SGC - Earnings call 3 2023 | Superior Group of Companies, Inc.

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Operator

Good afternoon, everyone, and welcome to the Superior Group of Companies Third Quarter 2023 Conference Call. With us today are Michael Benstock, Chief Executive Officer; and Mike Koempel, Chief Financial Officer. And as a reminder, this conference call is being recorded. This call may contain forward-looking statements regarding how 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. Words such as believe, anticipate, think, outlook, hope and variations of such words and similar expressions identify such forward-looking statements.

and to and suggested differ forward-looking known cause that by involve statements. results future materially statements unknown uncertainties risks may the Forward-looking from those filings disclosed and but including, Form to, recent the are XX-K risks most limited Securities further company's report Such company's Exchange uncertainties not periodic annual with the Commission, and the and quarterly in on and these and are factors undue such XX-Q. Shareholders, Form are readers on statements place other made not potential forward-looking cautioned investors herein in to reliance carefully forward-looking to reports evaluating statements. the consider urged on the does the except herein, undertake company The law. not to forward-looking statements by required update contained as turn call And to Mr. the now I'll over Michael Benstock.

Michael Benstock

and the from only second significant second across far what quarter quarter outlook. for grow us third it and discussion the up business. consolidated we results businesses. improvement thanks, you, . We'll a in as were start quarter to are quarterly our doing performance financial results, even around and as down segments the strongest of our results weighted a decline to Thank X% strategies reflecting third XX% Q&A. as Mike nature our I'll profitably our over the the us improvement expansion. for then and the discussed today. And detail the growth along sequential Earlier to full provide well more joining continued was operator, up million on then each open year call year, for updated of back-end that generated with X% additional year-over-year by And our quarter. quarter's so everyone, of which our year through I'll walk we're I'll the this of expected, our of each year. third revenues turn setting margin consolidated highlighting We year-over-year, $XXX our over

year-to-date, the quarter. result $X.X compared the million down but from EBITDA prior to quarterly is million, third year's the second highest consolidated of adjusted million $X.X just quarter Our slightly $X.X up

Lastly, a economic last diluted differs by from impairment market $X.XX down on quarter. $X.XX customer, of effect adjusted our from excluding up charge, earlier sequentially business and of but by $X.XX of customer The year's conditions was the market segment. EPS EPS segment by second year

We see conditions more clients issue starting periods. rebrand RFPs Again, and are slowly it basis. than past improving on really buy to as is customer-by-customer, more market-by-market a more,

and continuing we longer-term outlook, team's support success we're This control. feeling by includes the increasing our long-term can determined be While optimistic to will while our on focused positive our drive conditions normalize. cash to about what our investments balance remaining flow sheet when also strengthening growth further

able we and year-to-date. in continued Adhering our $XX September capital We by were million significantly capital generate after of ended turn million of covenant year operating expenditures. to this working to focus, EBITDA, X.Xx $XX net reductions net through a at start reducing of the the an with better debt than improved flow cash ratio year-to-date, full lower leverage

to Let's turn X our now businesses.

reduced third brands quarter. the for at for quarterly flat million Healthcare $XX quarter its the segment Our the in second healthcare up highest and Seal apparel million $XX year-over-year revenues from essentially year

our and caregivers above to line, the entire beyond we our $X.X featuring X wear getting industry. expectations. went broader perform continues our remains We soft brands $X.X launched $X.X closer market day. inventory weak intend well market year-over-year apparel up believe quarter. the million for million This and the is large a growing remains addressable an we to rebranding from of EBITDA million-plus share every our market. spring, already website Back and in initial who and was for Adjusted second healthcare SEC, from up expand in The product the but through it and million direct-to-consumer equilibrium

This engagement deeper with DXC brand. our creating both channel and new awareness consumer higher is

is in accounts optimistic the website, quarter, launched rates BXB year year-over-year now helping about our continuing see outlook. wholesale the improvement our We we're more fourth this us. growth the and efficiently earlier in also which longer-term Overall, engage we with

