Good morning, ladies and gentlemen. Thank you for standing by. And welcome to the Stran & Company First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. I would now like to turn the floor over to the host, David Waldman, Investor Relations. Please go ahead.

Good morning, everyone. And thank you for joining Stran & Company's 2022 first quarter 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, Friday, May 13, 2022, containing first quarter 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 three months ended March 31, 2022. 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.

Thank you, David. And thank you everyone else for joining today, as we discuss our significant progress made during the first quarter. First, I’d like to highlight that we achieved a record revenue of $12.3 million for the first quarter of 2022, an increase of 62.5% when compared to Q1 2021. Even more important, excluding the G.A.P. Promotions acquisition, our organic revenue increased 50.8% over the same period last year. And we have maintained a solid balance sheet with $30 million in cash reserves and no long-term debt as of March 31, 2022. Our revenue growth is a direct result of significant contract wins with leading organizations while executing on opportunistic yet aggressive acquisition strategies. 2022 is already proving to be a transformative year for Stran, as we are gaining traction in the market. One example is the recent multiyear contract we secured with a large national healthcare company. This selection was based on our ability to execute as well as our ability to address their complex marketing needs. The initial value of this contract is expected to be over $6 million. However, we believe we can secure additional business from this organization as well. We also look forward to highlighting them as a case study to demonstrate our capabilities in the healthcare sector. While companies such as this already utilize promotional products as a marketing tool to increase brand awareness, they are now realizing the power of promotional products to drive healthy consumer behaviors. As a result, our goal is to add similar customer engagements in the months ahead. We are winning these projects as a result of our compelling value proposition and comprehensive offering. We truly act as an extension of our client's team by providing branded products, a flexible and customizable e-commerce platform for order processing, creating merchandising services, warehousing, fulfillment and distribution services, custom sourcing capabilities, print on demand, kitting and assembly services, point-of-sale displays, loyalty incentive programs, and as you can see, much more. All of these are custom-designed to meet the unique needs of each of our clients. Heading to the second quarter, we are seeing very strong bookings with over $18.8 million in orders secured year-to-date. It is important to reiterate that these numbers are reflected as billed revenues in total products are delivered over the next few months. However, this trend bodes well for the balance of the year. In addition to organic growth, we continue to pursue new M&A opportunities that we believe will be highly synergistic with our existing operations. We now have a proven track record identifying and acquiring companies at attractive multiples, as well as quickly integrating these companies into our own operations. Most recently, we acquired G.A.P. Promotions, a leading full-service promotional agency that generated over $7 million of sales in 2020 and 2021. It’s also worth noting that G.A.P. has always been profitable since its inception. This acquisition adds an impressive roster of top-tier beverage and consumer packaged goods clients. G.A.P. expands our reach within the beverage and consumer packaged goods sectors, which represent very sizable markets. The combination of G.A.P.’s track record and industry relationships with our own end-to-end solutions make this a perfect marriage. To support our continued growth, we have invested heavily in sales and marketing and also appointed key management team members. As previously discussed, Sheila Johnshoy recently joined our team as Chief Operating Officer. She brings over 20 years of experience with an impressive track record in developing and executing growth strategies, as well as building effective sales and marketing teams. In the short time since joining, Sheila has made a considerable impact on our organization. We could not be more excited to have her as part of the executive team as we work aggressively to expand our market share. Additionally, management team members, including myself, have been actively participating in industry and investor conferences to increase awareness of Stran and our products and solutions. Overall, we believe we have built a highly scalable business model. This is best illustrated by the decrease in operating expenses as a percentage of revenue. Also, bear in mind that our results for the first quarter include the acquisition and integration expenses related to G.A.P. as well as other fixed expenses to support our planned accelerated growth. Looking ahead, as we continue our revenue growth, we expect to not only maintain our track record of profitability, but we believe this company has tremendous earning potential. We have maintained a solid balance sheet. We ended the quarter with $30 million in cash reserves and no long-term debt. As a result, we are well capitalized to internally fund and execute both organic growth and acquisition strategies. Let me say no uncertain terms, we have no plans to raise capital anywhere near our current levels. We share the frustration of our investors with the share price given the fact that we're now trading below cash. We're not alone in this market with numerous companies impacted by the sell-off in the market, which has disproportionately affected microcap and small cap companies. However, we believe our results speak for themselves and we are in this for the long game. Nonetheless, we have put a share buyback plan in place as we see this as an opportunity to create additional value for shareholders while the markets are so volatile. We have not started utilizing the buyback for the sole reason we have been in an extended blackout period due to the timing of the 10-K and the 10-Q. But outside of the blackout, we can and will plan to buy back shares. It is also worth noting that management and the board will also consider opportunistically purchasing shares in the market. So to wrap up, the promotional products industry is an enormous market valued over $23 billion and yet is highly fragmented with no clear leader. In addition, we are expanding within the broader $387 billion product packaging, loyalty incentive program, printing, and tradeshow markets. Based on our strong track record of organic growth and accretive acquisitions, we believe Stran can become a major player within this industry. At this point, I'd like to turn over our call to our Chief Financial Officer Chris Rollins to go over the financials. Please go ahead, Chris.

