Good day ladies and gentlemen, and welcome to the Stran & Company Fiscal 2021 Year End Earnings Call. At this time, all participants are in listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, David Waldman, Investor Relations. Sir, the floor is yours.

Good morning and thank you for joining Stran & Company's 2021 year-end financial results conference call. On the call with us today are Andy Shape, Chief Executive Officer, and Chris Rollins, Chief Financial Officer. The company issued a press release today, Monday, March 28, containing 2021 year-end financial results which is also posted on the company's website. If you have any questions after the call, or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020. The company's management will now provide prepared remarks reviewing the financial and operational results for the year ended December 31, 2021. Before we get started, we would like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of Stran's ability to implement its business plan, expected revenues and future success. These statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond Stran's control. With that, I will now turn the call over to Andy Shape, Chief Executive Officer. Please go ahead, Andy.

Great, thank you, David, and thanks to everyone for joining us on our first ever conference call. We've got some very exciting developments. We want to take this opportunity to provide an update on our progress and answer questions from investors. I'm pleased to report that we achieved year-over-year increases in revenue growth and gross profit and once again achieved profitability for the full year. And while we achieved 5% revenue growth, our recurring organic sales, defined as sales excluding the U.S. Census Program, revenue from the Wildman Imprints asset acquisition, and personal protective equipment, increased roughly 50% to $31.2 million for the year ended December 31, 2021. We achieved this strong organic growth despite the impact of the pandemic and while preparing for our IPO. In addition, we are off to a very strong start to 2022 as employees return to the workplace, and there are more in-person events. As a result, we expect to achieve double-digit year-over-year organic growth in 2022. For example, in January, we announced that we were selected by a large nationally recognized healthcare company to provide incentive products and literature designed to help drive consumer and health behaviors. Due to contractual obligations, we are not able to disclose the specific name of that customer, but this new multiyear contract is projected to generate over $6 million in annual revenue with potential expansion of that opportunity as well. Signing the contract with this new customer illustrates our shift from largely transactional sales to program offerings with long-term recurring revenue streams. We believe the healthcare market represents a significant, yet largely untapped opportunity to utilize promotional products to help drive positive and healthy consumer behaviors. Additionally, over the past few weeks, I'm pleased to report we have had amazing success in booking new business, with up to over $4.5 million in February alone, making it our third highest month of bookings in the company's history. With almost a week left in March, we are on pace to surpass that and achieve the second largest month of bookings in the company's 26-plus-year history. It's important to note that this won't turn into billed revenue until the products are delivered over the next few months; however, this trend is extremely encouraging. I'd like now to review some of the ways we've achieved this success and discuss our plans moving forward. We responded to the challenges posed by the COVID-19 pandemic by developing a clear company-wide strategy and sticking to our core value of delivering creative merchandise solutions that effectively promote our customers' brands. In addition to branded products, we offer clients a flexible and customizable e-commerce platform for order processing, creative and merchandising solutions, warehousing fulfillment and distribution services, custom sourcing capabilities, print on demand, kitting and assembly services, point-of-sale displays, loyalty incentive programs, and much more. We are now able to offer our customers a true one-stop solution. For that reason, we are investing heavily in sales and marketing, differentiating ourselves as a service-driven, feature-rich, and customer-focused company that provides our customers with more than just products. In addition to broadening our customer base, we are deepening our penetration with existing customers, given our compelling value proposition and comprehensive offerings to address their complex marketing needs. Alongside organic growth, we are pursuing M&A opportunities that would be highly synergistic with our existing operations. We have a proven track record of identifying and acquiring companies at attractive multiples as well as integrating these companies into our operations. For example, in September 2020, we acquired Wildman Imprints in Warsaw, Indiana. As a result, we gained over 1,400 customer accounts, including over 120 customer programs with high repeat business potential. This acquisition allowed us to extend our geographic reach into the Midwest and further diversify our customer base. More recently, in January 2022, we acquired GAP Promo, a leading full-service promotional agency that generated over $7 million in sales in 2020 and 2021. This acquisition adds an impressive roster of top-tier beverage and consumer packaged