deal with placed large orders before the tariffs went into place, understandably. But it led to record inventory levels, and it slowed orders across the board in the industry for the entire balance of the calendar year, which was seven full months. But here's what we're seeing in January, February. First of all, the holiday sales for apparel were what we would describe as solid, +4%.
Al Carey: We've seen improvements in orders from many customers in early January, and we're cautiously optimistic about the recent order trends that we're seeing into February. You may recall back in about April, May timeframe last year, our revenues dropped precipitously, and that's when the tariffs, the reciprocal tariffs, were placed in order. That created turmoil in apparel and textile supply chains, and most of the customers that we deal with placed large orders before the tariffs went into place, understandably. But it led to record inventory levels, and it slowed orders across the board in the industry for the entire balance of the calendar year, which was seven full months. But here's what we're seeing in January, February. First of all, the holiday sales for apparel were what we would describe as solid, +4%.
Speaker #2: tariffs Before the into went place record inventory levels in it slowed orders board across the industry for the orders balance of the calendar year , which was seven full months it led to .
Speaker #2: we're here's what But seeing in January . February . First of all , the holiday sales for apparel were what we would as a plus solid describe 4% .
Al Carey: I wouldn't say they were great, but they weren't bad, and most of the retailers are satisfied with what they saw. Second, recently, we have seen customers come back and order to replace their inventories, especially those whose fiscal years ended on December 31. Third, Central America demand has picked up, which is very important for us. It really does look like in the near future that this will be a good nearshoring opportunity for retailers and brands in North America. More on that later. And then finally, innovations. Our innovations of Textile Takeback and on ThermaLoop are now gaining some traction. It's taken a long time to get there, but we're optimistic about what we're seeing and probably more to come in the summer.
Al Carey: I wouldn't say they were great, but they weren't bad, and most of the retailers are satisfied with what they saw. Second, recently, we have seen customers come back and order to replace their inventories, especially those whose fiscal years ended on December 31. Third, Central America demand has picked up, which is very important for us. It really does look like in the near future that this will be a good nearshoring opportunity for retailers and brands in North America. More on that later. And then finally, innovations. Our innovations of Textile Takeback and on ThermaLoop are now gaining some traction. It's taken a long time to get there, but we're optimistic about what we're seeing and probably more to come in the summer.
Speaker #2: I wouldn't say they were great , but they weren't And bad . most of the retailers were that we satisfied with what in the saw .
Speaker #2: Second , recently we have customers come back seen order to inventories the those , especially fiscal whose years ended on 1231 . Central America demand .
Speaker #2: Second , recently we have customers come back seen order to inventories the those , especially fiscal whose years ended on 1231 . Central America demand . Third , central very replace important for us .
Speaker #2: really It up , which is does look like in the near future that be a this will good nearshoring opportunity for retailers and brands in North America More on that .
Speaker #2: later . And then finally , innovations , our innovations of textile takeback and loop on some gaining traction . It's long thermal time to get there , are now but we're taken a optimistic seeing we're about what and probably more to come in summer .
Al Carey: So in summary, we expect the sales to improve, and when you combine that with our lower cost base right now, it gives us quite a bit of optimism for what our profitability and our cash flow can be going forward. So to take a deeper look at all this, let me turn it over to Eddie Ingle, our CEO.
Al Carey: So in summary, we expect the sales to improve, and when you combine that with our lower cost base right now, it gives us quite a bit of optimism for what our profitability and our cash flow can be going forward. So to take a deeper look at all this, let me turn it over to Eddie Ingle, our CEO.
Speaker #2: So in summary , we sales to expect the improve when you combine that with our lower cost base right now , gives it optimism for our cash what our profitability and flow us quite a going can be forward .
Eddie Ingle: Thanks, Al. And as Al just noted, our results for the second quarter were in line with our expectations, actually, with some of the metrics showing up better than expected. Now, while we are only a few weeks into the third quarter of our fiscal 2026, we are also starting to see some initial signs of an improved operating environment, driven by increased customer engagement, and many of them are beginning the post-holiday restocking. Importantly, the strategic initiatives that we have put into place to realign our cost structure and operations have put us in a much stronger position to take advantage of these positive trends as we move forward. I'm going to walk you through this in more detail in a few minutes, but first, we're gonna change things up a little bit slightly this quarter.
Eddie Ingle: Thanks, Al. And as Al just noted, our results for the second quarter were in line with our expectations, actually, with some of the metrics showing up better than expected. Now, while we are only a few weeks into the third quarter of our fiscal 2026, we are also starting to see some initial signs of an improved operating environment, driven by increased customer engagement, and many of them are beginning the post-holiday restocking. Importantly, the strategic initiatives that we have put into place to realign our cost structure and operations have put us in a much stronger position to take advantage of these positive trends as we move forward. I'm going to walk you through this in more detail in a few minutes, but first, we're gonna change things up a little bit slightly this quarter.
Speaker #2: So to take a look at all this , let me turn it over to Eddie Engel , our CEO deeper
Speaker #3: Thanks , Allan . And as al just noted , our results for the in line second quarter were with our expectations . Actually , with some of the better than showing up expected .
Speaker #3: Now, while we are only a few weeks into the third quarter of our fiscal 2026, we are also starting to see initial signs, some operating, of an environment driven by increased customer engagement.
Speaker #3: of them And many are beginning to improved post-holiday restocking Importantly , the . strategic initiatives that we into place to realign our cost structure operations have put us in much stronger position a advantage of these to take trends .
Eddie Ingle: I'm gonna turn the call over to A.J. now to walk us through the numbers for the quarter, and then I'm going to come back in to discuss our near-term strategic priorities and what lies ahead. With that, I'll turn it over to A.J. now to review our financial results. A.J.?
Eddie Ingle: I'm gonna turn the call over to A.J. now to walk us through the numbers for the quarter, and then I'm going to come back in to discuss our near-term strategic priorities and what lies ahead. With that, I'll turn it over to A.J. now to review our financial results. A.J.?
Speaker #3: As we move positive . I'm going forward through this in few minutes . more But first , we're going to change things up a little bit slightly this quarter .
Speaker #3: I'm going to turn and to now A.J. detail in a call over walk us through the the numbers then I'm quarter . And going to come back in to near-term discuss our strategic priorities for the and what ahead .
A.J. Eaker: Thank you, Eddie. I'll start off by discussing our consolidated financial highlights for the quarter on Slide 5. Net sales for the quarter were in line with our expectations, as Eddie said, but down 12.5% year-over-year, primarily driven by lower demand in the Asia segment and pricing pressure in the Brazil segment. Consolidated gross profit was $3.6 million, and gross margin was 3% during the period, compared to gross profit of $0.5 million and gross margin of 0.4% for Q2 a year ago. SG&A was just $9.7 million during the quarter, a 25% improvement from the prior year period, and adjusted EBITDA was just a loss of $0.7 million, which represents an improvement of $5.1 million compared to the year ago period.
