Good afternoon, everyone. Welcome to the Superior Group of Companies First Quarter 2024 Conference Call. With us today are Michael Benstock, Chief Executive Officer; and Mike Koempel, Chief Financial Officer. As a reminder, this conference call is being recorded. This call may contain forward-looking statements regarding 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 Michael Benstock. Please go ahead.

Thank you, operator, and welcome, everyone, to our Q1 call. I'll begin with our first quarter highlights, including our revenue and profitability growth, and our improving financial positions. I'll then walk us through each of our three business segments, discussing the recent improvement in marketing conditions and our strategies to maintain our momentum throughout 2024. I'll then hand the call over to Mike for additional detail on quarterly results and our more favorable outlook for 2024. At the end of the call, we'll be happy to take your questions. We had a strong start to 2024 with year-over-year improvements across the entire business. For the first quarter, we generated consolidated revenues of $139 million, reflecting a 6% year-over-year increase. Our EBITDA climbed 40% over the prior year quarter to $9.6 million. We generated $0.24 of diluted EPS, up sharply from $0.06 a year ago. On top of the improved operating results, we enhanced our financial position by generating solid operating cash flow that enabled us to further reduce our net debt and improve our net leverage ratio. This enhanced financial flexibility ensures we can continue to make prudent investments to further grow our business organically while also capitalizing on any market dislocations that could produce attractive M&A opportunities. Turning to market conditions, I'm pleased to say that so far in 2024, we've seen continued improvement in the end markets we serve. Our clients are generally increasing their spending. For now, we remain cautiously optimistic on the durability of underlying demand in each segment, but even more important for our shareholders to understand is the reality that we operate in huge markets and have a very small but growing share. Our success will be determined by remaining laser-focused on new customer acquisition and our continued strong customer retention. To accomplish our goals, we're also investing in people and technology in our very attractive businesses. We are optimistic about the markets in which we operate, confident in our ability to execute, and, therefore, excited about the future. Let's have a look at how each of our businesses performed during the quarter. Starting with Healthcare Apparel, we grew top-line revenues by 4% year-over-year and EBITDA grew by 68%, mainly driven by improved gross margins. Demand strength has improved since last year, and opportunities continue to be uncovered. As I've outlined on recent calls, last year we kicked off rebranding efforts under the Wink trademark and are now entering year two of our direct-to-consumer efforts. Simultaneously, last year's launch of our B2B website is adding efficiency to the wholesale process while we further fortify our relationships with other digital channels. All in all, we are seeing improved market conditions in Healthcare Apparel. This is a large, resilient, and rapidly expanding addressable market, and we're looking to grow our market share well beyond the more than 2 million caregivers who already wear our brands to work every day. Next up is our Branded Products segment, which generated 6% revenue growth during the first quarter as compared to the year-ago quarter, along with 32% year-over-year growth in EBITDA driven by continued gross margin improvement. The demand environment has been improving, continuing the positive trajectory we first noticed last summer. Our key to success for Branded Products emphasizes strong customer retention, growing our share of wallet, driving greater RFP activity, and increasing our sales rep recruiting. This is a $24 billion and growing market, and we intend to continue expanding our market share currently at less than 2%. Rounding out our business segment discussion, Contact Centers grew revenue 7% over the prior year quarter, and EBITDA was up 5% from last year. As we've indicated on prior calls, we're now beginning to anniversary the higher labor and talent costs that have been with us since early 2023, along with our move over the past year to raise prices, which should bring stronger margins going forward. Demand drivers remain solid, and our pipeline of new business remains strong. Our focus is on increasing seats with existing customers, continuing to build our pipeline of new customers, and leveraging the very latest technology to enhance efficiency. With that, I'm going to hand the call over to Mike for a closer look at our first-quarter performance, along with our stronger outlook for 2024. Mike, go ahead.

