SGC - Earnings call transcript Q2 2024 | Superior Group of Companies, Inc.

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Operator

Good afternoon, everyone. Welcome to the Superior Group of Company's Second 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. Words such as expect, believe, anticipate, think, outlook, hope and variations of such words and similar expressions identify such forward-looking statements.

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

Michael Benstock

to the our Today, operator, call. I'll you, our with quarter. and second start Thank from welcome highlights financial

Next, which the I'll turn questions. a detailed and I our for then the I'll through segments cover take Mike go-forward be strategies. us take and after some our business of discussion to to discussion of high-level XXXX, your a how over of both to each call Mike financial performed, including would outlook X happy

started. We quarter. second get Let's delivered profitable the results in

we supply forecasted due originally conditions as strong to had well chain delays. However, as our as were results market as not softening

revenues period. are over million, care full $XXX in X% quarter. segments the outlook. On third expect maintaining branded We in revenue the health we we up prior consolidated with basis, year that chain to recover apparel our basis, year generated a On the supply of associated products and the delays the

X.X% down from Our EBITDA year of earlier million $X.X with to $X.X X.X%. margin a million compared a of was

by than last continued growth were margin year. margin as offset in dollars gross to gross SG&A higher more and percentage Our compared

our costs first deleveraged down SG&A revenues. our slightly on costs quarter from lower-than-expected were second the quarter, the While

a prior as EPS quarter our was in $X.XX the quarter. result, year second $X.XX As diluted compared to

capture We which, leverage sheet solid a term financial enabled we will while strategic help share markets, very the past our our cash standing we maintain end continue highly are us on optimistic the across ready compelling position net strong during remain we any for market flow mentioned balance additional opportunities. I the made the over long year demand in attractive M&A investments second quarter over trends quarter, to strong a improvements segments. ratio. Therefore, business operating across that us to cautiously X drive the that last X make to with

end upcoming shift geopolitics While the we began slower first and see said, we rates, a positioning but the uncertainty a we I'll quarter to long-term half quarter. X remain around the attractive of large, Superior last customer the of that weigh has can control, which growing is was growing inflation, strong, purchase interest the reiterate decisions very what focused on our second to of to markets. during on as mentioned what quarter demand for still share small Group customer global and sentiment. With back I Companies growth. company election

of through technology. future capitalize given of more and through investment own driven the while our enormous on our in people, superior ability products share impressive win and our We markets optimistic our providing We're new retention customer fair target to experience. customers to our maintaining are customer statistics the than size wide a

start apparel. with health I'll to care business our segments, Turning

business, strong year, as timing our partially headwinds chain continued part both to issues. These down our business compared During the wholesale supply second revenue were channels. quarter, last in due wholesale due offset to the of digital our store-based continued and largely X% softness our to uniform was by in in in direct-to-consumer revenues temporary and growth

the gross support driven brand marketing a primarily direct-to-consumer channel. investments SG&A the higher While stages early to increased in at year, for rate the our up rate, weak last of by and the percentage of versus drive was margin further awareness

of million and result, this year's growth. Over addressable wear our a to expanding compared million the we every our quarter. prior than health work time, more in EBITDA sales second the under as care and As ourselves resilient brands significant quarter additional expanding long-term was the efforts rebranding will the we apparel, drive health market, care well strategies large who $X.X selling million $X.X direct-to-consumer year including in apparel, our believe to trademark Wink beyond see decline capturing day. Despite already last growing in X caregivers share successful

Turning Products. to Branded

X% up despite but uniform instead the arrived an to was in related contract to inventory inventory quarter June, was ago the shift to compared contemplated third on revenue Our whose customers year shelf be quarter. certain in the

the in offset increase order overall As buying Interestingly, of by number pattern of our in which a revenues and the by a the the these driven result, BAMKO assets products, customers. orders, in for trajectory segment, third will lower-value is largest sizes contract portion customer the significant demand a the be particular, being quarter. by smaller realized is cautious from reflecting partially

additional are, revenue. The from for haven't therefore, stopped customers employee-related news their was customers, the when expanded was dollars being higher the rate The including orders, and opportunity which of higher by in They gross SG&A, margin good number including increased growth and share commissions by however, spend. driven that, is offset results greater capturing with new market on the more margins. for buying. primarily costs, prudent normalize gross increase headwinds However, in

down plan driving EBITDA from result, increasing greater standpoint, rep year recruiting. for our From $X.X slightly strategic game products million products our wallet activity, growing strong a earlier. our was the a sales around RFP share, branded million retention, of $X a As revolves branded customer

