Superior Group of Companies (SGC) 27 Oct 182018 Q3 Earnings call transcript

Good afternoon, everyone. Welcome to the Superior Group of Companies, 2018 Third Quarter Earnings Conference Call. With us today are Michael Benstock, the company's Chief Executive Officer; Andy Demott, its Chief Operating Officer; and Mike Attinella, Chief Financial Officer and Treasurer. [Operator Instructions] This call is being recorded and your participation implies that you agree to this.

If you don't, then simply drop off the line.

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undertake this based that the the call in are update to makes XXXX, unless in this expectations forward-looking I'll the on statements statements noted. relate over made and that, comparisons period call growth conference today note duty does turn Please Michael. any will or call elsewhere. to With during to current Forward-looking management not that conference all management's beliefs. otherwise Management corresponding

good Officer everyone. joined in Thank to team. and of complement a operational August to Attinella, brings and welcome experience XXXX Chief like to afternoon I our who Hala Welcome extend warm QX to Mike new a strong our earnings and you Treasurer call. Financial our would and us financial, governance

Operating Officer operations now takes reins, global stewardship can As our Andy and CFO the Chief focus his Mike growth. domestic on continues fully strategic and and our as

sales operational of delivered third market more on The expectations bolster produce Superior remarks direction exceed I'll and Mike's year. progress, is Promotional change will successful results our segments. organic on performance, detail segments revenue work dynamics, on and and Companies slightly Group followed integration Andy and margins highlights. do our format both and by but have manage Products track Gurus growth with call results Uniform my continues Office in and we financial providing to for to quarter as on to the our still Our earnings, strategic to focus

pipeline to last opportunities As our hitters particularly our seasoned teams. moving very BAMKO heavy strengthened Tangerine productive adding and quarter, sales with noted and our to organization, continues forward. other wins We've be

see are plan. executing very on shortly. initiatives detail ever. steal Andy We more and closed excited already to we're thunder, on already already that don't booking of largest want as on seeing but sales success on to provide Andy's their them – I other any their we've BAMKO will our quarter

our in efficiencies we recent our When diversified robust on remarks, executed might efficiencies an synergies what that fully our collaborative in outlined will integrate we as capture business, pace a acquisitions. employee firmly to could the on we growth his we've I plans that take look in CID Tangerine are we sooner where of now HPI optimize the but we in leverages have good a accelerated and discuss emphasize power Andy Resources on rooting rearview through past, strategic mirror capitalizing is in our shared been, realize services very three the As business that operational have model businesses platform. our across further and skills well will of to our the as ID our model.

a of to covering calls could would than impacting it, our mitigate sales we've to a a is $X action million XX% no is manufacturing less about total on we effect redundant took be built basis. our footprint if that. which Chinese subsidies we spoken additional nearly Andy, strategy, believe Phase cost all Superior business. estimate put exposure manufacturers and rate belts on valuations the relationships in $X.X Before times the This of tariffs and us in has have of the pretax significant We at our many potential Uniform from that place for round The through that longer-term imposed on the million mitigate Chinese expect to turning some smallest will our and of categories these of our portion Uniform like represents address we headwear. government conference adjust exposure Currently, a which to sourcing strong X the the We offset the apparel, tariffs, the call and imports. implemented, over to segment, tariffs of within I'd and which pressure. currency further will on U.S.

of sourcing tariff of mandates outside our and for you will our want of price pay either other increasing or been less better to that over quarter to is this us, attention front the manufacturing China uniforms last use made something all that years than things to, countries. We that other we were XX% in product customers. move adjustments much put rate our and perspective, through been To has in already have, options pricing, anticipation, leverage moving in to countries and utilize in as the of to

well by QX already XXXX. underway exposure end this by the planning product to more of underway and reduce fact, In is than half

even that our can their production China. The though in reduce the more we XX%. exposure expect impact to is of by BAMKO We less is bulk million $X.X than significant, of

to pass-through the typically clauses include orders being increases manage current based action. cost, are due market price on and government However, contracts to priced

of expect pass any footing line, long short-term We quickly. find blip term bottom preponderance alternative adjust they a tariffs. sources The in price and increases to alleviate are equal expect can we and but to we through of on believe impact profitability, the

focused very and of dynamics. here other and We sufficiency increases the abroad wage including labor, competitive are of business, foreign pricing doing rising cost also on