Thank you, Michael. We generated solid first quarter results with quarterly revenue of $139 million, up 6% versus the year-ago quarter. All three of our business segments grew, with Branded Products up 6% to $87 million, Healthcare Apparel up 4% to $29 million, and Contact Centers up 7% to $24 million. This was profitable growth as well, with our consolidated gross margin up 380 basis points over the prior year, reaching nearly 40%. All three of our segments demonstrated improved gross margins versus the prior year quarter, particularly our Branded Products and Healthcare Apparel segments. Branded Products was up 480 basis points, continuing the trend of year-over-year margin rate improvement and reflecting favorable pricing and lower supply chain costs. Healthcare Apparel was up 350 basis points, primarily driven by lower costs, including improved manufacturing efficiencies in our Haiti facilities, improved market conditions, and higher margin sales from our direct-to-consumer channel that launched in the second quarter of last year. Our first-quarter SG&A was $49 million, flat sequentially from the fourth quarter, but up from $43 million a year earlier. As a percent of sales relative to the year earlier quarter, SG&A was up about 2 percentage points to 35%. This was primarily driven by increased employee-related costs, an increased charge to recognize the fair value on written foot options, and lapping the benefit of a reduction in acquisition contingent liabilities from the first quarter of last year. In terms of EBITDA, we generated $9.6 million during the first quarter, 40% above the prior year's $6.9 million. All three of our businesses contributed to this strong EBITDA performance, with Branded Products up 32% to $9.9 million, Healthcare Apparel up 68% to $2.6 million, and Contact Centers up 5% to $2.9 million, despite the higher labor costs we've yet to fully anniversary. Our interest expense for the first quarter was $1.8 million, which improved by $800,000 from the year ago quarter, driven by our efforts to significantly reduce debt over the past year. Our first-quarter net income was $3.9 million, or $0.24 per diluted share, not only up slightly on a sequential basis but up significantly from $900,000, or $0.06 per diluted share, in the year ago quarter. The improved result was driven by the increased sales and gross margin rate improvement across all of our segments. Shifting to the balance sheet, we've continued to make improvements with cash and cash equivalents of $22 million, up from $20 million in the fourth quarter, and debt outstanding lower by an additional $4 million during the quarter, following the significant reduction in 2023. Additionally, we've generated approximately $9 million of operating cash flow during the quarter, on top of significant operating cash flow generation last year. Based on lower debt outstanding, combined with improved profitability, our net leverage ratio ended the quarter at 1.6x trailing 12-month covenant EBITDA, a substantial improvement from 3.8x a year ago. Turning to our updated full-year 2024 outlook. We remain cautiously optimistic on the demand environment continuing to slowly improve, and on our own ability to push pricing when possible. We're raising and tightening our 2024 revenue range to $563 million to $570 million, versus the prior range provided in March of $558 million to $568 million, and up from 2023 revenues of $543 million. In addition, we're raising and tightening our full-year earnings per diluted share outlook to a new range of $0.73 to $0.79, which reflects our updated sales guidance and better-than-expected gross margin performance, partially offset by incremental stock compensation expense from the May issuance of performance-based stock rewards. Our updated outlook is up significantly from the prior range of $0.61 to $0.68, and reflects meaningful improvement over 2023's $0.54, despite the estimated incremental noncash stock compensation expense of $0.04. From a quarterly progression standpoint, we expect a more balanced performance throughout the year as compared to 2023's heavily back-end weighted results. With that, operator, Michael and I would be happy to take questions if you could please open the lines.

Our first question today comes from Jim Sidoti with Sidoti & Company.

I hope everyone's well there. You had growth in all three businesses, but the one that really stood out to me was Branded Products. Was that more attributable to better pricing or better volume, or can you give us some sense of how pricing affected that?

It's a combination. While pricing did impact us, we remain in a competitive market. There isn't much flexibility to set prices as high as we would like, but we are seeing a good mix of new customers. We've increased our sales team, which has helped us attract new clients. Overall, the situation is positive. However, I wouldn't say we've consistently been able to raise prices significantly from one quarter to the next. In the past year, we managed to price certain ad hoc business effectively due to the circumstances, but a lot of our contract business did not allow for any price increases. So, most of this growth came from either new business or increased business from current customers.

And I think, Jim, also there's still some favorable mix as well, both from a product as well as customer standpoint, where in addition to some pricing, we're also seeing, again, variability from a cost standpoint, some of which we started to realize in the back half of last year.

Okay. And how about for the call centers? Have you been able to hold the price increases that you put through there?

Yes, we did implement the price increases that we discussed during our calls last February. These increases primarily took effect at the beginning of the second quarter last year. As we move forward, we are beginning to see some positive effects from those changes. While we did encounter some resistance, we were able to clarify our position by highlighting the inflationary pressures on labor and the ongoing improvement in our performance metrics, thanks to the technology we are using, which has helped reduce overall costs.

Okay. And then, the balance sheet has made a lot of progress over the past 12 months. Your coverage ratio is well under 2x. It has been a little while since you've done a deal. How active are you on that front? And are there a lot of opportunities out there right now?

There's a lot of opportunities. We're very open to look at them. We haven't found anything that excites us very much yet. We're really focused on organic growth right now and trying not to distract ourselves from what we believe is a pretty ripe environment in each of the markets that we serve. Whenever we get into these tough economic environments where, as the macro environment has been for the last year or so with a lot of uncertainty, our competition tends to get weaker, and we tend to get more aggressive. So, we're behaving very aggressively in the market to try to accelerate our organic growth and not be distracted by acquisitions. But there will be acquisitions in the future. We certainly have the horsepower to do it and the dry powder to do it. But we'll just wait until we find the right ones. There are plenty of them out there in each of our verticals.

