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UNIFI INC (UFI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 net sales were $138.9M (+1.4% YoY) with gross margin at 0.4%; GAAP EPS was $(0.62) and Adjusted EPS was $(0.86), reflecting weak Asia mix and pricing, partially offset by Brazil strength and Americas volumes .
  • Company-level guidance for FY25 was lowered to “net sales approximately equal to FY24” (from +10% YoY previously); Q3 FY25 is guided to sequential improvement in net sales and Adjusted EBITDA, with CapEx of $5–6M .
  • Management announced consolidation of U.S. manufacturing (closing Madison, NC), aiming to improve cost structure and fixed cost absorption, prioritize sale proceeds to debt reduction, and expect $5–$7.5M restructuring charges in CY2025 .
  • Key growth vectors: Beyond Apparel (carpet, military) beginning to ship, and REPREVE textile takeback innovations (filament yarn, ThermaLoop) building traction, expected to ramp in 2H FY25 and FY26 .
  • Q2 results missed the prior quarter’s issued Q2 guidance: net sales $138.9M vs guided $140–$145M and Adjusted EBITDA $(5.8)M vs guided $(4)M to $(2)M; management cited localized hurricanes impact in Americas and China pricing pressure; Brazil remained robust .

What Went Well and What Went Wrong

  • What Went Well

    • Brazil continued to be the best-performing segment: net sales $27.5M (+5.5% YoY) and gross margin 13.8% (+170 bps YoY) on pricing and market share gains .
    • Americas net sales rose to $83.1M (+3.2% YoY), with traction in Central America and initial Beyond Apparel revenues; management expects a stronger 2H .
    • Strategic footprint consolidation: closure of Madison facility to improve fixed cost absorption and profitability; proceeds prioritized to pay down debt .
    • Quote: “We are taking steps to optimize our business by consolidating our U.S. manufacturing footprint, which will make us a leaner and more profitable organization…” — CEO Eddie Ingle .

  • What Went Wrong

    • Asia softness: net sales down 6.6% YoY and gross margin down 570 bps due to unfavorable mix and pricing dynamics in China; Q3 expected similar before improvement in Q4 .
    • Q2 missed the prior quarter’s guidance on net sales and Adjusted EBITDA; hurricanes in the Southeast U.S. dampened demand by “a couple of million sales dollars” .
    • REPREVE Fiber sales mix down: $43.3M, 31% of net sales vs 33% YoY, driven by Asia macro pressures .

Financial Results

MetricQ2 FY24 (Dec 31, 2023)Q1 FY25 (Sep 29, 2024)Q2 FY25 (Dec 29, 2024)
Net Sales ($USD Millions)$136.9 $147.4 $138.9
Gross Profit ($USD Millions)$1.6 $9.5 $0.5
Gross Margin (%)1.2% 6.4% 0.4%
GAAP Net Loss ($USD Millions)$(19.8) $(7.6) $(11.4)
GAAP Diluted EPS ($)$(1.10) $(0.42) $(0.62)
Adjusted EBITDA ($USD Millions)$(5.5) $3.3 $(5.8)
Adjusted EPS ($)$(0.81) N/A in PR $(0.86)

Segment net sales and gross profit

Segment MetricQ2 FY24Q1 FY25Q2 FY25
Americas Net Sales ($M)$80.5 $86.3 $83.1
Americas Gross Profit ($M)$(6.7) $(1.4) $(6.5)
Brazil Net Sales ($M)$26.1 $34.3 $27.5
Brazil Gross Profit ($M)$3.1 $7.9 $3.8
Asia Net Sales ($M)$30.3 $26.8 $28.3
Asia Gross Profit ($M)$5.2 $2.9 $3.3

KPIs

KPIQ2 FY24Q1 FY25Q2 FY25
REPREVE Sales ($M)$45.7 $44.7 $43.3
REPREVE % of Net Sales33% 30% 31%
Net Debt ($M)—$118.0 (as of 9/29/24) $116.5 (as of 12/29/24)
Cash & Equivalents ($M)—$13.7 (as of 9/29/24) $18.7 (as of 12/29/24)

