Sign in
CI

CULP INC (CULP)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue $52.3M, down 13.5% year-over-year and down 6.1% sequential; GAAP diluted EPS was $(0.33), and adjusted operating loss improved sequentially to $(1.6)M as mattress fabrics restructuring drove efficiencies .
  • Adjusted EBITDA was near breakeven at $(0.123)M, a ~$1.1M sequential improvement despite $3.4M less sales; mattress fabrics operating loss fell 58.3% sequential on lower sales, demonstrating restructuring impact .
  • Guidance shifted: management now targets continued sequential improvement in Q4 and a foundation for a return to consolidated operating income in fiscal 2026 (previously expected in Q4 FY25) — effectively a deferral of the profitability timeline .
  • Liquidity actions and catalysts: conditional agreement to sell Canadian real estate for ~$6–$8M to retire borrowings; incremental ~$1M annual cost savings began in Q3; hospitality/contract mix rose to ~40% of upholstery sales, supporting margin resilience .

What Went Well and What Went Wrong

What Went Well

  • Mattress fabrics operating performance improved meaningfully: “near break-even consolidated adjusted EBITDA… even with lower sequential sales,” and a 58.3% sequential reduction in mattress fabrics operating loss, confirming restructuring benefits .
  • Upholstery segment remained profitable in a tough demand backdrop; hospitality/contract sales grew year-over-year and sequentially, ~40% of CUF sales in Q3, with management highlighting “increased potential with a diverse range of commercial fabrics and window treatment products” .
  • Cost actions and balance sheet catalysts: restructuring substantially complete; conditional sale of Canadian facility with ~$6–$8M expected proceeds intended to retire outstanding borrowings; new ~$1M annualized savings actions began in Q3 .

What Went Wrong

  • Consolidated sales down sequentially (−6.1%) and year-over-year (−13.5%) amid industry weakness; residential upholstery pressured further by a large customer’s inventory normalization, fewer shipping days, and weather disruptions .
  • Gross margin remained compressed vs prior year (12.1% vs 12.7%); GAAP loss from operations widened year-over-year (−$3.9M vs −$1.7M) due to restructuring charges; net loss was $(4.1)M .
  • Cash generation remained negative: nine-month cash from operations $(9.4)M and free cash flow $(10.1)M; net cash turned to slight net debt ($(0.105)M) as borrowings funded restructuring and working capital .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$60.418 $56.537 $55.674 $52.253
Diluted EPS ($USD)$(0.26) $(0.58) $(0.45) $(0.33)
Gross Margin (%)12.7% 9.0% 10.8% 12.1%
Operating Margin (%)−2.9% −12.1% −9.7% −7.4%

Segment Sales and Profitability

Metric ($USD Thousands)Q3 2024Q1 2025Q2 2025Q3 2025
Mattress Fabrics Sales$30,021 $28,076 $30,074 $28,642
Upholstery Fabrics Sales$30,397 $28,461 $25,600 $23,611
Mattress Fabrics Op Income (Loss)$(1,582) $(3,549) $(1,037) $(433)
Upholstery Fabrics Op Income$2,092 $1,712 $615 $679

Key KPIs

KPIQ3 2024Q1 2025Q2 2025Q3 2025
Adjusted EBITDA ($USD Millions)$(0.550) $(2.652) $(1.323) $(0.123)
Cash ($USD Millions)$12.585 $13.472 $10.531 $5.279
Lines of Credit ($USD Millions)$0.000 $4.017 $4.074 $5.384
Net (Debt) Cash ($USD Millions)$12.585 $9.455 $6.457 $(0.105)
Free Cash Flow YTD ($USD Millions)N/A$(0.550) $(3.423) $(10.063)
Capex YTD ($USD Millions)N/A$0.501 $1.578 $2.440