A.J. Eaker: Thank you, Eddie. I'll start off by discussing our consolidated financial highlights for the quarter on Slide 5. Net sales for the quarter were in line with our expectations, as Eddie said, but down 12.5% year-over-year, primarily driven by lower demand in the Asia segment and pricing pressure in the Brazil segment. Consolidated gross profit was $3.6 million, and gross margin was 3% during the period, compared to gross profit of $0.5 million and gross margin of 0.4% for Q2 a year ago. SG&A was just $9.7 million during the quarter, a 25% improvement from the prior year period, and adjusted EBITDA was just a loss of $0.7 million, which represents an improvement of $5.1 million compared to the year ago period.
Speaker #3: I'll turn it to With that , A.J. now to review financial our results over . A.J. .
Speaker #3: I'll turn it to With that , A.J. now to review financial our results over . A.J. . lies Thank you .
Speaker #4: Eddie , I'll start off by discussing our consolidated financial highlights for the quarter on slide five . Net sales for the in line with our As Eddie said , expectations .
Speaker #4: But down quarter were 12.5% year over year, primarily by lower driven demand in the Asia segment and pricing pressure in the Brazil segment.
Speaker #4: Consolidated profit gross $3.6 million and gross margin During the period , was compared to gross was 3% . profit of half gross margin of the 0.4% for second quarter .
Speaker #4: A year ago , SG&A was just $9.7 million . During the a quarter , 25% improvement from the prior year period . And adjusted EBITDA was just a loss 0.7 million , represents an improvement of of $5.1 million year ago period to the .
A.J. Eaker: These favorable and improving results are the initial benefits of the hard work we have put into implementing our cost-saving initiatives, which we anticipate will continue throughout the remainder of the fiscal year. On Slide six, in the Americas, net sales were down 7.1% compared to the prior fiscal year, due to a lower portion of fiber sales, which normally carry a higher selling price, along with the tariff uncertainty that Al mentioned. Gross profit in the Americas region increased by $6.1 million during the quarter, primarily due to the previously noted cost-saving initiatives that included the consolidation of yarn manufacturing operations in this region. While we are likely to continue to have some short-term challenges in the Americas, we do believe that the mid- and long-term outlook is improving, given the better customer engagement that we're seeing today.
A.J. Eaker: These favorable and improving results are the initial benefits of the hard work we have put into implementing our cost-saving initiatives, which we anticipate will continue throughout the remainder of the fiscal year. On Slide six, in the Americas, net sales were down 7.1% compared to the prior fiscal year, due to a lower portion of fiber sales, which normally carry a higher selling price, along with the tariff uncertainty that Al mentioned. Gross profit in the Americas region increased by $6.1 million during the quarter, primarily due to the previously noted cost-saving initiatives that included the consolidation of yarn manufacturing operations in this region. While we are likely to continue to have some short-term challenges in the Americas, we do believe that the mid- and long-term outlook is improving, given the better customer engagement that we're seeing today.
Speaker #4: favorable These and results benefits of the hard work we have put into are the implementing our cost improving initiatives , which we anticipate will continue throughout saving the remainder of the fiscal year .
Speaker #4: six , in the On slide Americas , net sales were down 7.1% compared to the prior fiscal year , due to a lower portion of fiber sales , with normally carry a higher selling which price with the .
Speaker #4: tariff Along uncertainty that al mentioned . Gross profit in Americas region increased the by quarter , primarily due to the previously noted cost saving initiatives that included the consolidation of yarn manufacturing operations in this region .
Speaker #4: While we would likely to continue to have some short term challenges in the Americas , we do that the mid and long term believe outlook is improving , giving customer engagement the better that we're seeing today .
A.J. Eaker: Slide 7 displays the Brazil segment, which saw net sales and gross profit decrease versus the prior year due to some pricing pressures associated with lower competitive prices and imports from Asia. That said, demand and growth opportunities continue to remain strong in Brazil, and we are anticipating that we will see an improved performance in the region during the second half of this fiscal year. On Slide 8, our Asia segment net sales and gross profit declined by 27% and 10%, respectively, primarily due to lower sales volumes and pricing dynamics in the region. Despite these headwinds, gross margin in the region improved, expanding by 260 basis points on a year-over-year basis, underscoring the effectiveness of our asset-light model and its flexibility.
A.J. Eaker: Slide 7 displays the Brazil segment, which saw net sales and gross profit decrease versus the prior year due to some pricing pressures associated with lower competitive prices and imports from Asia. That said, demand and growth opportunities continue to remain strong in Brazil, and we are anticipating that we will see an improved performance in the region during the second half of this fiscal year. On Slide 8, our Asia segment net sales and gross profit declined by 27% and 10%, respectively, primarily due to lower sales volumes and pricing dynamics in the region. Despite these headwinds, gross margin in the region improved, expanding by 260 basis points on a year-over-year basis, underscoring the effectiveness of our asset-light model and its flexibility.
Speaker #4: Slide Brazil segment , which saw net gross sales and profit decrease seven displays the versus the prior year pricing due to some pressures associated with lower competitive and imports prices Asia from .
Speaker #4: That said , demand and growth opportunities remain strong in Brazil , and we anticipating that we will see an improved the during region second half of this year .
Speaker #4: Eight, our Asia On slide segment net performance in fiscal gross profit declined by 27% and 10%, respectively, primarily due to lower sales volumes and pricing dynamics in the region.
Speaker #4: Despite these headwinds , gross the region margin in improved , expanding by 260 basis points on a year over basis year , underscoring the effectiveness light of our asset model .
A.J. Eaker: From a demand standpoint, we're beginning to see signs of improvement in that region, with December outperforming both prior months, October and November. However, tariffs are continuing to create uncertainty, and brands are still evaluating the most appropriate course of action for their businesses in Asia. As we've noted in the past, we continue to see immense opportunity in Asia once trade pressures begin to subside, given that the majority of the world's polyester is still produced from China-based assets. Slide 9 outlines our balance sheet and capital structure. Our year-to-date free cash flow reached $13.3 million, reflecting a significant increase compared to the previous year's first half results. CapEx during the first half came in at just $3.1 million, around a 60% decline compared to the prior period as we prioritized our spending and cost savings.