And it really was a stellar quarter in terms of sales, in terms of EPS and free cash flow. You said the year would be more even this year, but I would imagine that you're not going to have four quarters like this. Are you anticipating a pickup in CapEx spending or anything else that would affect the rest of the year?

From a CapEx standpoint, we would expect a pickup in CapEx, Jim. I mean, if you look at the quarter, we had low capital spending for the quarter. We still expect to spend more this year than we did last year. We consciously pulled back last year. So, you'll see a pickup on that just based on the timing of projects here Q2 from the second quarter through the balance of the year. In terms of the cadence for the year, if you look back to last year, 75% of our earnings were in Q3 and Q4. So, I think what we're saying is, we'll be more balanced than we were last year, but there'll still be some seasonality, if you will, that we've seen in some of our businesses in future quarters.

I think it's important to note that we're in an election year, and unusual events can occur in the quarters leading up to an election. This period tends to be a significant distraction for many individuals and businesses, creating a sense of uncertainty. As the election intensifies, it is likely that the distractions will be more pronounced than in previous election years. Therefore, we are being cautious as we outline our guidance, ensuring we set targets we are confident we can achieve. Overall, I'm optimistic about this year. We've managed to smooth out some fluctuations, and as mentioned, a significant portion of our earnings typically comes in the latter half of the year. This time, however, we anticipate a more balanced distribution.

The next question is from Kevin Steinke with Barrington Research.

Congratulations on the strong start to the year. I'm just wondering what has trended maybe a little bit better than expected thus far in the year that enabled you to increase the guidance just one quarter into 2024.

Sure. I think, Kevin, you've seen in previous quarters, we've grown margin, our margin rate has improved in the third quarter again, the fourth quarter. So, I think getting another quarter of margin growth where we're really seeing that growth across all three of our segments has been obviously a real positive for us, seeing some momentum in the healthcare side of our business, both in terms of sales growth again, as well as seeing margin benefits. So, we're seeing the benefit of cleaner inventories, as I mentioned in our prepared remarks, and starting to see some margin benefit from our direct-to-consumer businesses that are starting to grow. So, I think we're seeing continued signs of momentum that obviously translated into strong results in the first quarter, which we believe will lead to stronger results for the year.

Yes. Since Mike didn't mention Contact Centers, Contact Centers had some tough comps for the quarter and didn't quite grow as we had expected. But part of that was a timing issue. I think you're going to see greater growth from our Contact Center business going forward. Already in the second quarter, we know that our growth is going to be better than what we're able to show in the first quarter. So, we're optimistic about that business as well. And getting back to the cadence we've spoken about of high-single digits to low-teens growth and high teens EBITDA margin.

Okay. Great. And you spoke there to the continued strength in gross margin and the improvement in gross margin really stood out in both Branded Products and Healthcare Apparel. And it sounds, would you say like there's some sustainability to these gross margin levels going forward or I think I asked a similar question last quarter, but how are you thinking about that for the remainder of this year?

The remainder of the year, we expect margins to still reflect improvement over last year, like not necessarily to the level of the first quarter. But I would say, Kevin, as you're looking at the balance of the year, again, we would expect to continue to reflect margin rate improvement in driving the business.

Okay. Great. And on the SG&A side, you mentioned, I think, a couple items that increased SG&A in the first quarter, and you talked in the earnings release about some investments. So, is this a reasonable run rate for SG&A for the remainder of the year, or how are you thinking about that over the next few quarters?

Overall, Kevin, I would say it's a reasonable proxy. We have made, and will continue to make, investments in talent. Also, as the business improves, we're recognizing additional expenses related to associate payroll and similar costs. Some of these will remain consistent. For example, the adjustment to the fair value put option that we had this quarter will not occur again. There may be some variability from quarter to quarter, but I believe it's a good proxy for the rest of the year.

Okay. And you mentioned starting to lap some of the higher labor costs in Contact Centers and perhaps increasing price there. What's your ability to increase price or plans to increase price over the course of the year in that business?

I think it'll be less frenetic than it was last year. We're not in a position to really have to raise prices dramatically to get where we want to go. We've done some small price increases already this year, but we'll continue to do them as necessary, and contracts allow us to do so, and where we can't gain efficiencies in some other way to create more bottom line for that business.

The next question is from David Marsh with Singular Research.

Congratulations. Really a fantastic quarter.

We're feeling good about it.

Yes, I would be too. It's a great print here. Following up on some earlier questions, this 40% gross margin is something I haven't seen from you guys in the last few years. It seems like, based on your response to the last call, that might come down a bit, but it also sounds like you believe you can remain close to that range. Could you provide a bit more insight on that?

