Superior Group of Companies (SGC) 7 May 242024 Q1 Earnings call transcript

Good afternoon, everyone. Welcome to the Superior Group of Companies First Quarter 2024 Conference Call. With us today are Michael Benstock, Chief Executive Officer; and Mike Koempel, Chief Financial Officer.

As a reminder, this conference call is being recorded.This call may contain forward-looking statements regarding the company's plans, initiatives, and strategies, and the anticipated financial performance of the company, including, but not limited to, sales and profitability. Such statements are based upon management's current expectations, projections, estimates, and assumptions. risks believe, and outlook, forward-looking differ similar involve and expect, of and statements.Forward-looking materially as may known words that by such expressions unknown statements. from such those anticipate, results the hope, think, variations statements cause suggested Words future uncertainties forward-looking to and identify such Form limited with and Exchange on Commission, Such risks disclosed and further annual Securities are XX-K company's in the recent but reports the XX-Q. not to, quarterly and uncertainties company's the most periodic on filings the including, report Form consider Shareholders, factors statements other potential cautioned reliance investors, readers and and forward-looking herein in are not forward-looking urged the such to place undue on these evaluating to are carefully statements. made contained the as I'll The law.And now, over by call herein, except undertake company forward-looking does not turn required Michael to to Benstock. update statements the go Please ahead.

business. to more At with detail to we'll you, then us momentum marketing business and our QX Mike the in outlook additional our call our conditions, call. XXXX welcome, across I'll growth, including and recent strategies to maintain segments, positions. and profitability take then on and happy and entire favorable be financial a the Thank XXXX. with highlights, our our to start revenue improvement X first over year-over-year quarterly had I'll each the improving for end strong for of I'll of results call, to operator, throughout quarter hand XXXX. the the everyone, discussing our our begin questions.We through our walk your improvements

year-over-year a of revenues $XXX increase. first reflecting the For consolidated generated we X% quarter, million,

position market $X.XX net We improved further from up year sharply top to our flow $X.XX diluted we financial year Our improve by the quarter can EBITDA we that M&A prior investments EPS, to serve. in financial generating our over XXXX, produce far in solid climbed debt flexibility seen improvement cash to while further leverage grow organically, This and markets of continue that say us that ensures results, business market operating our pleased to any we prudent our of end enabled attractive to $X.X reduce ratio. ago.On the continued to enhanced a net so enhanced dislocations on could million. make operating I'm XX% generated the capitalizing conditions, we've opportunities.Turning also

their generally clients Our spending. increasing are

For the durability operate now, of demand optimistic we to our more even for a have huge is we small and reality understand share. remain on segment, but growing each markets in important underlying that very the cautiously but shareholders in

remaining also strong Our be customer in success attractive by our businesses. will determined acquisition and investing laser-focused goals, accomplish retention.To technology in we're our continued very and on people new customer our

therefore, with last a Healthcare top-line revenues Demand be opportunities uncovered. X% improved year, margins. Starting driven by We improved to and continue own and, how the grew has performed strength gross have which quarter. during confident EBITDA mainly are at by markets XX%, in year-over-year our and Apparel, since by execute we about to optimistic grew we future.Let's of ability each look the about operate, the in excited businesses our

with launch on channels. large, digital market, conditions a is outlined further Healthcare direct-to-consumer recent Apparel. growth improved work our are while which during Products million caregivers and process, under I've our X% along the day.Next we generated positive efficiency are beyond is Branded to who wholesale fortify already our XX% year last segment, and looking X entering brands to first continued and relationships quarter rapidly grow quarter, we been to is seeing more adding year trajectory as we're All market continuing rebranding we off we margin in summer. every has The in revenue first X last year-over-year Wink the the of the market EBITDA, As efforts trademark environment improving, driven gross all, the calls, efforts.Simultaneously, demand last now wear well year's website by our growth our kicked expanding compared to with noticed up our BXB improvement. to other the resilient, share addressable This than of year-ago

