Greetings, and welcome to the Stran & Company Fiscal 2023 Year-end Earnings Call. Please note, this conference is being recorded. I will now turn the conference over to your host, Alexandra Schilt, Vice President of Crescendo Communications. Ma'am, the floor is yours.

Good morning, and thank you for joining Stran & Company’s 2023 year-end financial results and business update conference call. On the call with us today are Andy Shape, Chief Executive Officer; and David Browner, Chief Financial Officer. The company issued a press release today, March 28, 2024, containing its 2023 fourth quarter and 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 3 and 12 months ended December 31, 2023. 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, Ale, and thanks to everyone for joining us today as we discuss the meaningful progress and milestones made throughout 2023. First, I'm proud to report that we generated record sales of approximately $75.9 million for 2023, which is a 28.7% increase over the prior year. Additionally, our gross profit increased 50.2% to approximately $24.9 million, with our gross profit margin increasing to 32.8% compared to 28.1% for 2022. Most notably, we achieved profitability for 2023. As I previously mentioned, Stran has historically been profitable, and while we did report a loss for last year as we integrated a number of acquisitions, we knew these acquisitions would be highly accretive and beneficial for our shareholders. We are now at an important inflection point within the company and are confident that we can sustain long-term profitability as a result of the successful execution of strategic growth initiatives implemented throughout the past few years. The improvement in operations is even more visible when you look at our fourth quarter results. While revenue increased by 27.5% to a record approximately $23.3 million for the fourth quarter, even more impressive, our gross profit increased 63.5% to approximately $8.7 million, and our gross margin increased to 37.4% compared to 29.2% for the same period last year. You can get a really good picture of the operating leverage we're starting to gain when you look at our fourth quarter operating income, which increased 156% to approximately $1.1 million versus $421,000 for the same period last year. Our strategy is working, and we're firing on all cylinders. We believe our substantial growth and increased profitability stand as proof of the investments we've made alongside diligent expense management, validating the scalability and profit potential inherent in our business. And while we've been active on the M&A front, we are proud to have realized a 16.6% increase in organic revenue for 2023. Despite the challenging macroeconomic conditions during 2023, we have demonstrated our resilience, especially compared to many of our peers who experienced nominal growth or even declines in 2023. This achievement highlights our robust competitive position, expanding market presence, growth within existing client relationships, and the addition of several first-class customers that I'll talk about in a moment. On the M&A front, we closed the T R Miller acquisition in June of 2023, which was our fourth acquisition within less than 2 years, and followed G.A.P. Promotions, Trend Brand Solutions, and Premier NYC. Each acquisition has delivered crucial strategic benefits to Stran and our operations, including the expansion of our geographic reach, bolstering our warehousing and manufacturing capabilities, expansion into specific verticals, and attracting esteemed clients to our already impressive portfolio. As previously mentioned, M&A has played a crucial role in our growth strategy, particularly given the conducive environment for consolidation within the promotional products industry. While we continue to actively explore potential M&A opportunities as they emerge, our primary focus is on nurturing our organic growth and optimizing the benefits of our existing acquisitions. Currently, we are actively expanding into new verticals and geographic regions to bolster our growth trajectory. Moreover, our improved sales and marketing initiatives, including more targeted SEO and demand generation, combined with an experienced sales leadership team, are having a positive effect on our contract pipeline, evidenced by several new contracts announced during the year, as well as expanding contracts within existing clients. Specifically, we secured a six-figure contract with a leading medical group that specializes in the treatment of gastrointestinal disorders; this customer has over 200 locations throughout the United States and over 3,000 employees. We have successfully launched a new marketing program for them and also provided holiday gifts for the 2023 season while continuing to supply recruitment gifts and new hire kits to employees. We also expanded our partnership with an existing online sports and entertainment client and introduced a loyalty redemption program tailored to their needs. This offering includes a blend of physical and experiential rewards incentivizing desired behaviors. This program exemplifies one of several initiatives built upon our eCommerce loyalty program platform, which encompasses every aspect of client and consumer engagement, from concept to development to production, technology integration, logistics, inventory management, fulfillment, and reporting. Our goal is to ensure a seamless experience for both the client and their customers. Within the first week alone, this program generated over 22,000 orders resulting in sales exceeding $2 million. The program successfully delivered over 51,000 orders, generating over $4 million in total