A.J. Eaker: From a demand standpoint, we're beginning to see signs of improvement in that region, with December outperforming both prior months, October and November. However, tariffs are continuing to create uncertainty, and brands are still evaluating the most appropriate course of action for their businesses in Asia. As we've noted in the past, we continue to see immense opportunity in Asia once trade pressures begin to subside, given that the majority of the world's polyester is still produced from China-based assets. Slide 9 outlines our balance sheet and capital structure. Our year-to-date free cash flow reached $13.3 million, reflecting a significant increase compared to the previous year's first half results. CapEx during the first half came in at just $3.1 million, around a 60% decline compared to the prior period as we prioritized our spending and cost savings.
Speaker #4: And it's flexibility from a demand standpoint. We're beginning to see signs of improvement in that region, with December outperforming both prior months, October and November, and tariffs.
Speaker #4: However , are continuing to create uncertainty are still , and brands evaluating the most appropriate course of action for their businesses in Asia .
Speaker #4: we've noted As in the continue past , we to see immense in opportunity Asia once trade pressures begin to subside . Given that the majority of the polyester is world's still produced from China based assets .
Speaker #4: Slide nine outlines our balance sheet and capital structure . Our year to date flow free cash reached $13.3 million , reflecting a significant increase compared to the previous year's first half results .
Speaker #4: during the first half came in at just $3.1 million , around a 60% decline compared to the prior As we period . prioritized our spending and cost savings .
A.J. Eaker: Our net debt was reduced to $75 million at the end of December, a stark improvement from recent levels, and our working capital on a year-to-date basis came in at $149 million, which was 9% lower than levels seen during the prior fiscal period due to our leaner operations in the US. This significant improvement to our balance sheet and capital structure was directly attributable to our recent cost-saving measures, footprint consolidation, and reductions in working capital, which have helped us establish a more efficient manufacturing base in the US. We expect these efforts to minimize the drag on free cash flow through the remainder of fiscal 2026. At the same time, as customers begin to rebuild their depleted inventory levels into calendar year 2026, we do anticipate a moderate increase in working capital spend to support disciplined inventory builds and accommodate higher sales activity.
A.J. Eaker: Our net debt was reduced to $75 million at the end of December, a stark improvement from recent levels, and our working capital on a year-to-date basis came in at $149 million, which was 9% lower than levels seen during the prior fiscal period due to our leaner operations in the US. This significant improvement to our balance sheet and capital structure was directly attributable to our recent cost-saving measures, footprint consolidation, and reductions in working capital, which have helped us establish a more efficient manufacturing base in the US. We expect these efforts to minimize the drag on free cash flow through the remainder of fiscal 2026. At the same time, as customers begin to rebuild their depleted inventory levels into calendar year 2026, we do anticipate a moderate increase in working capital spend to support disciplined inventory builds and accommodate higher sales activity.
Speaker #4: Our net debt was reduced to 75 million at the end of stark December . improvement A from recent levels and our working capital on a year to date basis came in at 149 million , which was 9% lower levels seen during the Due to our period .
Speaker #4: fiscal in the operations US . This leaner to our balance sheet and capital structure was directly attributable to our recent cost saving measures , footprint consolidation and reductions in working capital , which us establish have helped efficient manufacturing base in the US expect these efforts to .
Speaker #4: minimize the drag on free We cash flow through the fiscal 26 . At the same time as begin to customers their depleted rebuild inventory levels into calendar year 2026 , we do anticipate a moderate increase in working spend capital to support inventory disciplined builds and accommodate higher sales activity .
A.J. Eaker: As a result, we expect Q3 will exhibit lower operating cash flows compared to Q2 to support these efforts. This concludes the financial review, and I'll now pass the call back to Eddie.
A.J. Eaker: As a result, we expect Q3 will exhibit lower operating cash flows compared to Q2 to support these efforts. This concludes the financial review, and I'll now pass the call back to Eddie.
Speaker #4: As a result, we expect the third quarter will exhibit lower operating cash flows compared to the second quarter. To support these efforts, concludes the.
Eddie Ingle: Thank you, A.J. As you just heard from A.J., the hard work of our team is starting to pay off, and we're excited to see the solid start of a recovery in our core operating metrics. Today, I'd like to start with a broader perspective and talk to you through the cumulative results of two years of strategic initiatives and investments, which we have, which we believe has positioned Unifi for long-term success. So let's turn to slide 10 for an overview of our priorities for the second half of fiscal 2026. As we look ahead, our focus continues to remain on returning Unifi to long-term growth and profitability. In order to achieve this goal, we are concentrating our efforts on four key areas.
Eddie Ingle: Thank you, A.J. As you just heard from A.J., the hard work of our team is starting to pay off, and we're excited to see the solid start of a recovery in our core operating metrics. Today, I'd like to start with a broader perspective and talk to you through the cumulative results of two years of strategic initiatives and investments, which we have, which we believe has positioned Unifi for long-term success. So let's turn to slide 10 for an overview of our priorities for the second half of fiscal 2026. As we look ahead, our focus continues to remain on returning Unifi to long-term growth and profitability. In order to achieve this goal, we are concentrating our efforts on four key areas.
Speaker #4: This Review , and I'll now pass the Financial Eddie .
Speaker #3: Thank you . A.J.
Speaker #3: As heard from A.J., the hard work you just put in as a team is paying off, and we're calling back to a solid start of a recovery in our core operating metrics.
Speaker #3: Today, I'd like to start with a broader perspective and talk you through the cumulative results of two years of strategic initiatives and the investments which we have, which we believe has Unifi positioned for long-term success.
Speaker #3: So let's turn to slide ten for an overview of our priorities for the second half of fiscal 2026 . As we look ahead , our focus continues to remain on returning Unifi to long term growth and profitability in order to achieve this goal , we are concentrating our efforts on four key areas .
Eddie Ingle: First, we have dramatically improved our operating model through targeted cost decisions and manufacturing footprint consolidation, and we need to continue to better leverage the work we've done here. At the same time, we have and will continue to invest in ourselves to help strengthen and scale our leading brands. Next, we have a culture built around innovation and new product development, and we will continue to prioritize the customer adoption of our innovative solutions to support future growth. And finally, we must convert all this operational progress into a sustained financial momentum. The next few slides offer more details on each of these priorities. Let's start on Slide 11. As you can see from this slide, over the past two years, we've executed three strategic initiatives that have helped us better align our cost structures and operations.
Eddie Ingle: First, we have dramatically improved our operating model through targeted cost decisions and manufacturing footprint consolidation, and we need to continue to better leverage the work we've done here. At the same time, we have and will continue to invest in ourselves to help strengthen and scale our leading brands. Next, we have a culture built around innovation and new product development, and we will continue to prioritize the customer adoption of our innovative solutions to support future growth. And finally, we must convert all this operational progress into a sustained financial momentum. The next few slides offer more details on each of these priorities. Let's start on Slide 11. As you can see from this slide, over the past two years, we've executed three strategic initiatives that have helped us better align our cost structures and operations.
