Good afternoon everyone. Welcome to the Superior Group of Companies' Fourth Quarter 2023 Conference Call. With us today are Michael Benstock, Chief Executive Officer, and Mike Koempel, Chief Financial Officer. And as a reminder, this conference call is being recorded. This call may contain forward-looking statements regarding how the company's plans, initiatives, and strategies and the anticipated financial performance of the company, including but not limited to sales and profitability. Such statements are based upon management's current expectations, projections, estimates, and assumptions. Words such as expect, believe, anticipate, think, outlook, hope, and variations of such words and similar expressions identify such forward-looking statements. 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 are further disclosed in the company's periodic filings with the Securities and Exchange Commission, including, but not limited to, the company's most recent Annual Report on Form 10-K and the Quarterly Reports on Form 10-Q. 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, except as required by law. And now, I'll turn the call over to Mr. Michael Benstock. Please go ahead.

Thank you, operator. We appreciate everyone being on today's call. I'll start with our fourth quarter highlights and some broader perspective on 2023, and then I'll discuss our go-forward strategies to sustain and accelerate our momentum in the new year and beyond, before I turn the call over to Mike for additional detail on fourth quarter results and our outlook for 2024. We'll then be happy to take questions. Throughout 2023, we talked about the back-end weighted nature of our financial performance, and that played out with our consolidated fourth quarter results being the strongest of the year. We generated $147 million in revenues during the fourth quarter, up sequentially and down just 1% versus the prior year quarter, which was our strongest year-over-year comparison of 2023. Fourth quarter adjusted EBITDA came in at $9.9 million, again, our strongest quarter of the year and up significantly from $3.5 million last year. We also produced $0.22 of diluted EPS in the fourth quarter, much improved from the adjusted $0.06 net loss per share last year and again, our best results of the year. In addition to improved earnings, as you can see in our results release today, we continue to drive strong operating cash flow while reducing working capital. As a result, we have strengthened our balance sheet, reducing our net leverage ratio by almost 50% during the year. Similar to what we described in our November call, business conditions have continued to slowly improve. Many clients are gradually expanding activities and while demand certainly hasn't returned to full strength, we're cautiously optimistic that underlying trends will continue to move in the right direction and that we'll continue to see a gradual pickup in RFPs and other leading indicators. In this still uncertain environment, we have our teams focused on what we as a company can control, most importantly, on quality service that leads to strong customer retention. In addition, we are strategically investing to fully capitalize on the very favorable long-term outlook for all three of our very attractive businesses. For those of you who need a quick primer on SGC and our three segments, we have released a brand-new investor slide deck today that's available on our website, and I would encourage you to take a look. Shifting gears, I will provide a high-level overview for each business segment and then turn it over to Mike for a deeper dive. Healthcare Apparel, which primarily consists of the Wink and Fashion Seal Healthcare brands, grew both revenues and EBITDA year-over-year. Market conditions for Healthcare Apparel have been improving with more positive signs emerging. Our addressable market for this segment is large and expanding, and our aim is to grow our market share well beyond the more than 2 million caregivers who already wear our brands every day to work. We began this process last year with our rebranding efforts under the Wink trademark and the launch of our direct-to-consumer website, which continues to produce favorable results. To build on this momentum, we'll continue our digital advertising efforts to further enhance customer awareness and engagement with Wink. As with any D2C startup, this required investment is a gating factor on profitability in the shorter term, but one that we firmly believe will establish a foundation for profitable sales growth over time. Combined with the favorable contribution from our B2B website, which we also launched last year and is adding efficiency to the wholesale process and the strengthening of our relationships with the other digital channels that we service, we see a compelling longer-term outlook for Healthcare Apparel. Moving on to Branded Products. During the fourth quarter, we drove our strongest revenue and EBITDA results of the year. The gradual expansion of demand that began in mid-2023, that I referenced on our November call, continued through year-end, and we ended the year with a stronger pipeline than a year earlier. Our booking trends have remained favorable so far in the first quarter, albeit with the normal seasonality. Our focus within Branded Products is on strong customer retention and increasing share of wallet, as well as driving RFP activity and sales rep recruiting, while maintaining stronger margins. We're confident in our ability to capture share, currently less than 2% of this large, attractive, and growing market. Next up is our Contact Centers business segment, which also grew revenue year-over-year. Increased costs related to labor and talent that first took hold in early 2023 weighed on quarterly profitability, but we will begin to anniversary these higher costs this first quarter. Our focus for Contact Centers is on increasing seats with existing customers and building the pipeline of new customers. We will continue to utilize the latest technology to enhance efficiency and take advantage of our ability to increase prices when possible to improve margins during 2024. Our pipeline of new business remains strong for the office crews, and we're bullish on the outlook for this high-margin business. I'll now turn the call over to Mike, who will walk us through our fourth quarter financial performance in greater detail and provide our outlook for 2024. We'll then take your questions.

