Financial Data and Key Metrics Changes - In Q2 2025, the company reported a strong top-line growth of 24%, primarily driven by CPaaS and the rollout of Zenvia Customer Cloud [3][4] - Consolidated adjusted gross profit fell to R$69 million, with a gross margin down to 24%, although stable compared to Q1 [4][5] - Normalized EBITDA for the quarter was R$11 million, below expectations, but the company anticipates a progressive recovery throughout the year [5][11] Business Line Data and Key Metrics Changes - SaaS revenues grew 3% year over year in Q2, mainly from SMB customers, while Zenvia Customer Cloud revenues increased by 23% in the first half of the year [5][6] - CPaaS revenues were up by 33%, accounting for 72% of total revenues, but this higher mix with low margins negatively impacted gross profits and margins [7][9] Market Data and Key Metrics Changes - The market remains highly volatile and competitive, particularly affecting profitability in the short term [4][12] - The company expects CPaaS margins to normalize closer to 20% by Q4 of this year [9][21] Company Strategy and Development Direction - Zenvia Customer Cloud is positioned as the new core business, with expectations of 25% to 30% growth in 2025 [6][12] - The company is focusing on streamlining operations and enhancing efficiency, with AI playing a significant role [12][36] - There are ongoing evaluations for divesting non-core assets to optimize the balance sheet [12][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the competitive landscape and pricing pressures but believes the current strategy will lead to long-term profitability [20][23] - The company is optimistic about the future, expecting to transition from volatile revenues to a more stable, high-margin business model [35][36] Other Important Information - G&A expenses decreased by R$9 million, or 27%, compared to the same period last year, bringing the G&A to revenues ratio down to 9% [5][10] - The company has implemented strict expense management since the end of 2022, resulting in significant cost savings [10][11] Q&A Session Summary Question: Can you provide more color on forward guidance for Zenvia Customer Cloud? - The company maintains expectations of around R$200 million in revenues for Zenvia Customer Cloud, with growth of approximately 25% and gross margins close to 70% [16] Question: Are tight margins on the CPaaS side the new level? - Management indicated that while margins are under pressure, they expect stabilization at a higher level by year-end as cost increases from carriers are passed through [20][21] Question: How is the enterprise side performing for both Zenvia Customer Cloud and the rest of SaaS? - The company has seen adoption of Zenvia Customer Cloud by enterprise customers, which was not the initial focus, indicating a positive shift in strategy [24][25] Question: Can you provide insights on cash flow and divestitures? - The trailing 12 months EBITDA is close to R$100 million, with approximately R$60 to R$65 million in cash flow available to serve debt, leading to considerations for asset divestment [26][28]

Financial Data and Key Metrics Changes - Kroger achieved identical sales without fuel growth of 3.4%, marking the sixth consecutive quarter of improvement in this metric [10][22][36] - Adjusted EPS was $1.04, reflecting a 12% growth compared to the previous year, the strongest growth rate since 2023 [28][33] - FIFO gross margin rate, excluding rent, depreciation, and amortization, increased by 39 basis points year-over-year, primarily due to the sale of Kroger Specialty Pharmacy and lower supply chain costs [24][25] Business Line Data and Key Metrics Changes - Sales growth was led by pharmacy, e-commerce, and fresh categories, with e-commerce sales growing by 16% [10][14][29] - The pharmacy business saw strong growth driven by core pharmacy scripts and growth in GLP-1s, positively impacting gross profit dollars [22][23] - Kroger's Brands products outpaced national brands in sales growth, with Simple Truth and Private Selection leading the way [13] Market Data and Key Metrics Changes - Food inflation was slightly lower in Q2 compared to Q1, trending in line with original expectations [22] - The company noted that low and middle-income households are increasingly looking for deals and using coupons, while higher-income households are still spending on premium products [101][102][104] Company Strategy and Development Direction - Kroger is focused on simplifying the organization, improving customer experience, and enhancing value creation [5][6] - The company plans to open 30 major store projects in 2025 and increase store openings by 30% in 2026 [16][35] - Artificial intelligence is being leveraged to improve pricing, reduce shrink, and enhance fulfillment capabilities [17][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining sales momentum, although the second half of the year will present tougher year-over-year comparisons [55][70] - The company is proactively addressing the changing tariff environment and does not expect significant impacts on its business [24][104] - Management remains cautious about consumer sentiment and its potential impact on spending [81][104] Other Important Information - Kroger ratified