Good day, ladies and gentlemen, and welcome to the Stran & Company Third Quarter 2022 Earnings Call. At this time, all participants have been placed in listen-only mode. It is now my pleasure to turn the floor over to your host, Aly Schilt, Vice President of Crescendo Communications. The floor is yours.

Thank you. Good morning, and thank you for joining Stran & Company's 2022 third quarter financial results and business update conference call. On the call with us today are Andy Shape, Chief Executive Officer; and David Browner, Interim Chief Financial Officer. The company issued a press release today, November 14, 2022, containing its third 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 September 30, 2022. Before we get started, we'd like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of our ability to implement our 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, we will now turn the call over to Andy Shape, Chief Executive Officer. Please go ahead, Andy.

Thank you, Aly, and thanks, everyone, for joining us today as we discuss our progress and financial results for the third quarter of 2022. We continue to witness steady growth in sales for the third quarter of 2022, as evidenced by our record revenue of $13.6 million, a 24% increase compared to the same period last year. It's also worth noting that our third quarter of 2022 was the second-best quarter in the company's history. Notably, we experienced a 50% increase in sales year-over-year. Additionally, we continue to carefully manage expenses, and even though we reported a slight loss for the quarter, this is part of our deliberate investment in infrastructure and capabilities to further accelerate our growth. While we have historically been profitable and will be profitable again in the near term, this market is ripe for consolidation; the time to strike is now. I'm also confident that the investments we're making in the organization will allow us to reap the rewards for years to come. At the same time, we have maintained a strong balance sheet with a combined $22 million of cash and cash equivalents and short-term investments as of September 30, 2022, and no long-term debt. We believe the activities we are undertaking, including mergers and acquisitions that complement our business operations, increasing Stran's recognition within the industry, and entering new geographies, are the fundamental pillars for accelerated growth and ongoing success, while also serving as the key differentiating elements that will position Stran at the forefront of the industry. To execute our growth strategy, we actively explore, identify, and research companies within the promotional products market that we believe have the potential to be synergistic and accretive to Stran. Towards this end, we completed the acquisition of Trend Brand Solutions in September, and we have fully integrated the business within Stran. Trend has an established presence in the South, specifically in the Houston area, expanding our geographic presence, which is key to our growth strategy. Houston ranks third among metro areas and Fortune 500 headquarters locations and is home to two dozen Fortune 500 companies. With Trend's recognition in the Houston market and our comprehensive platform comprised of leading technologies and knowledgeable employees, we believe we have the ability to become a leading player in the Texas market. In connection with the acquisition, we welcomed Michael Krauser, former CEO of Trend, as our new Regional Vice President of Stran. Michael has assumed the responsibility of overseeing our Texas regional operations with the aim of further penetrating the Southern market, and we look forward to his contributions. Not only are we executing on our M&A strategy, we're also continuing to secure significant multiyear contracts with high-profile clientele. This includes our contract with a leading North American infrastructure service company announced during the quarter. We've been contracted to provide promotional products and services, which we are currently delivering. The customer's goal is to increase our market awareness as well as our customer loyalty. This contract is projected to generate over $1 million in revenue annually, and I'd like to highlight that this contract came as a referral from an existing customer, which we believe further validates the quality of our products and services, as well as our value proposition for our customers. We've effectively implemented a growth strategy that is allowing us to reach new records operationally, financially, and geographically. Furthermore, as I previously mentioned on the call, we have invested heavily and launched an expanded sales and marketing program with a dedicated lead and demand generation team comprised of experienced industry veterans. We believe these leads are resulting in active discussions with potential customers and companies, validating our ongoing efforts and demonstrating the vast opportunities within the industry, which we intend to take advantage of. Through these and other initiatives, we are gaining significant traction in the market and believe we are firmly positioning ourselves as a leader in the promotional products industry. In addition to our sales and marketing efforts, combined with acquisition opportunities, we've worked diligently to implement Oracle's NetSuite as our new ERP in order to gain operational efficiencies, provide greater financial analysis, and prepare for additional scalability, and we expect to be fully implemented by the end of 2022. Looking to the fourth quarter, we are seeing very strong bookings with over $48 million in orders secured year-to-date. It's important to reiterate that these numbers aren't reflected in build revenue until the products are delivered over the next few months, which includes the approaching holiday season. However, it does reinforce our traction in the market. Overall, we continue to build upon an already established and successful business model that we are actively scaling. We believe our activities have directly resulted in our record revenue numbers, as well as assisted in the steady growth of the company. Lastly, we continue to carefully manage expenses and have maintained a strong balance sheet, as I mentioned earlier. We ended the quarter with $22 million of cash and cash equivalents and short-term investments and no long-term debt. As a result, we are well capitalized to internally fund and execute on both our organic growth and acquisition strategies, firmly establishing Stran as a leader in the promotional products industry, a market valued at over $23 billion. Furthermore, showing our confidence in the business, we have continued to execute our share repurchase program. Since we last reported, the senior management team has purchased approximately $1.2 million worth of common stock. We've repurchased shares opportunistically and intend to continue to do so as appropriate. In summary, we are very proud of the ongoing efforts that allow us to further execute our growth strategy, resulting in growing our customer base, expanding geographically, and identifying accretive acquisition targets. At the same time, we are focused on increasing awareness of Stran through investor and industry-related activities. Together, we believe these initiatives, along with continued execution, will drive long-term value for our shareholders. At this point, I'd like to turn the call over to our Interim Chief Financial Officer, David Browner, to go over the financials in more detail. Please go ahead, David.