X% to intend and Our up is key Centers driving currently discussion, activity, recruiting. less our segment X%.Rounding quarter, Branded customer a Products growing retention, of for Contact $XX at last prior and rep continue our we to increasing year growing share success business billion than wallet, over sales year. This revenue the share and out RFP market strong our and emphasizes greater expanding from grew EBITDA our X% market,

anniversary on strong. pipeline As which should been bring new the to that of over business year our early labor solid, we're higher XXXX, have past with calls, our prices, indicated costs to talent prior margins us move beginning remain with along remains now forward.Demand raise the drivers and since going and we've stronger

increasing build with go on customers, our continuing closer our is focus outlook hand efficiency.With ahead. look our along at I'm Mike technology very pipeline seats quarter that, to leveraging going call a stronger to for the performance, to and first customers, new for XXXX. to enhance Our with Mike, of latest existing the over

XXX X with X% first reaching growth to X with X% segments Branded the particularly X% Centers gross This Branded nearly up over margins grew, profitable quarter. to up our our revenue million, points gross Thank sequentially sales of and versus quarter primarily but chain demonstrated lower well, improved margin Products launched facilities, driven with million. up Apparel year-over-year of year $XXX Contact our quarter, that improvement and favorable up solid million, was million Michael. fourth prior segments. basis of to margin million, prior was and from rate up the market costs, from last $XX All quarterly versus Apparel segments Products $XX higher a XXX up from including of business XXX $XX in points, up efficiencies basis year.Our you, consolidated basis was up our improved points, and manufacturing and SG&A costs. Healthcare ago the pricing the Healthcare We channel lower Products by direct-to-consumer quarter continuing the was year Apparel XX%.All our earlier. quarter, margin Branded our reflecting flat $XX first as in trend the year year, supply generated quarter of second million, Healthcare results X% $XX conditions, Haiti improved

a EBITDA our costs the we've debt by year. for fair XX% and expense $X.X the X% of $XXX,XXX sales of reduce this of costs, to the with million, up yet contingent increased liabilities XX%. $X.X higher strong an relative during percentage on Centers to written the earlier quarter, employee-related which driven despite up SG&A from to businesses driven and our Contact about Products All the fully As to charge contributed million. to year of a by percent XX% quarter, the to was lapping was year's reduction increased labor primarily $X.X Healthcare $X.X anniversary.Our last from points quarter in generated first over benefit X X quarter, was past terms of to This we value million, acquisition to first the the prior by significantly up efforts million, the year-ago above XX% interest improved million options, million, EBITDA, first $X.X the performance, quarter $X.X Branded up foot year.In recognize to Apparel

improvement in margin ability issuance Our share, million which please first from per throughout would expect of sheet, you up cash guidance of that, in diluted the margin $X.XX quarterly outlook $X.XX from noncash share, compensation only diluted share up up a on incremental lines. of segments.Shifting with net was or outlook our to and outstanding per earnings $XX offset debt year-ago $XXX the basis, operator, improvement was compared new of gross but provided diluted we've million, significantly range to $XXX performance-based stock the the estimated to to income results.With rewards.Our to million, pricing possible. The rate $X.XX million, of a result increased $X.XX and our performance, quarter to $X.X $XXX,XXX, not take quarter. push and across expense the the balanced updated fourth our make quarter, $XX addition, on and year gross more performance sales reflects $X.XX. back-end improved of could or by all sequential equivalents despite when slightly the significantly $XXX driven continued improvements up cash own million.In From and May our balance a our leverage the during I net compensation per reflects continuing full-year by meaningful the top partially at to XXXX's with of tightening following expense to and $X.XX, X.Xx remain generation cash heavily ended $X.XX, the standpoint, if incremental progression additional weighted quarter, cautiously open ratio by significant quarter, and million of a ago.Turning updated environment revenues $X from stock the X.Xx, cash from as our We we from to approximately quarter stock to to raising and improvement raising operating full-year range prior outlook. on of prior $XXX from tightening slowly XXXX's questions on lower profitability, Based XXXX trailing a $XXX on generated over the be combined million substantial significant million, a updated year million the covenant improve, to reduction Michael lower in XX-month March and and outstanding, We're happy we've improved revenue during we're demand to range XXXX.Additionally, sales EBITDA, optimistic better-than-expected of our versus range $X.XX, XXXX debt is operating last $X XXXX in the an million flow flow year. up the

[Operator Sidoti Company. from & today Instructions] Our question with first comes Sidoti Jim

there. well everyone's hope I

pricing businesses, X that? Branded Was out You had total more to or me you but give X in affected some on all that can Products. better stood volume, how was really us pricing to that or growth sense better the

but still competitive Certainly It's affected, a mix. pricing a pretty we're in environment.

