SGC - Earnings call transcript Q3 2019 | Superior Group of Companies, Inc.

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Operator

Good afternoon, everyone. Welcome to the Superior Group of Companies’ 2019 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. After the speakers’ opening remarks there will be a Q&A session. This call is being recorded and your participation implies that you agree to this.

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Safe to the Senior Relations, Now go the turn over who statement. Hala ahead. read Investor I will Halliburton call Elsherbini, Please of Vice will Harbor President

Hala Elsherbini

uncertainties, you. forward-looking risks about you Group on the may statements to the are today. information this its hear and differ results is these of of contain bear Please Report and uncertainties and Superior of filings SEC. opportunities subject This operations. conference and business in in Thank of may anticipated Quarterly morning's what Form Group Superior with forward-looking from Company's actual call other and described results Companies Many mind in news risks that Companies' release XX-Q,

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

I'll that, the With to call Michael. turn over

Michael Benstock

followed our XXXX you, improvement on My remarks Thank good Thank fiscal everyone. for Mike's remarks operational our us market environment. review. direction by our progress, and on financial an to against QX on our initiatives will give afternoon, joining focus our progress update performance review brief highlights, you strategic Hala, results. and integration will Andy and

align long-term and our business strategic creation. of quarter significant against We consecutive initiatives growth. sales sustainable While to quarters made not we decline, breaking the are XX drive our our enterprise streak with net value satisfied support third progress growth infrastructure, investment of

continuing expanding the opportunity and encouraged to customers. pipeline new are we’re and We with both develop existing engagements by strategic our

solutions disruptions market potential of a building brand aggressively business as ahead we proactive through staying are leader. transform our measures into We

up segments the solid Gurus with maintains remote sales segment products Overall, Gurus, lagged. quarter Product segment and promotional a XX.X%. Office growth, while third results quarter Promotional results, the uptick BAMKO, delivered our record Uniform The momentum XX.X% were delivering sales. in our sales Office solid another with mixed staffing of

segment Uniform to levels, fewer resulting revenue sales working under merchandise of periods, our receipts down result the largely recognition management rules. Our reduce and was in capital comparable lower between current

We also experienced impact event the by outline program during at from rollouts Andy and will Mike caused further an that period. QX XXXX isolated reoccur not WMS the these disruption did the items remarks. CID current and their in implementation

active our in complimentary strategy portfolio business optimize our Our our teams executing to very across segments. are

progress our and performance by the those segment segment review our SAP capabilities integrations, end Let first as Uniform integrations investments. technology quarter in with underway expected to well it the are relates XXXX. completion of our broaden

of position. both quarter, seasoned innovation, have executives, Superior consolidation our elevating strengthen operating the the greater competitive and that the of creating during under service final businesses who and sales proven additional in efficiencies announced bringing HPI, we depth Also ID leadership of experience

calls, wins with Management mid-tier successes taking market said prior some in we’ve the focused of is the as very already in securing place. segment on

We pipeline. robust the through work we sales and are capture through sales share as to X-year following shift our expect a cycle, midway market strategy

continues improvements, and development in the to Seal leaving changes to organizational Fashion CID, on the changes design Healthcare product appropriate delivery believe the operational fashion-oriented more forward of healthcare primarily and leadership we uniforms focus marketplace. and CID’s For consolidation forward. founders our realignment made in move organization and We leverage

improvement offerings. We as we talent share this expanded highly with momentum ultimately build pleased their for will for we're sales margin engaged, is and sales solid as market next drive leverage products, to continued customized promotional capture great and at to they and record BAMKO's the achievement and over capabilities stronger continues The order the continue closer division Looking to scale product higher. flow the backlog. opportunity team expand year see