new labor agreements covering approximately 54,000 associates, improving wages and benefits [31] - The company raised its quarterly dividend by 9%, marking the nineteenth consecutive year of dividend increases [33] Q&A Session Summary Question: Plans for e-commerce fulfillment using stores - Management confirmed that stores are heavily used for e-commerce fulfillment, with no significant changes needed for reworking stores [41][44] Question: Competitive pricing environment and price investments - Management noted that the competitive pricing backdrop remains rational, and they will continue to lower prices while managing margins responsibly [46][48][50] Question: Sustaining ID sales momentum - Management expressed confidence in sustaining ID sales performance, although the second half will have tougher comparisons [54][70] Question: Incrementality of e-commerce growth - Management indicated that new households are being added through e-commerce, and existing customers are increasing order volumes [91] Question: Performance by income segments - Management observed that low and middle-income households are looking for deals, while higher-income households are still spending on premium products [101][102]

Financial Data and Key Metrics Changes - In Q2 2025, the company reported a strong top-line growth of 24%, primarily driven by CPaaS and the rollout of Zenvia Customer Cloud [3][4] - Consolidated adjusted gross profit fell to R$69 million, with a gross margin down to 24%, although stable compared to Q1 [4][5] - Normalized EBITDA for the quarter was R$11 million, below expectations, but the company anticipates a progressive recovery throughout the year [5][11] Business Line Data and Key Metrics Changes - SaaS revenues grew 3% year-over-year in Q2, mainly from SMB customers, while revenues from Zenvia Customer Cloud increased by 23% in the first half of the year [5][6] - CPaaS revenues were up by 33%, accounting for 72% of total revenues, but this higher mix with low margins negatively impacted gross profits and margins [7][9] Market Data and Key Metrics Changes - The market remains highly volatile and competitive, particularly affecting profitability in the short term [4][12] - The company expects CPaaS margins to normalize closer to 20% by Q4 of this year [9][21] Company Strategy and Development Direction - Zenvia Customer Cloud is positioned as the new core business, with expectations of 25%-30% growth in 2025 [6][12] - The company is focusing on streamlining operations and enhancing efficiency, with AI playing a significant role [12][36] - There are ongoing evaluations for divesting non-core assets to optimize the balance sheet [12][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the competitive landscape and pricing pressures but remains confident in the long-term strategy [20][23] - The company aims to transition from volatile revenues to a more stable, high-margin business model over the next two to three years [35][36] Other Important Information - G&A expenses decreased by 27% year-over-year, contributing to a lower G&A to revenues ratio of 9% in the quarter [5][10] - The company has implemented a workforce reduction of approximately 15%, expected to yield cost savings of R$30 million to R$35 million for the full year 2024 [10][12] Q&A Session Summary Question: Can you provide more color on forward guidance for Zenvia Customer Cloud? - The company maintains expectations of around R$200 million in revenues for Zenvia Customer Cloud, with growth of approximately 25% and gross margins close to 70% [16][15] Question: Are tight margins in CPaaS the new level, or should we expect recovery? - Management indicated that while margins are under pressure due to competition, they expect stabilization at a higher level by year-end [20][21] Question: How are the dynamics for enterprise customers in both Zenvia Customer Cloud and the rest of SaaS? - The company has seen adoption of Zenvia Customer Cloud by enterprise customers, which was not the initial focus, but is proving successful [24][25] Question: Can you provide insights on cash flow and divestitures? - The trailing 12 months EBITDA is close to R$100 million, with approximately R$60 million-R$65 million in cash flow available to serve debt [26][27]

Financial Data and Key Metrics Changes - In Q2 2025, the company reported a strong top-line growth of 24%, primarily driven by CPaaS and the rollout of Zenvia Customer Cloud [3][4] - Consolidated adjusted gross profit fell to R$69 million, with a gross margin down to 24%, although this margin remained stable compared to Q1 [4][5] - Normalized EBITDA for the quarter was R$11 million, which was below expectations, but a progressive recovery is anticipated throughout the year [5][12] Business Line Data and Key Metrics Changes - SaaS revenues grew by 3% year over year in Q2, mainly from SMB customers, while Zenvia Customer Cloud revenues increased by 23% in the first half of the year [5][6] - CPaaS revenues were up by 33%, accounting for 72% of total revenues, but this higher mix with low margins negatively impacted gross profits and margins [7][10] - Adjusted gross profit for the SaaS business was up 5% year over year to R$45 million, with adjusted gross margin slightly