Speaker #3: First , we have dramatically improved our operating model through targeted cost decisions and manufacturing footprint consolidation , and we need to continue to better leverage the work we've done here .
Speaker #3: At the same time , we have and will continue to invest in ourselves to help strengthen and scale our leading brands . Next , we have a culture built innovation and new product around development , and we will the prioritize customer adoption of our innovative solutions to support future growth and finally , we must all this convert operational into a sustained progress financial momentum .
Speaker #3: The next few slides are for more details on each of these priorities . Let's start on slide 11 . As you can see from this slide over the past two years , we've executed three strategic initiatives that have helped us better align our cost structures and operations .
Eddie Ingle: We began this process back in December of 2023 with the implementation of our profitability improvement plan, which streamlined our organization, realigned leadership to enable a more efficient, responsive go-to-market structure, and initiated a sales transformation plan to improve operational efficiencies and gross margins. Then, throughout calendar year 2025, we undertook a US manufacturing transition, which entailed the sale of our Madison, North Carolina, facility to a third-party buyer for the price of $45 million, with the proceeds of the sale being used to pay down our debt. Additionally, this transition helped improve efficiency and utilization at our Yadkinville, North Carolina, facility and created a more efficient operating footprint and with a higher productivity labor environment as we leveraged the existing automation assets.
Eddie Ingle: We began this process back in December of 2023 with the implementation of our profitability improvement plan, which streamlined our organization, realigned leadership to enable a more efficient, responsive go-to-market structure, and initiated a sales transformation plan to improve operational efficiencies and gross margins. Then, throughout calendar year 2025, we undertook a US manufacturing transition, which entailed the sale of our Madison, North Carolina, facility to a third-party buyer for the price of $45 million, with the proceeds of the sale being used to pay down our debt. Additionally, this transition helped improve efficiency and utilization at our Yadkinville, North Carolina, facility and created a more efficient operating footprint and with a higher productivity labor environment as we leveraged the existing automation assets.
Speaker #3: We began this process back in December of the 2023 with implementation of our profitability plan , which streamlined our organization , realigned leadership to enable a more efficient , responsive go to market structure , and initiated a sales transformation plan to improve operational efficiencies and gross margins .
Speaker #3: Then , throughout calendar year 2025 , we undertook a US manufacturing transition , which entailed the sale of our Madison , North Carolina facility third party to a buyer for the price of With the $45 million .
Speaker #3: proceeds of the being used to pay down our debt . sale Additionally , this transition helped improve efficiency and utilization at our Yadkinville North Carolina facility and created a more efficient operating footprint .
Eddie Ingle: And then, most recently, during the end of calendar year 2025, we implemented an additional cost restructuring program, which reduced our headcounts and lowered labor hours, operating spend, and CapEx. As a result of this program, we will see reduced operating spend and a $4 million in SG&A savings, all being reflected in fiscal year 2026. As AJ just mentioned, we are already beginning to see the initial benefits of these initiatives, and we estimate that these efforts have reduced our annual revenue break-even point by approximately $125 million to roughly $575 million today. Some of these initiatives were difficult to execute, and I want to thank our teams in each of the business units for their help in turning ideas into actions and changing the underlying cost structure of our business.
Eddie Ingle: And then, most recently, during the end of calendar year 2025, we implemented an additional cost restructuring program, which reduced our headcounts and lowered labor hours, operating spend, and CapEx. As a result of this program, we will see reduced operating spend and a $4 million in SG&A savings, all being reflected in fiscal year 2026. As AJ just mentioned, we are already beginning to see the initial benefits of these initiatives, and we estimate that these efforts have reduced our annual revenue break-even point by approximately $125 million to roughly $575 million today. Some of these initiatives were difficult to execute, and I want to thank our teams in each of the business units for their help in turning ideas into actions and changing the underlying cost structure of our business.
Speaker #3: And with a higher productivity environment . As we labor leveraged the existing automation assets and then most recently , during the end of calendar year 2025 , we implemented an additional cost program , which restructuring reduced our headcount and lowered hours labor , operating spend and CapEx .
Speaker #3: As a result of this program, we will see the impact of reduced operating spend and $4 million in savings, all being reflected in fiscal year 2026.
Speaker #3: As A.J. just mentioned , we already are beginning to see the initial benefits of these initiatives , and we estimate that have these efforts annual revenue break even point by approximately $125 million to roughly $575 million today .
Speaker #3: Some of these initiatives were difficult to execute , and I want to thank our teams in each of the business units for their help in turning ideas into actions changing and the cost structure of our business .
Eddie Ingle: It's now up to us to further leverage this improved operating platform and drive long-term results. To do so would require top-line growth. So on slide 12, you'll see some of the continued efforts we are making to further scale our innovative brand. During Q2, we had several new co-branding placements of our latest product technologies and our REPREVE offering with key brand leaders. Save the Duck launched a collection highlighting ThermaLoop, showcasing our circular textiles to textile insulation. Spanish brand, El Ganso, brought REPREVE into their stores with new signage and in-article branding about their usage of REPREVE. Now, on the US front, co-branding efforts from winter wear outfitter, Obermeyer, a hat collaborative with Ciele and REI, and furniture from Brentwood Home round out a diverse showcase of REPREVE branding usage.
Eddie Ingle: It's now up to us to further leverage this improved operating platform and drive long-term results. To do so would require top-line growth. So on slide 12, you'll see some of the continued efforts we are making to further scale our innovative brand. During Q2, we had several new co-branding placements of our latest product technologies and our REPREVE offering with key brand leaders. Save the Duck launched a collection highlighting ThermaLoop, showcasing our circular textiles to textile insulation. Spanish brand, El Ganso, brought REPREVE into their stores with new signage and in-article branding about their usage of REPREVE. Now, on the US front, co-branding efforts from winter wear outfitter, Obermeyer, a hat collaborative with Ciele and REI, and furniture from Brentwood Home round out a diverse showcase of REPREVE branding usage.
Speaker #3: It's now up to us to further improved leverage this operating and platform drive long term results . To do so would require top line growth .
Speaker #3: So on slide 12 , you'll the continued efforts we are making to further scale our innovative brand . During the second quarter , we had several new co-branding placements of see some of product technologies and our reprieve offering with key brand leaders .
Speaker #3: Save the duck launched a collection highlighting thermal , showcasing our circular textiles , textile insulation , Spanish brand Eleganza brought into their stores Repreve with new signage and in article about their usage of repreve and on the US front , co-branding efforts winter wear outfitter from .
