Q2 2021 Superior Group of Companies Inc Earnings Call
[music].
Good afternoon, everyone welcome to the superior group of companies second quarter 2021 conference call.
With us today on behalf of the company here, Michael Benstock, the company's Chief Executive Officer.
Andy demand as Chief operating Officer, Chief Financial Officer, and Treasurer book.
<unk> said chief strategy Officer.
And from the promotional products Division, we have J Kimball's thing Bancorp's President.
After the Speakers' opening remarks.
We Q&A session. This call is being recorded.
And your participation implies that you agree to this if you do not then simply drop off the line.
I'd like to turn the call over to Hollow LG.
I'll shoot meaning senior manager director of 3 part advisors, who will read the Safe Harbor statement. Please go ahead.
Thank you.
Well good afternoon, everyone net.
Call may contain forward looking statements about superior group of companies the company within the meaning of the Securities Act of 1933. The Securities Exchange Act of 1930 by the private Securities Litigation Reform Act of 1995, and all rules and regulations issued thereunder.
Such statements are based upon management's current expectations projections estimates and assumption.
Words, such as will expect believe anticipate think outlook hope and variations of such words and similar expressions identify such forward looking statements which include statements on.
The impact of COVID-19 on the company's business, including inventory supply chain manufacturing capacity at the company's own and contract manufacturing facility.
Surface capacity and customer demand.
Forward looking statements involve known and unknown risks and uncertainties that may cause future results to differ.
Differ materially from those suggested by the forward looking statements such risks and uncertainties include but are not limited to the following the effect of the COVID-19 crisis on the U S and global market.
Our business operations customers suppliers and employees.
On economic conditions.
And the areas of United States in which the company's customers are located.
Changes in the markets, where uniforms are worn where promotional products are sold and will call Center services are used the impact of competition the company's ability to successfully integrate operations following consummation of the acquisition.
Availability of manufacturing materials as well as the risks and uncertainties disclosed in the company's periodic filings with the Securities and Exchange Commission, including the company's annual report on form 10-K for the year ended December 31, 2020 quarterly.
Quarterly report on form 10-Q for the quarter ended June 32020.
Andy on and the 8-K filed recently.
Shareholders potential investors and other readers are urged to consider these factors carefully in evaluating the forward looking statements made here under and are cautioned not to place undue reliance on such forward looking statements.
The company does not undertake to update the force.
1 on statements contained herein to conform to actual results or changes in the company's expectations, whether as a result of new information future events or otherwise except as required by law.
Please note that all growth comparisons that management makes today will relate to the corresponding period in 2020.
Unless otherwise noted with that I'll turn the call over to Michael.
Good afternoon, everyone. Thank you Howard.
Thank you your portion of this gets longer and longer every single quarter.
Thank you all for joining us to discuss our Q2 results. In addition to the Andean Jake I'm pleased to be joined by.
<unk> looked at lucid.
Our recently appointed Chief strategy Officer, and the newest member of our C suite.
Dynamic later with proven strategic acumen, and we're excited to further tap into his expertise. Additionally, Jay has been invaluable leader, serving as CEO and CFO of <unk>.
These past few years as.
Congrats on a business and industry experience as well as prior M&A work is tremendous asset. His recent promotion to president is certainly well deserved.
So the call format I'll open with second quarter highlights and build provide higher level thoughts on our strategic direction, followed by <unk> review of Babcock Andy will then provide.
Stepped on operational financial review.
As usual.
When we're done we will open the line for questions.
Let's get started sales.
Sales are quickly moving in the right direction on our core businesses are prospering in particular, we're seeing a faster than expected recovery in most of the sectors of our uniform business debt.
<unk> by the pandemic. We are also seeing a return to normalized at strong levels and our other uniform channels overall second quarter results and visibility for a strong second half gives us greater confidence to update our sales guidance that we gave during our first quarter call. We now expect.
Net.
<unk>.
$525 million in revenue for fiscal 2021 versus our guidance last quarter of approaching the $500 million Mark. This puts our revenue target on par with 2000, Twenty's spectacular numbers to keep from perspective here on I'm going to throw out a lot.
Now I hope, we can keep up with it in 2019, our total sales revenue was $377 million in.
In 2020, our sales revenue.
We're at $527 million exceeding our budgeted $408 million by 1 <unk>.
Lot of $19 million.
Core non PPE sales for 2020 <unk>.
Last year was $396 million.
Our anticipated sales for this fiscal year will greatly eclipse, our actual core sales results last year.
Our 12, 5% guidance with respect to our.
<unk> 9.2025 remains the same we are on track to meet our consolidated CAGR goals of organically, achieving nearly $900 million and revenue.
<unk> in 2025, and along with acquisitions expect to exceed $1 billion.
Let's take a closer review of our segments.
As.