Actual vs Q2 FY25 guidance issued on Q1 call

MetricQ2 Guidance (issued 10/31/24)Q2 ActualOutcome
Net Sales ($M)$140–$145 $138.9 Miss
Adjusted EBITDA ($M)$(4) to $(2) $(5.8) Miss
CapEx ($M)$4–$5 Six-month CapEx $4.9; Q2 not disclosed in PR N/A (quarter-only not disclosed)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY25+10% YoY (vs FY24) Approximately equal to FY24 Lowered
Adjusted EBITDAFY25Significant increase YoY Increase YoY (partially offset by transition costs) Maintained direction; added offset
CapExFY25~$12M $14–$16M (includes transition costs) Raised
Net Sales/Adj. EBITDAQ3 FY25Not previously specifiedSequential improvement vs Q2 New
CapExQ3 FY25Not previously specified$5–$6M New
Effective Tax RateQ3 FY25Not previously specifiedContinued volatility New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY24, Q1 FY25)Current Period (Q2 FY25)Trend
Beyond Apparel (carpet, military)Qualification and early commercial discussions; margins “double” base in some cases “Beginning right now,” initial revenues in 2H FY25; installing capacity in FYQ4 Accelerating commercialization
REPREVE innovations (Textile Takeback, ThermaLoop)Launched filament yarn and ThermaLoop; sampling in FY25; revenues in 2H FY25/FY26 31% of sales; expect improvement in 2H FY25/FY26; co-branding traction with major brands Building traction
Tariffs/macro/de minimisFY25 outlook assumed normalization; cautious retail inventories Canada/Mexico/China tariff uncertainty; potential positive if de minimis loophole is fixed (~$1.5B cited) Mixed risk; potential U.S. benefit
Americas operations & footprintCost reset; liquidity add ($25M facility) Madison facility closure; move production to Yadkinville; material fixed-cost savings expected Restructuring for efficiency
Regional performance (Brazil/Asia)Brazil strongest; Asia recovering; Americas cautious Brazil robust; Asia pressured near-term (Q3) then improves in Q4; Americas order book improving Brazil resilient; Asia near-term soft

Management Commentary

  • “We are taking steps to optimize our business by consolidating our U.S. manufacturing footprint… make us a leaner and more profitable organization…” — CEO Eddie Ingle (press release) .
  • “Beginning in January… we have seen an improvement in our revenue trends… should allow us to show up with a stronger half 2 performance” — Executive Chairman Al Carey .
  • “Tariff announcements… remain uncertain… Mexico and Canada have delayed… impact remains unclear” — CEO Eddie Ingle .
  • “Proceeds… from the sale of the Madison facility will be prioritized against existing debt” — CFO A.J. Eaker .
  • “REPREVE… 31% of sales… anticipate improvement… as Takeback filament yarn and ThermaLoop gain traction” — CEO Eddie Ingle .

Q&A Highlights

  • Sales drivers: Brazil demand broad-based (apparel/denim), Central America was star performer; some Americas demand dampened by hurricanes .
  • Beyond Apparel potential: initial sales now; sequential growth through CY2025; installing capacity in FYQ4; margins significantly better than legacy products .
  • Asia trajectory: Q3 similar due to Chinese New Year; meaningful improvement expected in Q4 FY25; 10% China tariff less impactful than MX/CA .
  • Tariffs & de minimis: management sees potential U.S. benefit if de minimis loophole fixed; cited ~$1.5B of sales through de minimis last year .
  • Madison facility economics: expected material savings post consolidation; tax value ~$29M and book value ~$9M; ~950k sq. ft. property .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 FY25 EPS and revenue was unavailable at time of retrieval due to SPGI API limit; therefore, estimate comparison cannot be provided at this time. We will update estimate-based comparisons as soon as S&P Global consensus becomes accessible.
  • Company guidance comparison indicates Q2 FY25 actual net sales and Adjusted EBITDA were below guidance ranges issued on the Q1 call .

Key Takeaways for Investors

  • Near-term: The Q2 guidance miss and Asia weakness are headwinds, but Q3 is guided to a sequential step-up and order books in Americas are improving; stock may react to execution on footprint consolidation and tangible Beyond Apparel revenue prints .
  • Medium-term: Footprint consolidation (Madison) should lift fixed cost absorption and margins; sale proceeds targeted to reduce net debt ($116.5M) .
  • Mix shift: Beyond Apparel and REPREVE Takeback/ThermaLoop products carry structurally higher margins, supporting margin expansion as commercialization ramps through 2H FY25/FY26 .
  • Regional dynamics: Maintain overweight view on Brazil contribution; monitor Asia pricing/mix normalization post-Chinese New Year into Q4 FY25 .
  • Policy watch: De minimis reform and tariff clarity could be a positive catalyst for U.S.-centric production and Central America sourcing; track regulatory developments closely .
  • Execution priorities: Deliver Q3 sequential improvement, manage transition costs (restructuring $5–$7.5M), and demonstrate sustained cost savings and margin lift from consolidation .
  • Risk management: Persistently low gross margin (0.4% in Q2) underscores sensitivity to mix/volume; sustained margin improvement requires Asia stabilization and execution on new product ramp .