Culp(CULP) - 2026 Q1 - Quarterly Results

CULP ANNOUNCES FIRST QUARTER FISCAL 2026 RESULTS Culp, Inc. reports Q1 FY2026 financial results, highlighting improved profitability and operational efficiency despite market challenges Fiscal 2026 First Quarter Financial Highlights Culp, Inc. reported a decrease in consolidated net sales but significant improvements in gross profit and operating income for Q1 FY2026, driven by restructuring benefits. The company reduced its net loss significantly compared to the prior year Consolidated Financial Performance (Q1 FY2026 vs. Q1 FY2025) | Metric | Q1 FY2026 | Q1 FY2025 | Change (YoY) | | :-------------------------- | :---------- | :---------- | :----------- | | Net Sales | $50.7 million | $56.5 million | (10.3%) | | Gross Profit | $7.2 million | $5.1 million | 42.4% | | Gross Profit Margin | 14.3% | 9.0% | +530 bps | | Operating Income (Loss) | $1.6 million | $(6.9) million | (123.6%) | | Non-GAAP Operating Loss | $(1.9) million | $(4.1) million | (53.7%) | | Net Loss | $(231) thousand | $(7.3) million | (96.8%) | | Diluted EPS | $(0.02) | $(0.58) | (96.6%) | | Adjusted EBITDA | $(1.1) million | $(2.7) million | (59.3%) | Management Commentary Management emphasized the effectiveness of restructuring initiatives in improving operating performance despite a challenging market. They anticipate further cost and efficiency benefits from ongoing division integration and recent price increases, aiming for approximately $6 million in annual enhancements. The company is focused on returning to profitability and reducing net debt - Restructuring initiatives completed last year led to substantial double-digit improvement at both gross profit and operating levels[3] - Ongoing integration of former divisions (upholstery operations transition, Read Window operations transition) and recent price increases are expected to generate approximately $6 million of additional cost and efficiency enhancements annually[4][6] - Highest priorities are to return CULP to profitability and reduce the current net debt position, leveraging size and scale advantages to win market share, particularly in bedding[7][8] Financial Outlook Due to macroeconomic uncertainty and the fluid global trade and tariff environment, the company is providing only limited forward guidance. Expectations are based on current information, projected impacts of restructuring/integration, and market headwinds, assuming no further significant tariff impacts - Limited forward guidance provided due to macro-economic uncertainty and fluid global trade and tariff environment[9] - Expectations reflect management's assumptions regarding business and industry trends, projected impact of restructuring and integration initiatives, ongoing market headwinds, and no further meaningful impacts from tariffs and trade negotiations[9] Fiscal 2026 First Quarter Business Segment Highlights Following the integration of its former divisions, Culp now reports its businesses as Bedding and Upholstery segments. SG&A expenses are managed on a consolidated basis, and segment-level operating performance is no longer reported - The company's two formerly separate divisions, Culp Home Fashions and Culp Upholstery Fabrics, are now referred to as Bedding and Upholstery segments[10] - Selling, general and administrative (SG&A) expenses are now managed on a consolidated basis, and segment-level operating performance will no longer be reported[10] Bedding Segment The Bedding segment maintained flat sales and significantly improved gross profit in a low-demand market, driven by a restructured cost platform and market share gains - Sales in the Bedding segment were $28.0 million for the first quarter, generally flat compared with the prior-year period, despite a low-demand market, as the segment continued to win market share with larger customers[12] - The newly-restructured cost platform drove gross profit of $2.9 million, or 10.5% of sales, a significant improvement from the prior year period's negative $(326) thousand, or negative (1.2%) of sales[12][13] - The company expects sequential sales growth throughout the year and anticipates cost and efficiency benefits, along