last segment of the customer increase. Due revenue in pressure grew to discussion, X% puts TOG business from opportunities, only to year-over-year, term. market. growth on than offices new our Our the margin quarter's in revenues billion both advance less continues centers gross share X% contact talent to but up ample expand X% which has $XX invest satellite market in room accelerating and growth, in slightly this attractive and and short SG&A, to support long-term existing Wrapping

is more competitive continue value performance and and while we flat result, TOG's our We're results. earning our new pipeline prior ultimately bring offerings customers, and strategy top with for reflects existing period EBITDA the to line a was our that year business ensuring solid both the our million almost demand As clients. $X.X to at our growing stronger despite offering from seeing the

some margins highest quality technology to latest already at employing the experience, the our while to investigating time, provide also and turn technologies of efficiency outlook year. update are using call grow additional the provide and enhance us for customer to We over quarter full on the walk time. I'll greater our over Mike the second an through financial our results to Mike? now and to detail in same

Michael Koempel

Thank you, Michael.

During full the given second rest the quarter year-over-year light for This quarter, reiterate favorable line are we we growth. year. quarter to somewhat year year our able the revenue was over forecast, top And consecutive grew our outlook second revenue of the versus of X% prior was expectations while our our our period. our second

partially $XX our $XX in segment, increases X% X% the care growth offset grew our $XX Our to Branded decline consolidated which to driven apparel grew our by X% These to quarter. was Products by were million. sales segment and million segment, contact million, sales for a health which center

of a health products our In terms and and costs combination by at XXX of coming our contact year, in our XXX increases Both margin expanded point decline branded offset points, increases over a anticipation profitability, new of XX.X%. in center margin margin basis year. gross points pricing. These our in to basis costs year-over-year continued including increases respectively, improved supply were of agent consolidated segment, driven chain care in at the gross of half drive prior back partially with clients employee-related XXX and the of the rate expansion driven training agents, apparel XXX-basis by by

sales-related year costs. the professional from the margin, products driven expenses Our and were compensation $XX from in a employee-related in growth and up SG&A for higher $XX primarily third-party increased branded expenses, million by increases earlier, million advertising higher fees marketing quarter, gross

prior million down Our period. EBITDA was of in year from the million $X.X $X.X

to the much prior almost flat support combination quarter $X.X talent reflecting and improved million. EBITDA Looking slightly the $X.X year just quarter Centers expense higher by of expenses. Health $X.X in which our That outstanding, higher primarily apparel SG&A SG&A this largely improved $X.X $X.X last and sales sales a by in expense million touch came at offset revenues reduction growth $X.X care primarily in a rate first margin stronger as the quarter. The down year Branded as investments $XX for million was year-over-year down million year the a a by the moment. interest driven gears, to was average marketing decrease stronger a was lower lower debt at sales million this in higher $X.X second in from earlier the to was rate growth. Shifting our million from in at and segment, year I'll in from were weighted expenses from offset gross and by Products EBITDA was future margin EBITDA million gross million, sequentially period, quarter. Contact this due on interest

diluted share reported $XXX,XXX quarter relative second diluted $X.X $X.XX million for of per terms per In we to year income, in $X.XX the share or net ago period. a or

improved with ratio to provided a year-to-date, covenant leverage during our million, XXXX the our wrap which flow relative is which up X.Xx $XX operating was the our full year generated the reduced continues on another end balance last net and EBITDA to quarterly unchanged million cash ended much sheet, quarter. We've quarter we we equivalents from X.Xx what with call. trailing We also at our and improve. of second outstanding Turning XX-month cash cash $XX million outlook, in our by earlier. I'll to debt of year $XX and the second quarter

the range diluted These $XXX be the that first our million range prepared million of ranges as to results, full Specifically, be the remarks. expected operator, would we our full call concludes you open happy over Michael to the for quarter, acceleration share previously be please could per and timing to year take later year look to sales I and a for including in half of discussed. That of second were $XXX questions. during in to quarterly $X.XX. if line, $X.XX And originally the revenues earnings

Operator

Barrington question Kevin The instructions] Research. comes [Operator with first Steinke from

Kevin Steinke

I asking wanted off supply about the to start delays. by chain

You care delayed mentioned quarter. being you and apparel the the And third pushed revenue mentioned Branded Products. health to

could quarter third will how the trying that benefit? was delayed to a much get size therefore, the revenue you as sense Just if to and