Mike provides model closing the the after and return I call and with have financial resilient. our to my and to adaptive be and overall over now been overview address strong, The then continue supply market be diversified engaged as costs. business will proactively partners and with best our Andy, in rise to to chain We needed is I'll will adjust continues to nimble, remarks. turn

Thank marking quarter million, Seal from primarily sales you, Healthcare our XX.X% third consolidated segment, XXXX net year-over-year Uniform of afternoon consecutive net everyone. gain, delivered to quarter the The includes CID and Fashion Mike to increase. sales the acquisition. net which inclusion the a sales HPI, XXth and $XX.X good company's increased The for of CID

As Michael mentioned, and work lessons we the from road strategic CID. integration map for learned HPI employee we are business taking as integration on ID our

ERP provide but will We XX CID's expect expectation conversion this SAP to as to they our update XX in planning, the that with we on finalize next on to we will system months. be accelerate the an

fastest-growing is sales Their and of per and Seal operational powerful branded medical with the expertise opportunities our see providers CID Fashion a hours CID We As significant we stated, between uniforms. cross-selling combination. marketing one paired Healthcare. of is

our excited and CID's offering to handle with our our are relationship sales customer to with CID's and recognizable We the dealer channel retailers direct in in network base strengthen highly in ability healthcare, the laundries coordination brands.

to by exposure. conversion is already ERP and allowing as these with strong capitalizing well opportunities, of completed CID transitioned identifying functional mid-next year. to The team increase rate. SGC, we the under on focus CID's on and pipeline expanding underway now our implementation expected HPI's Some be have to well integration the brand is continue operations cross-selling as

all on are operational pace levels across at accelerated to realize an segments. We efficiencies all

facilities streamlining making to available and further necessary are making We and ultimately warehouse systems, upgrades all divisions. space maximizing

bringing in strong we automation to foundations order we to effectively can In are addition warehousing, bear to shared labor market technological to in environment. more ensure introduce operate any

superior fulfillment of and experience. customer are continuously through the ultimate proposition goal excellent We enhancing capabilities value our strong

being Turning to BAMKO, are evidenced efforts largest quarter quarter-to-date. on bearing XXXX initiatives fruit as sales their third the bookings by

recently and established can have solid industry the We tremendous quickly bring traction. sales who and who'll deliver organization sales create fortified with veterans expertise

efforts and across solidify to are we taking growth line drive our acquisitions. top synergies short our a intensify we businesses, pause on effectively As

Remote will Office we into take trajectory. segment, its continue The growth remarkable our opportunities However, Staffing continues consideration. compelling to Gurus,

driving We are penetration and increased our successfully customer is retention strong. market

Additionally, anticipated forward. Jamaica moving to the expansion is

the turn I'll call over Mike highlights. Now, for financial the to

Thank everyone. and both Andy I'm excited the join Superior afternoon team. honored good and you to

and continue growth with and business been getting shareholders entire know and of an time forward execute our investors. the prospective While passion, as long-term here dedication plan. to is I've time, short strategy to This I'm exciting for diversify Superior to for the look a I we impressed our integrity only organization.

to of Products acquisition review Uniform to million. on increase of XXXX my XX.X% our I'll we Since sales income review. key for Promotional segment, financial of together XXXX our increased the largely our in Now, filed and sheet our limit This acquisition Tangerine this the to $XX.X morning, XX.X%. represented segment, third in highlights the quarter the was balance XX-Q period. statement quarter which Net CID result sales third the for and

in change segment Staffing growth, our recognition X.X% accounting X.X%. revenue to the contributed contributed Remote for and sales Our

to X.X%, sales we these While Uniform wins, our segment our pipeline offset by achieved customer new in continues build. and lower organic increases opportunity

sales segment Andy these which noted, our by segment quarter-to-date. revenues contributed our added other of The its due At decreases. the of compared bookings as X.X% year, to level, CID, quarterly XX%. in and acquisition to XX.X% offset sales net Additionally last increased of Uniforms change Products accounting X.X%, Promotional are largest largely had partially

results acquisitions segment deliver volumes. to The accelerate customers. Staffing and to third-party both customer increase new a growth solid existing Remote sales segment customer with to continues in XX.X% continues Our in

the the product contributing increase. with accounting in of was timing This Our for this increased Organic were change by variability. offset XXXX XX.X% project Promotional growth sales XX.X%, Product essentially – slightly result segment a by quarter, sales flat and acquisition of revenues. our

significantly and this the of improve. has However, quarterly larger, bookings grows segment improved will volatility as pace and scales

in contributed segment reported gross compared the standard third freight profit, higher profit on between the We mix gross lower-margin year and increased costs, customers a gross a we quarter. recognition to quarter effect the periods. with product the combined XX.X% revenue XX.X% This, through margin all ago. sale the new change change of and saw mix a in For of XXXX, of to

