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UFI UNIFI

Participants
A.J. Eaker VP, Finance
Albert Carey Executive Chairman
Edmund Ingle CEO and Director
Craig Creaturo EVP and CFO
Chris McGinnis Sidoti & Company
Daniel Moore CJS Securities
Marco Rodriguez Stonegate Capital
Samantha Hanley KeyBanc Capital Markets
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2021 Unifi, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, A.J. Eaker, Vice President of Finance. sir. ahead, go Please

A.J. Eaker

and everyone. operator, good you, morning Thank

On Eddie Craig Ingle, today is Creaturo, Executive Chairman; Al Carey, Officer. Chief Financial Vice and the President call Executive Chief Executive Officer; and

differ federal be at meaning referencing these call, this presentation laws. be statements involve projections today’s forecasted expressed, not which These are clicking securities conference are fiscal management and based in expectations, by materially first implied be call of advises and will estimates or unifi.com During certain a may predict. link. are statements by risks and that certain on included Unifi forward-looking from statements. Management about and/or current will to what guarantees statements cautions that the performance outcomes difficult webcast in can quarter the is statements XXXX within the the future these found Management that you of markets call Actual operates. that results

the discussed the please be to You various financial impact I Al debt working Also, results. directed capital and EBITDA, SEC these over adjusted now factors that call call. be that and filed certain regarding the as XX-Q Forms to may measures advised non-GAAP XX-K are on adjusted Unifi’s this may on disclosures such will net with turn Carey.

Albert Carey

CEO, for fiscal call Thanks a thought A.J. our and a two, turn broad quarter few our just I'll today. our presentation provide first of for everyone this to I'd and to good with but Ingle, in morning minute listening you over Eddie highlights XXXX. thanks I or

And improved March. since and of profitability good October performance also ahead trend a in And and the part October, new our start. solid was pandemic off revenue gotten our we've quarter. was in our First, volume of expectations. Each is it continues our our and the began to sequentially has month

helped has our goals And our was REPREVE continuing. quarter mix. REPREVE prioritizing four with we - customers. then Second, They quarter business. see back of actually quarter trend that this we see XX% and mix are in Last our in sustainability our a was and that REPREVE of XX% first

ourselves Third, the better record out we've our We've a when paid a to business long-term of set been busy net come for debt we the pandemic up period level. during COVID. quite down to

Our say we’ve sized our cash CEO, inventories, our I'd We brought Vivo new Ingle. a position inventories. we began is We've strong. equipment cooler Eddie but reduced innovative and placing in right

is an with back. management reset team member say of I'd that of XX with person a working And came not Although Eddie the quite had of Unifi the recall entire the we've right I highly for and and - turnover, addition career only not so well Eddie fourth, he new, on now you months team motivated bit And before he each but our feel the may a last Unifi. for XX-year had we've or job together. at completed also leadership is they're the

difficult but two, about the quarter we as and deal look environment are do in, work precision. still a of makes in a of we to optimistic and still I'm one operating amount out progress any our it quarter I So in uncertainty forecast fair have so of over great with level it there's to

ahead slightly industry our our believe I considered, is nicely industry. of of the all pace recovering So and we're

now. a quarter right leave I one feeling positive So with

more provide for you it let with Eddie our So for highlights. Ingle to to turn more over detail our on CEO, QX performance me

Edmund Ingle

good Thanks Al, morning, and everybody.

the safety pandemic and positioned for I Reflecting employees of the mentioned, thank low and allowed business have our Today fourth well. COVID to very provided for fiscal As on operate a sharply from proud again On are quarter overview to of numbers X all Slide Al our revenue our the to the XXXX. results dedication year. their of rebounded quarter navigate us On their we low recovery first an the the continuing of we want case believe all quarter business are maintain quarter. we're and fiscal XXXX to fiscal our sequential measures well customers. basis,

that we say the Let's as through business the improved quarter. went

the from beginning Our while operation that as region saw highest quarter the on the we the performance American as fantastic there gross and options we fiscal our Interestingly XXXX, the at predominantly of expansion. during U.S. restarted for ramp of good running capacity. the Salvador El was managing in that allowing feeds team is additional Central a At mix Asia pre-branded chain we've costs the operations volumes conversions product in branded market. the in also a resulting in did full growth supply and improving region, margin past the and up strongest segment the volumes about for the sales the great record, quarter to Brazil quarter first product quarterly saw experienced in the now rebound growth a our job talked fourth

like in recovery performance segments a expectations quarter's Each with our year-over-year to solid market's fiscal basis of for of give growth the has is levels. around for apparel slightly look year-end. by on quarter the little industrial markets XX% now we our our last to a XXXX ahead end stated the pre-pandemic momentum call And XX% the and providing on hovering As to you markets towards aspiration. below this first first been automotive, returning quarter. detail more and I’d