Gurus, as El Salvador reached business anticipated we're Belize year. In much than ahead The rate. an grow addition were quicker strong facility strong results and a Office Jamaica is the we the to our their needed underscored at to center growth. this call has Shifting solid to by customer capacity segment, to stay working a to and increased expected finish continues acquisition expect of

automation, Our especially uncertainty driven geopolitical view is environment. and very competitive and of company's in in this and has our current the our consumer cost due pressures, intrinsic minimum wage by macro be disruption retail continues tensions served the around A customer to to environment variability space to culture dynamic market approach long-term tariffs, end well, behavior. expansion, us and

and proactive growth. making taken to for changes create posture such market Overall, to improve disruptions, in as business mitigate anticipation efforts will efficiency always Chinese of to sustained investments potential opportunities our strategic necessary early the reduce initiatives believe exposure tariffs. long-term in our risks, We’ve our we our

the I over turn Andy and will now will financial provides return call after overview. then remarks closing my I with the to Mike

Andy Demott

My focus and quarter. highlights Thank on afternoon, key operational will the good everyone. comments for you, today integration our Michael, and

lower mentioned, Michael the of to merchandise receipts. inventory efforts segment portion Uniform in reduce our decline levels, a large in As from sales resulted our yielding

efficiency. disrupted quarter, at which affecting in sales, of temporary interruption Additionally, beginning resulted also CID, went system the which the warehouse third the operating while implementation at live a

Supplemental occur overtime relationships maintain recoverable, with still sales see were not approximately resolve million we $X customers the in of normalization these to impact moving and and to mid-quarter. resources strong forward. however, is lower and required expect The improvements issue

strong expectations. and seamless now expected launch delivery, is the extremely demand line our ensure in uniform mid-XXXX. anticipated surpassing interest, Indy To the Our garnering reconcile is

system. delivery to in exciting laundry care the harsh for the the that the sales strategy to fills scrub opportunity. look offering this this market essentially the We optimize fine our for that are initiative of vacuum a on tuning marketplace can forward in robust We fashion requirements health executing withstand

products are in management XXX% Operators equipped. our currently building and is Haiti, factory place. in which training, new is CID is in and team Our being dedicated the to is complete

and gross toward will continues fulfillment of expect an Haiti progress this of the capabilities. quicker multiple The end the robotic to benefit with Arkansas Eudora and will next improvement duty-free ways, platform in center support, including fulfilling shared We CID we facility Eudora, initiatives. divisions at see modernization Once important year. of efficiencies fulfillment a in in should margin finalized, our market, services completion operational anticipated our an facet

a we good as pace. The are implementation through on at at customer more of operational very is at efficiencies also schedule pace. CID's HPI a a we ERP and ERP implementation customer forward realizing deliberate time moving one work migration continues

continues in workforce schedule. our reduction on a domestic paced small Our

continue actions. on to will savings basis We annualized see an benefit from these

pursue of business responding making wins. to are increased We we're an fortify both uniform health our level Overall, businesses. we necessary aggressively to care activity opportunities as investments new care non-health for new and RFP

our sales reported its quarter being been of exceptional BAMKO at pace and in with coming to Products segment, flow highest backlog another order Turning growth, has level. at Promotional a record

to existing our a add force gross total margin do sales opportunities. volume. our its to continues projects and smaller the scale margin We cross-selling emphasize improvement and portion become expect to business low of continue We as to see

facility permanent the location. couple As has noted from previously, In online weeks, next been of group small incubator to Gurus that Jamaica move the location. Office new a in the will the incubator

and acquisitions. has continue we Our been anticipated of to strong ahead capacity posture growth see to customer scale

at pace are our accelerated X-year year, in guided we While slower ability sales metrics our the a to confident this extremely over achieve period.

I highlights. financial will turn the Mike over to Now call for the

Michael Attinella

quarter the filed This morning Form we you, third for our Thank ended XX-Q XX. Andy. September

So I'll statement my and income limit to sheet comments highlights. key balance

quarter decreased a quarterly million result which third the $XX.X $X of to net decreased sales level, segment X% million the compared At million. ASC XX.X%, XXX was Net for year $XX.X last sales or of to accounting. Uniforms

quarter, under given to of customer merchandise embellished goods our the contracts under ASC During revenues XXX. receipts lower rise declined,

our of Reducing ASC capital. in merchandise receipts manage lower lower accounting better working to XXX Under is conscious result efforts a receipts these revenues. result

quarter in prior in rollouts we lumpiness program not that significant quarter. as This ID contains also business repeat our do occurred employee third year the some

the coming quarters. earlier, noted to this we up pick As expect in

system the sales of CID Andy warehouse created of as mentioned, $X about implementation Lastly, management million. disruption the

net BAMKO XX.X% delivered with the of year. growth prior quarter sales another up to record compared

see The solid results Office a our in report continues XX.X% sales. to increase from continue We to execution with at Gurus sales BAMKO. team expanded sales strong