Speaker #3: A collaborated with Sealy and Rei , and furniture from Brentwood home round out a diverse showcase of Repreve branding usage . Co-branding continues to play a key role in reinforcing Repreve and our impact on global solutions for textile to textile recycling through our Repreve .
Eddie Ingle: Co-branding continues to play a key role in reinforcing REPREVE and our impact on global solutions for textile to textile recycling through our REPREVE Takeback and ThermaLoop brands. The interest in our recently launched products, like Integr8 and A.M.Y. Peppermint Technologies, have received very positive feedback. Conversations are growing around what we consider to be our circular textiles to textile offerings, in particular, REPREVE Takeback and ThermaLoop. We continue to leverage Instagram as a platform to collaborate with key brands and their usage of REPREVE in our technologies. A post with Dario Mittmann highlighted the use of REPREVE on the runway at São Paulo Fashion Week.
Eddie Ingle: Co-branding continues to play a key role in reinforcing REPREVE and our impact on global solutions for textile to textile recycling through our REPREVE Takeback and ThermaLoop brands. The interest in our recently launched products, like Integr8 and A.M.Y. Peppermint Technologies, have received very positive feedback. Conversations are growing around what we consider to be our circular textiles to textile offerings, in particular, REPREVE Takeback and ThermaLoop. We continue to leverage Instagram as a platform to collaborate with key brands and their usage of REPREVE in our technologies. A post with Dario Mittmann highlighted the use of REPREVE on the runway at São Paulo Fashion Week.
Speaker #3: Takeback and Thermal Loop . The brands in our recently launched interest products like integrating Amy , Peppermint Technologies , have received very positive feedback .
Speaker #3: Conversations are growing around what we consider to be our circular textile textiles offerings in particular , Repreve take back and thermal loop and we continue to leverage Instagram as a platform to collaborate with key brands and their usage of repreve in our technologies .
Eddie Ingle: Now, we know this is not going to bring in a lot of sales, but it does reinforce in our minds that designers are still thinking about sustainability and want to use it as a way to connect it with the young influencers. And lastly, another company, Dovetail Workwear, a leading US women's workwear company, partnered with our team to create a co-branded asset to announce the launch of their HOTSWAP denim, utilizing REPREVE and our climate control technology, TruTemp365. Overall, we are pleased with how the continued efforts we are putting into promoting our innovative brands through partnerships, trade events, and digital engagements are paying off. Now, turning to Slide 13, you will see the output of the investments we have put into developing and launching our most important innovative products during fiscal 2025 and 2026.
Eddie Ingle: Now, we know this is not going to bring in a lot of sales, but it does reinforce in our minds that designers are still thinking about sustainability and want to use it as a way to connect it with the young influencers. And lastly, another company, Dovetail Workwear, a leading US women's workwear company, partnered with our team to create a co-branded asset to announce the launch of their HOTSWAP denim, utilizing REPREVE and our climate control technology, TruTemp365. Overall, we are pleased with how the continued efforts we are putting into promoting our innovative brands through partnerships, trade events, and digital engagements are paying off. Now, turning to Slide 13, you will see the output of the investments we have put into developing and launching our most important innovative products during fiscal 2025 and 2026.
Speaker #3: A post with Mitman Dario highlighted the use of Repreve on the runway at São Paulo Fashion Week, and we know this is not going to bring in a lot of sales, but it does reinforce in our minds that the designers are still thinking about sustainability and want to use it as a way to connect with the young influencers.
Speaker #3: And lastly , another company , Dovetail Workwear , a leading US women's workwear company , partnered with our team to create a co-branded asset to announce the launch of their Hot Swap denim .
Speaker #3: Utilizing Repreve and our climate control technology , true temp 365 . Overall , we are pleased with how the continued efforts we are putting into promoting our innovative brands through partnerships , trade events and digital engagements are paying off .
Speaker #3: Now, turning to slide 13. You will see the output of the investments we have put into developing and launching our most important, innovative products during fiscal '25 and '26.
Eddie Ingle: So far, the adoption of these new products has admittedly been slower than we anticipated due to the current environment, but we are ramping up efforts to increase customer adoption to help support future growth. We see great opportunities for these products globally, especially with some of our customers in Europe, who are under increased legislative pressure to offer circular solutions by their governments and their consumers alike... Moving to Slide 14 for an overview of our outlook and how we anticipate sustaining our financial momentum. For Q3, we expect to realize the full benefits of our cost reduction initiatives and improved working capital efficiency. We are also anticipating that we will have greater clarity on the global trade environment, which should help support revenue improvement as we move through calendar year 2026.
Eddie Ingle: So far, the adoption of these new products has admittedly been slower than we anticipated due to the current environment, but we are ramping up efforts to increase customer adoption to help support future growth. We see great opportunities for these products globally, especially with some of our customers in Europe, who are under increased legislative pressure to offer circular solutions by their governments and their consumers alike... Moving to Slide 14 for an overview of our outlook and how we anticipate sustaining our financial momentum. For Q3, we expect to realize the full benefits of our cost reduction initiatives and improved working capital efficiency. We are also anticipating that we will have greater clarity on the global trade environment, which should help support revenue improvement as we move through calendar year 2026.
Speaker #3: So far , the adoption of these new products has slower than admittedly been we anticipated due to the current environment , but we are up efforts ramping to increase customer adoption to help support future growth .
Speaker #3: We see great opportunities for these products globally, with some of our customers—especially customers in Europe—who are under increased legislative pressure to offer circular solutions by their governments and their consumers alike.
Speaker #3: Moving to slide 14 for an overview of our outlook and how we anticipate sustaining our financial momentum . For the third quarter , we expect to realize the full of our cost benefits and working improved capital efficiency .
Speaker #3: We are also anticipating that we will have greater clarity on the global trade environment , which should help support revenue improvement as we move through calendar year Finally , we 26 .
Eddie Ingle: Finally, we will remain focused on margin accretive efforts, with a continued emphasis on our REPREVE value-added products and the expansion of our Beyond Apparel initiatives. Regarding the second point around global trade, just last week, two countries in Central America, El Salvador and Guatemala, just signed reciprocal tariff deals with the US government. This means that in the very near future, apparel made from regional yarns that are made in these two countries can once again receive CAFTA-DR-like duty-free treatments when the final garments are shipped to the US. To wrap up, we recognize that there is still important work needed to sustain the recent successes as we move towards our long-term objectives. That said, we are encouraged by the progress we've made to date.
Eddie Ingle: Finally, we will remain focused on margin accretive efforts, with a continued emphasis on our REPREVE value-added products and the expansion of our Beyond Apparel initiatives. Regarding the second point around global trade, just last week, two countries in Central America, El Salvador and Guatemala, just signed reciprocal tariff deals with the US government. This means that in the very near future, apparel made from regional yarns that are made in these two countries can once again receive CAFTA-DR-like duty-free treatments when the final garments are shipped to the US. To wrap up, we recognize that there is still important work needed to sustain the recent successes as we move towards our long-term objectives. That said, we are encouraged by the progress we've made to date.