up by 1 percentage point to 55% [8][9] Market Data and Key Metrics Changes - The market remains highly volatile and competitive, particularly affecting profitability in the short term [4][13] - The company expects CPaaS margins to normalize closer to 20% by Q4 of this year [10][22] Company Strategy and Development Direction - Zenvia Customer Cloud is positioned as the new core business, with expectations of 25% to 30% growth in 2025 [6][12] - The company is focusing on streamlining operations and enhancing efficiency, with AI playing a significant role in both client delivery and internal operations [13][36] - There is an ongoing evaluation of options to divest non-core assets to optimize the balance sheet [13][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the competitive landscape and pricing pressures but believes that the current strategy will lead to long-term profitability recovery [22][25] - The company is confident in achieving a solid foundation for 2026, with expectations of improved profitability levels by the end of the year [12][36] Other Important Information - G&A expenses decreased by R$9 million, or 27%, compared to the same period last year, bringing the G&A to revenues ratio down to 9% [5][11] - The company has seen a significant reduction in G&A expenses, now at one-third of what it was in the first half of 2022 [11] Q&A Session Summary Question: Can you provide more color on forward guidance for Zenvia Customer Cloud? - The company maintains expectations of around R$200 million in revenues for Zenvia Customer Cloud, with growth around 25% and gross margin close to 70% [18][19] Question: Are tight margins on the CPaaS side the new level? - Management indicated that while margins are under pressure, they expect stabilization at a higher level by year-end as cost increases from carriers are passed through [22][23] Question: How is the enterprise side performing for both Zenvia Customer Cloud and the rest of SaaS? - The company has been able to retain enterprise customers and is seeing adoption of Zenvia Customer Cloud by these clients, which was not the initial focus [26][27] Question: Can you provide insights on cash flow and divestitures? - The trailing 12 months EBITDA is close to R$100 million, with approximately R$60 to R$65 million in cash flow available to serve debt, indicating a near break-even position by year-end [28][29] Question: What will the business look like in two to three years? - The company aims to become a leading AI CX SaaS provider, transitioning from volatile revenues to a more stable, high-margin business model [36][38]

Financial Data and Key Metrics Changes - Kroger achieved identical sales without fuel growth of 3.4%, marking the sixth consecutive quarter of improvement in this metric [8][20][34] - Adjusted EPS was $1.04, reflecting a 12% growth compared to the previous year, the strongest growth rate since 2023 [25][31] - FIFO gross margin rate, excluding rent, depreciation, and amortization, increased by 39 basis points year-over-year [22][23] Business Line Data and Key Metrics Changes - Pharmacy sales growth was strong, driven by core pharmacy scripts and growth in GLP-1s, contributing positively to gross profit [20][21] - E-commerce sales grew by 16%, led by delivery performance, with a notable shift where delivery sales surpassed store pickup sales for the first time [12][26][42] - Fresh product sales continued to outpace center store sales, reflecting customer demand for healthier options [8][9] Market Data and Key Metrics Changes - The company noted that food inflation was slightly lower in Q2 compared to Q1, trending in line with original expectations [20] - Low and middle-income households are increasingly looking for deals and using coupons, while higher-income households are still spending on premium products [98][100] Company Strategy and Development Direction - Kroger is focused on simplifying operations, improving customer experience, and enhancing value creation [4][5] - The company plans to open 30 major store projects in 2025 and increase store openings by 30% in 2026 [14][33] - Artificial intelligence is being leveraged to improve pricing, reduce shrink, and enhance fulfillment capabilities [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining sales momentum despite tougher comparisons in the second half of the year [52][68] - The company is closely monitoring the consumer environment, which remains uncertain, and is prepared to adjust strategies accordingly [80][81] - Management expects to maintain a relatively flat gross margin rate for the full year while balancing price investments and margin initiatives [23][34] Other Important Information - Kroger ratified new labor agreements covering approximately 54,000 associates, improving wages and benefits [29] - The company raised its quarterly dividend by 9%, marking the nineteenth consecutive year of dividend increases [31][32] Q&A Session Summary Question: Plans for using stores for e-commerce fulfillment - Management indicated that stores are already heavily used for e-commerce fulfillment, with no significant changes needed for reworking stores [40][42] Question: Competitive pricing environment and price investments - The competitive pricing