sales. We are excited about the ongoing execution of this program for our client and are eager to explore similar opportunities within other clients. Additionally, we were contracted by a multinational direct selling beauty products company to provide incentive merchandise to assist in growing the customers North American loyalty program. We successfully launched their custom branded eCommerce merchandise store during the first quarter of 2023 for the North American market and are actively exploring how it can support their international clientele as well. With our global reach and community exceeding 4 million beauty influencers worldwide, we are delighted to have been chosen to assist in expanding their loyalty program by offering incentive merchandise to the North American customer base. We also continue to launch new online stores for customers and are now actively managing over 280 online customer stores. These provide long-term value for our customers as well as easy and simple access to the products. In addition, considering the growth trajectory we are experiencing, we have hired and promoted key personnel. First, we officially promoted David Browner to the position of Chief Financial Officer after serving as our Interim CFO for almost a year, as well as holding other key financial roles since becoming part of the Stran team in 2012. We have witnessed his management, operational and financial skills and appreciate his significant contributions to the company's growth and integration of several acquisitions. Given his long relationship with the company and background, David is a valued member of our leadership team. Following David, we made strategic hires and filled key positions including Chief Information Officer, Executive Vice President of Sales, and Senior Vice President of Client Strategy. Ian Wall, an experienced Information Technology Executive, now serves as our Chief Information Officer. Given his extensive experience in implementing technology differentiators, both internal and customer-facing while working at Harvard and Tufts in the education sector, and Vertex and Biogen in the pharmaceutical industry, Ian has added significant value to our team. We're actively working to fully implement NetSuite into our operations along with other eCommerce initiatives using Adobe's eCommerce platform, Magento Open Source. Ian brings the firsthand experience and deep skill set utilizing both of these platforms that will allow us to maximize our technology investments and improve the overall efficiency of our business. Additionally, Ian demonstrated his ability to leverage technology to enhance operations, improve efficiency, and strengthen the customer experience by implementing NetSuite and other innovative technologies at his previous positions. We are proud to have Ian on our executive team. Nick Kiefer now serves as our Executive Vice President of Sales and Michele Pytlinski is our Senior Vice President of Client Strategy. Both Nick and Michele are promotional products industry veterans and collectively bring decades of sales experience to our company. Our goal is to build on our strong foundation and we believe these industry professionals will enable us to better capitalize on significant opportunities within the market. Nick and Michele's successful track records of implementing strategic sales strategies to further penetrate customers and drive growth and we are proud to welcome them to our sales team. Importantly, as a result of our ongoing efforts, we have continually been recognized in the industry and I'm honored to jump 21 places to 24th in the Advertising Specialty Institute's 2023 Annual Listing of the Most Powerful People in the Promotional Products Industry, which follows our Top 40 Distributor ranking. In addition, I'm proud to say that I was named the 2023 Counselor Person of the Year by ASI. ASI serves a network of 25,000 suppliers, distributors, and decorators in the $26.1 billion promotional products industry, and being recognized with their awards validates our progress, including accelerated revenue growth and our ongoing business efforts to become an even more recognizable leader within the industry. Overall, we have implemented and continue to follow a carefully crafted growth strategy. This strategy has led to profitability for 2023 along with securing new contracts, improving business operations, and introducing new technology offerings. As I mentioned earlier, the improvements in our operations and increased efficiency are even more evidenced by our impressive fourth quarter results. We remain dedicated to our growth strategy and are confident that we will solidify our position as a leader in the $26 billion promotional products industry. At the same time, we have preserved a strong balance sheet with $18.5 million in cash and investments as of December 31, 2023. Excluding our rewards program liabilities, we maintain cash and investments of approximately $17.6 million as of December 31, 2023, compared to approximately $90 million as of December 31, 2022, demonstrating our ability to simultaneously maintain strong growth while prudently managing our cash. These funds continue to provide us with the flexibility to explore strategic opportunities as they arise. In summary, our objective is to continue to execute our growth strategy. This includes innovating, investing in technology, launching sales and marketing initiatives to deepen our client relationships, and selectively pursuing acquisitions to support our expanding operation. At this point, I'd like to turn the call over to our Chief Financial Officer, David Browner, to go over the financials in detail. David, please go ahead.