Turning which quarter the produced normalized. of the out, we're chain is of as back-end revenues with year weighted to nature products, segment, costs playing our have largest along supply profitability stronger We seeing our third the million, while up $XX and is prior million quarter year, the highest from quarterly $XX of represents quarter. second third the in from $XX million revenues in our the result down year

flat Our about to from year-over-year $X.X the adjusted million million of up quarter. was second and EBITDA $X

have seen an over trend for this believe to now We no upward won't have and demand reason X months continue.

pipeline So this with and our favorable, first trends segment booking part particularly next in year. growth very very, while to subdued, respect of appears the look the

over While this generally ongoing we've HR the the bolstered months. impacted by our and macro is marketing surely is been and seen segment by what related to past spend has confidence consistently environment,

very, our business further expanding further our to on products, to grow truly matter our other remains this our mention lines, expenses In for than less market stronger that meantime, aim billion products accelerate very the a stronger share, to is should our strong, ahead. us even potential. we're margins, be seeing that managing at demand market. large and retention it's capitalize Longer our conditions I ready similar such branded focused to economic fully we'll growth indicating of $XX of on X% now client term, branded significantly within

prior continues on to EBITDA segment earnings which is we to high-teens highest push centers, third as generate Our margins our we contact mentioned the that call. towards review our goal

million of represents $X the and revenue highest revenues office grower's history. year-over-year quarter quarter the second up the quarter approximately and were from in third both $XX Our million

was $X.X down from the million, up quarter million $X million adjusted third EBITDA but quarter. second Our year-over-year, from in $X.X

for we're XX.X%. margin contact incurred second gross more related expanded employ have centers, whenever efficiency increase by costs quarter which our to X to from to While technology labor points to and talent, higher prices reflected the possible nearly we and continuing higher create as percentage

opportunities the to new of improved result, see margin EBITDA sequentially business quarter. office longer-term continue margins. our over segment XX.X% for from outlook our third to the Mike a in pipeline this and we we to look at a turn financial for performance questions. second quarter the our attractive compelling I'll to the at XX.X% year it Mike? crews, to With for closer updated your grow and that, Overall, we take As before add

Michael Koempel

everyone, joining thanks, call. and Michael, for you, Thank the

far Our the we year. were and so in the reflecting earlier pattern back-end the in third described quarter XXXX weighted results strongest

quarter from Our quarterly revenue reached second the and we recorded stronger $XXX about $X as million well. importantly, up million, margins

which came up margin up a versus from gross at basis the points XXX quarter. year and points ago, basis is XX.X%, Our XXX in second

drove primarily XXX expansion due basis pricing margin year The improvement last and customer and mix was point segment to which from costs. by Products business favorable Branded lower chain our a supply led

year of million in of increase liabilities, a and XX.X% from combined foot quarter $X.X third value with million SG&A professional the $X.X in to third XX.X% increased by quarter last and -- third debt Our of up cost a driven XXXX, percent written XXXX. was SG&A sales fees. increases expense current fair options The of to quarter the benefit acquisition quarter for were bad in on $XX million quarter as for the compared

second was lower quarter did rates. due improve outstanding, expense reflecting the Interest in interest from to third discuss year as $X.X million expense quarter prior the million, higher from slightly quarter, up I'll a for the interest Our moment. debt $X.X in

In impairment per net per $XX.X share. loss tax net to income million $X.X share. goodwill third $X.XX the or to quarter $X.XX of million of compared related of per or charges prior or Third noncash million of quarter, company year the million $XX.X pretax the $X.XX share $XX.X diluted year recognized or net diluted quarter's prior

or which in down the third prior excludes net $X.XX second share quarter's of quarter. from diluted diluted in prior made impairment share basis, per year in up charges $X.X year million the quarter, $X.X from $X.X $X.XX million per was adjusted share an the but this diluted or per significantly or $X.XX income million On

balance Turning to sheet. our

improvements. We continue meaningful to make

outstanding with year. free maintaining the in $XX We balance start continue our of during the an to flat the $XX equivalents and while enabling quarter cash drive about significant million reduction our cash flow, additional of million, debt cash