Thank you, Michael. Rounding out a back-end loaded year, as we first referenced a year ago, our fourth quarter results were the strongest of 2023. Our quarterly revenue reached $147 million, which was up 8% sequentially from the third quarter and down 1% from last year. As compared to last year, fourth quarter sales increased in the Healthcare Apparel segment by 6% to $28 million and in the Contact Centers segment by 5% to $23 million. These increases were more than offset by a 4% fourth quarter sales decline in our Branded Products segment to $98 million. While Branded Product sales were down, the fourth quarter results sequentially improved from the prior quarter and represent the strongest quarter of the year. Our gross margin rate climbed significantly over the past year, up 760 basis points. The margin increase was primarily due to last year's inventory write-downs of $7.8 million, primarily within our Healthcare Apparel segment and a favorable shift in the mix of pricing and customers and lower supply chain costs within our Branded Products segment. Our SG&A for the fourth quarter came in at $49 million, relative to $44 million a year earlier. While the SG&A rate improved on a sequential basis by 130 basis points, the year-over-year rate increased by 360 basis points, primarily due to expense deleveraging from the sales decrease in our Branded Products segment, employee-related costs, and depreciation in our Contact Centers segment, and lapping unrealized gains of $1.6 million recognized in 2022 on written put options. Our interest expense for the fourth quarter was $2.1 million, a slight improvement over the past year despite higher interest rates due to our successful efforts to reduce debt outstanding by $62 million during the year. Net income for the fourth quarter was $3.6 million or $0.22 per diluted share, up from net income of $2 million or $0.14 per diluted share in the year-ago quarter, which included a one-time pre-tax non-operating gain of $3 million or $0.20 per share. Therefore, excluding last year's gain, our fourth quarter result of $0.22 per diluted share was up significantly from last year's adjusted results of a $0.06 loss per share. The improved result was driven by the aforementioned increase in gross margin for the quarter. Consolidated EBITDA for the fourth quarter was $9.9 million compared to $3.5 million in the year-ago quarter, excluding last year's gain that I previously mentioned. The EBITDA increase was primarily driven by the Healthcare Apparel segment, whose EBITDA improved significantly to $1.4 million in the fourth quarter from negative $6.5 million a year ago, mainly driven by last year's inventory write-downs. Also, despite a sales decrease in the fourth quarter, the Branded Products segment's EBITDA improved to $11.7 million in the fourth quarter from $10.8 million a year ago due to higher gross margins. These improvements were partially offset by an EBITDA decline in our Contact Centers segment to $2.3 million in the fourth quarter from $3.8 million a year ago, primarily driven by labor increases earlier in the year. Turning to our balance sheet. We've continued to successfully reduce leverage, ending the year just under 2.0 times trailing 12-month covenant EBITDA, a significant improvement relative to 2.9 times just three months earlier in September and 3.9 times at the end of 2022. In other words, we've cut our leverage ratio effectively in half over the past year. We also ended 2023 with cash and cash equivalents of $20 million, benefiting from our continued strong free cash flow and our focus on reducing working capital. Our operating cash flow for the year was $79 million. I'll wrap up with our full year 2024 outlook, which similar to 2023, will have a back-end loaded cadence due to the underlying nature of the markets we serve. Our outlook calls for full year revenues in the range of $558 million to $568 million, up from 2023 revenues of $543 million. We also expect earnings per diluted share in a range of $0.61 to $0.68, up from 2023 $0.54. And I'll reiterate that similar to last year, we expect a back-end weighted pattern. This concludes our prepared remarks. And operator, if you could please open the line, Mike and I would be happy to take questions.

Certainly. We will now begin the question-and-answer session. Today's first question comes from David Marsh with Singular Research. Please go ahead.