goods clients. GAP Promo's expertise in point-of-sale displays and more will also expand our reach within the beverage and consumer packaged goods sectors. We expect this transaction to be highly accretive given GAP Promo's track record of profitability since its inception in 2006. Importantly, Gayle Piraino, Founder and President of GAP, will continue with the company to help lead GAP Promo's business. It's important to note that our strategy is not to gut the acquired companies, but rather leverage the assembled talent to accelerate growth across the organization and repurpose people where appropriate in order to create incremental revenue and increase profitability opportunities. Through this growth, we expect to benefit from meaningful economies of scale. To summarize, over the past 25 years, we have successfully positioned Stran as a leading provider of outsourced marketing solutions, including a growing roster of Fortune 500 customers. These entities have identified Stran's offerings to be unique, in-demand, and of significant commercial value. The promotional products industry represents an enormous opportunity for Stran as there is no strong leader in this industry. The promotional products industry alone is valued at over $23 billion, and yet, the market is highly fragmented and comprised of more than 40,000 providers. We believe the market is ripe for consolidation, and the combination of our offerings is designed to position Stran at the forefront of the industry. Additionally, we are expanding within the broader $387 billion products, packaging, loyalty incentive program, printing, and tradeshow markets. Looking ahead, we are extremely encouraged by the outlook. We believe that we have seen encouraging signs of recovery from the effects of the COVID-19 pandemic. There has been a significant increase in the number of requests for proposals, which leads us to believe that companies are preparing to spend at an increased level, especially as employees return to the office and as there are more in-person events, including conferences and trade shows. We are at the right place at the right time. To capitalize on this opportunity, we're making key hires to support and accelerate our growth even further. I'm pleased to welcome industry veteran, Sheila Johnshoy, as Chief Operating Officer. Sheila brings over 20 years of leadership and a successful track record in the B2B promotional products industry. Among her many accomplishments, she led two industry startups, one of which was a public company that was successfully acquired. She also brought two of the world's largest retailers into the promotional products industry. While at Harland Clarke, she helped grow revenues from startup to $8 million within the first 12 months alone. In addition, we hired Steve Paradiso as our Chief of Staff, bringing over 30 years of experience to support Stran's growth strategy. Prior to Stran, Steve served as an executive at Top 40 players ePromos and Touchstone. Both organizations were generating less than $15 million in annual revenue before his involvement, and by the time he left, each was generating over $70 million per year. Mr. Paradiso also served as President of NASDAQ-listed Cyrk from 1988 to 2001, which became one of the largest promotional companies in the world, employing more than 2,000 people and achieving almost $1 billion in annual revenue while serving multiple national clients. We rounded out our additions to our executive team by adding Jason Nolley as our CTO and Steve Urry as our Vice President of Sales. Both have extensive experience and proven track records in delivering sales, operational, and technological leadership. Turning to our balance sheet, we are in a very strong financial position with over $32 million in cash and cash equivalents, approximately $40 million of working capital, and no debt as of December 31, 2021. As a result, we believe we are well capitalized to accelerate both our organic growth and our M&A strategy, including investments in new sales and marketing initiatives, as well as our technology infrastructure to drive even greater operational efficiencies. We are also actively evaluating additional M&A opportunities. We believe our strong cash position provides us with the flexibility to pursue acquisitions without the need to leverage debt, which we consider a distinct competitive advantage in this market. On a final note, given the strength of our balance sheet, our Board recently approved a share repurchase program of up to $10 million. However, we have not yet been in a position to utilize this buyback due to blackout restrictions surrounding the filing of our 10-K. However, absent any material developments that may impose additional blackout restrictions, we expect to be in a position to utilize this program in the very near future. While we remain focused on preserving capital, we believe our strong cash reserves and track record of profitability provide a unique opportunity to take advantage of market volatility through strategic opportunities, specifically considering the price of the IPO and private placements, which are considerably higher than the current share price. We remain committed to driving value for our shareholders and I can assure you that management and our shareholders are in complete alignment. We could not be more excited about the future for our business and believe 2022 will be a transformative year for the company. At this point, I'd like to turn the call over to our Chief Financial Officer, Chris Rollins, to go over our financials in detail. Please go ahead, Chris.