Office We robust pipeline see continue the opportunities to Gurus. of at from and existing customers new

BAMKO for sales the third improved XX.X% to consistent quarter Uniform margin remained from mix highly Gross in at our segment, a pricing at margin Gross by competitive in segments. TOG. and XX.X% compared by changes from mix offset margins relatively year-ago, customer operating despite was impacted environment our a

our costs ERP variance several Uniform XX.X% our was system administrative across consolidated As of increased our factors, associated and lower revenues investment with including and system a in year-ago. net the increment expenses support sales, a and to implementation percentage by warehouse business driven The growth to segment, integrations. XX.X% from selling

administrative and in accruals. selling benefited of approximately the from Uniform reversal Additionally, expenses $X.X segment incentive performance million certain of our

the we quarter during similar the incurred third XXXX. During were pension costs also approximately $XXX,XXX. losses period, settlement recognized of No of

higher $X.X million our operations in segment margins operating quarter. revenues QX overall were from compared in operating XXXX QX in and Lower and to margins expenses, the in Income decreased to Uniform XXXX. of X.X% operating pressured X.X%

partially the generally offset the Our increase This to Overall, attributed compared a the benefit effective effective taxes. $X.X million year-ago. XX.X% to quarter year-ago. for decrease in rate foreign an by XX.X% an is increase declined source foreign a $X.X rate of to was in XX% income, net compared tax tax income million in to

earnings a compared diluted per quarter share $X.XX to $X.XX Third were year-ago.

I Now items. few balance address sheet will a

our to our to to the amended ratio increased we X funded X. credit debt X agreement and to from covenant quarter, the During X related EBITDA to

expenditures XX, X.X%. $X.X through funded to of ratio the support as XX totaled our we that $X.X million improve nine ended was invest X.XX to months Quarterly through debt nine representing an As of and growth. in Andy X. September were EBITDA September our the projects XX the business ended effectiveness months outlined long-term September Capital our earlier million, increase to dividends overall

remainder will remarks call for for his Michael turn a back the to I year. the and outlook general closing now the of

Michael Benstock

Mike. Thanks,

making are capture ardent customers efforts sales pace and sustainable improve we're at profitability. our service right the investments integration growth better, our Our continuing to an and

myriad the market, through our multiple in to position currently the in risks taken address actions are organization. We of good across a

move are into Looking in fourth ahead, strength we the quarter as of XXXX. a that confident we we feel position in

right for the doing are creation things our the long-term for stakeholders. We value

very team members As their for dedication. the contributions always, SGC all working them thank continued of we appreciate our and hard

we'd that, questions. to your the call With like for open

Operator

Research. Thank you. ahead. of question Steinke comes Barrington [Operator Instructions] And go Please today the from first Kevin

Kevin Steinke

Good afternoon, everyone.

Michael Benstock

Hello, Kevin.

Michael Attinella

Hi, Kevin.

Kevin Steinke

Uniform make there. pieces sure So by the the off segment, just want revenue the I talking about moving decline all start to to in understand

if working improve X.X the X your to about essence, been ASC it XXX? the merchandised XXX hit from there In capital. had efforts in mean those talked weren't ASC essentially for that you that XXX, the Are for to from thing? of I also So, what million hit hit there million large have is merchandise reduce been same reduction have ASC you if a wasn’t and it levels, would would levels or