Hey everyone. Congratulations on the quarter. It looks really impressive. I'd like to start by discussing the Contact Centers segment. It seems to have declined a bit sequentially, and I know you mentioned some seats may have lost contracts. However, it appears you've had some solid backfill. Could you provide some insights into the overall cadence of that business and what your expectations are for this year in that segment?

Sure. Thanks for joining us. We're feeling good about the business. I mean last year was a little bit strange in that we had a lot of long-term customers cut back on the number of new agents that they had and it was tough to make that up as the year went on. But we did make it up. And in the end, we ended up with a net gain of agents that we were able to build out. In addition, last year, we were a little late in putting price increases in, which certainly impacted the first half more than the second half of the year. We're feeling strong about the business. It's growing. The infrastructure is all in place for it to grow. The sales efforts are yielding our expectations for the business. And there's really nothing holding us back. There's still a strong demand, pipeline is strong. First quarter should be pretty good. And we expect that that momentum will continue to build throughout the year. Fourth quarter is usually the softest quarter in terms of growth of that business. People don't tend to put on new seats as they're ending the year and looking at their budgets. Usually, that's when they're cutting back the most for the holiday season. And so fourth quarter is always kind of a little bit tenuous what's going to happen, but we're feeling strongly going into this year that we should see some pretty good growth.

And Dave, just to build on that, if you look at the de-build, if you will, from Q3 to Q4, you'll see it's fairly consistent last year versus this year to Michael's point, just around the holidays that we experienced and the fewer hours worked in the month of December in the fourth quarter.

That's really helpful. Appreciate that. And then just turning to the during to the Healthcare Apparel business, you guys talked consistently about inventory and getting it right. I saw that inventory did tick down a little bit again sequentially in the fourth quarter. Just wondered if you could give us an update there? Just kind of overall feel for your inventory level, what the demand is? And if you feel like you're pretty close to equilibrium and at a point where you could start to build again?

Sure, Dave. This is Mike. I'll address your question. At the beginning of the year, we indicated that it would take us about a full year to reach what you called equilibrium, and we believe we have achieved that by the end of this year. The significant charges we took in 2022 were the right decision as they helped us reduce inventory through various channels. We have successfully lowered our inventory levels by the year's end and are now shifting our focus towards new product launches and introductions as we move further into 2024. From a working capital and inventory standpoint, we have created significant value. I expect that will normalize as we advance, and we will look to invest in inventory where we see growth opportunities in certain categories.

Got it. And then just lastly from me. On the SG&A side, a little uptick in the quarter. I'm guessing that's just typical year-end kind of accruals for incentive comp and things of that nature and sure we expect a reversion back to a level kind of more similar to the prior couple of quarters going forward?

Dave, I didn't quite catch your full question, the very last part in particular. Can you repeat that, Dave, sorry?

There was a slight increase in SG&A in the fourth quarter. I'm curious if this is a normal seasonal rise due to year-end incentive compensation accruals. Should we anticipate that things will return to the levels seen in the first and second quarters, where you managed expenses well? What trend should we expect going forward?

Yes. No, no. Thanks, Dave. I would probably call it a couple of things. It wouldn't be driven by incentive comp accrual. I would call it a couple of things. One, just as a reminder, in the Branded Products segment, the commissions that we pay, which obviously roll through SG&A are based on margin. And so recognizing that the fourth quarter was the biggest quarter for Branded Products, we've got a larger commission expense in the fourth quarter, obviously, for good reason. And then one of the things I called out in the script is last year, we had favorability with respect to revaluing a stock put that we have. And actually, in the fourth quarter, we had an expense driven by the fact that our share price did appreciate. So, that was an incremental expense, if you will, in Q4. So, we wouldn't expect that to be normalized going forward per se, but those were a couple of things that drove the uptick here in the fourth quarter.

Got it. Thanks. I will yield to some of the folks who have questions. Again, congrats on the quarter. Good job guys.

Thanks, Dave.

Thank you. The next question comes from Kevin Steinke with Barrington Research. Please go ahead.

Hello. Good afternoon. I would like to ask about your outlook for 2024. You mentioned that you expect the year to be back-end loaded again. What makes you anticipate that? Additionally, how much do you think improvements in the demand environment are contributing to this expectation? I understand that you indicated business conditions are gradually improving, but they may not have fully returned to strength yet. I would appreciate any thoughts on that.

