Superior Group of Companies (SGC) 7 Aug 232023 Q2 Earnings call transcript

Good afternoon, everyone. Welcome to the Superior Group of Companies’ Second Quarter 2023 Conference Call. With us today are Michael Benstock, the Company's Chief Executive Officer, and Mike Koempel, the Chief Financial Officer.

As a reminder, this conference call is being recorded.

This call may contain forward-looking statements regarding the Company's plan, initiatives and strategies and the anticipated financial performance of the Company, including but not limited to sales and revenue. upon expectations, based assumptions. estimates are statements management's projections, current and Such forward-looking such think, and such such anticipate, expect, similar hope identify Words believe, or outlook, as and variations expressions statements. words

to, Securities unknown quarterly but in risks statements future Company's to Form filings the the and forward-looking Company's materially differ uncertainties known not the the Forward-looking those by Such and and periodic results XX-K suggested Annual involve reports and from statements. recent that including, Form Report may uncertainties are limited XX-Q. on Exchange cause Commission and risks most further with disclosed on the

place potential investors forward-looking statements. reliance Company factors statements by these the herein, on does Shareholders, consider The forward-looking update required to as not contained other law. to and made statements herein, urged are the undue to in except we forward-looking evaluating are such carefully and undertake readers not cautioned

turn ahead. Michael the Mr. call to And now, I’ll over go Please Benstock.

thank growth joining update on Thank quarter the consolidated in the an including operator, Company reviewing ultimately today’s basis, and highlights strategy compelling on to everyone, to second uncertainty by begin and the current our navigate our you, opportunities position I’ll ahead. a call. you, economic capitalize for

We'll results three quarter then open along business. more the profitably with Mike, our update I'll grow then our business second various an review our each detail call more will and segments initiatives outlook. full-year on to for then Q&A. on provide

year compared non-cash EBITDA which $XXX along million year's to impairment consolidated for same year, the revenues $X generated with the million last charges. We in excludes million consolidated adjusted quarter period quarter million prior $X compared $XXX of quarter to second second last of

on midst sheet. and was positive consistent delivering a conditions the remained of commitment call. our Our challenging the In described balance to in strengthen overall focused cash market environment, on market flow our our team drive last quarterly our financial soft performance with

generated and cash year, million in through business three we capital first of while operating result, six our markets attractive the flow also all investing $XX across improved ratio the As a segments. working the of our months leverage just addressable of with strategically

As believe With the in business on a macro a and that, trend softness beyond, take in capitalize half sales improved position at we second our better to a the three let's SGC better year gives to ultimately of each and is times. economic result, of closer look as way segments. uncertainty

in million, primarily Wink brands market. Seal $XX from Apparel, million came includes year across conditions second despite second quarter. X% This up the Fashion and the Healthcare of revenues healthcare generated continued Healthcare the prior $XX which quarter soft the increase

recall. EBITDA of from period, negative ago and our with may mentioned adjusted last equilibrium. quarter make on Second year, included write-downs Consistent million as year million we’ll you inventory I've calls, in continue significant achieving inventory what two better past which made earnings improved have progress $X.X towards $X.X the we to

$X market, channel single of with brands the million have By higher in our business, As early have who results a involves Wink remained consumer the able wear and our featuring to quarter, strategy drive the above product was awareness the excess Apparel market launch to website brand. and day. direct-to-consumer second adding growing share engagement our expectations. we addressable our in plus DXC a our line been our growing reminder, and Healthcare large our Since every of well overarching caregivers already

continue which wholesale growth website, year-over-year recent opportunities Apparel, engage designed us strategy within begun. expect more we of have Wrapping accounts allow launch stronger long-term see Healthcare BXB Apparel to Another efficiently. results, our Healthcare is up that to with the on already attractive

year the $X products, Product slightly branded of second EBITDA call. consistent ago, revenues of the during quarter generating with with economic last uncertainty was our another improving to second over on we our we're this Branded year, which million million Branded $XX a outlined segment is PPE segment margins, new last environment. is largest last gross sales million macro and continue, that adjusted up year's softness $XXX by which through is headwinds up quarter while Next managing caused result effectively managing Products write-downs, the related developing expenses, period reflecting versus inventory by overcome carefully strategies topline

well-positioned what's to time. as we're economy within these future words, growth leave will other our focusing control the on improves capitalize In and over actions on us

in X% for vision than $XX long-term is share is billion products attractive growing marketplace. branded expand and to currently less Our our market

to segment. highest Contact move on Centers, margin our Let's

the Second past improved to earlier, end talent, half higher from quarter million second year of Relative quarter. XXXX, the slightly and margin the this first quarter EBITDA costs labor the reflects revenues at of implemented a the XX%, adjusted with the million investments were offset adjusted were in $XX during and infrastructure by over quarter. price $X.X that technology year a of of EBITDA increases million $X.X first up partially reflecting X%

while continue pricing build We our new further of pipeline identifying to business opportunities.