Michael Attinella

Hi, contracts ship whom we specific have. What not where, we have goods, our it. Kevin. No, customers of happens pay Hi. with for contracts, only to with product, the This the when customers certain goods. what are those the upon to is we ASC contracts end We not. we to provide -- certain if we’ve with recognize that should with the In contracts happened those the Mike. and revenue to product contract, we respect receipt actually of saleable absolutely XXX get are sell the of the not us

the would that we of that recognize. when XXX ASC receipts amount amount reduce have we’re of that reduce So, we to revenue suggest making, the we

it's and So merchandise reducing we contract that through or past assets. in been the course of either amount inventory, we we release consciously because our the consciously of year a inventory half, say

those that On sheet, contracts. bring recognized that amount bringing we with it in of should of inventory under amount those We contracts. particular associated the we that one revenue we're the of the reduce balance reduces

the of million $X the inventory. related absolutely is those reduction to So

Michael Benstock

our was Michael met we investors when into working is balance said calls over -- when we sheet And again, capital. to ability the the improve over that have and purpose cash even on that necessary. is to turn of We’ve to these and with

inventories, revenue ago where of our impact, a the and We’ve their XXX better You year. again the certainly to see with SAP inventory tools concerted because on get looks of couple we HPI, more bank on like in as XX% even what borrowings what to line. particularly since to a going and revenue is to effort bring negative the And strategies be not with new there some been made much our beginning line, but cash. years They’ve that that’s and was that -- of progressed is apply a better now. inventories are manage their better, and business should XXX the a of reduce but before to about

Kevin Steinke

I That’s -- Perfect. just wanted I that. really That's thought that the helpful. Okay. to was clarify case,

So essence, of levels, here actions you’re revenue taking accounting by reported an terms your but just in you’re reducing in improve penalized inventory to because business getting change. of

So much just do benefit from can or in wanted you I do make flow the that much generation how that? think the how yes sure understood terms inventory cash levels but to of reduction guess, benefit you garnered from think you in everyone you’ve more so

Michael Attinella

$XX the will the our inventories our about you if from our you We $XXX,XXX. at -- beginning -- the are see contract are about that of Well, look assets by flow down million. and down, year inventory statement, Kevin cash

that's, So investment to amount over line we’ve essence our that the working that’s reduce items those time. in in the two able course been of capital

of assets by to product balance less some as with see support sell growth see associated the you the of flow the bring those on product sheet. cash contract is the and that we Now, in businesses as that also receivables in the offset on we you course sales statement, reduction

So a capital relates see those we benefit it's investments to the between two undertaken. and we’ve where as activities the specifically it balance working

Kevin Steinke

Okay. That’s very helpful.

about which on $X you deduction Uniform noticed to range. down million with I X% is XX leaves so to year-over-year, your an calculate in And that was X% XX-Q that I’ve metric the growth also points shipment segment decline percentage the hit X% that

that kind comp mentioned last against difficult program timing you of shipments, quarter year one So the mentioned? the in that a remaining you X% WMS also that to a then disruption just timing of related and is mostly or just as of of third rollouts

Michael Attinella

Yes.

you the event, about that's CID out If of of take the the $X X% million decline.

X.X% So with your about within of X%, that the course leaves activities say would I what associated business. normal

Michael Benstock

what left People timing those you the million all well, will do you two with sometimes is time, It's much in about is dozens of do, of yes, Kevin, and course quarter, that rollouts. And, rollout? after ask we $X.X of of the when us timing next the We rollouts. items.

a few are thousand hundred them of small, dollars. Some quite

over rollout over millions quarters, a of few thousand hundred or the Some them multiple actually dollars multiple quarters.

a straddle some quarters, three straddle Some year.

in how which can by there's every we before has big will customer manners all it’s kinds a by you do sometimes it imagine performance out roll of So region, a sometimes in this. And franchisees it's people oftentimes mean company-owned. I as be quarter impact couple of spread of out about year quarters rollouts. and gets third because straddle that in it. It major Last might quarters. period have of you don't it we couple rollout much we some doesn't did a talk over

number that money not in a on necessarily gone some We're who the they making but less have gone some the which extent program having to expensive in a across we Simplifying It's implement, their understanding help their means because less it us them divisions. to of the a it. to they also employees with a garment. customers of $X.X then are that heavily some million, they gave revenue. rely customer have, decided years expensive the garment, less have leverage had that, of less has had We strategy and they program

