Superior Group of Companies, Inc.

Good afternoon, everyone, and welcome to Superior Group of Company's third quarter 2021 conference call. With us today on behalf of the company are Michael Benstock, the company's Chief Executive Officer, Andy DeMott, its Chief Operating Officer and Chief Financial Officer, Phil Cusett, its Chief Strategy Officer, and Jake Himelstein, BAMCO's President. After the speaker's opening remarks, there will be a question and answer session. Today's conference call is being recorded, and your participation implies that you do agree to this. If you do not, then simply drop off the line. Now I'd like to turn the conference call over to Hala El-Sherbini, Senior Managing Director of Three-Part Advisors, who will turn the conference call over to Hala El-Sherbini, Senior Managing Director of Three- Thank you.

This conference call may contain forward-looking statements about superior groups of companies, the companies, within the meaning of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995, and all rules and regulations issued thereunder. Such statements are based upon management 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 consumption 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, the quarterly report on Form 10-Q for the quarter ended September 30, 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, 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 2020 unless otherwise noted. With that, I'll turn the call over to Andy.

Thank you, Holla. Good afternoon, everyone. Today, Jake and I are going to discuss financial and operational highlights first. Michael will then cover healthcare apparel and BPO businesses in more detail and discuss how we are navigating through the current macro environment. Phil will then review our strategic initiatives before we take your questions. We delivered solid third quarter 2021 results on the strength of our core offerings and robust demands. Overall consolidated net sales were $123.3 million compared to $127.7 million in Q3 last year. Consolidated sales declined by 3.5%, but reflects impressive performance against a historically high sales comparison in Q3 2020. As expected, crisis PPE sales continued to wane. Q3 2021 sales included $1.2 million of PPE sales, while Q3 2020 included $33.3 million. Excluding PPE sales, consolidated net sales actually increased by 29.4%. We are seeing strong sales momentum that is evident in our current year nine-month results of $395 million as compared to $381.3 million in the first nine months of 2020. This is a strong testament to the execution of our entire team and our ability to take market share. Turning to segment results, Uniforms and related products net sales decreased 15.1% or $11.3 million compared to last year. Excluding PPE, the uniform segment increased 3.9% to $61.6 million compared to $59.2 million in Q3 of 2020. PPE sales normalized to $.3 million versus $13.9 million a year ago. We are seeing an inflection point in demand for uniform apparel across our diversified end markets. showing a progressive recovery that is offsetting this expected decline in PPE sales. Gross margins in our uniform segment increased to 35.8% in Q3 2021 versus 33.5% in Q3 2020, due primarily to lower sales of PPE, partially offset by higher logistical costs in the current quarter. As a percentage of sales, our uniform segment SG&A expense was 31.1%, versus 30% in Q3 last year due primarily to lower sales to absorb overhead. Operating margin for uniforms in Q3 of 21 was 4.7% compared to 3.5% in Q3 of 2020. Jake will review results for BAMCO shortly, so I'll move to the office gurus. The team continues to excel and reported tremendous growth exceeding expectations. Net sales after intersegment eliminations were up significantly by 56.8% to $16.2 million. Our expanded customer base continues to grow through incremental opportunities with existing clients, developing new relationships and onboarding new engagements. Gross margins for the office scoopers decreased to 58.1% in Q3 of 21 versus 60% in Q3 2020 due primarily to costs associated with onboarding of more new customers in the current period. As a percentage of sales, SG&A expenses for this segment was 36.5% versus 33.7% in Q3 last year as we increased investments to support significant growth in this segment. Operating margin for the Office Guru has decreased from 26.3% in Q3 2020 to 21.6% for Q3 of 21. On a consolidated company basis, gross margin for Q3 of 2021 of 37.1% was consistent with our Q3 2020 margins due to higher product and logistics costs, which were offset by shifts in product mix across segments. Our consolidated SG&A expenses remained flat, and as a percentage of sales, our total SG&A expense was 28.4% versus 27.3% in Q3 last year. Income from operations for the third quarter was $10.8 million, compared to $12.5 million in 2020 Q3. Operating margin was 8.7% compared to 9.8% last year and well ahead of our Q3 2019 amount of 6.9%. Net income was $8.2 million or 51 cents per diluted share compared to $9.9 million or 63 cents per diluted share in the Q3 last year. Our effective tax rate for the quarter remained constant at 17.8% compared to 17.7% a year ago. Moving to our liquidity profile, we continue to generate solid cash flows supported by a healthy balance sheet. While net borrowings at September 30th increased by 8.5 million from year end of 2020 to 80.8 million, we were able to reduce debt by $17.4 million during the third quarter with strong operating cash flows generated during the quarter. Our debt to EBITDA ratio remains very good at 1.5 times, which is in line with our desired range and well under our covenant limits. Cash and cash equivalents at quarter end was $6.4 million, an increase of $1.2 million. Through the nine-month period, our CapEx was $14.5 million, with investments primarily related to the facilities and technology enhancements across our distribution and manufacturing locations. We made great progress at our Eudora Arkansas Distribution Center, and we began beta testing this week. There will be a gradual movement of accounts from the current warehouse operating system to the new system. Our plan is to be 100% operational with the innovative technology by the end of Q1 of 2022. We are on target with our CapEx investments in overall automation and efficiencies, including benefits of robotics installed at our CID Dallas distribution center. And our CapEx is tracking well against our plan of $16 to $17 million for 2021. Lastly, we paid our regular quarterly cash dividend of 12 cents during the third quarter. I'll now turn the call to Jake to review BAMCO's performance. Jake?