to to into high-teens. Contact market addressable in The while plan margins for is grow large long-term Centers significantly continue per the aiming the Our tapping Office EBITDA Gurus

Q&A. Mike? I'll Mike, turn call we the over now before to take

and Thank today. thanks everyone you, Michael, for joining

in year we to backend revenues May, of prior consolidated expect year. quarterly consistent were in the million cadence million we loaded our quarter. a $XXX with and generated We continue in to results quarter call $XXX Second described the compared

accounted Products gross basis improved a in significant expanded basis primarily the This by favorable for pricing of was improvement margin Branded over Our write-down points gross year. mix. XX.X%, of XXX to and customer past last XXX and million, year's points expansion inventory to rate due margin the driven gross the margin up $X.X which

increased SG&A second costs second quarter, as compared of XX.X% year. quarter XX.X% XXXX. last quarter for improved from for a While million to $XX to of sales expenses were percent of SG&A the the

costs in in our Branded the Products and to sales decrease infrastructure The deleverage sales segment. percent of additional increase with growth resulting Centers associated as a due higher support expense to Contact expenses headcount and was from

quarter higher out to $X.XX net diluted quarter's discussion, Second per interest last up the income million first income net $XX.X $X.X Rounding statement was year compared million $X was consistent $X.X share diluted or expense year second prior million a the was of loss per to quarter million rates. interest due of with from share. quarter but our $X.XX or

million net pretax names adjusted year and XXXX, to or about share. year $XX the ago net this was In tax basis, million related per share the diluted to second $X.X $X.XX of or diluted per income of On quarter the flat charges, prior recognized quarter's Company goodwill of impairment an year. non-cash million excludes $X.XX trade which charges or last $XX of

the Moving on balance to sheet.

Our since cash start of and cash the year. equivalents grew slightly

progress while and in flows mentioned, reduce the towards conditions, expenses tight our first by expenditures. $XX Michael operating we the these continuing to remain to we’ll two of made focused capital strengthening well have also year. market management challenging and As continue meaningful balance our cash quarters We debt and driving working of million capital sheet we navigate areas, as as on

times XX-month our and our improved quarter As a to covenant efforts, X.X EBITDA well trailing leverage the from requirements. slightly result within of covenant these ratio has first our was net

persistence in million. a March range the to Turning of relative to expect outlook, $XXX $XXX $XXX revenue given of to conditions, we range of million updated million full-year million to now uncertain soft issued our macroeconomic $XXX and the

than to relative to third quarters diluted our outlook of range in reflects both per $X.XX. share our now earnings for our stronger updated still Note For $X.XX to with fourth original quarters calls $X.XX weighted and the backend outlook first half. year that $X.XX the a both

expect sales demand Finally, the year on improvement full-year basis, segment Apparel, that growth balance through low-single-digit customer we and for as normalized levels levels. the the to business approach a for reflects continue inventory gradual Healthcare of

Products, sales on a second sales full-year, again, decline expect trend Branded during we high-single-digit For the half. an improved the for based

in sales the full-year. the Centers, compared double-digit we the quarters, half sales the the and for for in second year improved low first Lastly, to teens anticipate in of Contact resulting profitability second growth and

could questions. we’ll Operator, lines, open to be the if take happy now you

Thank you very much.

with the ahead. from begin now Barrington will session. question comes go Please first Research. Today's We Instructions] Kevin [Operator Steinke question-and-answer

afternoon. Good

year Just from year. But, wanted asking previously of anticipated? half than changed, of still your second by might back on just start-off the have clients, a to know an in half what's kind your just the and Branded I they're you're weighted about, the more side, expecting and little hearing that outlook, Product you're cautious if a changed what being, curious I uptrend suppose,

for thanks the anything And Hi, Kevin. can Yes, that Mike, jump sees. in. he add question. I'll

a market of in opening to representing budgets We see the The in months. fact, the the would expected strong over signs. yet up companies end bodes we're seeing March. delivered some return kind orders What was our is, seeing well is continue normalcy, large have received not for have past overall spending of then June earnings, but significantly, us, which it. tech to report And we few positive up that XX, pretty of started is backlogs, seeing any we're which signs we're good to of sooner, not