the PPE that volume lower as regional experienced was our off as to year and year-to-year from fourth the equipment developments in calendar While compared XXXX. market end we October negative taper The known, or major to and recedes. earlier to say, we pandemic I'm level our basis at through of we from continue demand of this And to expect revenues order as on the the protective quarter a Al provide solutions a over mentioned lower. categories. seen Polyester it's haven't a had flow But earlier, in markets are the any segment pleased strong volumes or course for personal market,

has created uncertainties this While exploring pleased and for driven also improving I'm also revenues short-term to continue us to to opportunities. materials focus on unchanged. that say new remain believe that the has stable business we and segment remains pandemic raw it outlook the

to share compared Given much to the position positively. it costs us June volume quarter to of and both naturally fixed our greater market sales profitability which the recent months, all seen the absorb in record in Brazil strongest first Brazil year leading has market period. the has allowed importers growth the reduced textured recovery the first of uncertainty impacted compared last levels sales inventory our yarns demand quarter, our and segments, volumes in June quarter a has the with level and over polyester their more of importantly the the prior of Amid competitive six stocks. achieved Brazil Out quarter.

business the and the Our on capitalize customer by were Accordingly, the previously able remained to recovered have to competitive we share and we committed than market to expected sold ready were facility in maximized experience situation. demand serve utilization region. quicker when importers, held

will to we to our share gains. Going on forward, market hold work

Asia’s of improvement existing over and XXXX, Western mix visibility in on levels. retail expected North is importantly of resulting many is year. the accelerated nicely. for segment online sales, pre-pandemic to recovering to improved solid product the Demand customer tied saw improve in fourth fiscal through an to European sales region, we in segment The continue experienced segment enrichment but and the gross us areas as new programs American we is Throughout region, the of due leading remainder Brazil, both margins. the the which the fiscal to the also restricted as pull to move year. closer to quarter Outside more Within to the this is through getting move

consumer slowest and developing It's Of course, dependent and new its near the remain we sentiments. and been recovery portfolio. expectations U.S. on all economies this us revitalize European place The remain the to segment so our and all our commercializing to segment segments products, I about Western in that segment. performed not long term in our the has Nylon this we is surprise performance to optimistic and committed this a and the have of

I'm product Looking quarter, pleased the consolidated the in same last time hit at and business XX% the XX% from quarter. the XX% to very first pre-fiber of share perspective, year that to during products our compared sales during a compared XXXX June to

increase fulfill their sustainable in REPREVE brands, of more products. can quarter sustainable towards first expanding an our practices commitments The of ever bringing to to and largely solutions attributed sustainable efforts portfolio looking sales to be

exponentially real estate of based as proliferation the a With on e-commerce the story evaluate online more readily have identify consumers product sustainability better fashion gain has versus far sustainability. products and sustainable can in-store. more e-retailers is and help Perhaps more there keywords search to a created internal shopping, even platforms understanding product new related Consumers can marketplace products. the importantly, also on consumer grown of

to working REPREVE customers both activations We products. market awareness and with are produce creating to merchandise identify customers’ the goods as sustainable co-branding and possible most our help for advantageous thereby our

brand examples in launched hoodies many as the where visible logos print, Hollister have and with We graphic these of the sweatpants on has REPREVE such apparel garments. our space co-branding U.S. programs

sustainable REPREVE categories are a across brand branded to a promoting denim contents. made lines. is for into across REPREVE, have of footwear work that Igloo both variety of several Ocean promoting American plans. charged in woven polos it Europe, their retail inclusion added items soft pointer company wrist Fitbit also. are to a in their of new wearable should In called Aramark, brand REPREVE North accessory iconic side from also a a Sundek across containing as collaboration And portfolios. rent. REPREVE the brand has is a coolers. Penti, and be the variety has first their bags. And their line girls its launched promoting of bands Several noted touting Danish has Yeah! Denim purchase of use products. future expansion REPREVE wear first Nixon reverser, REPREVE. for Justice line, Our its activewear Engel REPREVE and REPREVE by brands with REPREVE garments Turkish Ocean line bag Interestingly brand well-known Italy, of HXO In REPREVE and released just Our sense has released and expanded touting

return REPREVE trade Intertextile in stretch to China bi-components we flex saw where innovative important in-person quarter, REPREVE market polyester shows resin the two [indiscernible] Shanghai for participation with we yarns. products. our launched for During and

market. last market, the that in in-person heart backyards REPREVE was And that's on a speech keynote the a near sustainability I at deliver to the tour in highpoint textiles. to mobile my topic exhibited dear we furniture honored week gatherings and our Here in high right Carolina, just U.S. market furniture point North largest at here in furniture exists the the one of

call, along, As stayed quarters we're consolidation to market them. take going the in the opportunities previous evaluate come the with to right time

the this activity that mistakes in supporting a even to This acquired of where more, M&A LLC our capitalize So Service our saying our competencies month earlier air-jet is or acquisitions what Texturing are in assets on bolt-on we texturing call and core favorable. transaction forward portfolio of efforts step TSI. we