Sure. I'd like to highlight a couple of points, Kevin. Firstly, the back-end loaded nature of our results is largely influenced by our Branded Products business, which usually sees strong performance in Q3 and partially in Q4, particularly due to the holiday season and gifting. Additionally, in our Contact Center business, we typically observe a slight decline in Q4 as our customers reduce spending for holidays, and we start onboarding new customers in Q1. This onboarding tends to increase volume in the latter half of the year. So, these two segments often contribute to stronger performance in the back half of the year. While we don't expect it to be as back-end weighted as this year, it will still have some back-end weight. Regarding our guidance, we anticipate sales growth across all three segments, with low single-digit growth expected for our Branded Products and Healthcare Apparel segments. We foresee higher growth in our Contact Center segment, estimated between high single-digit and low teen growth. Together, this explains the range we provided.

Okay. That's helpful. I was going to ask about the segment growth expectation, so I appreciate that. It doesn't seem like you're assuming a dramatic improvement in the demand environment, but rather just the usual increase in new business. You mentioned having strong pipelines, so it appears your outlook is based on what you see today, which should lead to a stronger second half of the year. Is that accurate?

Yes, that is fair, Kevin. Thanks, it's Michael. I think we're seeing more predictability than we've experienced over the last few years. The years from 2020 to 2022 were quite chaotic for us, especially due to the pandemic, and then in 2023, we dealt with excess inventory. Now, we finally feel we've reached a point where our results are more predictable. We are certainly going to work really hard to exceed expectations. However, I believe we've set the expectations appropriately based on our current outlook and we have a high level of confidence in those expectations.

Okay, great. And you mentioned the direct-to-consumer effort in Healthcare Apparel continues to be pleased with the results there. I don't know any more color you can provide there? And I assume it's still too small to really move the needle, but maybe any comments on just again, how that's ramping and what you might expect in 2024?

So, I think what's really exciting, and I don't have any hard data that I can share on this, but the awareness of our brand, Wink and Carhartt, which we're a licensee of is much greater than it has been in the past as a result of a lot of our efforts. We're making a huge marketing investment to support that. And so while it's not a huge part of what we do, it's getting bigger, and it's not only helping the marketing efforts, not only helping the direct-to-consumer, but it's helping us really across all the different channels that we're selling. And you have the digital channels where we're selling into Amazon and Walmart.com and so on, Target.com and many others and that's been very helpful as well as selling to retailers, where I think we're creating a demand for our products that we haven't in the past. And I've spoken about our marketing team in the past. I think they're second to none. And I'm hoping that sometime in the not-too-distant future, we'll be able to start reporting more on the results, and it will have a bigger impact on our Healthcare Apparel business than it has today.

Okay, great. Lastly, I wanted to ask about gross margin. It was quite strong in 2023. I know you had some of the larger inventory write-down charges in 2022 that made that comparison a little easier. But even without that, those charges still some pretty healthy gross margin expansion. So, I'm just wondering if you could talk about what's driving that and speak to the levels of sustainability and gross margin or opportunities for improvement or pullback or how you think that might trend going forward?

Certainly, Kevin. This is Mike. Consistent with our previous discussions, particularly from last quarter, we continue to see robust margins in the Branded Products segment. Despite a decline in sales, we have managed to enhance margins through pricing strategies, customer mix adjustments, and some favorable supply chain costs. In the fourth quarter, the margin rate for the Branded Products business reached 35%, compared to approximately 31% the year prior. Looking ahead, we aim to maintain these margins and believe there is still potential for further margin improvement as we move into 2024. Overall, we are confident in sustaining these margins, as reflected in our guidance. Additionally, we've implemented some pricing changes in the Contact Center business earlier this year and will actively seek opportunities to enhance that margin going into 2024.

Yes, I will also address that briefly. We are highly focused on gross margins at the factories we operate in Haiti, improving efficiency and exploring various processes to enhance the gross margin from our own production. Additionally, we aim to shift as much as possible to countries where we have free trade agreements, allowing us to import goods into the United States without duties. This is a crucial aspect of our strategy. We also maintain a redundant manufacturing strategy, as we need to be prepared for unpredictable global events. However, our primary focus remains on gross margins, and we are committed to achieving improvements in this area.