Thank you, Andy. Revenue for the three months ended March 31, 2022, was $12.3 million compared to $7.5 million for the same period in 2021. The increase was primarily due to higher spending from existing clients as well as business from new customers. Additionally, we benefited from the acquisition of the G.A.P. Promotions assets in January 2022. These increases in sales were partially offset by a lack of in-person events and business still not being fully reopened as a result of the COVID-19 pandemic. Gross profit increased 40.4% to $3.2 million, or 26.3% of sales for the three months ended March 31, 2022, compared to $2.3 million, or 30.4% of revenue for the same period last year. The increase in gross profit was due to increased sales partially offset by an increase in purchasing costs. Additionally, we had slightly lower margins due to our new healthcare client, given the sheer size of the contract, but it also provides us an important foothold to expand our presence in the healthcare market. We also had higher freight revenue, which comes with lower margins. Operating loss for the three months ended March 31, 2022, was $806,000, compared to an operating loss of $354,000 for the same period last year. This increase was due to higher general and administrative expenses, which were primarily due to additional expenses related to the acquisition of the G.A.P. Promotions assets, the implementation of our new ERP system and Oracle's NetSuite platform, and ongoing public expenses related to the organic growth in our business. Operating expenses as a percentage of revenue were 32.8% in the first quarter of this year, compared to 35.1% for the same period last year, a decrease of over 220 basis points as we continue to carefully manage our expenses. Net loss for the three months ended March 31, 2022, was approximately $546,000, compared to a net loss of approximately $290,000 for the same period last year. This decrease was primarily due to the integration expenses related to the acquisition of the G.A.P. Promotions assets, ongoing expenses related to being a public company, and higher cost of purchases. These factors were partially offset by the increase in sales from our January 2020 G.A.P. Promotions asset purchase and the increase from recurring organic sales. On March 31, 2022, the company had cash and cash equivalents of approximately $40 million and no long-term debt. It's worth noting that of this $40 million, $10 million was a deposit from a customer offset in the liability section of the balance sheet. But even backing out the $10 million, we had $30 million of cash reserves at the end of the quarter. Given the strength of our balance sheet, we announced a share repurchase program of up to $10 million. And as Andy previously mentioned, we expect to be in a position to utilize this in the near future. At this point, I'll turn the call back over to you, Andy.

Great, thank you, Chris. To wrap up, we have a strong balance sheet and are well capitalized to execute on all of our organic growth strategies while continually actively pursuing synergistic acquisitions. We are extremely well positioned to take advantage of the opportunities in front of us and are excited about the outlook for 2022. I'd like to thank all of you for joining the call today. And we look forward to providing further updates as developments unfold. At this point, we would like to open up the call to questions. Operator?

Certainly. The floor is now open for questions. Your first question is coming from Edward Reilly with EF Hutton. Please post your question. Your line is live.

Hey, guys. Thanks for taking my question. I was wondering if you could speak to inflationary pressures and your ability to pass on increased costs to your customers.

