Superior Group of Companies, Inc.

Welcome to Superior Group of Companies 2020 Fourth Quarter and Year End Earnings Conference Call. With us today on behalf of the company is Michael Benstock, the company's Chief Executive Officer, Andy DeMott, its Chief Operating Officer, Chief Financial Officer, and Treasurer, and from the Promotional Products Division, we have Jake Himmelstein, BAMCO's Chief Operating Officer and CFO. As always, upon the conclusion of the company's remarks, there will be a question and answer session. This call is being recorded, and your participation implies that you agree to this. If you don't, then simply drop off the line. Now I will turn the call over to Hala El-Sherbini, Senior Managing Director of Three-Part Advisors, who will read the Safe Harbor Statement. Please go ahead.

Thank you. This conference call may contain forward-looking statements about superior groups of companies, the company, within the Meaning of Securities Act of 1933, the Securities Exchange Act of 1935, the Private Securities Litigation Reform Act of 1995, and all rules and regulations issued thereunder. Such statements are based upon management's current expectations, projections, estimates, and assumptions. Words such as will, expect, believe, anticipate, think, outlook, hope, and variations of such words and similar expressions identify such forward-looking statements, which include statements on the impact of COVID-19 on the company's business, including inventory, supply chain, manufacturing capacity at the company's own and contract manufacturing facilities, service capacity, and customer demand. Forward-looking statements involve known and unknown risks and uncertainties that may cause future results to differ materially from those suggested by the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following. The effect of the COVID-19 crisis on the U.S. and global markets, our business, operations, customers, suppliers, and employees. General economic conditions in the areas of the United States in which the company's customers are located. changes in the markets where uniforms are worn, where promotional products are sold, and where call center services are used, the impact of competition, the company's ability to successfully integrate operations following consummation of acquisitions, and the availability of manufacturing materials, as well as the risks and uncertainties disclosed on the company's periodic filings with the Securities and Exchange Commission. including the company's annual report on Form 10-K for the year ended December 31, 2019, and the eight case filed recently. Shareholders, potential investors, and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. The company does not undertake to update the forward-looking statements contained herein to conform to actual results or changes in the company's expectations, whether as a result of new information, future events, or otherwise, except as required by law. Please note that all growth comparisons that management makes today will relate to the corresponding period in 2019 unless otherwise noted. With that, I'll turn the call over to Michael.