balance focus as of generating operating of debt sheet. $XX flow of reducing strong outstanding cash cash million has in the of the up Since our representing $XXX reduction. Michael million mentioned. and start on our on a $XXX flow, from total as September Therefore, at beginning the working operating the capital resulted XX, improved XX% Wrapping the year, of million year,

conclude at year Our we've at ratio leverage beginning improved back-end X.Xx. net outlook, quarter the covenant of year of indicated updated from loaded. as the ratio with much throughout the EBITDA ended remains year, our X.Xx trailing the leverage net the full which I'll XX-month

to albeit of reflect the range revenue range relative year growth continues million, $XXX earlier $XXX to which lower at $XXX a full of million a expect improvement, half million We million rate. $XXX to to back

However, per range share, first the for $X.XX to of $X.XX, the year. outlook $X.XX diluted tightening we're range prior improvement $X.XX of from our to continued relative half reflecting to sequential earnings to the

XXXX to begin healthcare levels to and demand the For growth finish with normalize. customer low apparel, expect sales for year we inventory single-digit as

results. stronger decline while total products, we the a primarily first with driven improvement quarter by fourth expect look year, sequential quarter, second we the sales finish the to branded the year sales For for low-teen in and

we in single you Lastly, begin if now lines. the year digits. for the session, open would the can growth that, contact centers, we full expect With operator, to achieve sales high question-and-answer please

Operator

question the begin with And Barrington from [Operator Kevin question-and-answer Research. first now here Instructions] session. our Steinke come will We will

Kevin Steinke

results. on Good the sequentially afternoon. Congratulations improved

look bit. we a revenue as adjusted outlook, year the Just the to full you range

that wondering just still, sequential a stronger So again, represents quarter.

upper just outlook products, the the down a although, demand trend mentioned guess branded bit. You I in came

changed finger know don't this last quarter put to I -- your relative just maybe progressed? I'm to on trying what as outlook my So

Michael Koempel

Sure, Mike. question. I'll is that Kevin. take This

It you branded guidance bit. within the reflects little quarter we As that within continued range we in obviously, fourth down still the said, products. pulled a sales growth

demonstrated As our they in in remarks, had said the third we growth quarter. prepared

quarter. We that see continue expect the into growth fourth to

and as tightly, -- as turns managing our plays cash particularly in the of well. into which fourth to deliver in to contract I Contract we amount ultimately relates but assets, also our it products, the we're create December, revenue have in the the plan quarter. And half a back some manage could into branded business, we as range, we flow inventory we're think on, our which part of build of variability manage fair of volume what

in revenues. front. also had So little in as of still growth quarter. been fourth anticipate working Again, more as that we than tightening the the the we've That's a on think business. albeit look But quarter, as coming rate bit still expecting. we originally I lower to a on capital the at see fourth I slightly pullback again, said, But again, a growth we

Kevin Steinke

you you mentioned remains that a some the did end still think pretty apparel, Okay. the you but have market, Do coming And segment. back of are appears Good. healthcare there about market sequential And inventory but to you that just into market read inventory XXXX on you how equilibrium. it's touching think growth overall to the on good is things I bit mentioned harder be for soft, approaching still to internally, in trending there the believe inventory into the balance. Maybe side. way

Michael Koempel

care from trending end the include group goal aggregate, we of could We that down beginning the the million $XX coming toward health across the Kevin, internal the obviously year. an the you year would standpoint, peer of are our and our from see down. inventories see about were in inventories by -- our

bit the the to year in here . And So entering with to energy we're quarter. in a much in is cleaner than our fourth been last a we intent year than of most our reduce little making. yet happy we've to can inventories liquidate We've way that rather inventories. really got and the position go looking progress XXXX end and a focus we did forward again,

good progress I for seeing to made general satisfied the at in feel this we'll But only, market with can point, the extent. year where and from about perspective. ourselves. we've we're And healthcare the think some a end improved we're speak I again,

Kevin Steinke

the you initiative any expectations. on apparel, potential continuing healthcare business Maybe it on becoming in and BXC to up trend more meaningful just mentioned following the a beyond. starts of growth well. there outlook XXXX ahead e-commerce of Also Okay. part and and the update