to just, freedom but price to not it's customers. definitely love So it's have mix we'd a we to, extent new the of don't

which added one As on more you to new us salespeople, they as well. customers we've brought has been our of know goals,

a year, on a basis, -- to opportunity. we've on for really contract no wouldn't prices businesses, say some able opportunity do of price ad those we that us we gave of lot substantially. hoc too, raise been But it's our Last business it's from which mix.I did, prices. regular to, the a quarter So to are business quarter, appropriately the raise that able we good to

customers. was business or new So more that from all existing business

variability again, both think, addition standpoint, year. well, seeing, mix as to the a also which product realize from last where And started pricing, some cost standpoint, back to as from as a in I we of Jim, of some well we're there's in some favorable still customer also half

on how And Have about able hang price put for you Okay. been that centers? the -- increases the hold through you there? call to

Yes, beginning were primarily that, which February's we quarter we price increases. spoke last I We did about put the through implemented calls. think, And year. last increases, on price of the effective in second

were stronger employing, overall. of that starting our a some were whatever, -- So, we some of which stronger see as standpoint, fact bring labor as anniversary And we're were have, in yes environment we to we costs actually and improvement should inflationary the those we certainly technology getting helped explain going through the pushback little from their were well a forward. to some the bit down costs of with we metrics accordingly. But

the has past sheet lot XX made over progress of the Okay. a balance And then, months.

you you've And are that a there coverage since while has opportunities Xx. on well How out a It been right are Your deal. active now? a front? of lot done little under ratio there

of There's We're opportunities. to open at look a lot them. very

But We very behaving accelerate we're we market a with we're where organic our be going will by try into been found we environment just to as we excites not it ourselves acquisitions believe on last to weaker, acquisitions. a macro of us powder not organic much there our right each the do horsepower trying and and and or growth from -- competition to distracted pretty very We we're haven't plenty now do the markets ones. serve. We that dry right Whenever had is tough the get each of we in future. out to environment what economic growth to that the the them have in to ripe these There's of yet. environment and But there has find tend distract until wait anything focused really be more the in verticals. to certainly get lot aggressive.So, our aggressively year it. the get the of uncertainty, tends to for so in we

And EPS terms in it cash of really free flow. quarter terms was and a sales, of stellar in

more anticipating year? spending a You to or said year, you're would rest have the affect year that quarters like even imagine but X Are would you be that not I pickup the else this anything this. of in would CapEx going the

standpoint, you quarter, mean, Jim. spend we if year. pulled we expect CapEx would consciously last in than quarter. year. at for the We CapEx, I a last we still From capital the a expect did had year to look low spending We more this pickup back

you cadence XX% of just QX from back quarter pickup year, based here and the our on the the look were of second year, year.In a the if QX. balance terms earnings see the of QX you'll last that through So, projects on of for to timing the in

think I be but we'll you that seasonality, be were if quarters. last in seen future our is, saying still more we've some will, what there'll of businesses than we So, balanced we're some year, in

I feel election this that in in an And companies to guidance happen gets quarters major would and than very in be it's to little election an I'm imagine.So, of most year, able things It's just the out elections, a for going as that heated, bit say, being probably to and of comfortable year we're the a jump prior election. lot -- think certain little distraction a we to in going uncertainty. we're and also people, putting bit couching lot and hit. being a sometimes distracting a we're more more weird I

XX% a it we lot little of we So, bit it's a half going second the said, that have more -- in likely have we're glad It's smoothed I'm Mike happen more earnings going where to be balanced. our a be as -- to good year. not year. out of the don't to

from is question Barrington next Research. The Kevin with Steinke

than Congratulations year. maybe on to X the that better you I'm trended thus in to a just the guidance, far expected quarter strong increase what just the into start has XXXX. bit year wondering the enabled little

Sure.