We that expect given in will existing have non-apparel the complement this history our right own additional markets portfolio customers services gain the market. markets. from TSI our acquisition we air-jet texturing primarily already and in well end unfold

us sales how not as any revenue details transaction diversification the had will as our quarter. no this call, completed some financial volume impact well. So transaction we segment will just the much acquisition increase this specific this or TSI to On either provides and of discussing be with

improving strengthen position strides improving you. Craig. I'm made our the shape. good balance continues financial we going have maintaining remain call the financial to sheet over to Our to Thank health. liquidity and excellent in committed and With in I’m that, the levels to of proud turn

Craig Creaturo

On gross just I first impacting our morning, quarter the great to in Like fourth for and just to a and of with we quarter positions. sales performance and the and and beyond, the X comments. of Eddie, Al impacted quarter results and Pages XXXX to X in Eddie net shares relevant like compared XXXX. first maintain of fiscal team, There's fiscal webcast the presentation, completed you, XXXX thoughts. a rest X pandemic Thank highlights but position his fiscal Brazil add is business our of of On display. recovery already profit comparison our and shortfalls QX the results. as QX profit liquidity the the remaining cash and favorable everyone. the is fiscal strength our continues to on XXXX plenty net the would sales of I ability volume are quarter good and pleased shown. path am year-over-year Eddie presentation The except XXXX its few of for of Pages fiscal our traditional that and overview X to for provided our the broad year-over-year work theme has gross

normal activity we lower would commentary, answer reason the While for be having sales could go through general the the changes. the of

hopefully comparison So discussing just we normal quarter the quarter that small XXXX commentary. this One quarter will return the rate. the to skip that sales enough is December gap and more effective meaningful analysis for completed to a we're will for for item is tax the be

guilty, tangible between tax quite driving of just Slide change the periods to benefited here fiscal the benefit. will presented cash. income highlights. to XXXX. fiscal principle X discrete QX completed tax was the rate and I expense. from sheet around the debt at low commonly XXXX and income net typical The a concept the components, to more allow quarter a webcast year of and of graph recent net discuss and Our similar rate the from EPS legislation provides the balance XX% referred On prior we remain debt discrete million tax QX But high the in item presentation, This for as global $X.X favorable around tax to related trend

the during the see diligent made If liquidity the position onset beginning you recovery. of the in really and pandemic first strengthening our balance we of significant progress management with sheet with continuing quarter and have maintaining

concessions million to of on not covenants continue and revolver, or borrowings or any to approximately ABL debt requested zero changes We terms. with have our have we our $XX.X repayment availability

the with supported to final cash credit opportunities, presentation balanced us and ability at some repurchases approach call the of last to comments. share facility make time. to through the investments the the I'll take and Eddie maintain by current prioritizing now back reduction us Our to appropriate provide turn in slide the continues allocation, a and Eddie? and position capital debt growth business to

Edmund Ingle

Q&A. X of to I'll provide context before Craig. for some fiscal you, Slide of around turn XXXX three Thank our next to the up presentation quarters opening

our for All expected seasonality see will considering anticipate sales quarter sales. recent products routine rates XXXX. don't We economic The progress follow strong to to first expected confidence assumed, core of we Sales sales to are performance pandemic supports items. regions. and the during profitability trends, our we'll that that's percentage any fiscal related this incremental and continue and the in is see any our shutdowns REPREVE continue value-added of growth a consolidated expense

spend Lastly, million first million. also is great $XX quarter, our given the what markets in will momentum from of our the I to first indication achieve we of fall a range we return once perhaps $XX believe our normal. to believe annual CapEx the can quarter

towards and to our will brand working and and We continue growth our that focus costs capital, to platforms technology managing using innovation drive portfolio partnering on with sustainable look products. leaders providing

for will the we of development, unfolds. to people as invest but can recovery build the long positive momentum to the continue our forgetting year, their to not in the we while profit continue financial safe, remainder For keep term,

up for We the you. line open will Thank questions. now

Operator

first Your question with line of Chris Instructions] Sidoti McGinnis the & [Operator from Company. comes

Chris McGinnis

that? more taking driving Thanks. so maybe COVID do patterns? Have my talk Thanks that And of there's change increased congrats. about behind that do normal then, is you If maybe you would increase the the you're terms can of demand And both that to and or how think conversations REPREVE and nice from factor off and is? in demand I feel the that just back XQ order what do just for on under up the about you questions just having? quarter, think playing with start to volume pent some just you into XQ, for a

