Workflow
Culp(CULP) - 2025 Q1 - Earnings Call Transcript
CULPCulp(CULP)2024-09-05 17:19
Filings
Slide

Financial Data and Key Metrics Changes - Net sales for Q1 2025 were 56.5million,down0.256.5 million, down 0.2% compared to the prior year period [21] - The company reported a loss from operations of 6.9 million, which included 2.7millioninrestructuringexpenses[21]−Netlossforthefirstquarterwas2.7 million in restructuring expenses [21] - Net loss for the first quarter was 7.3 million or 0.58perdilutedshare,comparedtoanetlossof0.58 per diluted share, compared to a net loss of 3.3 million or 0.27perdilutedsharefortheprioryearperiod[22]−AdjustedEBITDAforthe12−monthperiodendingQ1wasanegative0.27 per diluted share for the prior year period [22] - Adjusted EBITDA for the 12-month period ending Q1 was a negative 5.7 million, showing a 66% improvement from the prior year [22] Business Segment Data and Key Metrics Changes - Mattress fabric segment sales were 28.1million,down3.928.1 million, down 3.9% year-over-year but up 9% sequentially [24] - Upholstery fabrics segment sales were 28.5 million, up 3.7% year-over-year and up 19.7% sequentially [25] - Operating income for the upholstery fabrics segment was 1.7millionwithanoperatingmarginof61.7 million with an operating margin of 6%, compared to 4.8% a year ago [26] Market Data and Key Metrics Changes - The hospitality fabrics segment accounted for approximately 33% of the upholstery fabrics segment total sales for Q1 [25] - The company noted that the hospitality industry is booming post-COVID, contributing to growth in the hospitality fabrics segment [46] Company Strategy and Development Direction - The company is undergoing a significant restructuring plan focused on the mattress fabric segment to reduce fixed costs and improve efficiency [11][12] - The restructuring is expected to yield annualized cost savings of 10 million to 11million,primarilyfromthemattressfabricsdivision[16]−Thecompanyaimstoreturntopositiveconsolidatedadjustedoperatingincomeinthethirdquarteroffiscal2025[16]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismabouttheimprovingmarketpositioninbothbusinesssegmentsdespiteongoingmacroeconomicchallenges[19]−Thecompanyanticipatesthatmacroindustryconditionsmayremainpressuredduringfiscal2025,butbelievesthetoughestconditionsarebehindthem[19]−ManagementexpectstoreturntonearbreakevenadjustedEBITDAinthesecondquarteroffiscal2025[31]OtherImportantInformation−ThecompanyhascompletedtheconsolidationofitsHaitisewnmattresscoveroperationandismakingprogressintransitioningitsdamaskweavingbusinesstoasourcingmodel[14][15]−Thecompanyreportedatotalcashpositionof11 million, primarily from the mattress fabrics division [16] - The company aims to return to positive consolidated adjusted operating income in the third quarter of fiscal 2025 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving market position in both business segments despite ongoing macroeconomic challenges [19] - The company anticipates that macro industry conditions may remain pressured during fiscal 2025, but believes the toughest conditions are behind them [19] - Management expects to return to near breakeven adjusted EBITDA in the second quarter of fiscal 2025 [31] Other Important Information - The company has completed the consolidation of its Haiti sewn mattress cover operation and is making progress in transitioning its damask weaving business to a sourcing model [14][15] - The company reported a total cash position of 13.5 million and $4 million in outstanding debt under its China credit line as of the end of Q1 [28] Q&A Session Summary Question: Can you discuss the cadence of business over the quarter? - Management noted a strong start in May, June, and July, with some weakness in July but overall feeling positive about market share [33][34] Question: Can you elaborate on the restructuring savings? - The savings are primarily from the closure of the Canadian plant, operational efficiencies, and outsourcing the damask line [35][36] Question: How will the restructuring change the business model? - The restructuring aims to reduce costs and shift to a more asset-light model, particularly in the mattress fabrics segment [42][43] Question: What is driving growth in the hospitality segment? - The hospitality industry is booming post-COVID, with new product lines and expanded roller shade capacity contributing to growth [46][47]