Thank you, Andy. Revenue for the first three months ended September 30, 2022, increased 24% to $13.6 million compared to $10.9 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 Gap Promotions assets in January 2022 and Trend Brand Solutions assets in August 2022. Gross profit increased 14% to $4.2 million or 31.3% of sales for the three months ended September 30, 2022, compared to $3.7 million or 34% of revenue for the same period last year. The increase in gross profit was due to an increase in sales, partially offset by an increase in purchasing costs. The operating loss for the three months ended September 30, 2022, was $649,000 compared to an operating income of $1 million for the same period last year. This decrease was primarily attributable to higher general and administrative expenses, which were primarily due to additional expenses related to the acquisition of the Gap Promo assets, the Trend Brand Solution assets, the implementation of a new ERP system on Oracle's NetSuite platform, ongoing public company expenses, and the organic growth in our business. Operating expenses as a percentage of revenue were 36.1% in the third quarter of this year compared to 24.6% for the same period last year. The net loss for the three months ended September 30, 2022, was approximately $0.7 million compared to net earnings of approximately $0.7 million for the same period last year. This decrease was primarily due to lead generation initiatives, integration expenses related to the acquisition of Gap Promotions and Trend Brand Solutions assets, ongoing expenses relating to being a public company, and higher costs of purchases. As of September 30, 2022, the company had $22 million of cash and cash equivalents and short-term investments and no long-term debt. Given the strength of our balance sheet, as previously announced, we implemented a share repurchase of up to $10 million. Since last reported, we have repurchased approximately 667,545 of common shares at an average price of $1.78 for a total cost of approximately $1.2 million through the buyback program. That brings our total share repurchase amount for 2022 to 1,667,545 shares at an average price of $1.85 for a total cost of $3,125,803. At this point, I'll turn the call back over to Andy.

Great. Thank you, David. To wrap up, we are experiencing strong revenue growth quarter-to-quarter and continue to successfully execute on a business strategy that has resulted in a robust roster of high-profile clientele, an expanded geographic footprint, and top-tier talent supporting operations. Additionally, we are firmly positioning ourselves as a leader within the promotional products industry and intend to take advantage of the vast opportunities we see within the market. I'd like to thank you for joining on the call today, and we look forward to providing further updates and developments as they unfold. At this point, we'd like to open up the call for questions. Operator?

Certainly. Ladies and gentlemen, the floor is now open for questions. Your first question is coming from Edward Reilly from EF Hutton. Your line is live.

Morning, gentlemen. You mentioned you're going to reach profitability in the near term. Wondering if you could expand a little bit more on this. And if you expect that to be driven more from an increase in revenue or decrease in G&A due to less acquisition costs and costs relating to the ERP system rollout?

