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UNIFI INC (UFI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 was in line with expectations: revenue grew 6% YoY to $147.4M, gross margin improved 680 bps YoY to 6.4%, and Adjusted EBITDA swung to $3.3M from $(4.8)M YoY, while diluted EPS was a loss of $0.42 vs. $(0.73) YoY .
  • Sequentially, seasonality and late-September hurricane impacts on customers drove a revenue decline vs. Q4 FY2024 ($157.5M → $147.4M) and a 50 bps gross margin step-down (6.9% → 6.4%) .
  • Guidance: Q2 FY2025 net sales of $140–$145M, Adjusted EBITDA loss of $(4)–$(2)M, CapEx $4–$5M; FY2025 outlook reiterated for higher sales (~+10% vs FY2024) and significant improvements in gross profit/margin and Adjusted EBITDA; CapEx ≈$12M .
  • Positioning: Brazil momentum (share, pricing) offset Americas seasonality/weather and Asia macro softness; liquidity bolstered by an additional $25M facility post-quarter-end, providing flexibility to invest in REPREVE and Beyond Apparel growth vectors—potential narrative catalysts into 2H FY2025/1H CY2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin and profit inflected YoY on cost-savings and productivity; Adjusted EBITDA turned positive to $3.3M from $(4.8)M YoY .
    • Brazil delivered the third strong quarter in a row: share gains and pricing drove YoY net sales +14.7% and gross margin 23.1% (up 570 bps QoQ) .
    • Product/portfolio: REPREVE innovation launches (white filament yarn with 50% textile takeback; ThermaLoop insulation) garnered strong brand interest and media reach—management expects revenue contribution starting 2H FY2025/into FY2026 .

  • What Went Wrong

    • Americas was modestly impacted by seasonality and late-September weather (Hurricane Helene) pushing ~1% of consolidated sales (≈2% for Americas) into Q2; gross margin remained negative in Americas at (1.6%) .
    • Asia softness: macro headwinds in China and pricing pressure pushed net sales down 2% YoY and gross margin down 620 bps YoY to 10.8% .
    • Cash from operations was a use of $12.8M in Q1 on working capital build and timing; net debt rose to $118.0M from $103.5M at FY-end .

Financial Results

Consolidated P&L and margins (YoY and sequential context)

MetricQ1 FY2024 (oldest)Q4 FY2024Q1 FY2025 (latest)
Revenue ($M)$138.8 $157.5 $147.4
Gross Profit ($M)$(0.6) $10.8 $9.5
Gross Margin (%)(0.4)% 6.9% 6.4%
Operating Income (Loss) ($M)$(12.0) $(0.8) $(3.2)
Net Income (Loss) ($M)$(13.3) $(4.0) $(7.6)
Diluted EPS ($)$(0.73) $(0.22) $(0.42)
Adjusted EBITDA ($M)$(4.8) $5.95 $3.30

Segment performance (Net Sales and Gross Profit)

SegmentQ1 FY2024 Net Sales ($M)Q4 FY2024 Net Sales ($M)Q1 FY2025 Net Sales ($M)Q1 FY2024 Gross Profit ($M)Q4 FY2024 Gross Profit ($M)Q1 FY2025 Gross Profit ($M)
Americas$81.6 $91.0 $86.3 $(7.4) $0.0 $(1.4)
Brazil$29.9 $32.2 $34.3 $2.2 $5.6 $7.9
Asia$27.4 $34.2 $26.8 $4.6 $5.2 $2.9
Total$138.8 $157.5 $147.4 $(0.6) $10.8 $9.5

KPIs and balance sheet items

KPIQ1 FY2024Q4 FY2024Q1 FY2025
REPREVE revenue ($M)$42.5 $53.6 $44.7
REPREVE % of sales31% 34% 30%
Cash & Equivalents ($M)$51.5 $26.8 $13.7
Net Debt ($M)—$103.5 (6/30/24) $118.0
Cash from Ops ($M)$7.1 —$(12.8)
CapEx ($M)$2.9 —$2.0

Versus estimates (Wall Street consensus)

  • Consensus EPS and revenue (S&P Global) for Q1 FY2025 were unavailable due to data access limits; management indicated Q1 results were “consistent with expectations.” Values retrieved from S&P Global were not available at time of writing; we will update upon access restoration .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesQ2 FY2025—$140–$145M New
Adjusted EBITDAQ2 FY2025—$(4)–$(2)M New
CapExQ2 FY2025—$4–$5M New
Tax RateQ2 FY2025—Continued volatility New
Net SalesFY2025“>10%” YoY growth (Q4 FY2024 call) “Increase ~10% over FY2024” Tightened/clarified (reiterated improvement)
Gross Profit/MarginFY2025Increase vs FY2024 (qualitative) “Increase significantly” vs FY2024 Reiterated/strengthened
Adjusted EBITDAFY2025Positive each quarter (Q4 call) “Increase significantly” vs FY2024 Reiterated trajectory
CapExFY2025$10–$12M (Q4 call) ~ $12M Narrowed to ~$12M

Note: Post-quarter, an additional $25M credit facility was executed, enhancing liquidity for growth investments .