Speaker #3: will remain focused on margin accretive efforts with a continued emphasis on our reprieve , value added products and the of our expansion Beyond Apparel initiatives .
Speaker #3: Regarding the global trade , second point around just last week , two countries in Central America , El Salvador and Guatemala , just signed reciprocal tariff US deals with the government .
Speaker #3: This means that in the very near future , a made from regional yarns that are made in these two countries can once again receive cafta-dr like duty free treatments .
Speaker #3: When the final garments are shipped to US . To wrap up , we recognize that there is still important work needed to sustain the recent successes as we move towards our long term objectives .
Eddie Ingle: We are one month into the second half of our fiscal 2026, and our focus remains on converting our operational improvements into sustained financial momentum and ultimately creating long-term value for our shareholders. With that, we'd now like to open the line for questions. Thank you.
Eddie Ingle: We are one month into the second half of our fiscal 2026, and our focus remains on converting our operational improvements into sustained financial momentum and ultimately creating long-term value for our shareholders. With that, we'd now like to open the line for questions. Thank you.
Speaker #3: That said , we are encouraged by the progress we've made to date . We are one month into the second half of our fiscal 2026 , and our focus remains on converting our operational improvements into sustained financial momentum and creating long term value for our shareholders .
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Our first question comes from the line of Anthony Lebeszinski with Sidoti. Your line is open.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Our first question comes from the line of Anthony Lebeszinski with Sidoti. Your line is open.
Speaker #3: With that, we would now like to open the line for questions. Thank you.
Speaker #5: Thank
Speaker #5: you .
Speaker #1: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.
Speaker #1: If you would like to withdraw your question , simply press star one again . If you are called upon to ask your question and are listening speakerphone in via your device , please pick up your handset to ensure that your phone is not on mute .
Speaker #1: When asking your question again, press *1 to join the queue. And our first question comes from the line of Anthony Libedinsky with Sidoti.
Anthony Lebeszinski: Thank you, and good morning, everyone.
Anthony Lebiedzinski: Thank you, and good morning, everyone.
Eddie Ingle: Good morning, Anthony.
Eddie Ingle: Good morning, Anthony.
Anthony Lebeszinski: - Thanks for taking the questions. Hi, good morning. Hey, so, by the way, it was a really good cash flow quarter, which is great to see. So I guess, you know, my first question, in terms of your comments about the pickup in demand that you've seen since the quarter end, is that in all three segments, or is one segment particularly doing better than others? Just wanted to get more flavor, more color on what you're seeing thus far since the quarter ended.
Anthony Lebiedzinski: - Thanks for taking the questions. Hi, good morning. Hey, so, by the way, it was a really good cash flow quarter, which is great to see. So I guess, you know, my first question, in terms of your comments about the pickup in demand that you've seen since the quarter end, is that in all three segments, or is one segment particularly doing better than others? Just wanted to get more flavor, more color on what you're seeing thus far since the quarter ended.
Speaker #1: Your line is open .
Speaker #6: Thank you and good morning , everyone . Good morning for taking the questions . Hey good morning . Hey . So by the way , it was a really good cash flow quarter , which is great to see .
Speaker #6: So I guess my my first question in terms of your comments about the pickup in demand that you've seen since the quarter end , is that in all three segments , or is one per one segment particularly doing better than others ?
Eddie Ingle: Yeah. Thanks, Anthony, for the question, for joining us today. We're seeing it really across the board. You know, Brazil is coming out of a holiday season, so there's destocking taking place, but also there's stimulation in the economy by the government. So there seems to be positive momentum in the orders that we're seeing down there. China, you know, the new year there is happening mid-February, so there was a lot of activity in January in our Asia business in particular. And so that seems to be actually continuing more positively, as more positive than expected because we're close to that new year period now.
Eddie Ingle: Yeah. Thanks, Anthony, for the question, for joining us today. We're seeing it really across the board. You know, Brazil is coming out of a holiday season, so there's destocking taking place, but also there's stimulation in the economy by the government. So there seems to be positive momentum in the orders that we're seeing down there. China, you know, the new year there is happening mid-February, so there was a lot of activity in January in our Asia business in particular. And so that seems to be actually continuing more positively, as more positive than expected because we're close to that new year period now.
Speaker #6: Just wanted to get more flavor and more color on on what you're seeing thus far since the quarter ended .
Speaker #3: Yeah . Thanks , for joining us question Anthony , for the today . We're seeing across really across the board , you know , Brazil is coming out of a holiday season .
Speaker #3: So there's destocking taking place. But also, there's stimulation in the economy by the government. So, there seems to be positive momentum in the orders that we're seeing down there in China.
Speaker #3: You know , the new year . There is is happening So there was a mid-February . lot of activity in January in our Asia business in particular .
Speaker #3: And so, it seems to be actually continuing more, more positively—as more positive than they expected—because we're near year close to that period now.
Eddie Ingle: And in the US and Central America, that's where it's shining, because we are seeing the impact of the restocking of the inventories post everybody year-end, their year-end, trying to get their inventories down. But also the news around the reciprocal tariff agreement with Guatemala and El Salvador is positive for us. And so we're seeing more brands placing orders to the mills, and the mills are placing orders with us. So it's really across the board.
Eddie Ingle: And in the US and Central America, that's where it's shining, because we are seeing the impact of the restocking of the inventories post everybody year-end, their year-end, trying to get their inventories down. But also the news around the reciprocal tariff agreement with Guatemala and El Salvador is positive for us. And so we're seeing more brands placing orders to the mills, and the mills are placing orders with us. So it's really across the board.
Speaker #3: And in the US and Central America , that's where it's shining . Because we are seeing the impact of the restocking of the inventories .
Speaker #3: Post everybody , year end . Their year end , trying to get their inventories down , but also the news around the the agreement reciprocal tariff with Guatemala and El is is Salvador positive for us .
Speaker #3: we're And so seeing more brands placing orders to the mills mills are placing orders . And the with us . So it's it's really across the board .
Anthony Lebeszinski: So that's encouraging to hear, certainly. So, you know, when we look at your business, I mean, you've talked about Beyond Apparel for a bit, you know. Can you give us an update? And I guess, as we talk about this, maybe just kind of give us an update where you are, like, as far as apparel or and footwear, what percent of revenue is that at the moment, and kind of, you know, how should we think about the Beyond Apparel initiatives kind of going forward?