with price increases, to drive EBITDA (adjusted) from near breakeven to slightly positive for Q2 FY2026, with operating performance and profitability improving sequentially thereafter[11] Upholstery Segment The Upholstery segment experienced a sales decline due to market softness, high tariffs, and uneven prior-year comparisons, resulting in reduced gross profit - Sales in the Upholstery segment were $22.6 million for the first quarter, down approximately 20% compared with $28.5 million in the prior-year period[17] - The decline was driven by market softness, historically high tariffs on China-produced products (which grounded residential upholstery order flow for ~5 weeks), and an uneven year-over-year comparison due to a large customer's purchasing concentration in the prior year[17] - Gross profit was $4.3 million, or 18.9% of sales, down from $5.5 million, or 19.4% of sales, in the prior year period, largely due to lower comparable sales[17] Balance Sheet, Cash Flow, and Liquidity As of August 3, 2025, Culp maintained $11.1 million in cash and $18.1 million in outstanding debt. The company had $28.7 million in total liquidity. Cash flow from operations was negative, but adjusted free cash flow was positive due to proceeds from asset sales. Capital expenditures decreased significantly - As of August 3, 2025, the Company maintained $11.1 million in total cash and $18.1 million in outstanding debt under its credit facilities, including $2.8 million in supplier financing[17] - Total liquidity was approximately $28.7 million, consisting of $11.1 million in cash and $17.6 million in borrowing availability under its domestic credit facility[17] - Cash flow from operations was negative $(695) thousand for Q1 FY2026, primarily driven by operating losses partially offset by favorable working capital. Adjusted free cash flow was $311 thousand[17] Conference Call Information Culp, Inc. will host a conference call on September 11, 2025, at 9:00 a.m. ET to discuss Q1 FY2026 financial results, with a live webcast and replay available on the company's investor relations website - Culp, Inc. will hold a conference call to discuss financial results for the first quarter of its fiscal year 2026 on Thursday, September 11, 2025, at 9:00 a.m. Eastern Time[15] - A live webcast and replay will be available on the 'Investor Relations' page of the Company's website, www.culp.com[15](index=15&type=chunk) About the Company Culp, Inc. is a leading marketer of mattress and upholstery fabrics in North America, serving global bedding and furniture companies. The company has manufacturing and sourcing capabilities in the U.S., China, Haiti, Turkey, and Vietnam - Culp, Inc. is one of the largest marketers of mattress fabrics for bedding and upholstery fabrics for residential, commercial, and hospitality furniture and other applications in North America[16] - The Company markets a variety of fabrics to its global customer base of leading bedding and furniture companies[16] - Culp has manufacturing and sourcing capabilities located in the United States, China, Haiti, Turkey, and Vietnam[16] Investor Relations Contact Contact information for Culp, Inc.'s Executive Vice President, Chief Financial Officer, and Treasurer, Ken Bowling, is provided for investor relations inquiries - Investor Relations Contact: Ken Bowling, Executive Vice President, Chief Financial Officer, and Treasurer[17] - Contact details: (336) 881-5630, krbowling@culp.com[17] Forward Looking Statements This section contains cautionary statements regarding forward-looking information, highlighting inherent risks and uncertainties that could cause actual results to differ materially from projections. It lists various factors, including economic conditions, consumer trends, trade policies, and operational challenges, that could influence future performance. The company does not undertake to update these statements - This release contains 'forward-looking statements' inherently subject to risks and uncertainties that may cause actual events and results to differ materially[18] - Factors influencing statements include housing starts, demand for home furnishings, consumer confidence, economic