Thank you, Andy. Revenue for the year ended December 31, 2021, increased 5.2% to $39.7 million from $37.8 million for the year ended December 31, 2020. The increase was partially due to higher spending from existing clients as well as business from new customers. Additionally, we benefited from the acquisition of the Wildman Imprints assets in September 2020. However, these increases in sales were partially offset by the completion of the U.S. Census program in 2020, market saturation of personal protective equipment in 2021, a lack of in-person events, and businesses not fully reopening throughout 2021 due to the COVID-19 pandemic. Gross profit increased 3.1% to $11.8 million, or 29.8% of sales for the full year 2021, compared to $11.5 million, or 30.4% of revenue, for the same period last year. The increase in gross profit was due to increased sales and reduced costs from improvements in sourcing capabilities and buying power, partially offset by increased freight costs. Operating loss for the full year 2021 was $438,000 compared to an operating profit of approximately $1.5 million for the same period last year. The shift from operating profit in 2020 to operating loss in 2021 was due to an increase in operating expenses, which were attributable to additional expenses related to the acquisition of the Wildman Imprints assets, the implementation of a new ERP system, recently completed Initial Public Offering expenses, and organic growth in our business. Net income for the year ended December 31, 2021, decreased to approximately $235,000 compared to a net income of approximately $1 million for the same period last year. This decrease was primarily due to the non-recurrence of sales of $10.5 million from our work on the U.S. Census program in 2020 and the non-recurrence of sales of $4 million from our work on personal protective equipment in 2020. Increased expenses in 2021 relative to 2020 were related to our Initial Public Offering and higher freight expenses. These factors were only partially offset by increased sales in 2021 of $6 million from our September 2020 Wildman Imprints asset purchase and an increase of $10.3 million from recurring organic sales from 2020 to 2021. Now I would like to turn your attention to liquidity and capital resources. As of December 31, 2021, the company had cash and cash equivalents of approximately $32 million, approximately $40 million of working capital, and no long-term debt. Given the strength of our balance sheet, we recently announced a share repurchase program of up to $10 million and, as Andy mentioned, expect to utilize this in the near future. At this point, I'll turn the call back over to Andy.

Thank you, Chris. In conclusion, although we faced challenges during the pandemic, we recorded solid financial results for the year 2021. We are especially encouraged by the macro trend as employees return to the workplace and in-person events increase. We believe we are well positioned in 2022 to take advantage of our unique capabilities to accelerate growth as a leading provider of outsourced marketing solutions, given our compelling value proposition and comprehensive offerings to address all the needs of our customers under one roof. With a strong balance sheet, we are well-capitalized to execute all of our organic growth strategies while continuing to actively pursue synergistic mergers and acquisitions, with no plans to raise additional capital. We remain committed to driving shareholder value and look forward to providing updates as developments unfold. I'd like to thank you for joining the call today. At this point, we would like to open the call for questions. Operator?

Thank you. Our first question today is from Eddie Reilly at EF Hutton. Your line is open. You may begin.

Hey, guys, congrats on the strong year. Just wondering if you could provide us with some color on the strength of the current acquisition pipeline and the multiples you're seeing in the market currently?

Sure, thank you, Eddie. Yes, we're excited about the year, and as mentioned, our merger and acquisition strategy is something that we really look to accelerate our growth. As I mentioned, there are 40,000 players within the industry, and we're number 32, as voted by the Advertising Specialties Institute. So we're well positioned to already be a leader yet, there are a lot of smaller players out there. So our pipeline for acquisitions is very strong. We are meeting with dozens of potential acquisitions every week. Additionally, we're part of a group called Facilis Group, which includes between 100 and 150 distributors, some of whom are looking to exit, while others have struggled during COVID and may be seeking a buyout. We also believe that rising interest rates may hinder some companies' abilities to finance their operations as they have in the past. This places us in a very unique position with our strong balance sheet and solid cash position. As for the multiples, many of the acquisitions we are considering are self-funding, where we may have to put up a little cash up front, but oftentimes we only need to do a two to four-year earnout where it is effectively self-funding. The multiples within this industry are generally ranging from about 3 to 6 times EBITDA, which may increase in certain cases. Thus, we are very excited about the acquisition opportunities currently available to us. We are taking our time to find the right opportunities, as we are not merely looking to add revenue; we want to acquire accretive revenue that fits within our long-term strategy.

Got you, got you. Thanks for that. And on integration with the two most recent acquisitions of GAP and Wildman, I was wondering how long that process takes and whether there were any surprises along the way, and possibly how the new ERP system might help address some integration issues?