Anthony Lebiedzinski: So that's encouraging to hear, certainly. So, you know, when we look at your business, I mean, you've talked about Beyond Apparel for a bit, you know. Can you give us an update? And I guess, as we talk about this, maybe just kind of give us an update where you are, like, as far as apparel or and footwear, what percent of revenue is that at the moment, and kind of, you know, how should we think about the Beyond Apparel initiatives kind of going forward?
Speaker #6: So that's encouraging to to hear . Certainly . So you know , when we look at your business I mean you you've talked about beyond Apparel for a bit .
Speaker #6: You know , can you give us an update . And I guess as we talk about this , maybe you're just kind of give us an update where you are like as far as apparel or and footwear , percent of what of revenue is that at the moment ?
Eddie Ingle: Yes. So Beyond Apparel is really centered around carpet, packaging, military slash tactical, and auto. And I can say that last quarter, we had a very, very strong quarter in the packaging sector. Carpet actually grew slightly also, and our military and tactical, while we didn't get orders, we're still continuing to do a lot of sampling. So in the Q3, we won't see as much impact as we're, we expect to see in fiscal 2024, as the orders really start to come through. But definitely, as we're still seeing very positive signals from the market around all of those initiatives, so we're, we're excited about that. And as a percentage of our business, apparel is still, of course, a large part of that, but we are moving towards making that a lower percentage.
Eddie Ingle: Yes. So Beyond Apparel is really centered around carpet, packaging, military slash tactical, and auto. And I can say that last quarter, we had a very, very strong quarter in the packaging sector. Carpet actually grew slightly also, and our military and tactical, while we didn't get orders, we're still continuing to do a lot of sampling. So in the Q3, we won't see as much impact as we're, we expect to see in fiscal 2024, as the orders really start to come through. But definitely, as we're still seeing very positive signals from the market around all of those initiatives, so we're, we're excited about that. And as a percentage of our business, apparel is still, of course, a large part of that, but we are moving towards making that a lower percentage.
Speaker #6: And kind of , you know , how should we think about the Beyond Apparel initiatives kind of going forward ?
Speaker #3: Yeah . So Beyond Apparel is really centered around carpet packaging , military tactical and auto . And I can say that last quarter a very , very we had strong quarter in the packaging sector .
Speaker #3: Carpet actually slightly also . And our military and tactical , while we didn't get orders , were still continuing to do a lot of sampling .
Speaker #3: So in the Q3 we won't see impact as much as we're we expect to see in fiscal Q4 as the orders to come through .
Speaker #3: But restart definitely as we we're still seeing very positive signals from the market around all of those initiatives . So we're excited about that .
Speaker #3: And as a percentage of our business , apparel is still , of course , a large part of that . But we are moving towards making that lower percentage still very , very important .
Eddie Ingle: Still very, very important, of course, but, we do think that we're still on the right track with these Beyond Apparel initiatives here in the US. Thank you.
Eddie Ingle: Still very, very important, of course, but, we do think that we're still on the right track with these Beyond Apparel initiatives here in the US. Thank you.
Speaker #3: but we do think that we're still on the right track with these beyond apparel initiatives here in the US . Thank you .
Anthony Lebeszinski: Thanks, Eddie.
Anthony Lebiedzinski: Thanks, Eddie.
Al Carey: Hey, Anthony, this is Al.
Al Carey: Hey, Anthony, this is Al.
Anthony Lebeszinski: Yeah.
Anthony Lebiedzinski: Yeah.
Al Carey: This is Al.
Al Carey: This is Al.
Anthony Lebeszinski: Mm-hmm.
Anthony Lebiedzinski: Mm-hmm.
Al Carey: Watch military in the next couple of quarters. It looks like it's bigger than expected, and we're making a lot of progress with it. It just takes a long time to test for durability and colors, but when you get the business, it's usually a good long-term one and with high margins.
Al Carey: Watch military in the next couple of quarters. It looks like it's bigger than expected, and we're making a lot of progress with it. It just takes a long time to test for durability and colors, but when you get the business, it's usually a good long-term one and with high margins.
Speaker #2: Hey , Anthony . ET al . This is Al watch military in the next couple of quarters . It looks like it's than bigger expected .
Speaker #2: making a lot of And we're with it . It progress just takes a time test to for durability and colors . But when you get to business , it's it's it's usually a good long term one .
Anthony Lebeszinski: ... That, that's good to hear, certainly. And can you also give us an update on the pricing dynamics in each of your segments? You talked about, I think you really highlighted, Brazil as dealing with pricing pressures. But maybe if you could just go over the pricing dynamics that you have seen and expect to see here, going forward in each of the three segments.
Anthony Lebiedzinski: ... That, that's good to hear, certainly. And can you also give us an update on the pricing dynamics in each of your segments? You talked about, I think you really highlighted, Brazil as dealing with pricing pressures. But maybe if you could just go over the pricing dynamics that you have seen and expect to see here, going forward in each of the three segments.
Speaker #2: And with high margins .
Speaker #6: That's good to hear . Certainly . And can you also give us an update on the pricing dynamics in each of your segments ?
Speaker #6: You talked about ? I think you really highlighted Brazil as dealing with pricing pressures , but maybe if you could just go over the pricing dynamics that you have seen and expect to see here going forward in each of the three segments ?
Eddie Ingle: Yeah, we talked about the jumping from Asia into Brazil. That has still continued, although in the last few weeks, as expected, as oil has gone up, as the Brazilian real has strengthened, and as it appears that some of the really inefficient assets in Asia are being shut down. So it has created an environment where in Asia, the pricing has gone up, and Brazil is fed by that raw material supply chain. So we are seeing some positive pricing momentum going into the Q3 in Brazil. Not huge, but enough to where we're feeling positive about that. In Asia, it's a very reactionary market, and so there is some a slight uptick, like I said, in the Asia market.
Eddie Ingle: Yeah, we talked about the jumping from Asia into Brazil. That has still continued, although in the last few weeks, as expected, as oil has gone up, as the Brazilian real has strengthened, and as it appears that some of the really inefficient assets in Asia are being shut down. So it has created an environment where in Asia, the pricing has gone up, and Brazil is fed by that raw material supply chain. So we are seeing some positive pricing momentum going into the Q3 in Brazil. Not huge, but enough to where we're feeling positive about that. In Asia, it's a very reactionary market, and so there is some a slight uptick, like I said, in the Asia market.
Speaker #3: Yeah , about we talked the the dumping from Asia into Brazil that has still continued , although in the last few weeks , as expected , as oil has gone up as the Brazilian real is strengthened and as it appears that some of the assets in Asia are the really inefficient assets in Asia are being shut So down .