Sure. Thanks, Eddie. Yes, so we're very aware of our expenses and are managing them. As we've mentioned in the past, our goal this year was to continue to build infrastructure for scale, getting to where we want to be. We got to approximately $40 million last year, and getting to scalability to be a $100 million-plus company will require investment in that infrastructure. So we've been consciously making an effort in that direction. However, we have a clearly defined plan for 2023, looking at Q4 and into 2023 for achieving profitability, starting with increasing our gross margin. This is the first step, which involves creating more automation through the implementation of NetSuite and enhancing visibility into our financials for better management. We're also taking advantage of rebates, discounts, and prepayments with our vendors since we have the cash and capital to leverage. Additionally, we're looking at creating shipping as a revenue generator rather than just a pass-through. We are adhering to a more structured budget, thanks to David Browner, our interim CFO, who has developed a much stricter budget for us. We are also making adjustments to our compensation plans to incentivize quantifiable growth and profitability, not just sales. We will monitor and enforce actions related to our sales expenses in relation to revenue and profitability. We are performing program analyses to remove or restructure unprofitable accounts and replace them with more profitable ones. Lastly, we are considering potential staff reductions as a result of automation efficiencies. However, we are not looking at layoffs; rather, we intend to keep our current staff. As we continue to automate, we won't need to add more people, and as revenue increases, we’ll be able to grow without increasing our headcount, which should be more accretive overall. Thus, we have a clear path to profitability. Although we don’t have an exact date of when that will happen, we anticipate it in the very near future.

Okay. Great. That was really helpful. And then I was wondering if you could maybe talk about the seasonality, if there is anything in the business. And as we approach the holiday season, what we should expect maybe in the fourth quarter?

Yes. Typically, the fourth quarter has been our strongest quarter, and we're most likely going to see that again this year, based on our forecasts. Historically, last year, there was a pent-up demand that drove a very strong fourth quarter, and we expect to replicate that performance this year as well. However, we’ve observed that supply chains are still challenging to navigate, so we are striving to push revenue recognition a bit more forward than we have in the past. We want to see revenue come in during November and early December rather than waiting until the end of December. In terms of seasonality, the fourth quarter has typically been our highest sales period, and we anticipate seeing that trend continue this year.

Okay. Got you. And then on gross margin, you mentioned various steps that you're taking to increase that, and I noticed that purchases over revenue compared to Q2 have decreased a little bit. Did you guys just implement the vendor prepayments policy? I'm wondering if you could unpack that a little bit for us.

Sure. A few factors are driving the gross margin higher. The first is increased awareness and education across our entire team. As we continue to acquire new companies and expand, it's vital that we realize Stran has a valuable value proposition to our customers. We don’t need to compromise our revenue because we deliver real value to our customers at market rates. The first measure we are taking is enhancing awareness, education, and reporting to identify areas where we should increase our gross profit margin while also adding value to customers. We want to be cautious about overcharging or losing business due to non-competitiveness. Regarding the rebates, discounts, and prepayments, those have been implemented; however, many of those benefits may not be captured yet because we typically report those at the end of the year after our annual spending has been recognized. We expect to see more rebates reflected in our P&L in the fourth quarter. Additionally, once we are fully operational with NetSuite—expected by the end of this year—we will have the capability to automate processes further, ensuring we don’t miss potential discounts when we pre-pay or take advantage of discounts.

Okay, great. That's it from me. Thanks.

Thank you. That concludes our Q&A session. I will now hand the conference back to Andy Shape, Chief Executive Officer of Stran & Company for closing remarks. Please go ahead.

Thank you, everyone, for listening. I would just like to reiterate that we're proud of our strong revenue growth. That was one of our goals this year: to see significant revenue growth so that we can continue to see the company grow and fund our growth to scale. We are accomplishing what we set out to do, which was to grow our business at a top-line level and look for accretive acquisitions. We are completing those and still looking at several opportunities within the market. We want to be patient in our approach and are not rushing into anything, but we have considerable activity in the M&A space and continue to explore those. We are excited about the future of Stran and our position within the industry. We are in a unique position with a very strong balance sheet, and I believe that in the near future, we will see further opportunities as other companies may struggle with rising interest rates and working capital challenges. Thank you for your time.

Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.