Michael Benstock

people we even about take like wholesale and we've the on. when say than Kevin, inclusive direct-to-consumer about amazon.com, this as progress are to made walmart.com, both the we're of well, that includes whole excited sell We're online ever. buying you very, TV market, digitally. -- question. which all and More Obviously, and target.com and us very digital channels, what's so step happening broader X the excited good is further online it customers those the

the store the and And larger down, than still struggling are more certainly, is retailers. traffic smaller retailers while

least at continue capabilities we certainly gathering more off we've insights. investments -- XXXX on for rebranding off this digital spend to learning. XXXX. testing somewhat our customer year. We'll we emphasis as full has Our potential made the the on in as key and on We're pay marketing, and go. paid in to We're We're learning realize

to better spend more see targeted carefully over is strategy and of a portion larger in We goal Our business to becoming inform manner. this our time. talent a our more

start business at be that significant I giving a on about. . don't meaningful our competitive in there's will enough a point this would more we're I be it doing grow I would and speak it following to XXXX think separately, Will trying it we're enough color to of reporting strategies. as it that out different of believe we'll in not years, the that so advantage be so. portion to hope it, testing separate,

Kevin Steinke

then here. driven And products. nice by gross margin branded and more Okay. year-over-year that had couple both sequentially, the a you expansion

mentioned You normalizing. chain supply

I a as just on kind margin get these sense on customer I to mix, anticipate some but quarter-to-quarter thoughts or higher if the just you But variability. margin mix. sustainable are trying how just gross based forward? levels -- think, some can vary profile going of any favorable to

Michael Koempel

orders chain in call, cost product space, to would happy through said, particularly pricing that margins we're in mix, starting given with third there in order some had you very summit. now of with mix the that combined margin lower in the order branded that of as an the inventory some be we Kevin, the Sure, just what the in we the basis. will where variability branded we're obviously system, by we're had products really coming see I supply quarter, the, on particularly

the to as a say to quarter, fourth hitting of consistent part that probably about margins probably that still good side. of end obviously, target we as margin. will your be more inventory the quarter as first of need So determine be expect last care plays in kind as third less would promotional than we to that we I given. But the ahead, would more little the the we toward year we on fourth guidance we bit of of -- or more quarter monitor third the may say consistent first might how the up look health again, into the we quarter, I quarter in said, expect fourth the year with margins, range the talked with we've I the still half work year than the

Kevin Steinke

branded It on selling And that the sequential just Great. looking basis. line, driven Okay. and administrative at there increase lastly, expense a an absolute looks just like by was products.

some in and terms going Just of the there on wondering there there's what's in trying might nonrecurring look call if or what something I was anything color on just if out to going the some And or investments base. there get it like forward. expense in there's to increase perhaps

Michael Koempel

really case increase of Sure. the commissions. portion a to branded In the related of products, big is

So in Products margins. is commission the the based business, Branded on

third and for quarter. So improvement in being expense really in and margin given increase drove SG&A commission digit, piece the the the single larger in of sales a margin growth therefore, despite down an

Kevin Steinke

I'll Okay. queue. jump the back in

Operator

Sidoti question & And Company. Jim come our next Sidoti will from with

James Sidoti

add did a plan in about the in any Just Can fourth add you SG&A you follow-up quarter? question. And you talk do third are the quarter? more headcount on the you salespeople -- to

Michael Benstock

overall a for thinking about segment? SGC? all you about Are Or speaking you particular are

James Sidoti

for primarily branded guess, products. I

Michael Benstock

have people. Brand added we products,

than our including before. It's It's the differently of X of we're strategies. there go up we've to with accounts, of people. we growing revenue sales right to will to doing them, sales strategies We that after inside all kinds now centers, strategies other done appointment some right things continue smaller have, best including try add Jim, that

But to products. it to grow is continue intention branded our

have add and even people to it's and do to So behind We're to recruit to muscle talent it. we're take actively some faster. to do us to recruiting to more more our have it, more recruiting going people going