backdrop remains rational, and Kroger plans to continue lowering prices while managing margins responsibly [46][48] Question: Sustaining ID sales momentum - Management expressed confidence in sustaining ID sales momentum, although the second half of the year presents tougher comparisons [52][68] Question: Incrementality of e-commerce growth - E-commerce is adding new households and increasing order volumes from existing customers, contributing to overall growth [89][90] Question: Pharmacy performance and its impact on other business areas - Pharmacy performance is expected to provide incrementality to the rest of the business, with a normalization of vaccine approvals anticipated [93] Question: Performance by income segments - Low and middle-income households are seeking deals, while higher-income households continue to spend on premium products [98][100]

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 2026 were $82.1 million, down $13 million, or 13.6% year-over-year, primarily due to declines at Home Meridian [4] - Consolidated operating loss was $4.4 million compared to $3.1 million in the prior year quarter, reflecting lower sales volume and unfavorable customer mix [4] - Consolidated net loss was $3.3 million, or $0.31 per share, with a six-month net loss of $6.3 million, or $0.60 per diluted share [4][5] Business Line Data and Key Metrics Changes - Hooker branded net sales increased by 1.3% year-over-year, reaching breakeven compared to a $329,000 loss last year, despite $655,000 in restructuring costs [3][15] - Home Meridian net sales decreased by 44.5%, significantly impacted by tariff-related buying hesitancy and the loss of a major customer due to bankruptcy [3][16] - Domestic upholstery segment's net sales were flat, with a slight decline of 1.7% for the first six months, but gross profit rose by $659,000 in Q2 [17][18] Market Data and Key Metrics Changes - Incoming orders for Hooker branded and domestic upholstery increased by nearly 11% and 1.6% respectively during the quarter, indicating some positive momentum [21] - The home furnishings industry continues to face challenges from low existing home sales, elevated mortgage rates, and persistent inflation, affecting consumer confidence [21] Company Strategy and Development Direction - The company is focused on cost reduction efforts, aiming to eliminate approximately $25 million, or 25% of fixed costs, with significant savings expected by the end of Q3 2026 [13][14] - A new Margaritaville license collection is set to launch in October, which is anticipated to enhance growth opportunities [10][21] - The company is adapting to tariff impacts by evaluating pricing on a SKU-level basis and implementing mitigation strategies across segments [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to profitability through cost structure scaling and strategic growth initiatives, despite ongoing macroeconomic challenges [7][9] - The company expects HMI's performance to improve significantly by the end of the fiscal year, barring additional tariffs or disruptive events [8][21] Other Important Information - The company reported approximately $1.9 million in cash on hand and no outstanding amounts under its credit facility, with $67.9 million in available borrowing capacity [19] - The restructuring costs for the quarter totaled $2 million, with about two-thirds in cost of goods sold and one-third in selling and administrative expenses [30] Q&A Session Summary Question: What is driving the increased orders at Hooker branded and domestic upholstery? - Management noted subtle macro improvements at the retail level, with positive feedback from partners regarding Labor Day sales [26][27] Question: How does the company plan to return HMI to profitability? - Management indicated that achieving a 25% reduction in overall spending by the end of Q3 is crucial for short-term profitability, with a focus on customer relationships [28][29] Question: What is the breakdown of restructuring impacts on costs? - Approximately two-thirds of the restructuring costs were in cost of goods sold, and one-third in selling and administrative expenses [30] Question: Can you provide updates on the Margaritaville launch logistics and interest? - Management described the launch as a significant opportunity, with positive early indicators from partners and a substantial number of SKUs planned [37][38] Question: What are the expectations for price increases and their timing? - Management clarified that they have a clear understanding of the pricing strategy and are evaluating it on a SKU-by-SKU basis [39][41] Question: Will the additional $2 million in charges coincide with the Savannah warehouse exit? - Management confirmed that the additional charges are primarily related to the closing of the Savannah warehouse [42]

