SUPERIOR GROUP OF COMPANIES, INC. Q3 FY2026 earnings call

• Overall Financial Performance: Consolidated revenue grew 5% year-over-year to $146 million, accelerating from Q2's 3% growth. Diluted EPS was $0.17, down slightly year-over-year despite strategic charges.
• Strategic Acquisition: Completed the acquisition of Select VoiceCom, a Philippine-based BPO. This expansion allows the contact center segment to offer nearshore, onshore, and offshore ("right-shoring") solutions, significantly expanding the addressable market, particularly in healthcare.
• Branded Products Growth: Strong momentum driven by higher volumes with existing customers and new client acquisitions. Management is investing in key leadership roles, including a Chief Revenue Officer and Head of Marketing, to drive further market share gains and long-term growth toward a billion-dollar run rate.
• Healthcare Apparel Turnaround: New leadership is streamlining product assortments and inventory. The quarter included significant one-time charges ($4 million inventory write-down and ~$1 million credit loss) as part of this necessary repositioning to improve future margins and reduce working capital needs.
• Balance Sheet Strength: Cash and equivalents increased to $28 million. Average debt outstanding decreased by $25 million, reducing net interest expense to just over $800,000. The company amended its $200 million credit facility for another five years, providing flexibility for capital allocation.
• Capital Return: Paid $2.2 million in dividends during the quarter and has approximately $9 million available under share repurchase authorization.

• Branded Products: Revenue grew 8% year-over-year to $92 million. This segment contributed approximately 63% of total consolidated revenue. Gross margins improved by 160 basis points, and EBITDA increased by 31%.
• Contact Centers (OfficeGurus): Revenue grew 7% year-over-year to $24 million. This segment contributed approximately 16% of total consolidated revenue. Gross margin was flat year-over-year but improved sequentially by 200 basis points. EBITDA increased by 22%.
• Healthcare Apparel: Revenue declined 3% year-over-year to $31 million. This segment contributed approximately 21% of total consolidated revenue. Gross margins decreased by 580 basis points due to a $4 million inventory write-down and credit losses. EBITDA decreased by approximately $3.7 million compared to the prior year period.

• Full Year 2026 Net Sales: Revised upward/tightened to a range of $578 million to $585 million (previously $572 million to $585 million).
• Full Year 2026 Adjusted EPS: Revised upward/tightened to a range of $0.60 to $0.66 (previously $0.54 to $0.66). This represents up to 43% growth at the high end compared to FY2025 EPS of $0.46.
• Note: Guidance does not include revenue from the recently closed Select VoiceCom acquisition.

• Healthcare Apparel Margin Pressure: Continued margin pressure expected in the first half of the next year as the company discounts inventory to streamline assortment. Credit loss risks remain due to changes in customer financial positions.
• Macroeconomic and Political Uncertainty: Potential impacts from changes in Washington policy, Congress-executive branch stalemates, and tariff regulations are acknowledged as uncertain, though management believes drastic negative impacts are unlikely.
• Integration Risks: While the Select VoiceCom acquisition is viewed positively, there are inherent risks in integrating offshore operations and realizing anticipated synergies and accretion.

Q: Analyst asked for details on the Select VoiceCom acquisition, specifically its size relative to TOG, strategic value beyond bolt-on, and financial profitability/synergies. / A: Dom Leide explained that Select VoiceCom provides an established offshore presence in the Philippines, enabling 'right-shoring' (blended nearshore/onshore/offshore) solutions. It expands the addressable market, particularly in healthcare where they employ Filipino nurses/therapists, and offers cross-selling opportunities for TOG’s AI tools. Mike Koempel added that annual revenues are ~$20 million; profitability details are pending valuation analysis for amortization, with pro forma data to be released in the 10-K and 2027 guidance.