Superior Group of Companies, Inc.

Good afternoon, everyone. Welcome to Superior Group of Companies' first quarter 2021 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 chief operating officer and chief financial officer. After the speaker's opening remarks, There will be a Q&A 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 would like to turn the call over to Hala El-Sharbini, 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 the Securities Act of 1933, the Securities Exchange Act of 1934, 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 statement. 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. The impact of global supply chain disruptions. 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 in 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, 2020. Thank you. the quarterly report on Form 10-Q for the quarter ended March 31, 2021, 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, feature 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 2020, unless otherwise noted. With that, I will turn the call over to Michael.

Thank you, Hala, and good afternoon, everyone. Thanks, as always, for joining us to discuss our Q1 results. Joining me today, as usual, are Andy, who will report on overall SGC results and the status of our operations, and Jake, who will report on BAMFCO's financials and operations. After our opening remarks, we'll open the line for questions. So let's get started. I'm very pleased to report another great quarter of substantial growth. I would characterize our core businesses as mostly thriving, growing both organically and through strategic acquisitions. We have again proven our ability to meet PPE demand as well as service spot crisis PPE orders as they arise. While we expect that to continue, our primary focus has always been and will remain our loyal long-term customers in the core products and services that we offer to them. Our disciplined long-term approach is yielding what we believe is sustainable organic growth in both our recurring customer base and with new customers across diverse end markets. Our differentiated share resources operating model that we've spoken about on previous calls continues to support accelerated returns as we gain economies of scale. Our omni-channel market strategy is paying dividends, and we are enthusiastic about the great potential even yet to be unlocked. First quarter net sales increased 49%, and net income grew by 211% when compared to the first quarter last year. While PPE was a strong contributor to our first quarter 2021 results, organic growth in our core businesses is the more pertinent narrative. As we look ahead, our indicators are pointing to a strong recovery in our non-essential customer base, replacing crisis PPE sales. Overall, our operational investments, cost reductions, and market response efforts completed over the last year further enhanced our ability to execute long-term growth and profitability in our core business segments. Our uniform segment reported strong growth and is sitting with a much increased backlog, which Andy will also address in his comments. Supply chain disruptions due to poor congestion, rail and container and trucking capacity issues interrupted the flow of inventory supply. Even with our outstanding results, this tempered them to some degree, as well as our service KPIs. A larger than usual amount of uniform orders, roughly estimated at $5 million received during the first quarter, will be fulfilled in the second quarter. This is not where we'd like to be positioned from a service standpoint, but it is the current condition that we're quickly overcoming in spite of the logistical challenges. We do continue to book additional PPE orders as well, albeit at much reduced levels than we saw in 2020. Our healthcare product lines saw a continuation of strong demand during the quarter. We anticipate broad-based strength for our signature brands, Fashion Seal Healthcare and Wonder Wink by CID. CID is making great strides in seeing success with their retailer and e-tailer partner expansion, as well as finding new channels to market their products. Our international marketing strategy that we spoke about on the last call through CID is also progressing as we near a significant milestone with the opening of of our first distribution point in Europe on track for later in the second quarter. This will allow us to better serve our existing customers in that hemisphere while expanding our footprint and improving our ability to capture new European and Middle Eastern market share. HPI, our employee ID business, serves diverse end markets, including essential and non-essential businesses. While this portion of our uniform business is more heavily weighted to essential businesses, some non-essential industries we serve, including travel, transportation, dining, and entertainment are seeing resurgence in activity after being nearly dormant. Hiring initiatives on the part of these customers are in full force in preparation for reopening or capacity increases. Entertainment venues such as theme parks and even movie theaters are starting to show signs of light. I'll share some stats with you. According to a recent study by QSR Magazine using March as a benchmark, Quick service restaurant transactions were up 29% year over year. Hotels saw a 93% increase in occupancy rates, with a greater portion of business going to limited service hotels. As a reminder, this part of the hospitality industry is our focus in that channel. Transportation is showing renewed strength, specifically over the past 8 to 10 weeks. As activity levels for these businesses have become increasingly stronger, We're expecting to see a normalization in the essential businesses we serve, such as pharmacy, grocery, and big box retailers. We continue to meet customer demand for non-legacy PPE. While we are aware that many customers will include PPE products as part of their normal uniform programs, we expect that demand for crisis PPE will steadily recede to pre-pandemic levels. Our promotional product segment, BAMCO, delivered another remarkable quarter. First quarter 21 sales grew by 125% compared to the first quarter of 2020. The conversion of new crisis PP customers to traditional promotional product customers has been a winning strategy. BAMFCO is clearly a differentiated industry leader and is very well positioned to continue to take market share, while the overall promotional products industry remains, as we understand, depressed. Jake will cover BAMFCO in more detail shortly. The office gurus delivered double-digit growth in both existing and new customers, resulting in a 42% increase in net sales in the first quarter when compared to the prior year. We added 320 additional billable agents during the first quarter, of which 84% will serve existing customers and 16% supporting new TOG customers. We expect that the new customers will continue to steadily grow their businesses with us, as has been the case when onboarding most of our existing customers. We have also implemented a redundancy strategy at TOG to mitigate risk against future catastrophic events by adding seats in different geographies to service some accounts, as well as continuing with our strategy of work from home. Our pipeline of opportunities continues to grow, outpacing our expectations. We're prepared to meet near-term capacity demands. As the growth trajectory of the segment continually pushes higher, We will leverage our work-from-home model. We anticipate maintaining approximately 25% of our call center workforce as remote agents. Currently, approximately 20% of our TOG workforce is back in our call centers, and we plan to increase that number per customer preferences and legal limits on a steady basis while keenly focusing on safeguarding the health of our team members. We feel very confident that the number of billable agents being added for the second quarter of 2021 could be largely in line with what we saw during Q1. Moving forward beyond second quarter, we expect to return to a more normalized cadence, which is approximately half of the current seated rate of additions per quarter at roughly 150 seats. Lastly, I should note that TOG won the Lawyer International Legal 100 Best BPO Provider Award for 2021, another strong accolade added to their growing list. Our optimism is pretty powerful, but it's not totally unbridled. Leaning into our disciplined, conservative approach, we're effectively navigating market challenges from a position of strength, giving us an edge over many of our competitors. Logistical headwinds originating in shipping ports are cascading throughout the transportation and logistics ecosystem. Notable logistics delays are now converging, with significant increase in orders creating inventory pressure. As orders increase, inventory is turning quickly, and items that should have already arrived in our warehouse are sitting in queue to be loaded on containers overseas or in line to be received at shipping ports. By comparison, however, smaller competitor weakness is profound. Many are unable to manage and sustain a pandemic and these supply chain issues. This ultimately opens the door for us to accelerate market share growth, as well as evaluate potentially attractive opportunities in both our uniform and our promotional product segments. We're also managing through cost inflation and instituted a sizable price increase in our uniform businesses. We're able to, and where we were able to, which largely took effect in the past few weeks. It was done to mitigate increasing logistic costs, higher fabric prices, wage increases, and persisting weakness in the dollar. These logistical challenges were further exacerbated by extreme weather in the southern United States during the first quarter, which shut down most parts of Texas and Arkansas, which, if you recall, includes our main distribution facilities. We anticipate the easing of logistical challenges, but these challenges will not abate until the fourth quarter, most likely. I will now turn the call over to Jake to discuss BAMCO's results.