Michael Koempel

really a is reducing started Hi, of to of getting Mike. Kevin, increase during this demand an certain China. second question. was suppliers combination just the we then in What out I'll quarter and see particularly the capacity and product take

receiving. product as some we of So, started well. revenue. in were on some side, production delaying goods see did in terms did directly the saw in fabric our finished that to of in impact us XX, also the recognition of impact sales facility It impacted which to which the health we delays side our it again And we also care

again, So, which the our dollars create to approximately a quarter. those would in did expectations experienced we I of, few the a delays, million say, tune shortfall for

timing, the third quarter recognize we'll some throughout primarily. to in of that's the we July of recognize again, so, began which and And month

Michael Benstock

be elected, of trying the demand of of in coming accelerate And that of those could a Asia. a year. on of of Kevin, were out delays try has anticipation China, the Yes. be demand. to that their with backbone to particular precipitated are that the placed lot people to there Trump If that products lot some placed logistics to of companies a by fact out next tariffs were the lot shipments meet on

of the delay. reasons one the certainly for that's So,

Kevin Steinke

quarter? slower the with softer to to And mentioned kind as apply that and thus the market that of conditions decision-making, the regard Branded you continued progress decision-making is third And, segments? slower the primarily across does into far Products? customer you that Is

Michael Benstock

had X.X are seen they concurred and weeks The customers' presidents part. RFPs brought our question. to forever. slower Good summit about together, all of the a ago leadership are We they responses have taking decision-making and that of up. going all on RFPs all never our

longest departments. or been pull certain their be and purchase part awarded forever spending customers from our defer exactly, it happens, ever. We're that true what's part time period And items. their people in to It's it sometimes than own to the been time. orders. told people's been our of businesses. I actually on companies uneasiness why business all they've that spending they've seeing in our to is even decision. taking trigger to slope us the are in than except is an being reason But and we're legal get some that taking The larger larger business than longer through Sometimes, takes things of mandates don't of Even longer after has causing they're our of for we've pipelines give make know pipelines or it for that just there. will the spending taken their a down that

So, dramatically in things that, pop, the a us share. larger in that that's start that life. past. happy will fact our do result of are just When than to been We're we they've market to pipelines additional believe

Kevin Steinke

that? some upon other that advertising And of and back what into I could the the think, marketing was to the and and in just of maybe magnitude health again, you direct-to-consumer relation half expenses, increased expand care, that areas, year? continue if will about talked you So,

Michael Koempel

again. Kevin, Mike this is

marketing continues segment. So, the care to be the predominant increase in advertising health in apparel

Michael of prepared invest we channel as As the these we say, last attributable in heavier time, well officially to as remarks, us in that the direct-to-consumer. Obviously, the are which, we, continuing mentioned build over early build that rebranding the of which of as again, continuing expect rebranded awareness the and leverage brand, gain in I'd investments to Wink to growth still to base. year customer would stages specifically, that's

down. see a is certainly sales particular, are pressure in can that you on in as So, where health putting care especially quarter,

half more back expect to We year. into gain the some would that have gain expect we'll that leverage again, a this move investment. and to sales as leverage But continue to forward our expectation half with of back on we the as in we year. But again, begin return move the meaningful we it on of to

Kevin Steinke

being back. half wanted supply of I to I the as of the kind to that is the second think of some year outlook? issues, seasonal chain assume something ask about think the that a delayed to about the also of lastly, guess you're Obviously, I Just revenue Is talked about outlook. expecting or the you you factored expect But you seeing outlook revenue. in in business? into kind typical come that And your due ramp

Michael Koempel

Michael longer. business a in our saying The is little with we're what bit in new to Kevin. just of been I has is customers. more That to expecting, what good decision-making terms would the say, RFPs pipeline that add news center is where was particularly contact our very strong,

decision-making, year. in And than that half year, and sales the the that of the so, into timing we magnitude might half back larger just factoring them again, that with otherwise QX back timing. And the see would of translate a of because of the the of for is particularly in

Operator

Your next question Keegan Cox comes D.A. Davidson. from with

Keegan Tierney Cox

center SG&A. you're and your the but contact on business, I got just little higher if out. in kind dig growing of I was on just about a early wondering bit you wanted more it talk ask to more why that that could was from little investment a I

Michael Koempel

a The increase being, gross one gross SG&A Sure. with handful driven increase of we've an And, in we branded said before, pay our as margin by dollars. did we business. commissions products based margin on factors, have

businesses. as in margin Products. I trend, those are gross what to our commission future believe Products talent growth rise, well some space we within Branded of making as our say our be expense as within support So, Branded obviously would will dollars we trend centers, so the investments contact to

call, would infrastructure. So, more building out, I little a bit what

a of investments current satellite our I offices, pools we additional to couple with really some which access of office business, train enable of would what helps us off the made have within also obviously, onboard Thirdly, format, in talent, call contact incremental center faster.