XX.X% percentage consolidated ago. SG&A at of XX.X% was year a net slightly higher compared sales, As to a

we our businesses. higher model last quarter, Uniform other business carries As discussed than SG&A CID's

growth XXXX. result margin Promotional note, expenses, SG&A. XXXX and acquisition-related in operations all segment, Promotional in This X.X% in our of segment the and to our liabilities, of value Remote a Additionally, XX.X% million SG&A. Income our in reduction acquisitions investments and within adjustment change contributed to resulting margins Uniform to Staffing of increased our gross aforementioned a relating outcome from largely and X.X% reported in market were amortization our QX contingent of was Products $X.X fair Products Of support increase for segments. acquisitions to intangibles the to in rates the QX compared operating acquisition-related

in tax resulting tax reduction the and in generally to in share reduction Diluted XX.X% year was the to X.X%. $X.XX taxes expenses X.X% decrease increased effective in Overall, based year approximately and shares tax with attributed tax income earnings of X.X%. differences $X between Our foreign compensation for contrasted periods of the is rate This was XX.X% the million higher federal versus million per XX.X% $X.XX a compared XX% net ago. a quarter effective X.X% $X.X ago. rose rate ago of of State rate outstanding. year period on to a

few for highlights. Now balance a sheet

condition financial flexibility. financial and to sheet remains optimizing strong and Our our to maintain balance continue focus on we ample liquidity

CID, just current of acquisition Xx under the XX With EBITDA. trailing is months leverage our

exploring We are for and we actively year our the on term alternative two loan. $XX very million leverage refinancing focused options reducing are

shareholders return dividends. to our in continue of to value the form quarterly We

an cash nine During we first million, XX.X%. of dividends $X.X the increase months paid of

I'll buyback share his now the repurchased the Michael we our and Additionally, outlook under program turn a for XX. general the remarks to through for year. call of remainder shares closing October back XX,XXX

done. Thanks quarter Mike. was completed there's record earnings still growth, and what Having work a much be to for just

the will investments and make are continue necessary for sustainable and We growth. to demonstrable

on allocating accomplish We up to the aggressively are resources goals, needed capital while operational resource beefing seeking our all and efficiencies. fronts and human

throughout of will our benefits organization, on cascade we the platform further available. capitalize As every the shared synergy services

the grow their our profitability, are guidance as continue resolved all for I our such, forward long-term all want serve We team and our and sustainable and valued integrate grow thank unchanged. higher dedication and efficiencies of the world squeeze remains to outlook to over business revenues SGC faster, move acquisitions to customers. members as levels to and drive we

vision, questions. We value. while to on will With your continue shareholder our that, we'd the for long-term to diligently open generating call like execute

[Operator Instructions].

with Please comes from Kevin go Barrington The Steinke ahead. Research. first question

reference to by afternoon mentioned think moving I segment. Good start I the – talking talk I forward, about wanted in Uniform everyone. pipeline you believe to the

and line your continuing recent see is beyond? we So thoughts on of previous business how in into rolling that XXXX to calls track with move you terms out in as new might

afternoon not more good of and of seeing first are a would considerably lot busy business, I way for you with of in down and thanks fact but now is to more and joining very of are each of forward more We're our you The the good. would in clutter I'm We're organization just have future. at light a optimistic. the tunnel There's tunnel, in Kevin, I the out segments. to optimistic. and it say seeing Hasn't say we ease Things in but end a all us. moving much Uniform certainly while. now. this the the what good felt right feeling our feels we're that moved in at

better anything, would changed. nothing's I say about future. So we're If feeling the to you that

Okay, great.

the on analyzed synergies are BAMKO the you're past. acquisitions about fully in is back, of that as HPI, like focused whole So now. to your just how kind that you of kind executed in could just Maybe But you integration talking mean on I you curious of have reference earlier I going far you collection made? was really or about comments

nearly Yes, their HPI. talking bought after particularly XX, sales were them. trailing When on we aggressive very, XX trajectory, you doubling we recall HPI, on months they if bought a very a about