Thanks, Eddie. Great question. So that is one of the benefits with our business model. Typically, all of our contracts are written that we price out the products as we reorder them. So when we buy inventory for customers, we have $6.1 million in inventory right now. And we sell through that inventory based on the price that we bought it for. But typically, we turn inventory over three to four times per year. So we usually sell through that before inflation has really impacted it too much. But as prices start to increase or we see inbound freight costs increase or any other costs, we typically go back to our customers as we reorder and increase prices relative to any price increases we've seen. So that does protect us from price increases, as well as identifying if we need to increase to cover our cost of living increases or just regular inflationary, as well as we do a lot of transaction orders for our customers. As we quote them, they typically order within 30 days, and our quotes generally are only valid for 30 days. So once they place an order, we purchase the goods, and that is typically fixed. So it does protect us from not being a retail model where we have things in the market for a long period of time and can adjust those prices. So we're very flexible with that.

Got it. I was wondering if you could unpack for me a little bit more about the customer deposit program liability for me. Is this just deferred revenue, and does it have anything to do with the healthcare customer that you guys gained?

No, this is completely separate. This is a program we've been running, a loyalty and rewards program where we send out gift cards for this customer to consumers. But we need to use that money to fund those cards. So they give us the deposit of funds, and then we set that aside and earmark that directly for those gift cards that we're funding. Typically, they fund anywhere from $20 million to $25 million historically per year, but that is continuing to grow. We don't obviously count that as revenue; we only count the service fees that we make for managing the program and processing the transactions as revenue, but that just shows up as an offset. So they typically send us anywhere from $10 million to $15 million in cash that we then set aside directly for those gift card funding. It's a gift card funding account that we use to fund those cards. So although it shows up on the balance sheet as cash, we'd like to make note that since it offsets a liability directly related to that, we don't want to mislead anyone that it's ours.

They go up and down together at the same amount, to zoom out of cash account and liability, up and down at the same.

Yep, got it. Yep, makes sense. And then on operating expenses, do you happen to have the costs in the quarter that relate to the ERP upgrade and acquisition costs, just so maybe we can paint a better picture of more normalized operating expenses?

Well, if we look at the public expenses related just to being public, anything between legal, investor relations, accounting compliance, D&O insurance, that's approximately $500,000 in the first quarter. Some of that was a one-time insurance as a result of the PIPE. But those are one of the expenses kind of going the opposite.

For the ERP, I think we added on $42,000 in consulting fees for the month of just for the quarter.

Yes.

For the ERP.

And then there was some stock-based compensation related to the acquisition of, I think, $90,000 in stock-based, and then $28,000 in stock option compensation.

That's right.

Okay, got you. And then just on the acquisition pipeline, could you comment on how that looks currently?

Sure. So we're actively pursuing all sorts of acquisition targets. One of the things we don't want to be is impatient. And so we're being selective of who we really want to do a deal with. We don't want to overpay, and we also want to make sure that there are synergistic properties. We don't want to just go out and buy revenue; we want to buy proper revenue. G.A.P. was a great example of someone where that was really a very good opportunity because they had not capitalized on their opportunities with their large customers. And we've already had the chance to go out and meet with their customers and expand that relationship. So we're looking for more customer engagements or more competitors who are in that space. We're actively talking to dozens of them. We don't have anything obviously that's public knowledge, but we are actively talking to dozens of competitors. Like I said, though, we're being selective, and we don't want to rush into things just to say we're doing it. We want to ensure that we dot our I's and cross our T's when it comes to the right partners.

Cool. And then the last one for me, just in regard to the blackout period for the share repurchase program. Is that effectively over today? Are you able to utilize that to repurchase?

I think we can next week. I think it's a few days. I'm not sure exactly what it is. But we're relying on our counsel for that. I think we have another, I think maybe until Tuesday as the earliest we could execute that. But that is our plan to go into the market for that.

All right, excellent. Thanks, guys. And congrats.

Thank you. Thanks, Eddie.

Your next question is coming from Anthony Marquese. Please pose your question. Your line is live.

Hi, I apologize. I had to come on Q&A late, but I listened to everything else. At what point will you feel comfortable giving guidance, even yearly guidance? That's my first question.

For forecasted revenue.