to Everybody able find is help we looking that economize. ways could are economize. We to them

with And rollouts quarters, would is at few contract the of our for quarters timing, with that months the we’re percentile in going going say million coming in but that the win have sticky. we again. lose mean customers, again, a anticipation are you happen matter the in is we point to you're something rollouts. to over you lose about And quarter mentioned there our minutes talked customers. plus on in Also I the We a are stickiness some. more of later. we see you we so very strange generally this our $X.X fair some this lost economy was fact the reasons very those, when I of The now right share customers, very, a that additional when XX and you gain Unfortunately, are and of lose we couple -- will ago. unless you that that them, a up next done some happens, that do six than is year spoke customer. them, boarding When we of make not all gain them, sometimes we you within for business some

all a little that. gap in So bit there, a between there is

strategies, have HPI leadership believe one years a have with been our than XX that should been now our very we sooner cycle. more and over particularly experience have has have with sales division, with in We I -- one in who the very that some two most are executives -- we even which seasoned company, very, of quickly with the has decade we the HPI seeing start successful the the results at sales and normal the side on that us other for the maybe who than

Kevin Steinke

on topic helpful. just That's great. then to some question move one more on things. other this I'll Okay, ask and

lastly at all you add are how disruption Maybe just terms was any at what CID? you you? like can of that WMS maybe about the confident that’s decline, and color Just, system in It from that the happened isolated. year-over-year sounded behind the

Michael Benstock

had have in had I in now, We our system. companies XX putting part. who bought other and not effort We're system, I And dislocation. under buy, difficult if warehouse do that looked think and perhaps lack at six through last can system Mike their almost test fifth we jump with a we years of at full have putting testing, warehouse this watched jump testing a will load, enough some is you wasn't it awfully weeks have do on our the it It which WMS is point. of I some companies it WMS to to unsuccessfully to in serious peoples’ second you under.

that done through doing. building, a of is our all lot expansion of we shipping are testing an why the the adjacent impact are been we have It's the that currently over that at We reasons are years. Eudora being that warehouse anticipating we these so any of warehouse one not the will actually

through can We will I luxury hours, percent pulled we it in ever And six-to-eight WMS of I with People the long work we the that off say and pulled have long they be it hard. and through able days, seen CID’s to them. implementation. implementation. turn as issues it. didn't but XX, with fastest wish, on work behind and is the weeks They whatever WMS have they

in done forward good ourselves have that did. theirs don't worse We now. many Andy, a years if you know add. They’re footing once lot us I They're but anything have ago, impacted than moving and to

Andy Demott

mean service of bulk we I by issues that’s -- that the pretty through -- were make covered say business this, million customers the having just while customers. of painful this would there it it's those up mean, retail, future. in sale speaking. relatively nature I The that was think you why of is being period that, doesn't it that with other go sales buying the you were we one of competitors. during really we well. when And it filled very lost add always when that the that It $X we for CID time well I means opportunities retail went lost, the won't

we and expect put Michael the it the we efficiently. position, will improvement expect go with as future majority warehouse the are we we to out reestablish with point, future. a at of in, that to starting forward of we’re in continue us see of really in as service issues vast we'll more And and those associated the and our better better over to in time them and this into costs behind realize to that some be having get mentioned even just able efficiencies the and We relationship customers, much have

Kevin Steinke

Okay, great. That's helpful.

that to have business fruits those the see responding all RFPs starting I Any a to? encouraged mentioned So you of to terms some activity been in color you What the in your on the to of of pipeline are activity. RFP think of Are win by efforts still you like? responding of RFP good uniforms been wins? the I you’ve responding more rates guess deal

Michael Benstock

that we’re much encouraged There's creates but employee in smaller sweet the piece lot a sweet of there we loss nice said, it. mean, we I Kevin, that for about business we business, clearly and we're RFPs won. contract have matter And risk risk greater won won win discuss been than by some now, our fine. our cases, HPI. customers, our loss. No, spot grabs is business of about. as We ever restricted of as In a But responding by risk are I've even that previous of existing that side of the with ID well of opportunity, rate spot the of discussions, fact, from a normally a of don’t loss, in we has bigger more In right there win there's greater our we’re or business the who spoken many as customers. so up of the doing midpoint of talking than the pieces rates to.