Absolutely, great question. When we acquired Wildman back in 2020, we recognized that in order to enhance efficiency and effectiveness, we needed to upgrade our ERP, including our accounting software. After evaluating several providers, we chose Oracle's NetSuite to implement as our ERP, with a projected go-live at the end of Q2. This implementation, begun last March, is expected to greatly assist us with integration and provide enhanced visibility. It allows us to bring in outputs from existing platforms that our acquisition targets may have, streamlining and training them to maximize efficiency. We often find that jobs may be redundant in older organizations as we acquire them. Thanks to this initiative, we can repurpose those valued employees to concentrate on revenue-generating and profitability-enhancing activities, which has proven to be a nice surprise for us.

Got it. On the new customer acquisition topic, could you take us through the strategies you're pursuing to acquire new customers?

Sure. We're focusing on several strategies, one of which is geographic expansion. Our primary headquarters is just outside of Boston, in Quincy, Massachusetts. After acquiring Wildman Imprints, we opened an office in Warsaw, Indiana, thus expanding our footprint into the Midwest. We are looking towards the West Coast and other U.S. regions, and potentially globally in the future. Currently, we execute our global programs through partnerships, but that is something we may explore later on. Additionally, we aim to target somewhat smaller companies, in the range of $3 million to $10 million, whose customers haven't utilized our technology offerings, supply chain strengths, or our financial capacity. We're essentially looking for companies with a strong customer base and capable personnel who haven't capitalized on all we have to offer.

Awesome. As you continue to grow through acquisitions and organically, do you expect that we will see continued reductions in costs of purchases going forward, or are you bound more by the Facilis Group at this time?

No, Facilis Group is simply an organization we're part of for community purposes and to take advantage of some of their software tools, as well as to gain increased buying power in lower volume supply chain areas. However, due to our existing spending levels, we negotiate directly with most of our major suppliers and factories, establishing our own buying power and rebate arrangements. We believe that as we continue to grow and scale, we will be able to enhance not only our gross profit margins but also our net profit margins. While profitability is crucial, our primary focus right now is to boost top-line revenue, while eventually seeking to balance that growth with profitability over time.

Got you. Do you have any estimates for potential non-recurring operating expenses that might have occurred in the year?

I don't have an exact figure for non-recurring expenses that could have impacted the P&L in 2021. However, it was significant. There have been a lot of direct and indirect costs associated with going public, the acquisition of Wildman, and the implementation of a new ERP system, all of which required resources that diverted from our normal day-to-day operations to strengthen our balance sheet through capital raising. We are extremely pleased with the outcome—the strength of our balance sheet is evident, and we are well-positioned to capitalize on a market that nobody else seems to be taking advantage of. This position is unique; the enthusiasm within our industry is high, and we are looking forward to further developments.

Okay, great. Thanks, Andy, and congrats again.

Thanks, Eddie.

Thank you. Our next question today is coming from Evan Greenberg at Legend Capital Opportunity Fund. Your line is live, you may begin.

Hello, guys. Congratulations on a great quarter.

Thanks, Evan.

You're welcome. First question has to do with shipping costs and the increase as a percentage of sales. I'm sure most of that was in line with or was slightly higher than the increase in core revenues. But some of that I'm sure had to do with inflationary situations. How are you able to control that and are you able to pass some of that along to customers?

Great question. As we have mentioned multiple times, shipping costs have significantly increased. For example, a container used to cost us $3,000 or $4,000 to bring in from China, and now it's closer to about $15,000 to $20,000. Fortunately, we are able to pass on the majority of this expense to our customers as we price products quote-by-quote. Thus, when providing quotes, we can adjust prices based on current market trends. While we strive to treat our customers reasonably, we can typically transfer those costs. We’re in a unique position to do so, as we do not have set prices for long periods of time; our prices fluctuate based on the projects we engage in. We're actively managing these costs and doing our best to negotiate preferred rates from our suppliers and utilize less-than-truckload shipping options wherever possible.

Okay, follow-up question to that. You have substantial cash reserves as you noted, and you're buying back stock while generating cash. I mean, you had some additional expenses this quarter. It is a two-part question. On a normalized basis, what do you think EBITDA would have been had you not had ERP implementation and merger acquisition expenses? Do you think it would have been around 10%?

I don't think 10% EBITDA would have been achievable this year, considering everything we faced. What we knew coming into 2021, we were losing nearly $15 million in revenue from the nonrecurring revenue generated by the U.S. Census program and PPE products. We had to work hard to replace that revenue, resulting in substantial efforts in sales and marketing. That's why we saw a 50% organic growth, knowing we needed to replace that revenue. It takes time for investments in marketing to yield results, but February and March are already showing strong bookings, surpassing both previous records in our company’s history aside from the month we booked the Census program. Overall, I would say on a normalized basis, EBITDA last year might have been closer to about 5% to 7%. Our goal moving forward is to aim for closer to 10% or above.