Financial Data and Key Metrics Changes - Net sales for the first quarter were $50.7 million, down from $56.5 million in the prior year period, primarily due to market softness and tariff-related shipment pauses [21][22] - Gross profit improved to $7.2 million or 14.3% of sales, compared to $5.1 million or 9% of sales in the prior year, reflecting a 530 basis point increase driven by restructuring benefits [21][22] - Operating income was $1.6 million, a significant improvement from a loss of $6.9 million in the prior year [21][22] - Net loss for the quarter was $231,000 or $0.02 per diluted share, compared to a net loss of $7.3 million or $0.58 per diluted share in the prior year [22] Business Line Data and Key Metrics Changes - Bedding segment sales were $28 million, flat compared to the previous year, with gross profit at $2.9 million or 10.5% of sales, a significant improvement from a negative gross profit in the prior year [24] - Upholstery segment sales were $22.6 million, down approximately 20% from $28.5 million in the prior year, with gross profit at $4.3 million or 18.9% of sales, down from $5.5 million or 19.4% [25][26] Market Data and Key Metrics Changes - The bedding industry is still in a down cycle, but analysts suggest that demand may be close to bottoming out, with potential for recovery driven by product replacement and household formation [8][9] - The upholstery segment faced challenges due to high tariffs on imports from China, which significantly impacted sales during the quarter [11][12] Company Strategy and Development Direction - The company is focused on restructuring and integration initiatives to improve operating efficiency and profitability, with expectations for sequential sales growth throughout fiscal 2026 [31][32] - Project Blaze aims to unify operations and share resources across divisions, which is expected to enhance overall business performance [16][18] - The company is strategically positioned to capitalize on market recovery by maintaining flexibility in its supply chain and not limiting production capacity [42][43] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing challenges from tariffs and market conditions but remains optimistic about gaining market share and improving profitability [9][31] - The company expects adjusted EBITDA results to range from near breakeven to slightly positive for the second quarter, with continued improvements anticipated throughout fiscal 2026 [31][32] Other Important Information - The company reported $11.1 million in total cash and $18.1 million in outstanding debt, maintaining a net debt position of $7.1 million [26][28] - Capital expenditures were reduced to $179,000 for the quarter, reflecting a focus on managing costs and efficiency [29] Q&A Session Summary Question: Are all known tariff impacts accounted for in your initiatives? - Management indicated that they have adjusted pricing and operations to mitigate tariff impacts, and they feel confident in their current strategies [34][35] Question: What is the elasticity of pricing in the current market? - Management acknowledged the competitive nature of the market but emphasized the need to pass on costs to maintain profitability [37] Question: How does the current market downturn compare to past cycles? - Management noted that while down cycles are common, the current downturn has been prolonged, but they are confident in a future recovery [40][42] Question: Will the company be able to meet increased demand with the existing cost structure? - Management assured that they have not limited capacity and can grow as demand increases, leveraging existing cost structures for better margins [43][44] Question: What is the estimated market value of real estate and the future use of NOLs? - Management provided a net book value of $12 million for real estate, with an estimated market value of $40 to $45 million, and discussed the potential future benefits of NOLs once profitability is achieved [45][46]

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 2026 were $82.1 million, down $13 million, or 13.6% year-over-year, primarily driven by declines at Home Meridian [4][5] - Consolidated operating loss was $4.4 million compared to $3.1 million in the prior year quarter, reflecting lower sales volume and unfavorable customer mix [4] - Consolidated net loss was $3.3 million, or $0.31 per share, with a six-month net loss of $6.3 million, or $0.60 per diluted share [4][5] Business Line Data and Key Metrics Changes - Hooker branded net sales increased by 1.3% year-over-year, reaching breakeven compared to a $329,000 loss last year, despite $655,000 in restructuring costs [3][15] - Home Meridian's net sales decreased by 44.5%, with a significant portion attributed to the loss of a major customer and macroeconomic pressures [4][16] - Domestic upholstery's net sales were flat, with a 1.7% decline over six months, but operating losses were reduced by 68% in Q2 [17][18] Market Data and Key Metrics Changes - The home furnishings industry is facing challenges from low existing home sales, elevated mortgage rates, and persistent inflation, impacting consumer confidence and demand [21] - Incoming orders for Hooker branded and domestic upholstery increased by 24% year-over-year in July, indicating some positive momentum [21] Company Strategy and Development Direction - The company is focused on cost reduction efforts, aiming to eliminate approximately $25 million, or 25% of fixed costs, with significant savings expected by the end of Q3 2026 [13][14] - A new Margaritaville product line is set to launch in October, which is anticipated to create growth opportunities [10][21] - The company is