Edmund Ingle

in are several there Yes, questions there.

demand to occurred. I think that's is to fulfilled is there being fulfill, the that replace depleted inventory

like - increase Central they're also seeing areas Christmas where an preparing we're season. So for but especially the America in

interestingly market supply is the quickly We're to back very the that So are increase nicely. as our the is don't segment and business from America in issues very where coming at does their us, also very Central in U.S. supply in seeing it demand that as also very, business. compared for apparel And just And China. chain. but buying homes, old allows And We fulfill us that's still chain automotive the stories we affect know quick home the a of brands people. the renovating coming logistic to turn market markets homes, China looking also. in And that or the all in affect is have an part returning demand, that significant of driving furnishings that upholstery people the same that new tired furniture.

was Brazil in increase the largest home sector. this, fact the saw furnishing demand that In within where the we

I So REPREVE very plays well brands. into think this all our of

If point what change millennials to with climate somehow the from much you do the - of by and are being driven buying issue, at [indiscernible]. more this They're connecting they're and and pandemic are issue something trying today consumers its conscious sustainability a view.

sustainable where And seeing gravitating REPREVE And our of so, brands products. fits by sustainable lot with buying solutions, towards a the benefit think co-branding also REPREVE. are And they're in. I that's

Chris McGinnis

Thank you.

Albert Carey

in and if having a we're the the brands Chris, to now to the the first there'll be not the that even sustainability. say significant Al. And let’s summer late that, And I customers. into wonder a big then the just discussions it much part sustainability. discussion in interest this in the increase decline of with middle I is the about summer thought say seemed of I COVID, right I'd add in big

objectives. targets take seriously And we their a I play that realize accomplishment they can sustainability in their now. those they think very of role

executives edge people young the the millennials in millennials companies, it to is, some noticed the they're these they're at you - run the these and jobs as who important when take the of their I've jobs of sustainability. very seriously early improving or comes thing other The looking start

Chris McGinnis

That's co-branding. great get especially congrats and to - starting on getting more

looking to on that's are so see that, something people time for I forward that think congrats good work. a long

Albert Carey

Yes.

Chris McGinnis

Just on are currency so business kind of in differently to that say that comes know Brazil. questions jump plays that than the demand the quick just going that? two little that as just bit a approach volatility trends in I left volatility in maybe to you past into happen Brazil, How doesn't into on back there.

Edmund Ingle

the perspective. focused level. committing currency imports that servicing really We The and Brazil it’s demand. local are think, from I customers can service in we to this there is what were at customers we servicing to last to importers don't in significantly. I saw when very down market Well the time the period. quarter a a think anything stopped about XX% do look that But our high was to we very, had And that us over on

expand what to to our rethink have But reason really So - expand an there there market. is running service that definitely that and us in domestically. customers more slightly is some to and given operations opportunity highlighted a essentially a pause that to little bit more or built we maybe operations is intensely to inventory look versus having buying importing

Chris McGinnis

Great.

Edmund Ingle

Thank you.

Chris McGinnis

just And question, better versus part, gross cost maybe then gross the how margin that yes a factor of much on is utilization. the of one just last improvement savings

utilization about maybe Any is at moment? the color on that? where Thanks. your just You talk

Craig Creaturo

levels. the improvement. utilization very several careful into And have sure, that’s items a had from careful that the piece largest was very quarters, We've We The that that the in gross being and well. control a definitely added amount helped the very, rebound volume definitely cost over I the profit been Hi. cost is last improvement the fair business. in that was of significant actions for on recovery the pre-pandemic. Chris, that piece But benefited even this gross margin Craig. just about as again think the of we've of

October we with we gross seeing And year room the is in continue if volume fiscal continue have of will to in said, of going got think seeing increases, grow. through we some the activity, we do think levels nice higher I what to we're this We the rest trend. as a uptick to margin.

to use up constrained. not to of with be We the like additional should the we recovery hit have. capabilities in capacity have start nicely do will we facility. some We able We we’re capacity feel we feel our the like

Chris McGinnis

for Great, in I'll QX. back in my luck good thanks questions jump but taking queue, and

Craig Creaturo

Thank Chris. you,

Operator

Daniel Your with Moore next the CJS question comes Securities. from line of

Daniel Moore

Thanks Good the morning, gentlemen. taking questions. for

Edmund Ingle

morning. Good

Craig Creaturo

Dan. Hi,

Albert Carey

Hi, Dan.