If you recall from a previous call, I don’t remember exactly when it was last year, we discussed that we had let go of some customers with very low gross margins who were no longer beneficial to us. This has greatly helped us concentrate on profitable customers and improve our margins. Currently, the market is favorable as many American companies are pulling back from Asia, leaving Asian factories eager for work and underutilized. This has allowed us to secure excellent pricing in our factories in Haiti, where we've achieved significant efficiency gains, operating more profitably with fewer variances in standard costs. Overall, everything is aligning well. We have a positive pricing situation with our customers, favorable costing conditions with our vendors, and our factories are performing excellently. This success enables us to invest in top talent for the business, which aims to drive even more efficiency. We feel optimistic about our margins. While there could be a slight pullback, it may not happen, and we could even see them rise slightly from where they currently stand.

That's a great color. Really helpful. Yes. The other thing I think that you guys should definitely be commended for is the inventory reduction you guys have been able to achieve in the last 12 months looks like about $30 million, 24% reduction. I know last year you guys had talked about feeling as though the inventory was a little bit above where you wanted it to be. Would you say that you're kind of where you want it to be now? Or do you think you could still perhaps whittle a little more away on that?

Yes, last year we set a goal for ourselves to adjust our inventories by the end of the fiscal year, and we made significant progress. By the end of 2023, we achieved our goal of aligning our inventories. As we look ahead and aim to drive the business forward, I see us making certain investments in inventory to support sales. This means we'll be taking a more proactive approach in some cases rather than reducing our inventory. We feel confident about our current position and will focus on inventory turnover moving forward, ensuring it aligns with demand. Looking ahead at business trends, we'll continue to invest in inventory, and overall, we feel good about where we stand.

I'm going to add a few more points to that. In particular, within the healthcare segment of our business, which holds a significant portion of our inventory, we encountered considerable challenges last year as we worked hard to reduce it. Currently, there is a lot of instability in that market. On the positive side, the competitive landscape is shrinking. We have seen major competitors file for bankruptcy and there has been turnover in leadership among several companies that compete with us, many of which are still figuring out their strategies. I believe there is an opportunity for us to capture more market share. Therefore, we will respond appropriately and promptly to this situation. This could involve being more aggressive in our sales efforts and potentially supporting a slightly higher inventory level than we currently have.

And Dave, I'll just add one more thing. And that would be, again, this would apply to the healthcare business. I think, as we move forward, the mix of the inventory is better as well. So we're introducing new products into our offering from our new design team. So, we're excited about not just the fact that the inventory is leaner, but also that the mix is with newly developed product entering the market.

Got it. Got it. That's helpful. Just one last question. Again, just on the balance sheet, because I think that it really deserves a lot of call-out and a lot of opportunity for some fanfare, if you will. You guys achieved a 40% year-over-year debt reduction from pre-elevated levels down to $84 million. As you go forward and you generate free cash flow, can you talk about priorities for cash flow? Will it be continued debt reduction, perhaps revisiting of the dividend maybe for an increase, or perhaps maybe share versus or something of that nature?

Yes, Dave, we will definitely keep working on reducing the debt. In the first quarter, we lowered our revolver by another $3 million. As we continue to generate free cash flow, we plan to pay down some portions of that debt going forward. Regarding the other ideas you mentioned, such as the dividend or M&A, these are all topics we discuss with our Board. We will keep evaluating the advantages of different uses of that cash as part of our capital allocation strategy.

The next question is a follow-up from Kevin Steinke with Barrington Research.

Yes. Just one follow-up. I wanted to ask about just the improving market conditions you referenced, and specifically in Branded Products. Certainly, still some macroeconomic uncertainty out there around interest rates, etc., but this may be kind of the overall tone you're hearing from your customers, and maybe they're just becoming more comfortable operating in this sort of environment.

Yes. We're seeing some pretty positive signs and increased spend with our clients and our prospects. There's still quite a bit of uncertainty due to higher interest rates and upcoming elections. Clients continue to be somewhat apprehensive, Kevin, about fully opening up their budgets due to the economic and political uncertainty, but let's put what you said in the past. None of this is really an excuse for not growing our sales. This is a huge market, a $24 billion market that we have a very, very small share in. And so, we have loads of market share to take from our competition and who we believe is not generally as well positioned as we are to do so. So, we can't use customer sentiment or economics as an excuse for not growing our business. It might grow at a slower pace than it would in a robust economy, but it's going to grow because we're going to continue to take market share.

Okay. That's helpful commentary. Appreciate it.

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

Thank you, operator. We very much appreciate everybody being with us today. 2024 is off to a strong start. Our entire team, as you can well hear in our voices, is energized about the opportunities ahead. We look forward to meeting with investors at the many upcoming conferences that we'll be doing, and we'll keep you posted on our progress as we move through the year. As a reminder, you can find our latest investor presentation, which was just completed, on our very updated website, also just completed. Stay safe. Please don't hesitate to reach out with any further questions, and thank you, as always, for your interest in SGC.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.