Yeah. We just want to be careful, since we were fairly new being listed. We want to be careful about forward-looking statements. So we're taking that day-by-day. But if we look at some of the announcements that we made, looking at last year's revenue of just under $40 million, and then we add — we announced we're getting $6 million and then we announced we acquired G.A.P. If you combine the three of them together, that will give you a pretty good idea of what we're doing. But rather than us going and making those forward-looking statements, we really want to rely on our proving it rather than saying we're going to prove it. So we just want to get a little bit of underneath us before. And we're also in — remember, we're also in very serious growth mode right now. So things can change very quickly because we're really aggressively looking at acquisitions, we're aggressively looking at adding new staff. So things could change very quickly. And we don't want to make those statements too far in advance. Right. Are there any public company comps that you can think of? I think you're growing very rapidly, at least in this sector, given the lack of research coverage, or at least I think as far as I can see, only one company covers you. Are there any public company comps that you can point to in terms of relative value, where you’re trading versus others?

Yeah. I would say there's a few different public comps. The first one, it's not a direct competitor, but they're very similar, is Imprints; they’re on the London exchange. And I'm not sure the ticker; I think it's.

Right.

For Imprints. They do have around $700 million in revenue, or they did historically; that's one we choose. There's another one on London called Pebble Group. They also, I think, are about $150 million in revenue. And then there's one, Superior Group of Companies; it's a uniform company, but they have a division called BAMKO that directly competes with us. And that’s really the closest comp, but it only accounts for about 25% of their revenue is what we do. The rest is a uniform, like Cintas. Cintas could actually be considered a comp as well, but it's more uniform-driven. So those are really the three main ones that we look at: Pebble, Imprints, and Superior Group of Companies.

Okay. And the final question I have is given what's going on in the markets, volatility, interest rates, and the economic front? Are you seeing valuations for your potential acquisitions affected by this, in terms of are you seeing better deals, or are you seeing more deals? I'm just trying to get a sense of whether this recent volatility in the last several months has created more opportunities for acquisition?

Not quite yet, honestly. That's why we're being a little bit patient about it because I don't think people have quite, especially those who may be struggling, have not started to feel it yet. As we start to see interest rates go up, finding raising capital becomes much harder to do as we start to find people are struggling to run their business just based on working capital. I think that'll open up more opportunistic things for us. Not because the companies aren't strong, just because it's harder for them to run. So we are being opportunistic when we're looking at it. I don't think enough people have recognized that yet, but we're waiting patiently for that to happen. Not that we want to be bottom feeders, but we do want to find those strong companies that really are just growing like us. When we were growing, we had a hard time keeping up; we were growing so fast that it was difficult to keep up with our working capital needs. We made it work and grew even faster. But some people don't like to take that risk. So we are finding that some people are starting to look right now. But we feel that in the next few months, it really will open up even further.

Okay, thank you very much.

Because one additional thing is the beginning of this year really was people started opening up spending more. So I think everyone right now in the industry is seeing a big increase; everyone started to see a pickup. So I think everyone was very optimistic. And then world events and the economy and everything started maybe putting a damper on that. So I think we will see those opportunities open up even more.

Got it. Okay. Thank you very much. Great quarter.

Thank you.

Thanks.

We have a follow-up question coming from Ed Reilly at EF Hutton. Please pose your question. Your line is live.

Hey, guys, sorry. Just one more for me. You mentioned that you're aggressively adding new staff. I was wondering what types of positions are making up the majority of that hiring.

So there's a few different things that we've hired in the past six months. We hired a Chief of Staff. We hired a new CTO, Chief Technology Officer, and a new Chief Operating Officer. We also hired some new people in marketing, a social media and digital content provider, an SEO Marketing Specialist, a head of Client Services that takes up our client service that's in charge of executing on sales, and a new Vice President of Sales, as well as additional salespeople to cover accounts and help grow them. So there's twofold that we're looking at. One is building out our infrastructure to handle our significant growth. As we continue to grow, what got us to say $40 million is going to get us ten times that. So we recognize that. So we need to build our infrastructure to handle additional sales and additional customers that we bring on. In addition to that, we're hiring new sales, marketing, and business development folks that can put those resources to work and help pay for those. So we're really looking at that in two sections, but not doing them one after the other; we're doing them simultaneously. We're adding new people to generate more business and more people that can help us execute on that business on the backend. So those are some examples of some people that we've hired, as well as a few additional people within our technology team.