stronger budgets we this positive of some seem that half most we aren't. bit we be But, our is what back in part are the the the back and of some to up economy to as uncertainty, opening heard a you seeing in would predicted that and where predictions stronger, expected was last little outlook second come of latter signs. and just bring year malaise budgets the come half aren't second live All will we first half on,

the we're think if is targets half the the of want order for you of certain of conservative to taking half I in disappoint, the want a the that achieve first and to we year year, to up significant are over the those We double-digits second realistic to be this. don't half our results. second Still year. approach do math,

that's merchandise that, happen little particular, uniform We're branded look Branded of that, in spoke it's the a bit expect about mixed segment within, that's slower It a a would merchandises, is. seeing side really this I Products but though than at part the And, will when Product Branded today. at, truly our point. branded bag. you that even of But, you smaller the guys

there's of ours at, have by year, competitors. to We're in in think product significantly. we've look to much to quarter, down Healthcare you of marketplace on. end coming I the up second but any pretty this product being which by sell. issue of excess of kind then overhang lot they And past I the And that's our left those our how been is a product looking clear was visibility still have sold get fact, no

we half the I of Mike but share better the when little on lot interestingly, can, get the than business, a of lastly, customers, in call we exact And, first a statistics center to can put year. did probably

uncertainty in cut had unprecedented a also lot jump of because customers, I of you in number business we required bit? a that have well. their Unfortunately, agents the rate. think, they on to an on who want as they that do Mike, back little

well Yes, just nothing I Products, Branded of I add add, would Sure. covered Kevin. in Michael it to terms there. mean,

business, Center we Contact the And certainly also we you'll that we the in on first of while saw first the seats. recall some back had at our quarter. had benefit that we few On and of growth the mentioned the customers the customers still in of within second our quarter on-boarded customers, quarter, quite cut a some we end existing

that a cut customers our tampered in some quarter. back the of bit the second so, little is And with what growth

customers guidance, we added noted plus continue sales pipeline. with of as to in I get trend the benefit the the my we improve, in customers as to Centers those Contact As, expect

we good the feel of the So, half Contact about Centers. for year back

you there. might as much Nice much or agreement didn't financial I didn't insight job for to on that the you move all executed. you it had your the based up spike flow cash really as the ratio, on, amendment that and as thought Thank Great. leverage credit

second how year, we this remainder the flow -- as relative covenants you the of and leverage the look half to have in to place, and about what year? think So, cash the we for of should

the back on year clearly Yes, I'll starting on months, really this particular say, and last Sure. felt in really in we obviously focused we we months. But with how Kevin, as we're see purchasing ended six year, improvement drive really and that talked happening. expectations would we six satisfied about the inventory first we clearly first our that cutting exceeded

for levels in to improvement I particularly still the you've room the think progress, making obviously, months, not of ix Healthcare. the more the that inventory progress magnitude, there's but seen still of year, go the for balance have we're first the while balance to in year,

reduction terms forward. balance made of So feeling debt and expectation in still leverage about with some, I'd to of more and covenant modest that we've our is and improvement year, comfortable make the say, position of improvement of going capital improvement where and working the our obviously the we're ratio, the

what to work (ph) time, Michael Still positive to hit, our we're I that forward. would more net to say do target be take is ratio, some have [X.X] obviously lower, feeling, and will which move as but leverage is we or

to that's good Okay. hear. Well,

So of offset back segment. of pulling you seen you in of What's some least pricing that in on costs fact mentioned, demand labor there's at costs agents currently that some take the the of in status And, Centers implementing had I that short-term? maybe the customers know agents. Contact And, the increases some there? labor price does less you're higher pressure some that off for number

their had reduce And a headcount, is always Mike, we in clients on again. that. a haven't which -- decided clients, good jump lost then and who not can add to No, few we We're I'll thing. seeing

Kevin, there's that an when do expectation, back. the those the corner, things get to standpoint, is clarity economic turn more and when seats in future we'll Our from

a that meantime, for we not And affects operate. the the overall part year. and where obviously, growth of kind it. a customers agents these during there's In that was we the we wouldn't with places there's customers headcount I that the new that did in say of contemplated particular QX. the would few that's demand so reduction first new redo our for that And, lesson that

back, those year, have in But, fact, to impact quarter, the that robust remainder near but to from seats as revenue cut going would the see shore of when say does single is you've for In you not it's a as ever XXX I you're been. you. close it

have that redeploy a we have tried And we amount seats seats. of many We've to won people of other those into won. fair

back had right now -- offsetting headcount So, it's basically, really that because to having we much. of temper growth, growth that. our one just our to other It's with haven't instead of had cut respect we're the expectations just to

Thank Okay. you.