Thank you, Andy. Sales increased 28.7% to approximately $75.9 million for the year ended December 31, 2023, from approximately $59 million for the year ended December 31, 2022. The increase was primarily due to higher spending from existing clients as well as business from new customers. Additionally, the acquisitions of the G.A.P. Promotions assets in January 2022, the Trend Brand Solutions assets in August of 2022, the Premier NYC assets in December 2022, and the T R Miller assets in January 2023 accounted for approximately $14.7 million or 19.4% of sales for 2023 compared to approximately $6.5 million or 11% of sales for 2022. Reoccurring organic sales, defined as sales excluding revenue from acquisitions of the assets from each of G.A.P. Promotions, Trend Brand Solutions, Premier NYC, and T R Miller, increased 16.6% or approximately $8.7 million to approximately $61.2 million for the year ended December 31, 2023, compared to approximately $52.5 million for the year ended December 31, 2022. Gross profit increased 50.2% to approximately $24.9 million or 32.8% of sales for the year ended December 31, 2023 from approximately $16.6 million or 28.1% of sales for the year ended December 31, 2022. The increase in dollar amount gross profit was due to increased sales, partially offset by an increase in purchasing and freight costs. Net income for the year ended December 31, 2023 was $35,000 compared to a net loss of $778,000 for the year ended December 31, 2022. This change was primarily due to the increase in sales during the year ended December 31, 2023, partially offset by an increase in operating expenses. As of December 31, 2023, the company had approximately $18.5 million in cash and investments and no long-term debt. At this point, I'll turn the call back over to Andy.

Thank you, David. We take great pride in the achievements we've accomplished thus far, including profitability, securing new contracts, and raising Stran's visibility. Most importantly, we are beginning to realize greater efficiency and economies of scale that continue to enhance our profitability. We eagerly anticipate further benefits from our growth initiatives, and we'll share updates as they develop. I'd like to thank you for joining the call today. At this point, we'd like to open it up to questions. Operator?

Thank you. We have a question from Bill Jordan, a private investor. Your line is now active.

Thank you. Andy, congratulations on the solid results. Just have a couple of questions for you. You made some new hires this year. Can you give us any more background on the people that you hired and why?

Sure. So I'll go in order. The first one that we discussed is Ian Wall for our Chief Information Officer. We're really excited to have Ian on board. He worked within the education and pharmaceutical sectors. Very smart individual that has an extensive background with both implementing ERPs like NetSuite and SAP to create more efficiencies, as well as integrating that with eCommerce, so that they're seamlessly attached to one another. Again, looking to make it easier for our customers to do business with us on a technology front and easier for our employees to process those orders and run the operations of the business. So we're really excited about Ian and we're excited to have him take over the reins to lead our technology initiatives well into the future. Additionally, we hired Nick Kiefer as our Senior Vice President of Sales. Nick's a true professional within the promotional products industry, helping companies grow from midsize companies to large players within the industry. We recruited Nick and brought him on board because of his ability to be a strong leader within our sales organization. We have approximately 36 sales reps and about 30 internal reps that report to him. We're really excited because he's helping them expand their business and maximize their potential through leadership coaching and strategic initiatives. So we're really excited about Nick, and alongside with Nick is Michele Pytlinski, who is the Vice President of Client Success. What we're trying to ensure is that as we have clients, we've been in business for almost 30 years, we have a great reputation. Our clients really enjoy doing business with us. We actually recently did a survey where our Net Promoter Score was over 70, close to 75. So our customers are very happy with the business that we're doing. It's Michele's job to ensure that we continue to do that as we grow and put our customers first to keep them long-term. So those are some of the biggest hires that we've had so far last year and the beginning of this year, and we're really excited about that. In addition to David Browner obviously being promoted to full-time CFO; David has been amazing and understands our business and this industry better than almost anyone I've ever met. I'm really proud of what David has grown into as a leader within Stran, as well as the information that he has been able to share with our entire organization.

