• Revenue: $150 million, up 10% year-over-year.
• EBITDA: $11.7 million, up 26% from $9.3 million.
• EBITDA Margin: Expanded to 7.8%, up 1 percentage point.
• Gross Margin: Increased by 130 basis points to 40.4%.
• SG&A Expenses: Held almost flat at 34.9% of sales.
• Earnings Per Share (EPS): Rose to 33 from 19 a year earlier.
• Operating Cash Flow: Positive, contributing to improved net leverage ratio.
• Health Care Apparel Revenue: Up 11% to $33 million.
• Branded Products Revenue: Up 11% to $93 million.
• Contact Centers Revenue: Up 4% to $25 million.
• Net Income: Improved to $5.4 million from $3.1 million.
• Interest Expense: Reduced to $1.6 million from $2.5 million.
• Debt Outstanding: $85 million, improved from $94 million at year-end 2023.
• Share Repurchases: 452,000 shares for $6.3 million, average price of $14.05 per share.
• Full Year Revenue Outlook: $563 million to $570 million.
• Full Year EPS Outlook: 73 to 79 per diluted share.

• Warning! GuruFocus has detected 4 Warning Sign with SGC.

Release Date: November 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 (NASDAQ:SGC) achieved a 10% increase in revenues year-over-year, marking the highest quarterly revenues ever achieved in their core products and services.
• EBITDA increased by 26% to $11.7 million, with a margin expansion of a full percentage point to 7.8%.
• The healthcare apparel segment saw an 11% revenue increase, benefiting from growth in online channels and improved gross margins.
• Branded products segment also experienced an 11% revenue growth, driven by increased volume with existing customers and new customer acquisitions.
• The company generated another quarter of positive operating cash flow, strengthening its financial foundation and improving its net leverage ratio.

Negative Points

• Despite improvements, there is still customer hesitancy due to ongoing uncertainties around inflation, interest rates, and geopolitical conflicts.
• The contact centers segment experienced a decline in EBITDA margin from 16.8% to 12.1%, impacted by increased agent costs and investments in talent.
• SG&A expenses increased to $52 million, up from $47 million a year earlier, driven by employee-related costs and marketing investments.
• There are ongoing supply chain challenges, including container shortages and logistics delays, affecting the timely delivery of products.
• Existing customers in the contact centers segment showed lower revenues, indicating potential volatility and unpredictability in customer demand.

Q & A Highlights

Q: Can you elaborate on the impact of supply chain delays on the third quarter revenue? A: Mike Koempel, CFO, confirmed that the supply chain delays from the second quarter resulted in a few million dollars of revenue being pushed into the third quarter, as anticipated.

Q: How are customers reacting in terms of spending and outlook, especially post-election? A: Mike Koempel, CFO, noted that while demand is edging up, customers are still managing budgets tightly. The recent Presidential election may stabilize some uncertainties, but overall, customers remain cautious.

Q: What is the current status of existing customer revenue in the contact centers segment? A: Mike Koempel, CFO, explained that while there was a decrease in revenue from existing customers this quarter, it is not indicative of a trend. The company had added seats for existing customers in the first half of the year, and fluctuations are typical.

Q: Can you discuss the pricing power and potential for future price increases? A: Mike Koempel, CFO, stated that for new customers who have never outsourced, pricing remains attractive as it is significantly lower than U.S. costs. However, for those familiar with outsourcing, pricing is more competitive, and the company is exploring lower-cost solutions to maintain competitiveness.

Q: Will the company complete its share buyback authorization in 2024? A: Mike Koempel, CFO, mentioned that as of the end of the quarter, $2.6 million remained under the $10 million buyback authorization. The company continues to view its stock as a good value and will manage the plan accordingly.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.