margin, the quarters, grown our think, in in Kevin, seen you've fourth rate previous again, quarter I quarter. we've margin third has the improved

starting of sales been benefit X both seeing some as the think getting terms I well benefits.So, margin across growth the prepared benefit grow. growth really real I our again, starting of segments another obviously for as where seeing direct-to-consumer of margin a side mentioned So, in quarter seeing in as growth of margin from some positive that's see in all healthcare we're we're remarks, of cleaner to seeing our business, us, businesses inventories, has that to our momentum our

to into I first we year. we're strong continued the signs the So, will obviously momentum in think translated results of quarter, seeing that which lead results believe for stronger

expected. Contact Centers, Contact we timing mention quite had was issue. had part didn't But didn't for and Mike as Since quarter grow Centers that the a tough some Yes. comps of

Center we're show our going second be growth forward. going in going our think see in from to to greater I is business that able know Contact quarter, you're Already we first than better growth what quarter. to

we're business teens back -- well. to cadence high-single about high we've So, EBITDA low teens growth spoken that low-teens as to to high getting optimistic and digits about margin. I'm the of sorry, And

I think how year? going for but about similar you like continued sustainability really the margin a margin the Healthcare to to Branded there's stood that sounds, you say remainder levels And gross and there last I strength it thinking of and are question Great. both in Apparel. improvement forward Products you this gross spoke would And margin Okay. in in the some these gross asked or out quarter,

last margins in continue the would margin to as The year, again, to remainder the business. I balance to the expect level still the not reflect the first reflect of improvement of the we improvement over to expect like say, would But looking at year, you're rate year, necessarily of we driving Kevin, quarter.

side, about couple release and earnings items in on talked quarter, think, And I investments. you SG&A the some mentioned, increased the first Great. you SG&A a in Okay. that the

a how that the this thinking is SG&A the are you over remainder next of few for about run So, or reasonable quarters? year, rate the for

say, would I it's reasonable Kevin, Overall, a proxy.

made it obviously, And have improves, talent. We -- as in the make associate additional relates investments to we're and also, to payroll business continue investments expenses as recognizing just whatnot.

obviously had So, some fair The things that an this of quarter, for example, itself. wouldn't those will consistent. repeat called option that be to we we the out, put value in adjustment

say proxy balance good So be the year. little quarter, there I'd could the of variability to a for bit quarter a of it's but

some you of price to business? and mentioned costs there. What's increase price over price lap to year higher Contact in plans And starting that increasing Centers in your of the ability the the perhaps to Okay. increase course labor or

them but than to We're gain other position have to and I to some to we where allow as some it create a bottom it'll already we'll this be go. increases think do want do and was raise so contracts necessary, less price small for to year. to year, more line last We've done way continue frenetic not in we prices efficiencies to in get dramatically that can't business. really where us

The next Singular David with question from Marsh Research. is

fantastic quarter. a Really Congratulations.

about feeling it. We're good

be It's print would great here. too. I Yes,

in bit pretty more provide like in Maybe call, like just come a XX% on could you may high. guys up close could there. bit. you you little don't I back sounded also range. the is, of gross like this was it kind color few margin this of sounds to Following is -- -- it you the that last mean, stay earlier looking ever like to think the some feel of in I just years. I have this that your I questions, mean, been a But little response terms feel could back last

and If it's I We great were customers you who helped very, an profitable pullback with last from the buyer's earlier Asia. from that's was were when very companies remember improvement. and most don't longer been on had American we some shed there out on the margin I spoke quite that mean, about focus recall no of call, customers us year. margin are and a deal, the fact the gross it low a kind accretive, market

dying are factories underutilized. They're Asian all for work.

Haiti. create gains much good a so profitable say So costs.So, efficiency We've the We've in well. to great We've a customers. all, good really pricing the has allowing standard a obviously factories And I in with talent to more very got I good And pricing own a much in operating less and in all would -- company us lot efficiency in with our environment seen all of costing very are been vendors, to within our come manner factories and variances mean, it's invest even them with in our doing on and got to business. together. the more that environment a own the our is talent business. that's

where on Slight bank good higher, margins than either much, we're pulling it it it wouldn't about even necessarily is. feeling way. I currently a could at. bit So little go pullback, our easily just as could are back. It be not

great a Really helpful. color. That's Yes.