Okay. The second question concerns acquisitions. If you encountered an acquisition larger than your current cash hoard, do you have credit lines or other access to capital that remains untapped and could be utilized?

Yes, we currently have a $7 million revolving line of credit with Salem Five Bank, a local bank here, with favorable terms. There's no unused line fee, and the facility is very flexible. We could potentially increase that credit line or take advantage of asset-based lending to leverage our position further. Currently, we also have $7 million available that we could tap into easily. However, a larger acquisition would have to be for a much larger company than Stran itself for us to utilize that credit facility.

Okay, great, thanks.

Thank you. Our next question today is coming from Will Hamilton at Manatuck Hill. Your line is live. You may begin.

Hey, good morning, and thanks for the time. Just a few questions—the healthcare customer that you won, was that an entirely new program for them? Was it an RFP they put out, or did you win that from a competitor?

That was not a new program. They had been running it somewhat differently before, but they did go out to RFP and we did win it away from an incumbent. We approached it differently, as consumers used to have to pick up their rewards versus us shipping them directly. Our unique approach impressed them, and we're very pleased with the progress of the program. Unfortunately, due to our contract, we cannot disclose their identity.

You announced you won it in January, but are you expecting any material revenue from it in the first quarter, this March quarter?

Absolutely, yes. We announced it in January because that's when the revenue started to come in. This is an annuity program with a three-year contract and two additional one-year extensions, and we're exploring opportunities for expansion into other parts of their business as well as with other healthcare providers. So, yes, we expect that to contribute to revenue in the first quarter and moving forward.

Understood. The fourth quarter growth appears to be around 35%. Could you give any insights into how much of that growth was organic and, within that organic growth, the contribution from new customers versus expanding existing relationships?

In relation to the organic growth in Q4, I can't provide exact figures, but I would estimate at least two-thirds of that came from organic growth and roughly one-third from new customers. Now that I think about it, almost all of that growth was organic because we finalized the Wildman Imprints transaction at the end of Q3 2020, allowing us to see its benefits in Q4 of 2020 versus 2021. All of the growth in Q4 was organic. I would estimate new customers accounted for approximately one-third of that, but I don’t have exact numbers at my disposal currently. We are focused on finding new logos while expanding existing accounts; we currently serve over 30 Fortune 500 customers with high potential for growth.

That's helpful. Last question: you mentioned driving future growth with sales investments. How many salespeople do you have right now, what did you add last year, and what do you expect to add this year?

Last year, our total employee count averaged 64. As of today, we have 89 employees; hence we have seen significant growth. Our current sales model consists of 21 outside sales reps and 24 inside sales reps concentrated on continuing to grow existing accounts. We aim to optimize this collaboration to explore opportunities within existing customers and add value, maximizing growth potential. We plan to continue expanding our sales team and marketing initiatives to create more inbound leads, thereby increasing visibility for Stran. Our strategy not only focuses on acquisitions but also emphasizes how we onboard new customers and enhance profitability for acquisitions made.

Do you have metrics for outside sales, specifically what you expect mature outside salespersons to achieve in a year?

We have various levels within our sales structure: junior, senior, and enterprise account sales respectively. Each has different expectations set for them. We recently revamped our commission structure to reward growth more than repeat business. While annuities are significant, we’re pushing for expansion within existing accounts. The industry traditionally accepts stagnation, but we are keen to promote providing greater value through more products and services to continue driving growth.

Thank you for your time.

You're welcome!

Thank you. We have no further questions in the queue at this time. I would now like to turn the floor back over to Andy Shape for any closing remarks.

Thank you very much. We're excited about the future of Stran. We're thrilled with our 2021 results. Our balance sheet is extremely strong compared to our trading position, where we’re often trading near or below cash value. This represents a unique opportunity for both investors and ourselves to build value in Stran further. The promotional products industry remains mostly untapped, with few public companies in this sector—especially on major exchanges like NASDAQ or the New York Stock Exchange. We stand out as the only promotional products-based business in this segment, while other companies may have divisions. Thank you for your time, and I look forward to the future of Stran.

Thank you. Ladies and gentlemen, this does conclude today's event. You may disconnect at this time and have a wonderful day. We appreciate your participation.