Earnings Call Themes & Trends

TopicQ-2 (Q3 FY2024)Q-1 (Q4 FY2024)Current (Q1 FY2025)Trend
Demand & InventoryDestocking bottomed; sequential recovery; cautious customers Continued recovery; Q1 (seasonally) slower, better into October Q1 up 6% YoY; seasonal slowdown; green shoots into 1H CY2025 Improving through 2H FY2025
AmericasMarket share gains; cost reset progressing Sequential productivity gains; some orders pushed out Weather/seasonality; ~2% segment impact; poised to benefit from Beyond Apparel Stabilizing; 2H inflection
BrazilShare gains to 18%; strong utilization Strongest segment; pricing and share gains Another strong quarter; 23.1% GM; 2H margins to “normal” after seasonal Q2 dip Sustained strength with some seasonality
Asia/ChinaCNY timing; recovery signs Recovery into FY2025 expected Weaker on China macro/pricing; some profitable programs shifted out Soft near term; long-term accretive
Innovation (REPREVE)Pipeline; sustainability targets Launch of Takeback filament & ThermaLoop Strong brand interest; revenues expected 2H FY2025/FY2026 Building commercialization
Beyond ApparelEarly traction; adj. margin > base business Commercial orders progressing Carpet, military, resin growth; margins ~30% better than normal Expanding as mix driver
Cost/Profitability PlanTargeting $2.5M/quarter saves into FY2025 Savings in place; reinvest in innovation “4th/5th inning” on cost actions Ongoing margin tailwind

Management Commentary

  • “Our financial results for the first quarter were in line with our expectations… evident by the significant improvement we experienced in gross profit during the period.” — CEO Eddie Ingle .
  • “We are going to see substantial improvements for half 2 of our fiscal year… The improved outlook is coming from REPREVE innovation, Beyond Apparel traction, Brazil momentum, and cost reductions in North America.” — Executive Chairman Al Carey .
  • “We recently took a few steps to strengthen the balance sheet… entered into an additional $25 million facility… avoiding burdensome interest rates” — CFO A.J. Eaker .
  • “REPREVE represented 30% of sales… we expect stability through fiscal 2025, especially in the second half as new products begin to contribute.” — CEO Eddie Ingle .

Q&A Highlights

  • Quantified weather impact: ~1% of consolidated sales in Q1 (≈2% Americas); lingering into Q2 as customers ramp .
  • Brazil sustainability: Q1 was exceptional; Q2 seasonally weaker, but 2H expected to return to normal margins amid strong volumes and share gains .
  • Asia margins: temporary pressure from delayed high-margin line and China macro; long-term expects return to stronger margins, Asia as growth engine .
  • Beyond Apparel margins: management cited “significantly better,” roughly 30% above normal product gross margins; mix accretive .
  • Investment behind launches: continued roadshows/tradeshows and brand education to accelerate adoption of Takeback filament and ThermaLoop .
  • Cost program: progress ~“fourth/fifth inning,” with continued work to lower production/administrative costs and improve efficiency .

Estimates Context

  • S&P Global consensus for Q1 FY2025 EPS and revenue was unavailable at time of analysis due to temporary access limits. Management stated results were “consistent with expectations.” We will update the comparison vs. consensus when access is restored .
  • Implication: Given the company’s “in line” commentary and YoY improvement in profitability metrics, Street models for the near-term may need only modest adjustments; the more material estimate sensitivity likely sits in 2H FY2025/FY2026 as REPREVE innovation and Beyond Apparel timing becomes clearer .

Key Takeaways for Investors

  • Mix and margin trajectory improving: YoY gross margin expansion and positive Adjusted EBITDA signal early benefits from cost resets and sales transformation; watch for 2H FY2025 acceleration (Brazil mix, Americas recovery, Asia normalization) .
  • Structural growth vectors: REPREVE textile-to-textile launches and Beyond Apparel (carpet, military, resin) offer margin-accretive diversification; commercialization milestones in 2H FY2025/FY2026 are key stock catalysts .
  • Near-term watch items: Q2 guide implies seasonal/macro softness; weather impacts linger; track Asia orders and Americas cadence through holiday quarter .
  • Liquidity/deleveraging: $25M incremental facility extends runway to invest through the cycle; monitor net debt trajectory and working capital management after Q1 cash use .
  • Brazil resilience: Continued share/pricing strength and high utilization underpin consolidated earnings power; seasonal Q2 dip expected to revert in 2H .
  • Guidance discipline: FY2025 outlook reiterates ~10% sales growth and significant profit improvements; risk is timing of innovation ramp and China macro; upside if Beyond Apparel commercialization and REPREVE adoption accelerate .