Daniel Moore

more of two into improvement I now little the in a or cadence August, What’s for as just on volume and guess, sequential as like segments? the September in October well Maybe terms look revenue in declines both year-over-year Asia the October. color polyester those of July,

Craig Creaturo

current in really where gap - the commentary we the calendar in as them as close we calendar seen XXXX month we confess April, to Dan, point comparing the we’re in the comparable stated low in each XXXX. we month month

us, the whole as kind single-digits For for to It's been. the so smaller than gap quarter. that that XX% the was definitely or or to into of as off the teens far starting smallest starting noticeably percentage it's now we for off. get hover October were around the the And we're

be where gap that's It's hasn't that that of steady been starting ratable from sudden, a change been pretty it's it's period nice, whole just one what to There there to now year. but from last a reasonable incremental been more during change, been is huge our trending. this was progressing time. month So performance

Daniel Moore

any not thinking helpful. obviously se, - your COVID, barring both know But we line both about And expect go commentary resurgence to and sequential bottom but like guidance in it's forward certainly that based major sequential It just you I and progress fiscal line trend. forward on as per Very cetera. QX? of improvement going clarify et be we from top should sounds

Craig Creaturo

December continued are in both we also impact seasonality the things will quarter. quarter think March that do and revenue We the progress definitely have, anticipating a some that other We some and Dan, there. from perspective us

and quarter. of types continue have see - that of customer thing And other that of the will pick starting And activity we pick this to think too the note that a we anticipated we up about lot up. during and where And discretionary that's conference I seeing like have things will to limited and calls the have forecasted Al been some a we been is, those bit that needed. on now have visits, brand But bit a want are engagement to those activities customers. be there we we spending, pretty Eddie both that. demand of to is lot get and of that of of and quite doing kind Zooms demand mentioned a we can pent-up yes via out

So increase will that a bit.

I think so. that top will theme we is quarters broader or put And some some extra next going dollars improvement into over on But again again the forward. the continued expecting the especially SG&A line. couple line overall, items are the seasonality we’ll

Albert Carey

Dan is And now. this

Daniel Moore

just more a that’s Yes, that. Yes Go helpful. ahead. color on little

as we and very customers they’re speak Christmas the on Now brands season. to bullish

amount level optimistic confident sure with go I'm after their think they’re Christmas not I season. Christmas, I'm done people. precision. happens platforms. e-commerce And what being a of I'm apparel the Then - on in fair listen, into from of any e-commerce of So business there's apparel what as we But the hearing

Daniel Moore

okay, Understood please. yeah,

Edmund Ingle

REPREVE. March/April Yes chain now adoption mean is REPREVE. it's what the our we're because for of growth And what supply I sell and they of servicing of seeing in makes. business there, the most continued China it periods actually the

are we're impacting not expecting the brands. back And So, coming levels And by rate we're to different that's China. seeing steadily And change. mentioned. as that adoption it's really to said continued And to earlier, sell it's we've in growth Western a pre-pandemic in be confident based brands U.S. in expect you. we're driven to Thank like what seemed the European the and in China. it's seeing really March/April periods what they on I

Daniel Moore

and helpful. tangible great, you that's from it the or Eddie that see difficult - recovery? too separate crosscurrents activity starting more and from simply benefit tariffs COVID to that's is of are to No, Polyester, trade sort

Edmund Ingle

as an coming QX only as the quarters where. demand of going do and of to took that resurgence and the see believe weeks, the sales. for we despite some three - out fact seeing will back. wind enjoy imports much of we we business not So our few last our through And year the that we us in of post-COVID are Today, improvement that go return in return next customers into did

We combined, terms good quick we have sell we that product have very, and also to but fact good payment quality. we and very the service is have have

mix that slow, few we but products product see seeing are - as So but has that through back expect we quarters. we next to move you. and come been Thank line, definitely the the it

Daniel Moore

Perfect. or market. But little Brazil, gave jump the apparel that color, what's just sustainability good Maybe obviously well core the out. one maybe the two mean your more, of color extends I like I'll turnaround - sounds it and pretty is it recovery beyond you a more just on perspective? from driving

Edmund Ingle

We people and seem their change we and there. or definitely be that home their of upholstery the converting in whether don't in or spending into a so rest the Brazil, apparel like have focused to of And that's Brazil, - also been furnishings home we home they're but or it's time has interesting. their because it's very into focusing on bedding goods traditionally some more there in step making in world's Yes a we been furnishing whether home have home home line can in comfortable of absolutely see that environments workspace really curtains more the see at that going changing into market the it’s go short-term.

right been there we've ready. So

of side producers also domestically in competitive. apparel because more exchange rates the the On change Brazil made apparel it's the

they And country apparel been, year imports. in with more with there that being the made production of than competitive said seeing an than are apparel more excited we're what's because market ago. And so. expand we’re do about very had costs long-term. our to more we had there So I Thank you. local perhaps past, happened say, we competitive And yarns earlier, cheaper local And our as a in is are Brazil. that in our been the the opportunity producers apparel share see have