So and supported last We – of of we their or you on and that six distribution been it in out as I way that months. ways, right them their have could the a out only time we know would with stayed best months other stayed those during things and do integration any was but year. way of jumped jump ways think some on in we've to XX some the didn't the

We're I we the with sword don't we done stops we all year sooner. right probably of the if early you certainly this. very could buck force how we some that I I we about there's table particular and more information on much CID. at more at HPI. like it and thing, think accelerated been accounting be technology now and of clearer profile I and pressure how enough changed sense, think well do them HR at on and will integration schedule integration perhaps systems integration to have they've right still is it But done could and certainly amount. but should than us to with for and they the we’ll in working were of falling on bit expand and right believe sales that little it's we've time IT, that on probably BAMKO, of the in to our been an out anything already the a be continue and and we the have them. at mind happy time, for a how integrate there we left approach conservative that a – future. the we've so organic doing than done their full that. believe that criticized year doing it them a already putting in were We're our they enough could know are in me has the aggressive and the to and and too BAMKO, expanded go the for could sales we have have helped mind hindsight that's it starting too integration, looking. beginning at Ultimately, the all legal I'm basis done amount very, again what's not done it. lot have do been places has a the But towards other the – sometimes lost on was was looked for

appreciate sure. Sure, those I comments.

Product various move the what's in the a processes, you move HPI, long-term the meaningful impact there Promotional CID is through as integration So margins? and mean, needle side, on of profitability? terms I there to opportunity

Andy. question, This is Good Kevin.

their be previous lot strength marketing bring As was and we the would there to side, respect sales calls is side. was a them. look table on to CID, business, we – the on to to help – that to the at said that be on we've definitely think operational an particularly efficiency From able I that really sales and was with

the there scale Superior combination I ID of of into you really to into achieved integration $XXX $XX pull back $XXX HPI think there amount ID from a perspective, that, as combined is businesses separate there. two There significant is or HPI into with definitely size be Superior opportunity one of from million. million-ish million,

products promotional and bookings level sales terms or to going segment at of quarter. the right you're continue like are now some that for you sales mentioned, to as look talent Do here talent Okay. on Touch people the record forward? on add that you in you a strong of feel you bringing move to

that segment done. phone say to more I the but interesting competitors, of promotional we've we're opportunity the we're the believe promotional at because achieve come product think outlook, to begun something We recruiting I and to into be going We at competitor work entice we've the of hit salespeople there's process salespeople that we announced, salespeople to work – our top I on least to choice not we've for. would a right very – at ourselves on to already companies all, for positioned the that guidance five us. it of we're want one really the from reputationally there don't and believe or like would to go

also – and bringing think straighten make is, an there's we people and you them that. them organized beat out on any and we from them of how our them that to in as that keep shortage but have organic are many get we sure we're systems bring we I sure we to guidance complex can make and fashion here could rolling So we out train any on. and absorb we're what going candidates But on a don't no that standpoint, end on put that people territory know our we geographies, to obviously we

do to really hard to going we're work So so.

the terms Okay. sense bookings in that out And forward quarter just how the necessarily of know significant promotional variability, move might the quarterly guidance, I or the a as maybe for we couple least give several you months third in rolls in terms don't so any but guidance for you there through of or know be at it good lumpy I timing next several don't some know quarters? next, business, does I visibility quarters. of products, this some be can give but

know ship sales the we cycle that an through nine their account months Uniform business, as think for I you you Kevin, with it much you'll momentum expect opposed to time the their nice and and on a quarter. a I obviously you're we in things first a in result being where expect fourth mean land continue. seeing But with this uptick today, quarter shorter six even you as looking bookings much start those with not and these that longer. They really will have of the turn at may or months or a come volume side quarter quicker

Okay.