inventory you where you where you bit little to year be little perhaps I I a about on was guys thing inventory it The be a definitely XX have million, it commended of you do the Or you're talked more guys think now? looks be. months know whittle about $XX kind should though want to think XX% last that? in like that guys still want for could you away as say reduction. you last Would above feeling you to the other achieve reduction is, been able had that you the

the of Yes. goal setting to by the And Dave, we significant end progress. last said, about talked for the fiscal year we you made right-size inventories. year ourselves as

line. we so achieve And more of the we were of getting our -- to in by XXXX, end goal inventories able

to fuel see I forward, business, support As certain inventory sales. looking we're as we the investments to in us look making

pulling where going, back some I'd we curve. that we'll be on with obviously the the inventory we bit are. offense And more forward keeping feel going as think and on So opposed inventory. a in on good But line I focusing about to going demand little turns cases say, forward, in

overall make So, investments ahead the -- the But investments feel position again, look as about business, at we in. good make and of the we'll trend we're in look to continue and inventory. again,

It's with going carries to just of awful lines a in lot add healthcare -- also that. really But pain was in reduce working our last to and which inventory -- of hard to of that. of the landscape of had businesses to I'm particularly to had an couple that our side there's competitive just There's business, in and most year our a lot smaller.We've Positive trying what major We've to do. out getting in the right turmoil file bankruptcy. that us they're is of figure now. still multiple business CEOs competitors are that really us, going turnover compete

I think there's an greater to us opportunity market share. take for

respond being that And having as so, inventory we're standpoint, sales this only And not to of to can. than higher include that on could necessary slightly support a currently but level a as timely from we're supporting. to aggressive going we basis

again, more Dave, be, just add would the that would I'll thing. this business. healthcare And to apply And one

inventory the well. as of better think, mix forward, I move is the as we

into new product design our offering from team. new introducing So we're our

we're leaner, newly is inventory product developed the also is entering market. about not but So, that excited just that mix the the fact with the

it. Got it. helpful. Got That's

a think if last lot question. some opportunity a of one Again, because on of fanfare, the you just call-out Just deserves it lot balance that really I and sheet, for will.

a reduction XX% to from pre-elevated levels year-over-year debt down million. achieved $XX guys You

perhaps revisiting flow, that and it nature? increase, maybe forward perhaps for continued for versus share flow? debt maybe the generate you free As something of or dividend or priorities you you cash can Will an cash talk be reduction, about go of

continue say, chip debt. to, the way, away I'd in Yes. at Dave, a we'll certainly

reduced You quarter, we our the another in can first revolver see by million. $X

move of as flow, we cash pay that we'll debt -- debt continue generate as forward. some additional So portions free to we down some

things question of other we mentioned, terms are was continue allocation merit as that's In the evaluate previous of part as course, to we'll with move strategy. our ideas those that or dividend capital whether all M&A, those, of discuss cash you forward Board, around we uses the our other of and the of

Kevin follow-up Barrington is question a next with The Steinke from Research.

Yes.

you follow-up. and Branded Certainly, tone about wanted maybe I Just uncertainty may cetera, there still overall in to rates, one sort some and specifically the Products. macroeconomic referenced, conditions kind just of becoming this ask market in hearing they're around improving of this just from you're be but customers, your interest out et the more comfortable operating environment.

a We're Kevin, pretty of increased elections. spend to signs bit with the and put Yes. really There's you prospects. an share to $XX have still somewhat very, due their in. growing fully that market, our the None our said excuse in sales. a economic rates, let's higher uncertainty, our Clients this past. a due clients be up we very is to budgets some positive seeing apprehensive, what quite opening market small but is and for continue and not billion a political about interest of This uncertainty upcoming huge

robust as because would at than business. It And pace going growing market we're might share. generally it's use a a grow do so, an going customer in to believe excuse our to we for and as from continue to to but or it so.So, economics we not slower take economy, grow well who of share competition take we have we are our sentiment to market is as positioned can't loads not

Appreciate Okay. it. commentary. That's helpful

to any the would conference remarks. Benstock our back over closing This like turn I session. to for question-and-answer concludes Michael

everybody operator. to you, much with Thank being very off us strong XXXX is We a today. start. appreciate

at about Our our we that upcoming entire meeting you look we'll posted to year. keep progress opportunities the doing, We be we'll as conferences investors move the in through our team, forward voices, you energized well many is ahead. and can hear with the on as

always, find also you, latest SGC. was a thank As your presentation, completed. just our on website, and very questions, interest further completed, reach Please out just hesitate for our with investor safe. to Stay which updated don't in as any can you reminder,

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

may disconnect. You now