Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Superior Group Of Companies Inc (SGC, Financial) achieved a 2% increase in consolidated revenues, reaching $132 million in the second quarter.
- The company maintained a strong net leverage ratio, enabling strategic investments and readiness for M&A opportunities.
- Contact Centers segment showed a 9% year-over-year revenue growth, indicating strong demand and potential for future expansion.
- The company reported a 170 basis point expansion in consolidated gross margin, reaching 38.5%, driven by improved supply chain costs and pricing.
- SGC reduced its debt outstanding by $12 million during the quarter, improving its financial position.
Negative Points
- EBITDA decreased to $5.6 million from $7.4 million in the prior-year period, with a margin decline from 5.8% to 4.2%.
- Healthcare Apparel segment experienced a 5% sales decline due to softness in store-based uniform wholesale business and supply chain issues.
- SG&A expenses increased to $48 million, up from $43 million a year earlier, driven by higher sales-related compensation and marketing expenses.
- Second quarter diluted EPS dropped to $0.04 from $0.08 in the prior-year quarter, reflecting lower profitability.
- Supply chain delays impacted revenue recognition, with several million dollars of revenue pushed to the third quarter.
Q & A Highlights
Q: Can you provide details on the supply chain delays and their impact on revenue?
A: Mike Koempel, CFO, explained that supply chain delays were due to reduced supplier capacity and increased demand, particularly from China. This affected finished goods and fabric supply, impacting revenue by a few million dollars. The delayed revenue is expected to be recognized in the third quarter.
Q: Are the slower customer decision-making processes affecting all segments, and has this continued into the third quarter?
A: Michael Benstock, CEO, noted that slower decision-making is affecting all segments, with delays in RFP responses and legal approvals. This trend is attributed to customer uneasiness and spending deferrals, but the company is optimistic due to a strong pipeline.
Q: Can you elaborate on the increased marketing and advertising expenses, particularly in Healthcare Apparel?
A: Mike Koempel, CFO, stated that increased expenses are mainly in Healthcare Apparel, focusing on rebranding and building the Wink brand's awareness, as well as investing in direct-to-consumer growth. These investments are expected to yield leverage and returns in the future.
Q: What gives you confidence in a stronger performance in the second half of the year?
A: Mike Koempel, CFO, highlighted several factors: historical seasonality favoring the third quarter, resolution of supply chain delays, timing of healthcare sales shifting to the second half, and onboarding of new Contact Center customers.
Q: Are the current gross margin levels sustainable?
A: Mike Koempel, CFO, believes the current gross margin levels are sustainable. The company expects margins to remain consistent with the previous year's strong performance, particularly in the high 30s percentage range.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