Okay. Thank you. If I could just sneak one last one in because you mentioned Haiti and I've read recently about some unsettled political conditions down there and just wondering if that's having any impact on your production down there? What's the state of that effort today?

Sure. It's a good question. The factories we manage are located on the border with the Dominican Republic, and there were some issues towards the end of last year concerning water rights, which were quickly resolved. We lost a bit of time, but typically in such situations, we might lose a few days due to countrywide strikes or violence in various parts of Haiti. People may take those days off, but because they need to support their families, they usually return to work and often work weekends to make up for lost time. So far, we've been fortunate not to have lost much time. The situation in Port-au-Prince and other nearby cities is quite bad, but we are far enough from the worst of it that it hasn’t significantly affected us yet. We are monitoring the situation closely, along with other companies in the industrial park to minimize disruptions. We always have contingency plans due to our redundant manufacturing strategy. We carry safety stocks for various scenarios and have other manufacturing locations available. For now, we consider ourselves fortunate that we haven’t been greatly impacted.

Okay. I appreciate the insight. I will turn it over. Thank you.

Thank you. The next question comes from Jim Sidoti with Sidoti & Company. Please go ahead.

Hi, good afternoon, and thank you for the question. It seems you expect the operating margin to expand about 50 basis points next year to just over 4% from just under 4% in 2023. Do you think this improvement is primarily due to leverage in the SG&A line or in gross profit?

I think, Jim, we would expect, again, a little bit more expansion on the gross margin line. And obviously, as we add sales, we'll get a little bit of leverage in G&A, but I would attribute any operating income improvement largely through some expansion in margin.

And how many sales folks do you think you'll add in 2024?

How many sales folks do you think you'll add in 2024?

Yes, you said that one of the reasons you're not going to get the leverage on SG&A is because you're adding salespeople so.

No, what I meant to say, Jim, just to clarify, I would expect, as we're adding sales dollars, we'll get a little bit of leverage in G&A. But again, I'd say it would be more driven by margin expansion, just to clarify.

Got it. Got it. And you seem to have really turned the corner in terms of cash generation and leverage ratio. What do you think the uses for cash will be in 2024? Is the first priority is going to be bolt-on acquisitions? Or do you think you could increase the dividend? Or are there other priorities?

Our priorities will remain consistent with what they have been prior to focusing on the debt. We will review the dividend on a quarterly basis with our board. Additionally, this year we plan to increase our capital spending, as we only spent over $4 million in 2023, which is quite low. We will invest more in capital expenditures, although it won't reach historical levels, but it will definitely be more than what we did in 2023. Regarding mergers and acquisitions, we have set that aside for now, but it's something we will consider as we progress. Although we’re not actively seeking M&A transactions, we are keeping the pipeline open and will evaluate any potential accretive opportunities. We are in a position where we could take advantage of such opportunities, and we’ll assess them throughout the year.

Great. Thank you.

This concludes our question-and-answer session. I'd like to turn the call back over to Michael Benstock for any closing remarks.

Thank you, operator. Firstly, I would like to publicly thank Phil Koosed for selling BAMKO to us almost eight years ago. And Phil, thank you for your leadership as well as your time in the C-suite as our Chief Strategy Officer. We've accomplished a great deal during your time with SGC and are more diverse and stronger than ever. Personally, it's been an incredible experience for all of us who have had the privilege to work side-by-side with you for these eight years. We are in a much better place than ever to succeed, in part due to your having a voice in our future. We wish you and your family continued success in all that you choose to pursue. Secondly, I want to welcome our two new Board members, Sue Lattmann and Loreen Spencer. We're excited to have you join us. Your combined business and governance experience will be a great asset to SGC as we navigate our continued growth and success. Thirdly, we want to welcome Dr. Kelly Richmond Pope as our first Board Observer in our brand-new Observer Program. This very unique and innovative program was conceived as an effort on our part to provide valuable public company board experience for people who, for reasons outside their control, historically have struggled with gaining entrée to seats on public company Boards. We're proud to be trailblazing in this initiative and setting an example for others by working to create a more diverse community of Board members for us and others in the future. With that, I'll close by saying we're excited about 2024. And again, we'd encourage you to have a look at our new Investor deck on our website. We look forward to participating in upcoming Investor Conferences and presenting our Q1 results in the spring. Until then, be safe.

The conference has now concluded. Thank you very much for your participation. You may now disconnect your lines.