Unifi(UFI) - 2025 Q3 - Quarterly Results

Third Quarter Fiscal 2025 Results Financial and Operational Highlights Unifi reported a 1.6% decrease in Q3 FY2025 net sales to $146.6 million and a wider net loss of $16.8 million, influenced by sales mix and Asia volumes, with a key facility sale agreement for debt reduction Q3 Fiscal 2025 Key Financial Metrics (vs. Q3 Fiscal 2024) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $146.6M | $149.0M | -1.6% | | REPREVE® Fiber Sales | $44.7M | $46.7M | -4.3% | | Gross (Loss) Profit | $(0.4)M | $4.8M | -108.3% | | Gross Margin | (0.3)% | 3.2% | -3.5 p.p. | | Net Loss | $(16.8)M | $(10.3)M | +63.1% | | Diluted EPS | $(0.92) | $(0.57) | +61.4% | | Adjusted EBITDA* | $(4.9)M | $(0.8)M | -512.5% | - Subsequent to the quarter's end, the company entered into an agreement to sell its Madison, North Carolina manufacturing facility for $53.2 million. The proceeds are designated for repaying outstanding debt[4] - The CEO noted that results were in line with expectations, driven by improved performance and positive traction in the Americas segment, particularly in Central America. The company is also making progress on optimizing the cost structure of its U.S. operations[3] Detailed Financial Performance Analysis Net sales declined due to weaker sales mix and lower volumes in Asia and Brazil, partially offset by Americas growth, leading to a significant gross profit decrease and a widened operating loss of $13.9 million - Net sales decreased to $146.6 million from $149.0 million, mainly due to weaker performance in the Asia and Brazil segments, which was partly offset by higher sales volumes in the Americas Segment[5] - Gross profit declined by $5.2 million year-over-year. The Americas segment's gross profit fell by $3.4 million due to inflation and transition costs, Asia's by $0.9 million from lower volumes and unfavorable mix, and Brazil's by $0.8 million from currency effects[6] - Operating loss increased to $13.9 million from $6.9 million in the prior-year quarter, primarily due to the significant decrease in gross profit[7] Segment Performance In Q3 FY2025, Americas net sales modestly increased to $93.5 million but gross loss widened to $7.0 million, while Brazil and Asia segments experienced declines in both net sales and gross profit Segment Net Sales (in thousands) | Segment | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | Americas | $93,544 | $91,130 | | Brazil | $28,124 | $29,573 | | Asia | $24,889 | $28,293 | Segment Gross (Loss) Profit (in thousands) | Segment | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | Americas | $(6,957) | $(3,514) | | Brazil | $2,988 | $3,837 | | Asia | $3,524 | $4,441 | Strategic Initiatives and Outlook Unifi is executing a manufacturing transition for $20.0 million in annual cost savings, anticipating sequential Q4 FY2025 net sales and Adjusted EBITDA improvement, despite $6.0 to $8.0 million in restructuring expenses Update on Manufacturing Transition The company is closing and transitioning domestic manufacturing operations, with a real estate sale expected by May 15, 2025, projecting $20.0 million in annual cost savings from headcount reduction and operational synergies - The manufacturing transition and restructuring charges will continue through Q1 of fiscal 2026 as machinery is relocated to other facilities in North and Central America[8] - The company expects to achieve annual cost savings of approximately $20.0 million, primarily from lower headcount and operational synergies, following the manufacturing footprint reduction[8] Fiscal 2025 Outlook Unifi projects sequential Q4 FY2025 improvement in net sales and Adjusted EBITDA, driven by Americas recovery, while anticipating $6.0 million to $8.0 million in continued restructuring and transition expenses - Expects Q4 FY2025 net sales and Adjusted EBITDA to improve sequentially from Q3 FY2025[13] - Anticipates continued restructuring and transition expenses, primarily for equipment relocation and abandonment, between $6.0 million and $8.0 million[13] - The CEO stated that despite global macroeconomic uncertainty, the company has taken steps to improve the business and is positioned for future growth[10] Consolidated Financial Statements This section presents Unifi's unaudited condensed consolidated financial statements as of March 30, 2025, including Statements of Operations, Balance Sheets, and Cash Flows, detailing the company's financial position and performance Condensed Consolidated Statements of Operations For Q3 FY2025, Unifi reported net sales of $146.6 million, a gross loss of $0.4 million, and a net loss of $16.8 million or $0.92 per share, compared to prior year's $149.0 million sales and $10.3 million net loss Statement of Operations Highlights (in thousands, except per share amounts) | Metric | For the Three Months Ended Mar 30, 2025 | For the Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net sales | $146,557 | $148,996 | | Gross (loss) profit | $(445) | $4,764 | | Operating loss | $(13,860) | $(6,926) | | Net loss | $(16,794) | $(10,295) | | Diluted net loss per share | $(0.92) | $(0.57) | Condensed Consolidated Balance Sheets As of March 30, 2025, Unifi's total assets decreased to $446.5 million, total liabilities increased to $218.2 million, and cash and cash equivalents significantly decreased