Thank you, Hala, and welcome, everybody. Good afternoon. Thank you for joining us to discuss our fourth quarter results. With me today, as usual, is Andy, who will report on the overall SGC results and status of our operations. And Jake will report today on BAMCO's financials and the state of our current operations there. Jake previously helped lead the third quarter earnings call, if you remember, when Andy was not able to attend. As BAMCO becomes a larger and larger part of our company, we feel that the addition of Jake to speak to BAMCO's results and answer questions is helpful. As usual, when we are done, we'll be open for questions. So let's get started. I am extremely proud to have reported our results this morning. Record results in all segments and significant increases in top and bottom line results is positive news for our shareholders. I am especially proud to have done so in one of the most trying years in our 100-year history to report on how we pivoted and brought even greater shareholder value than ever. To remind you, 2020 marked the 100th anniversary of the founding of this company. My great-grandmother, Rose, started this business on the heels of the Spanish flu pandemic, entering us into the world of medical apparel in 1920. She was a bold woman. Well, only after she started the company was she even given the right to vote. She was a trailblazer. I've been preceded by many bold leaders, my grandfather, David Benstock, who saw the company through World War II and the support we gave to our armed troops during that time, and my father, who diversified the company greatly in the uniform sphere, and took the company public in 1968. Our legacy of 100 years is phenomenal, and to have ended our 100 years in the midst of a pandemic with the level of success we have achieved gives us certain bragging rights. I mostly don't want to brag about our 4,600 associates who worked harder and smarter with so little clarity as to what was going to happen this past year. They fought for our survival, and not only did they succeed, but they exceeded beyond all of our expectations. Our work-from-home solution was deployed in mid-March across all countries that we operate in. None of us knew at that point what the future would hold, nor what the contingency plans we had put in place to sell PPE and to how to heighten our focus on essential customers would yield in terms of our level of success. As countries shut down, we benefited greatly by our long-term strategy of redundant manufacturing. moving production around the world like chess pieces to ensure continuity of supply. In keeping with our legacy, we also made record donations last year, millions of dollars in cash donations and essential products to healthcare systems. Our donations helped clothe over 100,000 caregivers. The full value of our donations well exceeded $5 million. Charity is in our DNA. It always has been, going back to our formation in 1920. Our business got started as an active charity when my great-grandmother, Rose, helped three fellow immigrants get our business started at Superior Surgical. We are fortunate to be physician today with greater strength and with more purpose than ever before. Our revenue has exceeded a half a billion dollars in sales this year. If you look back to 2010, when our revenue was $105 million, we managed to increase market share during and following the recession and the subsequent cotton crisis. Here we are 10 years later, more than five times the revenue we were able to achieve in 2010. Our 2020 earnings increased over tenfold over that same period of time. The most amazing part about 2020 was that not only did we source and sell over $131 million of PPE, but even without PPE, every segment of our business hit new revenue records. 2020 was not without its challenges. There was a sizable contraction in the promotional products industry and in the non-essential side of the uniform industry. But we have intentionally positioned our company to withstand most any uncertainty for the future. We always like to say to our investors that we are somewhat recession-proof and that we are so well diversified across so many products and services. But now we know we are pandemic-proof, too. In saying that, the bragging stops, of course. My heart goes out to the millions of families who have lost loved ones during this pandemic. My gratitude extends to all the caregivers, first responders, teachers, and other essential workers, including our very own warehouse and production associates, beyond anything I could possibly put into words. This pandemic isn't over, but our future is solid, with or without future crisis sales. Around this time last year, we discussed our trend successful transformation to elevate our innovation, automation, sales strategies, and leadership alignment for the next strategic phase of our growth. We continue on that same path in 2021. We accomplished a great deal during 2020, but the unprecedented growth we saw will require additional investments in human capital. As we have leveraged our investments in the past and our shared resources infrastructure to control costs and deliver record-setting results, we will continue to do so in the future. Our annual net sales were up by an impressive 40% to over $526 million, along with a remarkable 240% increase in net income to $41 million. These are truly outstanding results, further highlighting our resilience and strength. While the pivot to PPE sourcing was key to our growth in net sales and net income, we should emphasize again that we achieved notable organic growth in net sales in all three of our business segments, even without the impact of sales from PPE. Andy will, of course, provide more color to that. As we reported in third quarter, we are still seeing continued demand for PPE in our healthcare and employee ID retail business sectors, including reusable protective apparel, such as barrier coats and isolation gowns, as well as scrub apparel. Earlier in the year, we bolstered our inventories in much of our legacy PPE, as well as scrub apparel, which has supported much of our organic growth this year, and we believe the majority of which will be sustainable for the long term. Our FashionSeal Healthcare and CID scrub products saw sizable increases in sales across our traditional customer base. At CID in particular, we also found new channels with mostly e-commerce retailers to move the needle substantially with respect to revenue and operating margins. We've spoken previously about our Wonder Wink Indie line for FashionSeal Healthcare designed by CID. This new innovative fashion collection was essentially spoken for before even arriving in our warehouses. One of our key laundry distributor customers put out a press release at the end of December announcing the addition of the Indy branded scrub line as part of their managed uniform service offering. We are excited to continue our longstanding partnership with them and others who have come forward to support the long-term success of the first of its kind addition to our scrub offering in many years. We expect increasingly wide acceptance for this distinctive fashion scrub and anticipate that over a three-year period, it will ramp up to represent greater than high seven figures in annual sales. We continue to work on our international marketing strategy through CID. As we discussed last quarter, we are currently selling healthcare apparel into European markets at modest levels. As part of our long-term strategy, we have contracted with a warehouse in Poland to begin distributing our products and to be closer to our customer base. This will allow us to build our footprint further across those markets. HPI, our employee ID business, has a diversified customer base, including COVID essential and non-essential businesses. Revenue from the smaller non-essential sectors within our HPI customer base was down by almost 30%. This portion of our employee ID business includes the travel, dining, and entertainment industries. These sales declines were largely offset by robust sales to essential retailers, including pharmacies, grocery chains, and big box retailers. While we are seeing lighter activity than usual on the RFP side of HBI's business, we do expect a resumption of higher activity later in the year as the environment stabilizes to a new normal. As establishments increase their capacity and hire more people, the need for uniforms and rebranding will certainly provide a lift going forward. The essential side of our business still remains strong and should help mitigate most, if not all, the downturn that we have or will experience on the non-essential side of our business. Demand for PPE still continues. The challenge is often not how much we can sell, but how we can find sufficient and reliable supply. The supply chain has been extremely tight on many products. We're working with our teams across the globe day and night to source legitimate products that meet the rigid specs of this market. While many of our customers are including what we call non-legacy PPE product as part of their normal uniform shipments or as part of their employee startup kits, there is still a substantial amount of business opportunities to be won across all the sectors of PPE. In our promotional product segment, which Jake will report on further, the Banco team turned a colossal crisis into a tremendous opportunity by correctly anticipating early in the pandemic that PPE products were going to be in high demand and that customers would use those products not only to protect their employees and their customers, but also to help sustain their brand identity. Through our unmatched sourcing and creative expertise, the team exceeded expectations by delivering very profitable sales eclipsing $200 million, quite a milestone. The office gurus returned to pre-pandemic double-digit growth with a 31% increase in the fourth quarter and an 18% increase for the year. I can't say enough positive things about our team's timely pivot to a work-from-home solution that will enable us to continue to support all of our customers in the midst of an ever-changing government lockdown mandate. We onboarded several new clients during the pandemic, and grew our agent headcount by over 300 people to nearly 1,700 agents. We are considered by many of our customers who use other call centers besides ours to beat their pandemic-proof solution. We are excited about the opportunity that work-from-home means to us in terms of modest investments we will need to make in the business and our ability to scale its growth even further. Headwinds on the supply chain side impacted our uniforms and promotional products businesses, with logistic costs surging as we worked to serve our customers' elevated demands. This has happened across all freight, including domestic trucking, overseas air shipments, and ocean container shipments. We saw pricing pressures, both from a logistic standpoint and from a fabric increase cost, as well as some weaknesses. include the well-publicized backup of West Coast ports, the lack of availability of shipping containers, and scarcity of truckers to move freight. And this has caused severe logistic challenges, as well as more than doubling of our costs associated with bringing product into our warehouses. As a result of these many pressures, we implemented a sizable price increase that has largely affected this quarter. I will now turn the call over to Jake to discuss BAMCO's results and then come back to you at the close.