Speaker #3: That has created an environment in Asia where the pricing has gone up, and Brazil is fed by that raw material supply chain.
Speaker #3: So we are seeing some positive pricing going into the Q3 in Brazil , not not not huge , but enough to where we're we're we're feeling positive about that in Asia .
Eddie Ingle: But in particular, I wanted to circle back to the US and Central America. We've done a lot of right-sizing in that business. We've tried to exit businesses that were very challenging from a pricing point of view, and we've done targeted price increases. And we've also tried to make sure that for the complicated mix that we have, we've got the right price points in each of those different product lines that we serve. So we are seeing the benefit of that from a revenue point of view, and as our volumes increase, it'll become more transparent. But we're also seeing that be part of our margin improvement.
Eddie Ingle: But in particular, I wanted to circle back to the US and Central America. We've done a lot of right-sizing in that business. We've tried to exit businesses that were very challenging from a pricing point of view, and we've done targeted price increases. And we've also tried to make sure that for the complicated mix that we have, we've got the right price points in each of those different product lines that we serve. So we are seeing the benefit of that from a revenue point of view, and as our volumes increase, it'll become more transparent. But we're also seeing that be part of our margin improvement.
Speaker #3: We're it's very reactionary market . And so there is some a slight I said , uptick , like in the market . Asian But in particular I wanted to circle back to the US because and , and Central America , we've done a lot of bottom slicing in that business .
Speaker #3: We've tried to exit businesses that were very challenging from a pricing point of view . And we've done targeted price increases . We've also tried to make sure that for the for the complicated mix that we have , we've got the right price points in each of those different product lines that we serve .
Speaker #3: So we are seeing the benefit of that from a revenue point of view . And as we as volumes our But increase , become more it'll seeing we're also that be part of our margin improvement .
Eddie Ingle: The margin improvement has been helped by, of course, all these restructuring we've done, the spends, and the cost takeouts, but the pricing has been a big, a big part of that.
Eddie Ingle: The margin improvement has been helped by, of course, all these restructuring we've done, the spends, and the cost takeouts, but the pricing has been a big, a big part of that.
Speaker #3: The margin improvement has been helped by , of course , all this restructuring we've done and the spend , the cost take outs .
Anthony Lebeszinski: Mm-hmm. Okay. That, that's, you know, certainly good to hear. And obviously, as you guys have talked about, you've done a lot of work as far as the restructuring and manufacturing transitions and so on. So, as we think about the $575 million revenue that's needed to break even, how do you guys think about the mix between the three segments? You know, what do you guys need to get there? You know, I mean, if I look back, you know, historically, you know, the Asia and Brazil segment gross margins have done better than what we've seen the last couple of years or so.
Anthony Lebiedzinski: Mm-hmm. Okay. That, that's, you know, certainly good to hear. And obviously, as you guys have talked about, you've done a lot of work as far as the restructuring and manufacturing transitions and so on. So, as we think about the $575 million revenue that's needed to break even, how do you guys think about the mix between the three segments? You know, what do you guys need to get there? You know, I mean, if I look back, you know, historically, you know, the Asia and Brazil segment gross margins have done better than what we've seen the last couple of years or so.
Speaker #3: But the pricing has been a big, big part of that.
Speaker #6: Okay . you know , That's certainly a good to hear . So and obviously as you guys have talked about , you've done a lot of work as far as the restructuring and manufacturing transitions and so So as we on .
Speaker #6: think about the $575 million revenue that's needed to break even , how do how do you guys think about the mix between the three segments ?
Speaker #6: You know , what do you guys need to to get there ? You know , I mean , if I look back , you know , historically , you know , the Asia and Brazil segment , gross margins have done better than , than what we've seen in the last couple of years or so .
Anthony Lebeszinski: So, yeah, just broadly speaking, how do we think about the mix that's between the three segments that's needed to get back to break even?
Anthony Lebiedzinski: So, yeah, just broadly speaking, how do we think about the mix that's between the three segments that's needed to get back to break even?
Speaker #6: So , you know , just just broadly do we think speaking , how the mix that's between the three segments ? That's needed to get back to break even ?
A.J. Eaker: Yeah, good question, Anthony. Thanks for bringing up the break-even topic. Certainly proud of the actions we've been able to get through the system and get to this point. When we look at how that's distributed across the segments, you're looking at mid- to high 300s, generally for the Americas, and then the other two segments filling in the gap, really, from some of their historical run rates similar to those historical run rates. So that's how we would see the distribution that would get you to a high single-digit gross margin for the consolidated entity, and therefore, break even on an operating income zero basis.
A.J. Eaker: Yeah, good question, Anthony. Thanks for bringing up the break-even topic. Certainly proud of the actions we've been able to get through the system and get to this point. When we look at how that's distributed across the segments, you're looking at mid- to high 300s, generally for the Americas, and then the other two segments filling in the gap, really, from some of their historical run rates similar to those historical run rates. So that's how we would see the distribution that would get you to a high single-digit gross margin for the consolidated entity, and therefore, break even on an operating income zero basis.
Speaker #4: Yeah . Good Anthony . Thanks for bringing up the break . Even topic . Certainly proud of the been able actions we've to get through the system .
Speaker #4: And, and get to this point. When we look at how that's distributed across the segments, you're looking at mid to high $300 million generally for the Americas.
Speaker #4: the And then the other two segments filling in the gap really from some of historical their run rates similar to those historical run rates .
Speaker #4: So that's how we would see the distribution that would get you to a high single digit gross margin for the consolidated entity . And therefore break even on an operating income zero basis .
Anthony Lebeszinski: Got it. That, that's very helpful color, A.J. All right, well, I think that's all I had. I'll pass it on to others, and yeah, best of luck going forward.
Anthony Lebiedzinski: Got it. That, that's very helpful color, A.J. All right, well, I think that's all I had. I'll pass it on to others, and yeah, best of luck going forward.
Speaker #6: Got it . That's very helpful . Color AJ all right . Well , I think that's had . that's all I I'll pass it on to others .
A.J. Eaker: Thanks, Anthony.
A.J. Eaker: Thanks, Anthony.
Eddie Ingle: Thanks, Anthony.
Eddie Ingle: Thanks, Anthony.
Operator: And ladies and gentlemen, that concludes the question and answer session. Thank you all for joining in. You may now disconnect. Everyone, have a great day.
Operator: And ladies and gentlemen, that concludes the question and answer session. Thank you all for joining in. You may now disconnect. Everyone, have a great day.
Speaker #6: yeah best of luck going forward .
Speaker #4: Thanks , Anthony .
Speaker #3: Okay .
Speaker #1: And ladies and gentlemen that concludes the question and answer session . Thank you all for joining . And you may now disconnect . Everyone have a great day .