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Net SalesQ4 FY25“Third quarter expected to be flat to slightly down sequentially” (prior outlook baseline) Q4 expected YoY growth and flat sequentially Raised vs prior baseline (YoY growth)
Adjusted EBITDA (ex-restructuring)H2 FY25 / Q4 FY25Positive in H2 FY25; return to positive adjusted operating income in Q4 FY25 Continued sequential improvement in Q4; foundation for return to consolidated operating income in FY2026 Lowered timing (AOI shifted from Q4 FY25 to FY2026)
Mattress Fabrics ProfitabilityQ4 FY25Sequential improvement each quarter Further improvement expected in Q4 Maintained
Cost SavingsOngoing$10–$11M annualized savings post-restructuring (mattress fabrics) ~$10–$11M savings confirmed; plus ~$1.0M annual savings added in Q3 Raised (incremental ~$1.0M)
Canadian Facility SaleUpcoming monthsActively marketing; anticipated $6–$8M proceeds Conditional agreement; expect ~$6–$8M proceeds; planned use to retire borrowings Progressed; use of proceeds specified
Share RepurchasesQ4 FY25$3.2M authorization in place (no explicit plan) No repurchases expected in Q4 to preserve liquidity Clarified (maintain liquidity)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY25 and Q2 FY25)Current Period (Q3 FY25)Trend
Restructuring progress/costsPlan “well underway” in Q1; $10–$11M savings targeted; FY25 restructuring costs ~$5.1M, cash ~$3.0M, sale proceeds expected $9–$10M . In Q2, savings reiterated; costs updated to ~$7.3M, cash ~$4.4M; sale proceeds anticipated $6–$8M Substantially complete; expect $10–$11M savings; total FY25 costs ~$8.5M, cash ~$5.3M; conditional sale of Canadian facility with $6–$8M proceeds Completion; costs trued up higher; proceeds narrowed
Tariffs & supply chainLimited mentions; focus on restructuring and China New Year timing Detailed tariff strategy: supply chain optionality across USA/Turkey/Asia; Haiti (HOPE Act) for tariff-free covers; price increases where needed Elevated risk management focus
Upholstery hospitality/contract mixHospitality ~33% of CUF sales in Q1; flat in Q2 (~35%) Hospitality ~40% of CUF sales; expanding drapery/roller shades capacity; multiple brand standard wins Growing mix, margin accretive
Mattress market shareCHF market position improving; sequential sales up in Q2 Management cites share gains in fabrics and covers; new customer wins, quilting capability Positive momentum
China New Year timing impactQ1 noted timing aided sequential uplift; Q2 referenced holiday timing Q4 impact expected as holiday falls entirely in Q4 Near-term headwind
Incremental cost actionsNot highlightedAdditional ~$1.0M annual savings from labor/professional fees; evaluating synergistic efficiencies up to ~$2.0M annualized in FY26 New savings initiatives
Product innovationOngoing portfolio innovation FR inlay development with Precision Fabrics; quilting capability; window treatments scale-up Strengthening differentiation

Management Commentary

  • “We achieved further sequential improvement in our operating results… driven largely by the positive effects of our mattress fabrics restructuring activity.” — Iv Culp, CEO .
  • “We entered into an agreement for the sale of our Canadian mattress fabrics facility… intending to use the cash proceeds to pay off outstanding borrowings and further bolster our liquidity.” — Iv Culp, CEO .
  • “Sales… were down sequentially… exacerbated by some unique inventory adjustments from a large customer… We noted stronger demand in our upholstery fabrics hospitality/contract business.” — Iv Culp, CEO .
  • “We currently expect continued sequential improvement in adjusted EBITDA… and a foundation for a return to consolidated operating income in fiscal 2026.” — Iv Culp, CEO .
  • “For mattress fabrics… we are now well positioned with the bolstered USA platform… complemented by supply partners in Turkey and Asia; for sewn covers, nearshore Haiti is protected by the HOPE Act.” — Iv Culp, CEO .

Q&A Highlights

  • Profitability timeline: Management clarified the plan to return to profitability at current demand levels, aiming for early FY26, with adjustments to cost structure underway to achieve sustainable profit next year .
  • Market share: Leaders of mattress and upholstery businesses reported continued share gains, new program launches post Las Vegas market, and new customer wins supported by quilting capability .
  • Additional savings: ~$1.0M annual savings from personnel/professional fees begins in Q4; evaluating synergistic efficiency projects of up to ~$2.0M annualized in FY26 .
  • Tariff posture: Only ~30% of China-produced upholstery fabrics ship to the U.S.; price actions to offset tariffs; rapid sourcing shifts (USA/Haiti/Vietnam/Turkey) to protect customers and margins .
  • Industry consolidation: Viewed as a net positive given Culp’s scale and design/innovation capabilities to serve larger mattress OEMs .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q3 FY25 were not available at time of request due to data access constraints. As a result, we cannot quantify beats/misses vs Street for this quarter [SPGI error].
  • Implication: With adjusted EBITDA near breakeven despite lower sales, and hospitality mix rising, estimate revisions may bias toward lower near-term revenue/EBIT but improved outer-year profitability assumptions post-restructuring .
MetricQ3 FY25 ActualQ3 FY25 SPGI Consensus
Revenue ($USD Millions)$52.253 Unavailable
Diluted EPS ($USD)$(0.33) Unavailable

Key Takeaways for Investors

  • Restructuring is largely complete and delivering: mattress fabrics operating loss reduced 58.3% sequential; adjusted EBITDA nearly breakeven despite lower revenue — confirming tangible cost/efficiency gains .
  • Profitability timeline reset: previous plan for positive adjusted operating income in Q4 FY25 is deferred to FY26; monitor Q4 sequential EBITDA improvement and mattress segment profitability as bridging milestones .
  • Mix shift supports resilience: hospitality/contract now ~40% of upholstery sales with brand standard wins and window treatment capacity expansion, bolstering margin quality amid residential softness .
  • Liquidity actions pending: conditional sale of Canadian facility with ~$6–$8M proceeds targeted to retire debt; net cash turned to slight net debt in Q3 — follow closing to reduce balance sheet risk .
  • Near-term headwinds: tariff uncertainty, Chinese New Year timing in Q4, and a large customer’s inventory normalization continue to pressure volumes; supply chain optionality and pricing actions mitigate tariff impact .
  • Additional cost programs: ~$1M annual savings started in Q3; potential ~$2M synergistic efficiencies in FY26 enhance earnings power beyond restructuring savings .
  • Trading setup: absent Street estimates, stock reaction likely hinges on Q4 execution (EBITDA uplift, mattress profitability) and Canadian asset sale closing; hospitality growth and tariff navigation are key narrative drivers .