conditions, interest rates, tariffs, trade policy, and operational challenges like supply chain diversification and integration efforts[19] - The forward-looking statements are made only as of the date of this report, and the company does not assume any obligation to update them unless required by federal securities laws[21] Financial Statements This section presents Culp, Inc.'s consolidated financial statements, including net loss, balance sheets, cash flows, and segment performance for Q1 FY2026 Consolidated Statements of Net Loss The consolidated statement of net loss shows a significant reduction in net loss for Q1 FY2026 compared to the prior year, driven by improved gross profit and a restructuring credit, despite a decrease in net sales Consolidated Statements of Net Loss (Three Months Ended August 3, 2025 vs. July 28, 2024) (Amounts in Thousands) | Metric | August 3, 2025 | July 28, 2024 | % Over (Under) | % of Sales (2025) | % of Sales (2024) | | :-------------------------------- | :------------- | :------------ | :------------- | :---------------- | :---------------- | | Net sales | $50,691 | $56,537 | (10.3)% | 100.0% | 100.0% | | Cost of sales | (43,463) | (51,461) | (15.5)% | 85.7% | 91.0% | | Gross profit | 7,228 | 5,076 | 42.4% | 14.3% | 9.0% | | Income (loss) from operations | 1,617 | (6,851) | (123.6)% | 3.2% | (12.1)% | | Net loss | $(231) | $(7,261) | (96.8)% | (0.5)% | (12.8)% | | Net loss per share - diluted | $(0.02) | $(0.58) | (96.6)% | | | Consolidated Balance Sheets The consolidated balance sheet shows a slight decrease in total assets and total liabilities from the prior year, with an increase in current assets and current liabilities. Cash and cash equivalents decreased year-over-year but increased significantly from the previous quarter Consolidated Balance Sheets (Amounts in Thousands) | Metric | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :-------------------------------- | :------------- | :------------ | :------------- | | Assets: | | | | | Cash and cash equivalents | $11,094 | $13,472 | $5,629 | | Total current assets | $88,891 | $82,678 | $83,534 | | Property, plant & equipment, net | $23,552 | $30,476 | $24,836 | | Total assets | $126,414 | $129,139 | $123,370 | | Liabilities: | | | | | Lines of credit - current | $11,120 | $4,017 | $8,114 | | Total current liabilities | $47,903 | $42,221 | $46,964 | | Total liabilities | $68,767 | $60,015 | $65,730 | | Equity: | | | | | Shareholders' equity | $57,647 | $69,124 | $57,640 | Consolidated Statements of Cash Flows For Q1 FY2026, cash flow from operating activities remained negative, but cash provided by investing activities turned positive due to proceeds from asset sales. Financing activities provided a significant cash inflow, leading to an overall increase in cash and cash equivalents Consolidated Statements of Cash Flows (Three Months Ended August 3, 2025 vs. July 28, 2024) (Amounts in Thousands) | Metric | August 3, 2025 | July 28, 2024 | | :-------------------------------------- | :------------- | :------------ | | Net cash used in operating activities | $(695) | $(206) | | Net cash provided by (used in) investing activities | $986 | $(332) | | Net cash provided by financing activities | $5,154 | $4,010 | | Increase in cash and cash equivalents | $5,465 | $3,460 | | Cash and cash equivalents at end of period | $11,094 | $13,472 | Statements of Net Sales and Gross Profit by Segment The Bedding segment maintained flat sales with significant gross profit improvement, while the Upholstery segment saw a substantial sales and gross profit decline. Overall consolidated gross profit increased significantly despite lower net sales Net Sales by Segment (Three Months Ended August 3, 2025 vs. July 28, 2024) (Amounts in Thousands) | Segment | August 3, 2025 | July 28, 2024 | % Over (Under) | % of Total Sales (2025) | % of Total Sales (2024) | | :-------- | :------------- | :------------ | :------------- | :---------------------- | :---------------------- | | Bedding | $28,046 | $28,076 | (0.1)% | 55.3% | 49.7% | | Upholstery | $22,645 | $28,461 | (20.4)% | 44.7% | 50.3% | | Net Sales | $50,691 | $56,537 | (10.3)% | 100.0% | 100.0% | Gross