James Sidoti

then All cash allocation, the generating Should mean, we job there quarter? you regard with to great pull and similar third a opportunities the might you right. quarter. capital are of fourth I trigger that in paying off Or And a trend debt did see there out opportunities in inorganic on? the

Michael Koempel

I capital. going working would remain -- you drove For to the the we're significant year, tell say, There's can months, of first on from balance improvement. Jim, X the we focused

working our normalize. capital obviously, think, starting is to I

QX. a a that But going So we're on the year. with the I focused in not for similar remain said, balance similar result of anticipate to would that

previously, targeting As X.Xx. of ratio Michael and we range a really I net have to the said in X are leverage

obviously getting So we're closer.

through year. we'll continue that's to leverage we forward going the obviously, so our achieve And once balance look focus objective. allocation the of that net here And then at begin priorities our to

James Sidoti

think your And businesses, drivers -- of X But all of All feeling businesses. the -- drivers about different they this pretty do think are the at look you line. are different definite you current in then point right. at you businesses, you which out in businesses, this you X most growth best X X

Michael Benstock

I at look and has growth do years, it. care not but you a the health workers segment if it's But businesses, and healthcare has a coming of fact feeling hard in is love our But consumer good that I'm segments can in all smallest long about question more. business. wholesale the there the me as the the look like we you a price-sensitive right pretty of X at of I X asking them. tremendous it term, because also, which it's look, now That's It's potential kid believe of middle, retail and

health but not is not workers going wholesale look our the to X be get have at have to care isn't we're side and or to get in and to take Most going grow us. coming point all capability the to going retail anybody of side, the old we're continued -- it years direct-to-consumer -- it's the you at filled to of care

or -- So will of it's solve or and the through the infancy, workers about into fill know millions schools back basically call want so its are that, workforce is center healthcare but the whether that gap, it's in they feeling you the integration if to that more it, going truth. bring our through schools great to wherever business

in center we're now $XXX million. mean, I a great flow one That one, small call as who greatly time a provides this right building second team invested cash strategies. in doing putting goes that. sales first We business And on us on. our it invest put around sales great under a has to free on more executive new we've opportunity. for year, out

year this dollars year into marketing ever so First, be bring not spent reliant others on really more so be and we've to next will business. and us

actually never had a force. We've sales

So $XX that him $XX to a merchandise we've doing years million X force. of sales And Phil a not ago to -- take that doing to was a you from that's done products amazing if X $XXX what the prior done and was just side over without take Jake's year. branded and million grown had business the business of sort million

X why businesses. of I should excited be all as these about So not equally

to don't did my of question angry this call. want I be any because I me at So children after the

it. I'm But about excited

that do to years market that in competition going great think and to away we not I coming hard make from all the take enough share our business market X we're with our in share be have it's that businesses internally we're think I to don't doing stronger. in,

James Sidoti

you. thank Well, right. All

Operator

. Marsh next question our will come David Research. from with Singular And

David Marsh

tax year? and that you was to low the in the which Were forward? expect of carry the idea quarter to tax and as you benefit income I what just touch touch extremely wanted on ops. there quarter in forward us the some roll of give you income GAAP will the loss First, in expense in a that you Could percentage continuing coming benefited you and some -- that continuing on quarter, continue next from as

Michael Koempel

Yes, it's our this a we and the international. domestic mix have And large versus in Central of it's amount in really profit been Dave, far so contact through the our obviously, America. center quarter year, really business of profit

to So and in what really at that has the, case rate look the that's been we we'll profit be would which the single plan as year. perspective. I'll the balance of that our through rate a and is mix we a year, expect of digits, call, year the of the that relook again, from then domestic driver mix, next benefit driven from high where, we the lower foreign But to year, next obviously, this year. this . And obviously

We last discrete which point, last really haven't it's due year, many nature the year, discrete had. foreign had what to rate the this a our domestic we drove this But did as year, higher of as profit. of versus again, items we at reflection