from we we better we may There to So secure think table technology that a than are we is is lose than anybody product with distribution business. are business that position that lose. and our we development while more issues don't timing we to are bring happens believe all that and with with in staffs gain some standpoint to a in that how respect going and all business we but and our we a may better be to anybody along standpoint way, our position ERP the design than

had safe to realized can really refocused to as spoke be -- we the how as larger the are we that since size customers, and as And valuable probably are that out we ourselves customers that choice most other we year there last feel those which they with about But bidding the much smaller just their the them we very quite are the safe, in business are for we safe really winning have are not choice think our on the any innovative some like for frankly opposed I tremendous than very, customers. many. we're big but companies we we we competitors mid-tier and on share.

more win pipeline don't and to ever or not And expect but is pipeline. necessarily reasons, -- would we obviously for We quantify to. who competitive what our we size of our in wish is

Kevin Steinke

synergies Okay. helpful. may have a enough. bit pace, more numbers. the launch rollout, also of size, That’s the how of Fair the I between meaningful little us you of just the mean, think CID. timing comments give talked is be can market that mid-XXXX scrubs, in sense the the it terms your And and Fashion Healthcare in Seal seen for I fashion given you about you

the get my for to put arms business? trying Just a that what around means

Michael Benstock

at things marketplace years have a partners four why keep a of the there that healthcare Seal were into marketplace, marketplace, direct or have against selling you is you by commercial to is don't when since if if we, product we that in why to would laundries, fashion going go the company -- a you Superior, you’re void of need. in have really a serious since Healthcare, to going guys, we accepted have a choice. one product. back -- recognize healthcare product direct sell Kevin, years Fashion for up we you're which And ago, direct healthcare developed the are we the bumping in to And the do that you as three sell you and We created their was -- sells ago a and laundries be not market product

tried of the explanation, And Healthcare recognition products market so and I people but know this systems. big committees in respect long to people products. no are decisions wear. making to is nursing there a was to those anyway. decisions to fashion And important within it, influencers And with nursing often And were face Fashion part -- The groups making within healthcare am among going it are some chief very I a the are nurses today. nursing go systems but we create Seal with let's going very, their what officers, healthcare

the demand of that so in lending would And set one product time, introduce did recognizable all not And at the companies is those hopes always marketplace. that have buying, that you their And introduced when customers out why designing, years for did, acceptance brand many discussions disappointed we CID we’ve the and a we else, one reasons we everything But there so a realizing everyone well we accepted looked overwhelming of realize a you the we scrub did, point many, product of you many that was as the we the that fashion at is apparel. we the marketplace with that and on the we the had most if you because their in now -- released it were brands. didn't at WonderWink that anticipate surveys with have marketplace resources manufacturing, demand. with and with anticipate could have all we

basis by this discussion a those increasing to in that on of a some are so there. it with will respect ever expect number people of We mid-year marketplace we And going us how very product with dollars couple see it to the serves the million are to in to few results probably from best. and we be launch results,

competitive we're intel it in if there So retain won't we that all really about out the year. sooner the we this advantage away are a than out that that’s competitive point giving at we advantage product. have much get We longer everybody. We this don’t think

where So that’s we stand. currently

Kevin Steinke

Got great. it. That’s

space again in uniform little environment. pricing happened the the the about You the mention to bit from market, in a pressure competitive

it commented gross gross hit Mike, the year-over-year. bit, up but the that think, margin little even a I in margin was still uniform

ways you etcetera? So can't having its meaningful through a base managed I impact efficiencies and various the with about manage something still and the think or cost supplier should offset we mean, you this all

