Superior Group of Companies, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Consolidated revenue in Q3 declined by 7% y-o-y, but SG&A expenses were reduced by 7% or $3.9 million, with all 3 segments seeing improvements in SG&A.
• Focused on cost-consciousness while aggressively investing in areas for long-term growth.
• Branded Products: Addressed factors like sales pull forward and delayed ordering, with a strong pipeline and order backlog.
• Healthcare Apparel: Reduced expenses, invested in demand-driven activities for Wink and Carhartt licensed brands, with growth in direct-to-consumer channel and retail store footprint.
• Contact Center: Pipeline remains strong with new customer conversions starting to be realized.
• SG&A expenses improved by $4 million y-o-y to $48 million, EBITDA was $7.5 million, net income $2.7 million, EPS $0.18. Balance sheet healthy with $17 million cash and cash equivalents, over $100 million liquidity available.

Segment Performance

• Branded Products: Experienced an 8% revenue decline to $85 million due to factors like sales pull forward, lower customer employee turnover, smaller average order sizes, and delayed ordering. However, combined Q2-Q3 revenue increased compared to last year with a stronger pipeline and order backlog. Revenue contribution: largest segment.
• Healthcare Apparel: Saw a 5% revenue decline to $32 million, impacted by macro uncertainty in wholesale and institutional health care apparel.
• Contact Center: Revenue was up 9% to $23 million for the quarter, driven by lower volume. Despite short-term challenges, the pipeline remains strong with new customer conversions beginning.

Guidance

• Tightened full-year revenue outlook to $560 million to $570 million from the previous range of $550 million to $575 million, reflecting a higher midpoint and slight growth year-over-year at the high end of the range. The company is focused on converting strong pipelines while maintaining expense discipline.

Risks

• Uncertainty in market conditions including trade policies, inflation, and interest rates affecting customer behavior.
• Tariff-related impacts on Branded Products (sales pull forward, delayed ordering) and Healthcare Apparel (product cost reductions, margin mix).
• Elongated decision-making in the Contact Center business leading to short-term challenges.

Question and Answer

Q: First of all, congratulations on your impressive SG&A reductions, pretty impressive in a challenged environment. A couple of questions. First of all, on Branded Products, you just -- can you just kind of describe the environment?

A: Jake Himelstein talks about the market being challenged due to tariff environment, clients being selective, positive impact of new tariff announcements, and being proactive with clients to build pipeline and backlog.

Q: If you don't mind, if I can squeeze in a couple more? I believe in the last quarter, you mentioned that you purchased inventory for Branded Products in healthcare in advance. I was just wondering where you are in working off that inventory, and maybe kind of give us your thoughts on potential cost increases of inventory going forward.

A: Jake Himelstein says they've been opportunistic with inventory from lower tariff jurisdictions and domestic sources, communicating with clients on when to build up or hold off on inventory, and Michael Benstock mentions healthcare leveraging Haiti sourcing to manage tariff pressure.

Q: I was just wondering if you could give any color on your sales trends kind of by month, or what areas you're seeing strength in each segment?

A: Mike says sales building month-to-month with December being largest month, and Branded Products seeing strength due to strong bookings, pipeline, and aggressive approach.

Q: I was just wondering if you could give any color on your sales trends kind of by month, or what areas you're seeing strength in each segment?

A: Mike says sales building month-to-month with December being largest month, and Branded Products seeing strength due to strong bookings, pipeline, and aggressive approach.

Q: And if I can sneak one more in, and I might have missed this on the call, but how much did the cost savings program help this quarter?

A: Michael Benstock says ~$4M G&A reduction, about half related to cost savings, with annualized $13M savings target.