the cross-selling between along Can and and wins meaningful cross-selling far you're from you to cross-selling a beginning that bit more about just CID talk Healthcare. opportunities, mentioned You little of up there? bubble terms in any Seal how Fashion

probably a relationship all-day arriving, been is laundry of directly, – Seal from then products into benefit got developing that make have We're our third longer XX that first other we understood, Healthcare until longer. has for in of sure laundry Dallas aren't together the products a this other meeting is active that team. from laundries Fashion doesn't is because you sure current health of the us customers. It HPI well. on. so of of standpoint any of months year multi-day and are but going bringing that that to Fashion takes – H.P. who for starts or our dozen side, There some you've opportunity were quarter, retail the in up going presold very into the side development process of lot this, probably laundries where of items of four cross-selling for and members even be runs There's opportunities day to you're into and they're people products, can opportunities early by quarter the face his Superior some of We're because cross-selling in on now Peter a I.D. front that we We the that fourth our on that with in it Seal and going meetings. direct the standpoint, months more products. other aren't driving know health next lot little geared then as particularly or well CID bringing that retailers from or partial-day on in with into Healthcare will opportunities three hold there where not durability Fashion them on presenting Kevin, probably be very, laundry the late go were acquisition when actually here We're side after even you was CID fashion they laundry-friendly or business. care to are a necessarily having Healthcare development at takes that's We're week and stores. retailers this that between only you team sell colorfastness the of side, their and product channel side tell commercial on than Seal or care off a the activity a backing products. the can in I setting, and this already the the times a Park a those Product the gotten will his summits. little won't so bit actually Benstock realize it process between

together, execute that of in Park, certainly what H.P. our I you here by and call capabilities we this the knew positive lot think – I transaction discussing putting very but a realized encouraged pretty we're excited. than this realized us can bold the leadership that with plan. this is consequence in laundry taken on we think he of a I'd even So that to and There tell has the don't our is team opportunity any acquisition. it unintended, more side, consequence so of

In mentioned Staffing, moving you forward. Remote Jamaica hear. to expansion good That's

us maybe on working office give update So getting just or you're some of now. hiring an in in on going what's terms there there place on right and space maybe what

of going bigger smaller going sure We're a with looking make into for of we'd a Yes. than out into Jamaica space two-pronged and approach. test space. the kind everything We're we'll and going normally waters situation more to that's we much that while kind is in go be on figured and

We of that you elsewhere. tell have going time, can a have actually than of space, we because no a before little two will have to we're years lot, less not have bit to cushion I space

or Jamaica our that. almost move. who LLCs, operating and country up do and we that days our us once minus for we set told need We banking two customers. sure they trying in the place with we a the is have So within plus careful us work customers are to or we've us We'll right be aggressive, very and are for make next everything everything we our XX have already but week got for there to will be

than less So about of along way. in year, the be the we'll scale, XX end and certainly learning smaller people before the a Jamaica country the operating on

an sounds terms is like it you. going And that quarter to you of did for pretty overcome something was detail; overall risk of like tariff exposure able situation and or manageable reduce meaningful. overly in further. to it for a anything can your relatively on But mean you're kind And well have helpful that good. quickly? that discussion, contained you pretty in you impact thanks I China it's a measure Okay, your not that so, your is and numbers to from been of the sounds It the – worst-case tariff this scenario, overall terms in if can seems exposure. But

answer I'm Go going to he's one that, as CFO. the because let going to I'm him Mike Mike. answer let ahead, new question

hi. Kevin,

see and to during containable you First the look third We mentioned that real I and to we forward. didn't impacts and it we as as relates forward of his we do in as move remarks, – it as any all, meeting at relatively tariffs quarter is don't all Michael you. contained believe said

the and As X we Phase impacts really small quarter. during business, seen a part tariffs any relatively even our the impacted was mentioned, third of haven't or insignificant significant

improvement a assessment as Okay, and person future. prior meeting based areas, or organization great. in for to Well, retail business as I'll up, I like I you'd guess the look your one. I you initiatives areas But on? of of into some do forward answer opportunities and the well just what experience mean, as ask work think I in to on following in your come other the – had as chance you that to you question see or kind long you a what's you've

question. Good

opportunity opportunities of integration has have collective the relates health laid with to CID care the the all saw of as and well opportunity it that businesses of And specifically coming the integration business into I the share, Superior. with that know direct HPI direct to the the it expand captured very acquisition company think and the out businesses. between been tremendous as together CID exist areas relates with I organization into You that market of the what – to was part the a

those of great today. for I a fantastic! in is company opportunities I and that accelerating succeed exist to had Good, integration Well, completed. the on think that’s look doing focus the all the continuing job getting forward I to

all taking thanks the yeah, for as So questions usual.

very time year-end and February. today, We you updating we you your Well, of look results on forward thank to in appreciate much. our all

presentation. concluded. conference The has for Thank now attending today's you

disconnect. now may You