Unifi, Inc. Q3 FY2026 earnings call

Year-long cost reduction efforts bearing fruit with Q3 better than expected, including completion of Madison plant closure, improved efficiencies in current plants, optimized product lines and SKUs; product innovation work not reduced, has begun to gain customer traction and will commercialize innovations like textile-to-textile recycling, products for non-apparel categories with higher profitability, products with performance benefits. Strengthened balance sheet, generated $7.2 million free cash flow in Q3, year-to-date $20.5 million, CapEx $800,000 in Q3, net debt reduced to $68 million. Future focus on continuing operational improvements, investing in capabilities and technologies to reinforce sustainable solutions platform, building culture around innovation to advance new product development, navigating current trade and geopolitical environment and driving top-line growth when global economic headwinds subside.

Americas: Net sales down 16% y-o-y, but generated gross profit of $3.6 million in the quarter, the first time positive gross profit in Americas for some time, benefiting from footprint consolidation and cost actions to improve domestic operational efficiency. Brazil: Net sales increased by $1 million, gross profit declined just slightly by $0.2 million, performance solid in Q3 with March being the best sales volume month on record, expected robust results in Q4. Asia: Net sales and gross profit declined to $22.6 million and $2.7 million respectively, primarily due to lower sales volumes associated with tariff uncertainties and pricing dynamics, but margins held up well due to asset light model, and saw momentum improve in March.

Anticipate moderate increase in working capital in Q4 to accommodate modest sales increase and higher cost raw materials purchased, estimate $4 million - $7 million working capital impact. Brazil segment expected to benefit from current market supply chain dynamics; Asia segment expected increased adoption of technologies and circular solutions to drive revenues; Americas segment expected to improve in volumes and revenues from pricing actions and value-added products, but still face demand challenges in Central America.

Textile industry still faces headwinds, especially as customers navigate tariff complexities and oil prices.

Q: Talk about pricing versus unit volumes in 3Q and how it might change in 4Q.

A: AJ and Eddie responded on different y-o-y and q-o-q pricing and volume situations in Americas, Brazil, Asia, and expected pricing actions in 4Q to offset cost headwinds.

Q: Give additional details on Asia segment's innovative and sustainable platforms adoption and potential of new products.

A: U.S. Beyond Apparel expected $2 million uplift in 4Q, Asia Thermaloop etc. have progress.

Q: Talk about gross margin potential in Americas segment.

A: Long-term goal to return to good margin levels like 10 years ago, currently carefully controlling spends.

Q: Talk about longer-term opportunities and challenges in Brazil segment.

A: Brazil market has opportunities due to population and economic growth, dumping lessened making margins more stable, expected strong Q4 and long-term return to normal EBITDA and gross profit.