Profit (Loss) by Segment (Three Months Ended August 3, 2025 vs. July 28, 2024) (Amounts in Thousands) | Segment | August 3, 2025 | July 28, 2024 | % Over (Under) | Gross Margin (2025) | Gross Margin (2024) | | :-------- | :------------- | :------------ | :------------- | :------------------ | :------------------ | | Bedding | $2,942 | $(326) | N.M. | 10.5% | (1.2)% | | Upholstery | $4,286 | $5,518 | (22.3)% | 18.9% | 19.4% | | Total Segment Gross Profit | $7,228 | $5,192 | 39.2% | 14.3% | 9.2% | Reconciliations of Non-GAAP Financial Measures This section provides reconciliations of various non-GAAP financial measures, including net debt, adjusted free cash flow, adjusted operating results, and adjusted EBITDA, offering a clearer view of the company's underlying financial performance by excluding certain non-recurring or non-cash items Reconciliation of Net Debt This section details the company's net debt position, reconciling cash and cash equivalents with total debt Net Debt Position (Amounts in Thousands) | Metric | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :---------------------- | :------------- | :------------ | :------------- | | Cash and cash equivalents | $11,094 | $13,472 | $5,629 | | Total debt | $(18,145) | $(4,017) | $(12,714) | | Net (debt) cash position | $(7,051) | $9,455 | $(7,085) | Reconciliation of Adjusted Free Cash Flow This section reconciles net cash used in operating activities with capital expenditures and asset sale proceeds to derive adjusted free cash flow Adjusted Free Cash Flow (Three Months Ended August 3, 2025 vs. July 28, 2024) (Amounts in Thousands) | Metric | August 3, 2025 | July 28, 2024 | | :------------------------------------------ | :------------- | :------------ | | Net cash used in operating activities | $(695) | $(206) | | Capital expenditures | $(179) | $(501) | | Free Cash Flow | $(874) | $(707) | | Proceeds from the sale of buildings and equipment | $966 | $37 | | Adjusted Free Cash Flow | $311 | $(550) | Reconciliation of Selected Income Statement Information to Adjusted Results This section adjusts reported income statement figures for restructuring credits and expenses to provide a clearer view of underlying operating performance Adjusted Operating Results (Three Months Ended August 3, 2025) (Amounts in Thousands) | Metric | As Reported (Aug 3, 2025) | Adjustments | Adjusted Results (Aug 3, 2025) | | :-------------------------------- | :------------------------ | :---------- | :----------------------------- | | Net sales | $50,691 | — | $50,691 | | Gross profit | $7,228 | — | $7,228 | | Restructuring credit | $3,508 | $(3,508) | — | | Income (loss) from operations | $1,617 | $(3,508) | $(1,891) | Adjusted Operating Results (Three Months Ended July 28, 2024) (Amounts in Thousands) | Metric | As Reported (Jul 28, 2024) | Adjustments | Adjusted Results (Jul 28, 2024) | | :-------------------------------- | :------------------------ | :---------- | :----------------------------- | | Net sales | $56,537 | — | $56,537 | | Gross profit | $5,076 | $116 | $5,192 | | Restructuring expense | $(2,631) | $2,631 | — | | Loss from operations | $(6,851) | $2,747 | $(4,104) | - The restructuring credit for Q1 FY2026 primarily represented a $4.0 million gain from the sale of the Canadian manufacturing facility, partially offset by charges related to operating model transformation[38] Reconciliation of Adjusted EBITDA This section reconciles net loss to adjusted EBITDA, accounting for non-cash and non-recurring items to reflect operational profitability Adjusted EBITDA (Quarter Ended August 3, 2025 vs. July 28, 2024) (Amounts in Thousands) | Metric | August 3, 2025 | July 28, 2024 | | :-------------------------- | :------------- | :------------ | | Net loss | $(231) | $(7,261) | | EBITDA | $2,292 | $(5,575) | | Restructuring expense (credit) | $(3,508) | $2,631 | | Restructuring related expense | — | $116 | | Stock based compensation | $156 | $176 | | Adjusted EBITDA | $(1,060) | $(2,652) | | % Net Sales | (2.1)% | (4.7)% | - Trailing 12 Months Adjusted EBITDA as of August 3, 2025, was $(1,947) thousand, showing an improvement from $(5,667) thousand in the prior trailing 12 months[42]