Michael Benstock

relationship margin, execution mouth But we hasn’t of move sourcing We customers at margin our great that -- from operating money gross XX% admit. been great, looking who one in have I not to impacted that, on as that talk but a Vietnam, the on tariffs still been so they XX% so tell factories China hiccups around Chinese factory we look our both extending with more There a into I’ve we gross standpoint, we service perfect don't whom to on and are negotiating RFPs it from margin they tariffs. a an And be have we customers of I somebody the of you long-term done suppliers, sides need the pressure. because never there Vietnam want us. out always I the out -- component product themselves margin, up standpoint. we done going those can we but done if in other good has -- now who at customer. never could as have the of what the by we us said, as hand, seen that I were couple a in I are many many a at to factories out enjoy are margin margins do have But from of price the but gross job as that are have world always quite have a They have a to the frankly I’ve relationships because And for and well, they’re with future. because -- of left right them, didn't have they of service if what's make Vietnam. moved -- for that job better so themselves. there. It to with lot purely there. in way as countries the not that's of group to things certainly pressure mean, lot being there's Chinese the of China see along our

we period the RFP and that of pick RFP for time, had And in in RFP, might more volume generally four, making low out years, over gain actually to our third, have of to of of in order some we efficiency, at we that on coming we picks prices, back operating fifth year They person that supplier put at than efficiency. that got years, an were those the business. sometimes to up pretty the five in contract go money the tight end up five give we’re So is fourth we maintain beginning. we the in much

they from So is a by downhill unfortunately it our wages. we are impacted I environment. things And pressure so forcing that, minimum these downhill. there's that impacted by they're what's try customers, them are impacted happening all They're competitive think which a by to tariffs, And is very lot. with to push

Kevin Steinke

Right. Right.

in to of larger and it larger maybe there of ramp this think some to continue so of smooth in you’re the we’ve being growth nice smooth Is you business, you there the opportunity And strategy, it, a growth add sounds as past in volume driven just your the promotional expanding part out products from sales quarters. in really force. want past lumpiness is to little this time of from Okay. an you assume kind grows just to And your couple jobs increases? some bit terms I like business quarter-to-quarter the of headcount. continue out organic by it over kind seen

A –Andy Demott

at of that’s totally growth their that larger definitely were wise as much that takes as efforts scale of we -- said tied coming bought at oftentimes sales case. Kevin, grow, grow that piece in it Yes, the they margins this I the new But over in, the the continue to to operating we bought that. individual that impact mean, with improve sales already a from growth organic we really it's now relationships we our see business is have. the The the for they point a percentage have We to opportunities with business growth. substantially they and coming time some while. larger time they and them,

Kevin Steinke

products. Okay. operating and about margins And you did talk promotional improving

in ago, the about operating it couple have to where years given average corporate you the historical investments or -- of of was are past products you think it's promotional talked and kind of had margins not was I some you what up the getting the -- how Just that what maybe but a promotional are cetera, you you think profitability potential wise? of et and to how get about a of that making products? is trying a target -- kind margin still you thinking do are of could baseline business

A ��Andy Demott

that past. have said we’ve and in we Yes, the is what

thought of we grow acquisitions, we and initially, we approach organically. business the switch help of that to it's slower where expect than change are think sales that more did their we people go also in kind seasoned little approach I the somewhat getting will growing I in do were but we we to we mean, a bringing -- a

we’re are as So that to that Office the in investing investing volume to we to little bit similar the business. little we we grow, what of doing kind to bit in a and we’re place be ahead get a are able service that structure at state, Gurus, a of of

that, As we margins to efficient those to improve see and operating more expect up. do with become go we continue

Michael Benstock

you good And a point. I make mean, really

that statement we that and to we that is and more we that have making years the we at margins made So ago operating that three business the that we point that it or -- still achieve expect case. two started

Kevin Steinke

it. Got Okay, great.

Let's see.

So, Gurus to continues the nicely. Office grow

or you maybe down what's geographies the -- there. get you do various of to on I pace of now, the what the a trying center in terms into mean, you kind call of have have slow capacity? built, You’re investing a and of the you outlook of there? sense are ahead out build growth just investment you revenue much capacity footprint How given can grow in bit

Michael Benstock

its we will is from it's there of we to kind we Jamaica The three and about because outlook expansion in take have when which that is have. -- Belize years. out the pieces full us what get grow addition can have we’ll in done of of our into the capabilities we The expansion what mode that

our you that current that so or year excess know million And a grow that. business guidance $X is in that at will of we

give us $XX So it capacity the of do million to another about should business.