David Marsh

then had with some to last it. levels, customers to as And you quite refresh high this that that in regard secondly, just I quarter. but know call, had maybe some growth obviously, the center about nice Got quarterly call talked sequential the business,

have trying for guess, sequentially out versus you tone kind just how about segment? the and are maybe generally seen fourth second the kind Just fourth guidance third quarter? of you thinking -- guys quarter And more for of of of could the trying improvement I I'm year you to Have of that you general the versus flat-ish talk, the beginning the been are quarter? maybe figure overall second renewals kind in quarter the we just through there? parse gave. quarter your And the to the

Michael Benstock

of and date, continue not we just But and last we they some that been to June, because that of at end And back seats have seats. few of lost again, hundred seeing were through And all we set by who the quarter. some spoke fact quarter, on I about odd customers that those, have grown They seats We have haven't we XXX of number new all have lost we spoke we new since have to hundred last the few are we done replaced seats. existing before. putting the macro replaced improvement. scaled a clip with that the and We're new put had about on them. of a environment.

ever again, we're seats we're all deficit XXX-some-odd fighting more year we're that on bring to future frankly, of the news We customers got But worked we've against put in we're periods. And on. still comps. we've opportunities more ever greater -- on to The on. as the opportunities put on we've more working good in quite working than will that larger than when trying us is, realized, revenue

We put December. we'll of on the on continue few put November, a in to seats month in month of the and

December a where with back holds to on centers they want Mike out to in with January. quarter. we But on headed of is of turn our where and not call seats. that get let we're to respect to the respect put that. speak says that Everybody traditionally quarter should a I'll lot period in kind the going well with guidance

Michael Koempel

in Sure. fourth I to segment expect mean the continue that quarter. Yes. see in growth to we

little as throughout that increases we there's we EBITDA a late being pretty in with from in perspective, cost terms year, pricing. think at a some of the sequential increasing low of on, the started touched I growth and first quarter given the an been point certainly

looking it's first for pipeline strong we've the the as customers, is more quarter. had We're strong But and onboarding new before.

picking XXXX. throughout again, momentum into feel, and center business up the year the like we So contact is

David Marsh

we a fight free do cash flow debt could to then cap on fourth of And lastly it's to bit quarter? you more fantastic for against give I just sequential helpful. like would Or if picture in holistic very and that a what With be the Would trends just guess job really little I a looks That's mean, little where you cash flow, expect bit of mean, a fourth of going. kind year-to-date. some Great. quarter working just repayment start I kind us debt repayment free me. regard there

Michael Koempel

Yes.

made of mentioned, a I the think lot through progress, we've first think, As I X for I -- months.

And would depending levels, expect what normalize fourth volumes inventory I the in those quarter, here we to making levels our depending we as of QX upon need So planned bit. for as things may in the to revenue look course, some we investments of QX, level upon look to like. start a

there's debt say, get I to, targeted QX, ratio would the still certainly with that we've level for, Dave, levels we the X that continue looking cash the look where to not still in we're generating down bring to again, toward free quarters. at opportunity over last would So look flow but been

you if already statement, our at coming far to at this look -- you chance look had inventories Receivables a flow have If our we've cash been pretty brought year. down significantly so down.

first still made not So We're I there's there, progress over we've opportunity of think extent quarters. again, there. a the -- some X lot but to the that seen we've

David Marsh

on the That And quarter. of Right. . sense. congrats lot makes Right.

Operator

session. to Benstock for turn closing over conference remarks. And our the like any to I'd Michael question-and-answer back

Michael Benstock

finishing you, We're I Thank for jump bit. operator. a call. to joining looking I our Okay. there everybody little the the strong. want to year thank gun forward

further evening, do markets so to of X share goal, obviously, you out times. to uncertain we and thanks can reach The attractive even and our updating grow, to this look Our intention year SGC's shareholder don't ultimate is is during We're so profitably. to Enjoy then. market enhancing questions that please confident our again. We across all with hesitate do any forward on continually before results full and value.

Operator

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

You lines. your may now disconnect

Superior Group of Companies (SGC) 6 Nov 232023 Q3 Earnings call transcript