Daniel Moore

markets outside texturing and seeing is good of as allocation attack, What of two terms quarters? you in of that are next of end apparel terms opportunities more redeploy concerned? far are as the you intend maybe in to one just will help to Thanks. over that some and Very you service other more, M&A capital M&A capital the

Edmund Ingle

different part on - take to very the TSI, I'll we a of as it. Yes, that call, said has going texture uses. - it And unique Craig market to acquired air-jet question, focus into maybe once add and that When market wants it’s is is us their on its of uses was to air-jet the a We very, texturing or business. any business selling to our XX% resilience. interesting much specialty complementary, lot texturing detection business end of non-apparel, goes non-military at and products into military. traditional a to TSI it into products, when compared that the Most we’re apparel sell of very, to makes very non-apparel, and it’s of products. stronger non-military yarn uptick little we be traditional portfolio gives see you margin their very bit specialty and was but air-jet which

may the Craig? we up teeth get further, expanding business business. into determined that's be our So, end but we once But, to that

Craig Creaturo

and And can is Yes providing strategic that we such are M&A, for value have to Dan, I'll diversity and there they're interested it good take we're us. yes, infrastructure fit just the and well. The Unifi, in good that as like that that. TSI market add significant advantage facility as of to of is businesses when end that we finding

be with us to integrate of during pleased out together, to we're of all But this active really are we'll you give that to interest and TSI and those as there. more business we acquisition we'll on as working details continue So the able quarter. be opportunities kind what's that that's

Daniel Moore

a lot perfect, Okay, me. that's for

the acceleration it's echo, see the opportunity. in exciting to co-branding Just

to Thanks. color. more to forward the look So for Thanks come.

Craig Creaturo

Thanks.

Edmund Ingle

Thank you, Dan.

Operator

Stonegate comes question the Marco with next of Your from Rodriguez Capital. line

Marco Rodriguez

morning, Good everyone.

Edmund Ingle

Hi, Marco.

Marco Rodriguez

questions. taking for bit a there. about have follow-up I But you the the that on year-over-year in the kind couple comparison. the in that I margins. can to maybe been understand more I'm curious sequential on Hi. talk little my improvement of you Thank volume, kind gross specifically wanted that questions drivers of asked, already a

example that I picking any savings. more volumes maybe But as items of the cost there segments if compared well commensurate quarter? some margin year you margin much gross last put utilization in much, of or or as had can the margins buckets obviously quarter little bit really about And more are half of you there by that a detail your of kind Nylon, a discuss help terms commentary if one-time lower still have up across a maybe be helpful? sort to were Yet gross level. and most heard sales greater, in the would same You this same

Craig Creaturo

comparison in I the - is Slide as I too. Marco probably addition I sales that think think slide, helpful on to well X year-over-year think

when think you you see a couple things I at look of that chart.

just costs taking out of taken completed the You quarter. that actively I period a activity lot QX, QX where not do were a there. which in during Yes, the of decreases. of see to we even still think not of making get in lot bit but pandemic this and a the in QX business FY XXXX, have where quite a was we - also volume of from We actions

So, had being I lot and we've resources little the volume ready. an adding We that without what to already talked really increasing rebound we able about think seen bit beyond the or a additional tackle a undertone. of that's that

to I So better there, continues it's you’ll There in changes just find add theme market part changes too, and broader in that. mix be the the that that's want some utilization well individual Eddie, mostly think the increase to though do utilization? as really theme utilization. it to - but of you are

Edmund Ingle

one - as thing QX and obviously very you yes in can of diligent were tell. some out effort has just I that taking and Yes we costs

as pre-portfolio we brands over our that’s customers our marketing will to expands, and expands as will mentioned reduction, as be business and into our earlier. little by on our supporting QX more has but a So cost continue focus we Craig bit spending

our we're REPREVE. to how - we're spend So brands not going are and of be in conscious retailers support who think who be money to to we always believe going we the afraid and

Marco Rodriguez

you, thank okay. Understood,

have the progresses the end in as fiscal sequential by “guidance” and some the providing of with year-over-year the that XXXX. growth terms year improvements you're so of kind And of you some

environment On you environment you some for Once are gross your have or perspective kind normalized back customers? to guys given done put growth take of you and those just the the reset in have gross costs of sales then do you've support kind margin normalized guy. of kind be a a hit what to out, margin to support