adapting to tariff impacts by evaluating pricing on a SKU-level basis and implementing mitigation strategies [11][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to profitability through cost structure scaling and strategic growth initiatives [7][21] - The company expects HMI's performance to improve significantly by the end of the fiscal year, barring additional tariffs or disruptive events [8][21] Other Important Information - The company reported $1.9 million in cash on hand and no outstanding amounts under its credit facility, with $67.9 million in available borrowing capacity [19] - Restructuring costs for the quarter totaled $2 million, with two-thirds attributed to cost of goods sold and one-third to selling and administrative expenses [30] Q&A Session Summary Question: What is driving the increased orders at Hooker branded and domestic upholstery? - Management noted subtle macro improvements at the retail level, with positive feedback from partners regarding Labor Day sales [26][27] Question: How does the company plan to return HMI to profitability? - Management indicated that achieving a 25% reduction in overhead costs by the end of Q3 is crucial for short-term profitability [28][29] Question: What is the breakdown of restructuring costs for the quarter? - Approximately two-thirds of the restructuring costs were in cost of goods sold, and one-third in selling and administrative expenses [30] Question: Can you provide updates on the Margaritaville launch? - The launch is seen as a significant opportunity, with positive early indicators from partners and a substantial number of SKUs planned [37][38] Question: What are the expectations for price increases? - Management is evaluating pricing on a SKU-by-SKU basis and believes they have a clear understanding of the impact of the 20% tariff [39][41] Question: Will the additional $2 million in charges coincide with the Savannah warehouse exit? - Yes, the additional charges are expected to be related to the closing of the Savannah warehouse [42]

Financial Data and Key Metrics Changes - Net sales for Q1 FY 2026 were $50.7 million, down from $56.5 million in the prior year, primarily due to market softness and tariff-related shipment pauses [21] - Gross profit increased to $7.2 million (14.3% of sales) from $5.1 million (9% of sales) year-over-year, reflecting a 530 basis point improvement driven by restructuring benefits [21] - Operating income for the quarter was $1.6 million, compared to a loss of $6.9 million in the prior year [21] - Net loss was $231,000 ($0.02 per diluted share), significantly improved from a net loss of $7.3 million ($0.58 per diluted share) in the prior year [22] Business Line Data and Key Metrics Changes - Bedding segment sales were $28 million, flat compared to the previous year, with gross profit improving to $2.9 million (10.5% of sales) from a loss of $326,000 (-1.2% of sales) [24] - Upholstery segment sales decreased by approximately 20% to $22.6 million from $28.5 million, with gross profit at $4.3 million (18.9% of sales), down from $5.5 million (19.4% of sales) [25][26] Market Data and Key Metrics Changes - The home furnishings industry remains in a down cycle, but analysts suggest that mattress demand may be close to bottoming out, with potential for recovery driven by product replacement and household formation [8][9] - The upholstery segment faced challenges due to high tariffs on imports from China, which temporarily halted shipments and impacted sales [11][12] Company Strategy and Development Direction - The company is focused on restructuring and integration initiatives to improve operating efficiency and profitability, with expectations for sequential sales growth throughout FY 2026 [31] - Project Blaze aims to unify operations and share resources across divisions, enhancing overall operational efficiency [16] - The company is strategically positioned to capitalize on market recovery by maintaining capacity and leveraging competitive advantages in supply chain management [19][44] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing challenges from tariffs and market conditions but expresses confidence in the company's ability to navigate these issues and improve profitability [9][31] - The company anticipates sequential growth in sales and adjusted EBITDA results moving towards breakeven or slightly positive for Q2 FY 2026 [31] - Management emphasizes the importance of maintaining flexibility in operations to adapt to changing market demands [43] Other Important Information - The effective income tax rate for Q1 FY 2026 was 120.3%, influenced by the gain on the sale of the Canadian manufacturing facility [23] - The company reported $11.1 million in cash and $18.1 million in outstanding debt, maintaining a net debt position of $7.1 million [26][28] Q&A Session Summary Question: Are all known tariff impacts accounted for in your initiatives? - Management believes they can take tariffs off the immediate worry list, having adjusted pricing and operations to manage the current environment effectively [35] Question: What is the pricing elasticity in the current market? - Management acknowledges the competitive nature of the business but is working to pass through necessary price