Right. Thank you.

Your next question is coming from Helen Litzak with Forge Capital. Please pose your question. Your line is live.

Congratulations on the strong quarter. I wanted to ask since the completion of G.A.P. Promo, are you seeing additional traction within the beverage space? And how will you get additional customers in this market?

Thank you. Yeah, the beverage space is a massive opportunity. If you think about if you go into a restaurant, a bar, or a package store or anywhere where you buy alcohol, you can see merchandise all over the place. And it's fairly recession-proof; people always seem to continue to buy alcohol even when the economy is tough. So that's a tremendous opportunity. G.A.P. has not only introduced us to some fantastic clients and some fantastic brands, but also some of their resources and buying experience that they have within that space has really helped us not only use that for expanding G.A.P.’s customer base but also applying it to some restaurants’ customer base, as well as attracting new customers together. So combined, finding those new beverage opportunities are really great. And we've already — as I mentioned, we've already gone out and visited some of G.A.P.’s customers and started trying to get more opportunities with them and more sales from those organizations. So that's a huge opportunity. We have a whole division that concentrates in the beverage space. We're looking to continue to expand that and build on that through expanding G.A.P.’s current business, acquiring new customers within that space with marketing tools and direct sales, as well as expanding our current beverage clients since we have an extensive list of them as well. So it's a great market, and G.A.P. is just helping us expand that even further.

That's great. Yeah, I saw some of their displays; they look really, really great. So thank you for that.

Thank you.

Your next question is coming from Maya. Please pose your question. Your line is live.

Thank you for taking my question. Given how you reiterated the disconnect with share price. Andy, how aggressive are you guys intending to be with the buyback? I know there are regulations you have to follow, one being the 25% of the daily volume. But I was wondering if you can enlighten us on how you aim — how aggressive you aim to buy?

Sure. The 10b-18 is like — as you mentioned, some of the restrictions restrict us to what we can do. And I think I don't know exactly what the share count is today. But we are restricted to only be able to do so much within the market. Our Board of Directors did authorize up to $10 million in capital to go — authorized to go repurchase shares. I do think that's probably a little aggressive based on market conditions. So we are looking to be fairly aggressive, but not use all that's been authorized. We did put up $10 million just to be flexible based on what the share price does. But I do think that as soon as we — the compliance window opens and we can get everything lined up and ready to go, we will start executing on that very shortly. We're also looking at some insider buys, myself included, to go purchase shares, so that will be coming in the near future and we'll do that. So we do have an open window between now and say mid-June when the blackout period is closed, and then 15 days before the quarter-end, we have to go into a blackout period as well. But we are looking to do that. We also are recognizing that we did raise capital; the reason why we went public and the reason why we raised money and the reason why we did the PIPE was because we want to accelerate the growth of this business. So we don’t want to limit ourselves by using all of our capital to buy back our stock; we also want to be aware that the reasons why we didn’t do this is that we want to become a leader and a player within this industry, a true leader. And if we use all of our capital to do that to just buy back shares because it's a good price, that may limit us. So we're conscious of that and want to find that nice balance.

Absolutely. And I appreciate that. Do you guys expect buying to be a daily occurrence until the blackout period starts again? Or can you enlighten us about your plan of action with it?

We're not too sure yet. We want to see how — we have not executed it yet. So we want to see how it goes. And then we'll play it day-by-day or week by week, depending on the volume. But yeah, we are planning on making those decisions almost on a daily basis.

Thank you. Congrats on a great quarter.

Thanks, Maya.

There appear to be no further questions in queue at this time. I would now like to turn the floor back over to management for any closing remarks.

Thank you, everybody, for joining. We are proud to have our first quarter in 2022 behind us with such revenue growth. We're working hard to create shareholder value. I hope everyone recognizes that we're really making a push to grow this company into something special within our industry. Thank you for your support. Thank you to everyone who has met with us over the past few months, learning more about Stran, listening to our story and believing in us. We believe in ourselves. We're really looking forward to the future of this company and the promotional products industry. Thank you, everyone, and we look forward to providing more insight in the future. So thank you for your time today.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time. Have a wonderful day. Thank you for your participation.