SGC

• Overall Consolidated Performance

  • Delivered a strong Q2 2026 with 3% year-over-year consolidated revenue growth to $148 million, 160 basis point improvement in SG&A as a percentage of sales, 27% year-over-year EBITDA growth to $7.7 million, and adjusted diluted EPS of 21 cents (more than doubling Q2 2025 results).
  • Ended the quarter with $23 million in cash and equivalents, generated $18 million in first half 2026 operating cash flow, and maintains a solid balance sheet with strategic flexibility for investments and capital return.
  • Paid $2.2 million in dividends in Q2 and has $9 million remaining under its share repurchase authorization.

• Strategic Transition & Operational Changes

  • Healthcare Apparel is under new leadership, undergoing a transition to a more focused, narrower and deeper product assortment to drive long-term sustainable margins and more efficient working capital use, with near-term margin pressure expected during the shift.
  • Contact Centers have built a significantly larger new business pipeline than a year ago, with net increases in agent counts and higher new customer conversion rates; the segment is investing in upfront human capital and AI technologies to drive future growth and operational efficiencies.
  • Branded Products has recorded three consecutive quarters of growth, driven primarily by volume expansion with existing customers, and maintains a growing backlog and strong replenished pipeline of both existing and new customer opportunities.

• M&A Strategy

  • The company prioritizes acquisitions that expand its ability to serve customers, fill gaps in product offerings, channels, customer bases, or geographies, rather than acquiring generic promotional merchandise businesses. The 2019 acquisition of Guardian Products (for auto dealership branded merchandise) serves as a blueprint for future targeted acquisitions.
  • Management actively pursues organic share gains in Branded Products alongside acquisition efforts.

• Management maintains its prior full-year 2026 guidance, with net sales expected in the range of $572 million to $585 million and adjusted diluted EPS expected between 54 cents and 66 cents, which represents a meaningful increase over 2025's full-year diluted EPS of 46 cents.
• Guidance continues to reflect a back-half weighted cadence for both top-line and bottom-line growth, driven by the traditional heavier third quarter weighting for the Healthcare Apparel segment and expected continued sequential revenue improvement in the Contact Center segment through the second half of 2026.
• Management will re-evaluate guidance after results from the third quarter of 2026.

1. Branded Products (largest segment): Revenue grew 6% year-over-year to $98 million, contributing 66.2% of total consolidated Q2 2026 revenue. Gross margin increased to 36.5% (up nearly 1 percentage point year-over-year), and segment EBITDA grew 25% year-over-year driven by higher volumes with existing customers, favorable customer mix, improved sourcing, and SG&A leverage.
2. Healthcare Apparel (Hofstra apparel): Revenue declined 4% year-over-year to $27 million, contributing 18.2% of total consolidated Q2 2026 revenue. Gross margin decreased 260 basis points to 32.9% due to a $2.6 million non-cash inventory write-down (partially offset by a $1.8 million net tariff refund benefit). Segment EBITDA declined $1 million year-over-year. Total inventory for the segment has fallen to just over $90 million, the lowest level in 6-7 quarters.
3. Contact Centers: Revenue declined 4% year-over-year to $23 million, contributing 15.6% of total consolidated Q2 2026 revenue. Gross margin decreased 170 basis points to 50.9% due to upfront human capital investments to prepare for future growth. However, improved SG&A (from cost reductions and lower credit loss expenses) drove stronger segment EBITDA year-over-year. This was the second consecutive quarter of sequential revenue improvement after 2025 client attrition.

• Continued near-term margin pressure is expected in the Healthcare Apparel segment through the end of 2026 (albeit at a lower level than seen in Q2 2026) as the company completes its product assortment transition.
• Soft consumer discretionary spending among caregiver communities may impact demand for consumer-facing Healthcare Apparel products, though the segment's good-better-best product lineup allows the company to serve customers across price points.
• Forward-looking statements are inherently subject to known and unknown risks and uncertainties that could cause actual future results to differ materially from current expectations, with additional risks detailed in the company's SEC filings, including Form 10-K and Form 10-Q.
• Slow decision-making for new business RFPs across segments can delay conversion of the large pipeline into revenue.

Q: What operational changes are underway at Healthcare Apparel under new leadership, and when will they drive tangible improvements?

A: New leader Chris Hein has spent his first 3-4 months focused on product assortment, merchandising, and sourcing to build a more focused, narrow and deep product offering, a priority given the long lead times for apparel. Near-term year-over-year margin pressure will continue through the end of 2026, though it will not be as severe as the Q2 2026 inventory write-down. Management expects measurable margin and revenue improvements to begin in 2027.

Q: What is the company's approach to M&A for the Branded Products segment, and is it gaining organic share?

A: The company is consistently gaining organic share in Branded Products, and will prioritize complementary acquisitions that add new capabilities, channels, or customer adjacencies rather than generic promotional merchandise businesses. The acquisition of Guardian Products, which allowed entry into the auto dealership branded merchandise market that was grown organically post-acquisition, serves as the blueprint for future targeted deals. Management says it evaluates many opportunities but only pursues truly additive targets.

Q: Why is management maintaining full-year guidance after a Q2 earnings beat?

A: Guidance is maintained because it already reflects expected back-half weighted growth from Healthcare Apparel's traditional Q3 seasonality and sequential Contact Center revenue improvement. Guidance also accounts for ongoing expected margin pressure from the Healthcare Apparel transition, which still has variable outcomes as the restructuring progresses. Management will re-assess guidance after Q3 2026 results are finalized.

Q: When will the Contact Center segment return to year-over-year revenue growth, and what is driving current margin improvements?

A: Management expects continued sequential top-line improvement through the second half of 2026, with year-over-year growth returning in Q3 or Q4 2026. The Q2 2026 EBITDA improvement comes from sustained SG&A cost cuts, lapping a prior year credit loss reserve, and leverage from growing sales. Q2 gross margin pressure was driven by one-time new customer onboarding investments, so gross margins are expected to rebound in the second half.

Q: Are there any acquisition targets expected to close in 2026?

A: Management prioritizes an acquisition or new market entry for the Contact Center segment in 2026: either a targeted acquisition will close this year, or the company will launch a new greenfield contact center in the Philippines this year with revenue starting in 2027. No other acquisitions are expected to close in the remainder of 2026.