Craig Creaturo

we're it's think bit I a Yes, I normalized more entering a think margin area. into - now more of a

of areas. hard a achievable lot a I towards. happening. and and not us an on that, a margin Again, just think for steps of right small It Again decent that we that’s for quarter. period year. But it’s drastically think there, proxy Marco think And past it again high, we this there's from the of We this a be lot good I we're achieved wasn't really recovering very I some of - XX% still basis are believe people to for year. some rest psychological lot benefit low thing a expected to the still we to that rest us. expecting in versus of lot having the quarter getting we different a be that that drastically But target think track, is that’s the level. gross margin incremental had should the proud takes that's above a that what for be working where us of we’re profile revolutionary the work that we

Marco Rodriguez

strategies customer obviously you to and you your look of took Then quarter uphold trying And Got you did in your Brazil, basically in share remarks have in - of the switching terms to kind talked discuss and here support about going very forward. you're share increasing services you to going some your it, helpful. levels there. guys to prepared that

be any or sort through hold are there go other as if at of that wondering you kind implementations looking year? strategies Just of share to you'll the fiscal

Craig Creaturo

Well probably to shutdown. shorter having in have thing is the will short-term a - we simple Christmas be a

sort We to the very this at which that you. shutdown support are will take longer on we and rebound build some inventories else are Long-term, So and disclose. do we Thank in we simple market than opportunity to extended that inventories replenish we to of That’s look January. an the provide have. to to liberty basis. that ready at not what be looking can normally we we have yet for can more low finished a goods

Marco Rodriguez

on Al, question in do, in But mentioned your and can had you then of to maybe maybe or months. goals different the remarks or have that if prepared work you I next here you four specific are have months, was XX obviously or the elaborate quick kind also wondering more year-to-date objectives Understood are XX and guys goals to then done trailing last guys that you what some outlined accomplish? here. months the fact or you accomplishments that looking you XX targets

Albert Carey

if pre-pandemic any jumping the a have overall, the say year-ago I about from do, going But the exactly may Yes, occur it color. mention from vision. bumps would it. just I’ll come kind we meaning what know getting that road more are that back can't because think sales that tell We some we couple pretty of when pandemic. the we to I to And don't it's we good back more feel they in see levels. to in work

the to would a I selling the potential take REPREVE, fashion Some work REPREVE REPREVE getting this, Nylon to customers plastic, interested. this customers and and in like advantage call then sustainability. to I environmental bring think some of it interest aggressive And on, line we in line out need innovations, of have are to of our great a of the ocean more things

an opportunity that's sell to innovation. So

placement we'll of about in talk machines think we're to at quarter. impressed more terms next but of do very reduction. these cost evil early coolers, I the the for very, of with these end can us what it's days, have And the

is we're the is on. So And that two development the other which side a our thing team. things those soft of are working

For we've replacing in place. been the last talent. We've managerial been senior months, putting leadership XX

a at people. the and our back we dive company deeper into we're think I into develop point start where to young now the

group environmental the part and that development about though, in We down organization talent of this that of in programs I'm have put a great are for the begun it business, we've these just to dividends a road. business. sustainability call soft optimistic of some, folks. Even young it passionate very the let's part people it's place pays about

Craig Creaturo

a tours that we our as brings all just have out thing used of it more said. of like into would we’re back. And to, I and it's think just have get when taking physical site that doing ready that. group, sales most I of inviting they're teams to careful. said, as the get customer direct the but know protocol. it don't customers difference. customers. We will recently has extensive brand have do they're connection a And it getting zoomed with But make we're one as that a what have we our most with and were or facilities, Al they begun back But whether I basically and face-to-face And safety more makes face-to-face we - Yes, people And we bring into are just our obviously be to a obviously, customers. very difference

Marco Rodriguez

zoomed out. I all think you

Craig Creaturo

that. I agree with

Marco Rodriguez

the for really Well, the I that's guys color, do time. great. Thank appreciate you

Craig Creaturo

Yes, thank you.

Edmund Ingle

Thank you. Marco

Albert Carey

Thank you.

Operator

Markets. question [Operator comes Capital next KeyBanc the line with Hanley from Instructions] of Your Samantha

Samantha Hanley

quarter. congrats Thanks the everyone. questions Good is? and on for morning, taking question our first My

Edmund Ingle

Hi, Samantha.

Samantha Hanley

you? new you relationship growth how existing? you First, opportunities REPREVE talk your can or about Hi, customers either up with expanding for are the see picking

Edmund Ingle

- times said sustainability REPREVE in started couple Yes we've We journey. XXXX as started a brand. customers and a has been long who a of back as it with believed just before, many in

to brand ago, didn't And were we customer many know sustainability. years as that And talking resonate with Patagonia. when is we it Samantha with first was customers the many, this brands. seem core about The we or worked several

after has so forward gone fast months today, So global. pandemic six the

I sustainability and We are that with and you this of relating with can are seeing happening of people earlier company going all on like each thoughtfulness that, all said is with efforts deal climate as pandemic the it more if. more around and happening what's change with themselves it's - what's somewhat know how