Mike --

You covered.

Okay.

one Okay. Good. just had Apparel. Thanks. about Healthcare last I

some just how results trending that's second mentioned could out about initiative maybe you XXXX? and early positive contribute to how You half the, potentially the on and of direct-to-consumer more talk think that play and

to Yes, don't it year. a have past, said did the April, as this we big it in of in We expect we soft I believe was a on launch April. impact end the

at every check customer getting We're a and than month months and a better half on prior keeping so want the three where our had in ad acquisition return added we've is far, month. So much we costs better spend, it.

speak metrics until We're because to not are I about. today you're us it's disclosing actual part really not what numbers. hear those to about going latter speak expect enough not XXXX, the would significant of

we that, at We're is of. merchandise lot it's to standpoint, happy with speak least -- And expectations. ability maybe very we competitive We're a from we tell a best clearance, beyond our to exceeding that. that, which said we're I But with the move even not business. to you it have off margins, through gross our very can the happy bringing could

about and we it it everything channel hoped excited the be. would we're so, is And

the looking of be, to report, And forward in question just of more our future when a significant I'm to it time. which being will sometime it is part business, able a

Thank you the I’ll Okay. queue. for Thanks. taking get over back for in I’ll now. the turn questions.

Thank you.

Company. from Jim The comes question with and go ahead. Please Sidoti Sidoti next

question. the taking and afternoon for good thanks Hi,

Hi, Jim.

in think a Do quarter any Are you primarily that's there? of looking based half beginning after for for low third the in guided you in around You've to the guidance. that like It falling see the grow evidence of second the starting -- turn the single your now year, of roughly and sounds on or you're to digits you're quarter? fourth top-line the XX% year.

You go ahead, Mike.

start. I'll Yeah.

Michael think, I in alluded a little to I previous Jim, bit this think the question.

encouraged we to the second I are in in into of the the trend which our last the year quarter. the the space, some in want to we saw not comp businesses our lastly, business, that is a a seeing the contact which and in about increase of new added the emphasis business, an there improvement year. we're branded obviously wholesale think, but we seeing in to are benefit the There's to little in will but And extent what first the center coming of go, business. our backlog think half is of with trend year, we digital, DXC, of provide overall includes then, that digital and ourselves. in QX that positive bit momentum customers the added of and driving there healthcare traction an seats, an when incremental business, signs think seen in placing get we've business were of I to business. terms lift the we're create back helping QX over a lot in in We're the from orders an that improvement seeing talked the quarter the ahead in Don't product

you're this it that to build expect like quarter, So some continue in but to you sounds evidence seeing QX. accurate? Is in it

Yes, and bill a QX. I between be it QX would think

the And drop the been seen plan and Alright. huge debt all Is going declining to flow. to that generated despite haven't significant in you that a you revenue, have What's now? pay right really cash down? earnings you've cash --

levels Our focus still down. is primarily debt bringing on our

like I enable position, As X.X. somewhere capital. into leverage and consider which to of and get back uses that target get us our historically X mentioned, there been would to would then our between is We've into down other net to ratio we

those bringing with six we’ve level debt we business happy unfinished got months on but focused made we in the we're remain have So, and progress down.

it has a of lot me, branded last for then grow. one for products sounds And that business, you to potential the in like Alright.

you it one things that some to two adding what What in to are the key up or is do there. to market? is increased the pick you share, do think that can into you promotional is it activity, or pick up need share people share growing If

even Yes, our with that away who business business. can months XX,XXX moved competitors, with XX within double that we support, with prior business that's the of their a their take employers. we them, right? have them salespeople of business a easiest in book Growing book have And to give we great to market us come their can of their way means of to question. XX% from to take grow, us, is X do The And generally share us versus help to

easiest least So, that's and the expensive way.