Thanks. That was really helpful. You talked a little bit about M&A. What are your thoughts on M&A going into 2024, just general M&A within your industry?

Sure. So M&A, as we've mentioned, we've done four acquisitions in the last just about 2 years. Although we're not pausing M&A by any means, we're not as active as we were in, say, 2022 and 2023 because we've acquired all of those companies. Our goal is to make sure that we integrate them properly as well as maximize their potential. So we're actively looking; I'm looking within the industry. I have discussions with other types of companies, but we're being a little bit more selective and patient. In terms of the industry, I think this industry will continue to consolidate since there are so many players; it's a $26 billion industry with over 25,000 companies within it. I think consolidation will continue to happen. We look to be a leader within that consolidation, but just selectively work to increase the value of our business, both short-term and long-term.

Great. There are just two other questions. How is your pipeline and just the general business as you swing into 2024 now?

Business is strong. We have a lot of momentum. Our sales efforts, along with our marketing initiatives, are starting to yield results with many more significant opportunities and RFPs we are pursuing. We are seeing both new business and expansion within our existing accounts, so our pipeline looks very robust. We anticipate growth in 2024. Given the current interest rates, there is a cautious optimism that they may decrease, encouraging continued spending. We are excited about the momentum we are observing in the first quarter. Typically, Q1 is the slowest season, followed by an increase in Q2, Q3, and Q4 as the year progresses. Overall, we are optimistic, and our pipeline remains strong, so we are looking forward to what’s ahead.

That's great. Last question. You saw impressive gross margin improvement in the fourth quarter and for the year 2023. Is this sustainable? What should shareholders or investors expect going forward with margins?

Yes, in 2023, we made a conscious effort to find ways to enhance our profitability. This can be achieved in various ways. One approach is to selectively increase our margins where it makes sense, ensuring we remain competitive and provide value to our customers without undervaluing our products. We focused on educating and monitoring our team's actions to ensure we charge appropriately to our customers and do not operate below industry average margins. Additionally, we concentrated on improving our purchasing strategies, negotiating better pricing, obtaining better rebates, and being more mindful of our spending practices. These combined efforts resulted from carefully examining these aspects and enforcing actions within our organization, along with gaining greater visibility into our operations. Our goal moving forward is to consistently increase our margins and maintain them above 30% for gross profit margin. We aim to reassure our shareholders that we can achieve this.

Great. Thanks. That’s all I have. Congratulations on the results again.

Great. Thank you.

Thank you. As we have no further questions in the queue at this time, I will pass it back over to Mr. Shape for any closing comments you may have.

Thank you, everyone, for joining. We are excited about the results for 2023. We are very proud of our Q3 and Q4 results, which had a significant impact and turned us profitable. This demonstrates that we can sustain this performance in the long term. We can recognize when we need to drive more profitability and utilize our available capital effectively. Having the capital we possess is a major advantage in this industry, allowing us to invest in our growth. We are eager to continue this process and demonstrate to our investors how we can consistently add value to Stran. Thank you for joining, and we look forward to showing what we can achieve next. Thank you.

Thank you. This does conclude today's conference, and you may disconnect your lines at this time. We thank you for your participation.