Craig Creaturo

people When store were they get things scarce. couldn't the in things finding were

and it stock. even experienced to especially because of shortages people the millennials if not experienced time lot sometimes it's actually probably product and takes the in go first they U.S. Tangier’s online, time The the the have in get a

of seeing commitments. made we're resources and So footprints just say carbon I've brand this all and translates into the

that's part Thank place industrial we're we’re and on And I in journey though is over or Now, the seems think markets through at be the been key markets for markets, the part I'm actually they're They automotive of there at or right apparel working REPREVE be years. whether right have upholstery this are it the real XX follow you. the help right brands want now solution. to of these interest. seeing the thing, going and brands even saying solution or like to I time markets to to I've

Albert Carey

just to want I add Samantha. to that.

first with the So up when about years recycled mark. to the get company to I would XX billion XX came REPREVE. it say took bottles

that a back. So year achieve XX XX while achieved we we'll billion. bottles billion This

to at the end bottles XX So an an you of years acceleration. get of to years gives get the We XX year we just another next indicator to year, a think by little of we'll XX, answer two be give you one billion bit three. that

Samantha Hanley

pretty well, Yes, to something of. be that’s proud

that - sustainable recession? that’s regarding for you consumers will pay continue fashion with along up do go even that to a think something is through you as So

Craig Creaturo

consumers willing actually only yes, bit to that. more little they're actually Yes, looking is more, for and I we're to sustainable - - spend do, seeing And going not a products. it

XXXX. hang give versus increase fiscal And distributed tags QX, the in marketing these in in from that of volume also the and bringing out. We hang that we’re And fiscal has XXXX tags. of XXXX tags and we've by the actually brands, hang number that products sustainable we’re versus increased they’re QX, volume the we're So we the XXXX. that that QX is in seeing growing seeing measured year-over-year

and the brands about brand very can the It’s sustainable the think really trusted be it a transparence. driving trusted. growth excited traceable, sell it's we're their to ability trusted can brands be certified, us help for adopt. that’s and that for transparent, is it's its REPREVE major to what’s easy third-party I other So packets is And story.

Edmund Ingle

as And it, that’s here's organization of of other a There about to a time customers slack there's speak think our I of is will don't REPREVE. they'll we opportunities it. about that One spend about customers more one is have to Haggar challenges talk convince say, some that made is many many, REPREVE our the customers use marketing talking many and and REPREVE with

Samantha Hanley

upcoming a Got I your more margins know last the you. sales but holiday on about if on this could talk seasons? indications for bit then my or is any you question a little partners you And already, given touched bit apparel have

Edmund Ingle

Well, feeds I’ll in need U.S. the And running that to that there. say market El supply turn full example chain. we're is plant our for as Salvador, a quick

having brand people there - it earlier know into is a happen it it. will they season be brands we've seems mainly going there products. the seeing of discussions now Christmas. we're People to buying that is normal, There So longer sales all seem heard with a confident their good like be are and And online they're than that because confidence a season. the shortages

from out poised So supply a react the phenomenon trying is which a perspective perfectly all spread perfectly brands being that. presents Central the buy time your to really and having of respond gives in buy to to is to period, so December longer over chain America to time Thank you. - whole situated

Albert Carey

business to ability to the the to you optimistic is, get tell in done the so we the like retail if to is for know store majority - these brands what's talk like about traffic products bricks-and-mortar. don't can't look very of in some is of e-commerce Christmas because they're still we going What or retailers, What holidays. marketplace their these

would optimistic, season, during here's consumers to bet not but it just So, taken more forecast have it's make. they don't If on because we I - pocket holiday have a spend vacations I know as apparel. would But in not and I'm are money traveling - many not I think their yet. this

Craig Creaturo

this going is hard it for quarter forecast, the given beyond beyond supply question see around, we Al purchases Christmas, Yes, Again, We but I what QX QX. in as said and so a the to of goods. us have fact is traveling, it’s haven’t that agree that, our am not into translate will I and not can chain, all true. stories is own why we that's big we’re a out hard little much, predict. But

Samantha Hanley

really on that again you was a and good guys congrats, it, quarter. Got helpful. Thank

Edmund Ingle

Thank you, Samantha.

Albert Carey

Thank you.

Craig Creaturo

Thanks, Sam.

A.J. Eaker

we'd no today. With questions, further for thank to everyone like participating

release Eastern December XXXX next today's the conference XX, market. to at is the tentatively of AM second morning, joining XXXX XX, again January ending Our Thursday, earnings Time. call a next for close XX, Thanks X:XX for January after follow for scheduled call. XXXX fiscal the Wednesday, quarter With

Edmund Ingle

you. Thank

Operator

today's for call. you conference Thank participating in

disconnect may You this lines your at time. now