SUPERIOR GROUP OF COMPANIES, INC. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Branded Products: Pipeline setting new records, order backlog strong, customer retention over 90%, recruiting new sales reps, winning new accounts, expanding wallet share.
• Healthcare Apparel: Investing in digital channels (wholesale and direct-to-consumer), strategic spending on licensed brand products.
• Contact Centers: Highest margin segment, first sales team benefits, using tech for customer experience and operational efficiency, targeting small- and medium-sized enterprises.
• Balance Sheet: Ended Q1 with $20M in cash, actively repurchasing shares, net leverage ratio 2.2x trailing 12-month covenant EBITDA, well within covenant requirements.

Segment Performance

• Branded Products: Sales of promotional products grew, but branded uniform sales with existing customers were down Y/Y. Pipeline of business opportunities is setting new records, order backlog is strong, customer retention over 90%. Revenue off less than 1% Y/Y.
• Healthcare Apparel: Revenue down 7% Y/Y due to economic uncertainty in institutional Healthcare Apparel and brick-and-mortar wholesale-related channel. Investing in growing digital channels and strategic spending on licensed brand products.
• Contact Centers: Revenue grew 3% Y/Y, highest margin segment, first sales team helping in winning RFPs and developing pipeline, using cutting-edge technology for customer experience and operational efficiency.

Guidance

• Revised full-year revenue outlook to $550M-$575M (vs prior $585M-$595M), suggesting ~2% Y/Y growth. No EPS outlook due to economic uncertainty and tariff developments. $13M annualized cost savings implemented, starting to impact Q2.

Risks

• Customer buying hesitancy due to inflation, interest rates, and tariffs.
• Supply chain challenges from tariffs and economic uncertainty.
• Uncertainty around executive branch moves and counter moves in tariff environment.

Question and Answer

Q: Kevin Steinke asked about pipeline building in Branded Products and Contact Centers.

A: Michael Benstock discussed Branded Products' aggressive strategies like webinars, white papers, strong pipeline despite delays, and Contact Centers' sales team benefits and pipeline development.

Q: James Sidoti asked about customer reaction to deal changes with China and cost savings.

A: Michael Benstock said supply chain disruption would take 6-9 months to normalize; Mike Koempel said $13M cost savings in SG&A from operational efficiencies.

Q: David Marsh asked about cost savings, acquisitions.

A: Mike Koempel discussed SG&A savings starting in Q2; Michael Benstock said conserving cash, will focus on accretive acquisitions post-tariff clarity.

Q: Jacob Mutchler asked about price elasticity of Branded Products.

A: Michael Benstock said they can recoup tariffs via price increases, have contractual language, and flexibility to move products to other sources.