to $16.3 million Balance Sheet Highlights (in thousands) | Metric | March 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $16,255 | $26,805 | | Total current assets | $245,530 | $248,933 | | Total assets | $446,540 | $469,244 | | Long-term debt | $127,894 | $117,793 | | Total liabilities | $218,154 | $205,859 | | Total shareholders' equity | $228,386 | $263,385 | Condensed Consolidated Statements of Cash Flows For the nine months ended March 30, 2025, net cash used by operating activities was $20.0 million, contrasting with $1.2 million provided in the prior year, resulting in a $10.6 million net decrease in cash and cash equivalents Cash Flow Highlights (in thousands) | Metric | For the Nine Months Ended Mar 30, 2025 | For the Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash (used) provided by operating activities | $(19,994) | $1,160 | | Net cash provided (used) by investing activities | $179 | $(8,076) | | Net cash provided (used) by financing activities | $9,275 | $(12,236) | | Net decrease in cash and cash equivalents | $(10,550) | $(19,298) | Reconciliation of GAAP to Non-GAAP Measures This section details adjustments from GAAP to non-GAAP metrics, including $2.9 million in Q3 FY2025 transition costs, reconciling net loss to Adjusted EBITDA, Adjusted Net Loss, Adjusted EPS, and Net Debt EBITDA and Adjusted EBITDA Reconciliation For Q3 FY2025, Unifi's net loss of $16.8 million reconciled to an EBITDA of $(7.8) million, with Adjusted EBITDA at $(4.9) million after $2.9 million in transition costs, a significant decline from prior year Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | Net loss | $(16,794) | $(10,295) | | EBITDA | $(7,817) | $(777) | | Transition costs | $2,900 | $— | | Adjusted EBITDA | $(4,917) | $(777) | - The $2.9 million in transition costs for Q3 FY2025 consisted of facility closure/relocation costs ($1.1M), inventory write-downs ($1.0M), excess manufacturing costs ($0.6M), and employee separation/retention costs ($0.2M)[28] Adjusted Net Loss and Adjusted EPS Reconciliation In Q3 FY2025, GAAP net loss of $16.8 million or $(0.92) per share was adjusted for $2.9 million in transition costs, resulting in an Adjusted Net Loss of $13.9 million or $(0.76) per share Reconciliation of GAAP to Adjusted Net Loss and EPS | Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | GAAP Net Loss | $(16,794)K | $(10,295)K | | GAAP Diluted EPS | $(0.92) | $(0.57) | | Transition costs | $2,900K | $— | | Adjusted Net Loss | $(13,894)K | $(10,295)K | | Adjusted Diluted EPS | $(0.76) | $(0.57) | Net Debt Reconciliation Net debt, calculated as total debt principal less cash, increased to $123.7 million as of March 30, 2025, up from $103.5 million on June 30, 2024, reflecting higher debt and lower cash Net Debt Calculation (in thousands) | Metric | March 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Debt principal | $140,002 | $130,299 | | Less: cash and cash equivalents | $16,255 | $26,805 | | Net Debt | $123,747 | $103,494 | - As of March 30, 2025, and June 30, 2024, nearly all of the company's consolidated cash and cash equivalents were held by its foreign operations[34] Supplementary Information About UNIFI and REPREVE® UNIFI, Inc. is a global, vertically-integrated manufacturer specializing in fiber science and sustainable synthetic textiles, with its flagship REPREVE® brand transforming over 40 billion plastic bottles into recycled fiber - UNIFI is a global leader in fiber science and sustainable synthetic textiles with direct operations in the United States, Colombia, El Salvador, and Brazil[12][14] - REPREVE®, its leading brand of traceable recycled fiber, has transformed more than 40 billion plastic bottles into recycled fiber for use in apparel, home, automotive, and other industries[15] Non-GAAP Financial Measures Explanation The company explains its use of non-GAAP financial measures like EBITDA and Net Debt, which management believes reflect underlying operations, while cautioning that these measures have limitations and are not substitutes for GAAP results - Management uses non-GAAP measures to assist in comparing operating performance on a consistent basis, for planning purposes, and as a valuation measure[40][41] - A reconciliation of forward-looking non-GAAP guidance is not provided because predicting the timing and likelihood of future events like restructurings or M&A activity cannot be done without unreasonable effort[39] - The company acknowledges limitations of non-GAAP measures, stating they should not be considered in isolation and that investors should rely primarily on GAAP results[43][44] Cautionary Statement on Forward-Looking Statements This statement warns that the report includes forward-looking statements, which are not guarantees of future performance and are subject to numerous risks and uncertainties, including industry competition, trade policies, and economic conditions - Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from expectations[46] - Key risk factors include the competitive nature of the textile industry, changes in trade regulations, raw material pricing, economic conditions, consumer spending shifts, and the financial condition of customers[47] - The company does not undertake any obligation to update forward-looking statements to reflect future events or circumstances[48]