increases to cover tariffs and improve margins [37] Question: How far along is the realization of the $18 million in initiatives? - Management indicates that the $10-$11 million from the previous year's restructuring is fully implemented, while other initiatives will impact the back half of FY 2026 [38][39] Question: How does the current market dip compare to past downturns? - Management notes that while down cycles are common, the current period has been prolonged, but they remain confident in a market recovery [40][42] Question: Will the company be able to meet demand if it turns? - Management asserts that they have not limited capacity and can grow as needed, leveraging existing resources to meet potential demand increases [43][44] Question: What is the estimated market value of real estate and the future use of NOLs? - The net book value of the real estate is approximately $12 million, with an estimated market value of $40-$45 million, while NOLs will provide future tax benefits once profitability is achieved [45][46]

Financial Data and Key Metrics Changes - Net sales for the first quarter were $50.7 million, down from $56.5 million in the prior year, primarily due to market softness and tariff-related shipment pauses [21] - Gross profit increased to $7.2 million or 14.3% of sales, compared to $5.1 million or 9% of sales in the prior year, reflecting a 530 basis point improvement driven by restructuring initiatives [21] - Operating income was $1.6 million, a significant recovery from a loss of $6.9 million in the prior year [21] - Net loss for the quarter was $231,000 or $0.02 per diluted share, compared to a net loss of $7.3 million or $0.58 per diluted share in the prior year [22] Business Line Data and Key Metrics Changes - Bedding segment sales were $28 million, flat compared to the previous year, with gross profit improving to $2.9 million or 10.5% of sales from a negative $326,000 or negative 1.2% [24] - Upholstery segment sales were $22.6 million, down approximately 20% from $28.5 million in the prior year, with gross profit at $4.3 million or 18.9% of sales, down from $5.5 million or 19.4% [25][26] Market Data and Key Metrics Changes - The home furnishings industry continues to experience depressed demand, with challenges from consumer spending and housing market trends impacting both business segments [10][11] - Despite the downturn, there are indications of pent-up demand in the mattress market, with analysts suggesting that demand may be close to bottoming out [8][9] Company Strategy and Development Direction - The company is focused on restructuring and integration initiatives to improve operational efficiency and profitability, with expectations for sequential sales growth throughout fiscal 2026 [31][32] - Project Blaze aims to unify the two former divisions into a single Culp-branded business, enhancing operational capabilities and cost efficiencies [16][18] - The company is strategically positioned to leverage its global supply chain and manufacturing flexibility to navigate tariff challenges and capitalize on market recovery [19][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing challenges from tariffs and a low demand environment but remains optimistic about gaining market share and improving profitability [31][32] - The company expects adjusted EBITDA results to range from near breakeven to slightly positive for the second quarter, with continued improvements anticipated throughout the fiscal year [31] - Management emphasizes the importance of not waiting for market recovery but instead making proactive adjustments to enhance profitability [42] Other Important Information - The company reported $11.1 million in total cash and $18.1 million in outstanding debt, maintaining a net debt position of $7.1 million [26] - Capital expenditures were reduced to $179,000 for the quarter, reflecting a strategic focus on managing capital and operational efficiency [29] Q&A Session Summary Question: Are all known tariff impacts accounted for in your initiatives? - Management indicated that they have adjusted pricing and operational strategies to mitigate tariff impacts, and they feel confident in their current position regarding tariffs [35][36] Question: What is the elasticity of pricing in the current market? - Management acknowledged the competitive nature of the industry but emphasized the need to pass on costs to maintain profitability, while being fair and aggressive in pricing strategies [37] Question: How does the current market downturn compare to past cycles? - Management noted that while down cycles are common, the current downturn has been prolonged since 2020, but they remain confident in a future recovery [40][42] Question: Will the company be able to meet increased demand with the existing cost structure? - Management assured that they have not limited capacity and can grow as needed, indicating significant cost leverage available when demand increases [43][44] Question: What is the estimated market value of real estate and the future use of NOLs? - The net book value of real estate is approximately $12 million, with an estimated market value of $40 to $45 million, and NOLs will provide future tax benefits once profitability is achieved [45][46]