second The is us to very do marketing marketing to heard to past, never money a to perhaps it who little but most from some way produce favorable people very, to the which marketing really we in starting have drive we are have effort, before. us, on spend done

bought And our way the right where comfortable the smaller the we've past and of is some third, leverage it's ratio that's third very we're strategy. with probably successful doing now, it done successfully up our not that. so we under [Vanco] (ph). in a at competitors is rolled And them Obviously, the been

people. talking We to are

We speak them. to continue to

So that when things ease to we'll and close able go up deals. from a covenant actually be perspective, ahead

being might you expectations the because have few a tell are and economy ago. because years they maybe interest rates is that and way what can I of than lower being been the they of

and there. any year, but we'll a go But work and I opportunities again. through never shortage expect deals, our more active we're the trying come but that be do sitting carefully, our M&A will to in back requirements favor a I sometime when well do will very, of I very valuations very capital certainly we acquisitions we very, be we in close can't out think to the movement. in there's say tight lot next will meantime, out but would

those the three ways. So really are

Marsh The next Research. David from question with Please is Singular go ahead.

guess the here provided you've that taking guidance is, meaningful numbers here for quarter. the pretty the what as the could questions. only I about of last be left thanks at to guys, part start of question quarter that and of out year. you like the kind kind the are with range put a macro, third you do able we feel months you'll really the conservative revenue reduction I Hey guys five sit from the that enough in through way hit is

a say We've across Yeah, range an we're some business very is into David. in what's the sense it's the with quarter I felt closer appropriate to good range, certainly our range. we seen feel range not that quarter, been that bit we're trends more but but to of that just comfortable the approached to pipeline, on hard guided meet beat we based obviously the the get third going just the range, a the segments. like can recently. would We're third to range. that We we've in that work little that

And kind inventory sense long are kind to or I it move the Okay. provided being close us pretty feel have you the guys a I now your helpful of being for did just of appreciate how you about pretty mean, that little then there -- clearance level the an to talked while, website. can is equilibrium equilibrium are of but still give a really mean, back a an to issue you are about get color way you like understand, some where can to normal close? turning to you you That's inventory to at able you through level. I to how go purchasing? close

space we'll within underperforming has well healthcare, I both of the DDC think Michael inventory We're us to definitely to on as some emphasis as on and wholesale making alluded obviously to Dave. helped digital the our do progress, liquidate continue digital that. as And the our

it was us equilibrium felt for the the to what year, part we forward, were As going our about call year our or talked really target. to better we looking will inventory reach last of when take we we

which to I target. improvement healthcare will expecting the Obviously, critical. will the moving help think us an two quarters we’re next facilitate reach business, So, inventory the in the our be of trend

our goal around year quarters the on important quarters. we'll two equilibrium remain next two inventories to focused liquidating reach will the And end our period. the be is those over inventory next and So

supply correct. you seen haven't any from perspective, And a meaningful disruptions,

you purchase to would can from a statement? fair like whatever that level You base. supply your still Is at

Yes.

It Yes. is.

And but [few reading I to then wanted get (ph) read to -- the answer. There I'm dancing of was kind it, definitive a just notes] some kind I trying of just around here.

As here some you you in that feel might have, sit today is of with still feel it kind -- you metrics remain it's with compliance amendment? you'll still covenants kind like like performance of you you need the or to another do maybe fifty-fifty that do

We the you place with, standing know, feel our the with amendment that current have in in and comfortable business. we

Obviously, So point, additional at at be hard would the looked this year. amendments at any this would I of we the that not anticipate beginning necessary.

And on business. viewing how to that. that in put we Obviously, outperformed an the it we so of increase felt like We nature was amendment felt cyclical ratio. based in cover the place any we've were the appropriate potential would

forward. we move point, as comfortable we this at so feel And

really That's Appreciate it. helpful.

the me Let caller. yield floor another to

in questions I We’re to like and to back closing Benstock further queue. seeing the no would call turn remarks. the Michael for go ahead

you, Thank Great. operator.

community years, every will this I would Superior Chairman and successes who his month, end the and and XX over the over He father, vision to remiss improve truly the led not with to be be I so Meredith to of deeply and many career last the announced of board long many. our decades. lives did many Jerry and that enjoyed operated the of in him, we family passing we have tangibly loss. we spanned missed Superior Benstock, mourn we whose knew call, mention, last of Before loved much all my by did we That his

today to thank again for want of call. I all our joining you

today, from As We're long-term the we excited and value about on creating aim keeping us we progress. continue to our profitably we updated our forward continue to look and times. shareholders to these share opportunities you navigate uncertain even capturing you ahead, heard at as for

hot this the reach enjoys rest I don't very with any and hope Please questions, of everyone again. summer. hesitate Thanks to out

now has you conference for your The concluded. Thank participation.

now may lines. You your disconnect