support So, with is advertising within health investments which I expense our new part some in to then and predominantly another growth on customers of early Kevin, we're that making those business. marketing care referenced board. the again again, here be would of And the stages just the coming lastly, meaningful

Keegan Tierney Cox

follow And up then of to kind just that. on

know have bit all a through the like impacted in delays, guys chain in heading such. been talked the You Have by facilities at I there? about and Haiti and they you supply little Caribbean, storm

Michael Benstock

result. been Haiti, storms, which in is happens has the as Haiti, by not impacted not other what And have They impacted unrest all really that side of civil the downtime thankfully. the at much we've the in And us quarter a had no either. past in

in So, we're good there. shape

Keegan Tierney Cox

kind up I were back from I about just it contact Is half dig one what to And I make Just of in think had talking, right in? kind the of Michael, to sure center? of just more the you the wanted picking -- down of the I pipeline that's into in then got business year. it segment And trying

Michael Koempel

list center the to second contact then, talking we've side business we're prospects about a are taking about where that is is in over at rate serious if higher. they case. And I of much that's that closing to the their is of with it's only told that say Yes, very pipeline that's won, course, I'm with. having longer when when business business. close And it taking conversations make people that But the who satisfied prospects, of the we're even that business

Operator

Jim from Inc. comes Sidoti question Next Sidoti with

James Sidoti

better first guidance. you And half we're to of of than to it was. QX So, of QX results moving QX and the even and that the seems the expect results the year the be

So, what's that confidence? you giving

Michael Koempel

of we benefit say which some delays, bit there in half Inc. historically quarter, year. would in has will about little we things, the the from Products couple a the I talked quarter. Two, typically perspective, a a is leading call chain a third very of is, obviously terms say of strong into know Jim. particular, Branded that fourth One would that I supply back what the seasonality I'd time

health just referring Michael the timing gets of Thirdly, took business timing second back Those of half what sales then Michael before, the is last the a as to in kind to pressure I and timing the there training just SG&A would customers, year, bit that that we what drive of of on orders. onboarding again bit expect are of customers from segment in in coming centers and year contact of But would that couple where a go. And say, decision-making in was from half the the a new on which as back the standpoint, were to touched place coming. Again, terms advance sales first sales on half this I the of just ready perspective, in of back those of and Inc. I center are contact we well. a purchase expense year. sales put comment for those Time are quarter in of trend customers, to care new for of of in a because little are half that the lastly, terms in now of the improved little

James Sidoti

QX. And than fact those historically, leveled guess, quarters I you're do little year, think in that do better a X to, going The QX is you that off? being even QX more this catch-up some

Michael Koempel

balanced, point. Jim, That'd a to bit little Yes. be more your

James Sidoti

finding with are you? hiring Or easier? branded of is terms that be any you still in challenge that then to a to salespeople And products, for

Michael Benstock

prior us internally, operational away other in do achieve some We've and we're we as the what return last success will to our grow of wedge some additional some force in help believe out had sales current that are efficient. that sales satisfied better a process hiring efforts technology well rolling using more had well. we've that the well have somewhat create sales even will things comfortable at environment. so getting to in quarters. AI lot to of our for somebody as than more can salespeople. We results their efficiency looking current we make We're force the for than other But ways in with easy we're never It's who's quarter as

James Sidoti

you margin, one last have is progress sustainable? then made from where that The these of you And me. your are XXXX think area gross and up levels one lot XXXX. significantly Do for a

Michael Koempel

expect, maintain would We we've margins where Jim, the been. to

up last of look you see our the If historically, third year, last continued back margin to rate just really you that started trend. we've year, quarter and in go to

have started last with start the we'd back margins quarter. accrue I'd that consistent lapping more in in we we because, stronger the So, say, year, the half only to third margins again,

James Sidoti

it sounds you high in number? like But XXs, a pretty that's sustainable think the

Michael Koempel

Yes.

Operator

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

Michael Benstock

next Yes. you thank summer. We're execution. We focused for operator. call excited any today. I on well. growth thank reach about questions further please as to to with for updating and the again on your And look want rest Enjoy then. our questions joining Thank have is great at the for before if and to for our you your prospects company call, being strong as forward of everyone here everyone SGC the hesitate Thanks you, [indiscernible] don't out always, us in you interest again

Operator

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

You may now disconnect.

Superior Group of Companies (SGC) 6 Aug 242024 Q2 Earnings call transcript