Kevin Steinke

Okay, perfect.

meaningful on the some over quarters? costs that your think there that? been but what any I some next associated Haiti are should just costs have the rollout, with forget, I wondering increased we last about how Before think of mention there couple related that of to call, facility

Michael Attinella

Yea, that so as the CapEx have incur in costs other some we costs will be and in operational there, incurring facility But will go. will into with in going it equipment be with put we facility. Haiti, the to training respect the it's getting the certainly underway establishment ready costs startup within management facility also to respect we getting we is that bringing of to and to

We part expect full product with of to ready middle producing to next go it year this to part latter with the actually getting the -- latter in in to of year. respect capacity part speed up the with be of

So we'll full at be operating we this won't capacity. operating year, be

speed, So operating by operating expense traditional They be manufacturing there manufacturing will not year. facility. but a in at us we'll this will typical full some be that’s that we the of will be and end incurring or and that for be

Michael Benstock

we If that. Haiti you much remember with the on the facility same put schedule is in, that first

Kevin Steinke

it to on from my into to. more popped process want headwind that should ASC are trying still the How the reduce I or I levels as backtrack to of with that rightsizing impact something being that still expect There's inventory we it. of the comps? headwind, in you just think XXX about leveled of even you -- a head initiative Got if have Okay. a such mean, based are done on guess that because much is I year-over-year should inventory? we pretty year-over-year it you off initiative, or

Michael Attinella

to to to our continue manage We are inventory try up. going turns

provide our at services contract to position. in-stock possible our assets need that to going are We can customers to lowest manage continue the try to the where we

be will there headwinds continuing. So

Now, got we started, certainly, we on off blast to a big when that.

don’t we the as to increase to turns. positions historically, but headwinds down inventory know as have they be that try I continue constantly will still robust our and been So will drive

Michael Benstock

we contract of, from their business, that contract impact don't because and of as most the this You know assets with most of the of in division business our of with and reside as to Healthcare Most of Mike assets much HPI. healthcare said our our In Fashion of that CID. see is nature that Michael. Seal comes

a So we expect from do you'd SAP, they and anyway. are had on big at better much information getting to that analytics we're HPI push that, that

inventory naturally So we better. will manage the

integrations, but affecting our won't be our business in in assets until see will in finish these they be reductions we won't other mean they places ship. You which the they inventories contract as up revenue will

Kevin Steinke

think the a given think Okay, I you lastly, this I it this still dividend, got noticed it. but year year-over-year. historically remained increase I of consistent just quarter, in paying at I guess maybe are bit it you time healthy a

any dividend So or thoughts on dividend policy?

Michael Attinella

are we a healthy said, dividend. you as -- We paying

Board dividend are every out respect where is what we’re quarter paying talk dividend with our with to and we yield to dividends. mid-X% respect the Our dividend -- in We, about with the range. policy to we going

to continue we -- continue that We process. will

XXXXs. mid we been As since you dividends paying know the have

Michael Benstock

Right.

Michael Attinella

New we dividend to our or are ability to But to increase on expect and very we we here. my and I'm will as -- make forward. guy us assess block. with move continue the I payments we dividend dividends am making continue important compadres sure. confirming maintain to

Kevin Steinke

all Thanks. taking for the That's thanks had. all Well, great. Okay, I questions.

Michael Benstock

Thanks.

Operator

you have -- sorry. Again, a if

Michael Benstock

Oh, go ahead.

Operator

As question-and-answer there Instructions] any no to for our Michael remarks. would are [Operator questions I session. in queue. over like conference further to the the This turn concludes back Benstock closing

Michael Benstock

gun I saw there. you As jumped the

Okay. appreciate February. of our today the year. rest your forward Enjoy Thank we time the much. We all in you XXXX you very on and to quarter fourth of look updating results

Operator

concluded. attending for now today’s presentation. is conference you Thank The

You may now disconnect.

Superior Group of Companies (SGC) 23 Oct 192019 Q3 Earnings call transcript