Growth dissipated our uniform divisions, serving both health care and essential employee I'd and markets are normalizing when compared to the frenetic pace of pandemic purchasing last year for HCI activity is booming with select customers demand is nearing an even exceeding pre pandemic levels. This is particularly.
As antennas and lodging entertainment hospitality foodservice and transportation as corporate customers realized rebounding sales. They are returning to initiatives paused during the pandemic, including uniform upgrades and market checking rfps. As a result, we are also seeing a market increase in customer.
We have an acquisition opportunities. We're excited about initiatives, we began last quarter at <unk> to combine the <unk> sales team with our <unk> sales team as a shared service to move both divisions towards a more direct sales approach versus the cross selling approach that we've successfully executed since our.
Customer acquisition of Ampco on 2016, I can tell you this group.
Exponentially deepens, our ability to uncover and participate in many more opportunities. This strategy strategy, which we beta tested in Q2 is already paying dividends Jacob will speak more about this in his remarks.
Our staffing division and the office Gurus continues to post remarkable results as existing customers add seats and many new customers are on boarded we're seeing more openness than ever for near shore outsourcing as many of our customers and prospective customers are experiencing difficulty in hiring in the USA.
Are many of these have their teams in the U S. Working remotely during the pandemic and have come to the realization that many of the tests. They thought had to be done in office could be done to remote environment and they are now looking to do the same work at a lower cost with us.
Customer preference for in center work is somewhat of a mixed.
We are seeing more customers willing to accept a hybrid solution of work from home and from center <unk>.
Regardless of their choices at our current rate of growth, we will have to only slightly tweak our future investments in infrastructure to accommodate this unprecedented opportunity for growth overall we.
Expect to capitalize on tremendous tailwind, resulting in a quarter, where we added 437 billable agents across all sites keep in mind that we added a 184 agents in Q1 for a total of 621 agents for the first half of 2021 to put this in perspective.
We continue digital 2021 forecast, which was an ambitious goal for 362, new seat requirements for the entire year, we have already put on 621 from a profitability standpoint. The team delivered outstanding results again in an operating margin of 24%.
<unk> delivered.
Our third consecutive quarter of record sales from core promotional products I'm going to leave the rest of our discussion around bansko to Jake <unk>.
Turning to our operating environment global logistical and supply chain challenges as well as increased prices for raw materials persist for many businesses, including ours, we are not.
On immune from the disruptions, but our proactive stance on building our inventory early has provided a level of installation and gives us on a longer term basis further advantage over smaller competitors. In addition, like others. We also faced hiring challenges domestically and lower wage jobs, which has presented a headwind.
Delivered to our distribution centers, we believe the coming cessation.
The supplemental unemployment benefits combined with our creative and aggressive recruitment incentive and retention programs should allow us to maintain needed staffing levels.
In regard to the recent tragic events in Haiti, Fortunately our own.
1 managed facilities and 1 on mint on.
Our far removed from the epicenter of disruption important prints the company's production facilities remain largely uninterrupted except for a couple of days following the tragedy and a 2 day government mandated mourning period overall, we have not experienced a material impact to our business and.
And our inventories of the products made in those factories as I said earlier are more than adequate to offset any unexpected disruptions. We're also still no breath of hiring and training mode. In our 80 facilities as we begin to staff now that the third facility has been opened.
As I said at the start of the call.
Continue to be impressed by the rising leaders in our company. Our team is passionate driven and hard working they are the key to our future success fills entrepreneurial drive innovation and strategic mindset, our assets to the company and we're pleased to welcome him as our first Chief strategy Officer, Phil take it from here.
We can thank you Michael.
Excited to take on this new role and to help shape the future strategic direction of SCC as we enter our second 100 years of growth.
From an entrepreneur by nature, So I know that growth and the ability to reinvent is really central to the success of any company this ability to re imagine the future.
Business and built into the DNA of FCC.
The reason why after 100 years, we are more than just surviving we are thriving.
<unk> the future of this business is the main focus of this role and the primary reason I'm. So excited about it we have built an incredible foundation upon which we can create future growth some.
Are there still areas to build upon will be shaping our technology strategy focusing on client experience expanding our M&A efforts in enhancing our talent throughout the organization I will touch on each of these briefly first shaping our technology strategy. Nowadays every company needs to be at that company and STC is no different.
Technology.
On critical ease into every aspect of our business. This will expand rapidly in the next decade as we benefit from the developments in AI machine learning advanced robotics and block chain. Some of these developments will involve building upon our existing proprietary technologies that we have developed in house and some of these efforts will require being at the forefront.
Of new technologies that can improve our business on the client experience side, we have some amazing highlights with some of the largest companies in the world showing just how good we are at customer experience. However, we must not rest on our laurels, we will be obsessed with client experience and we will work diligently to improve it at every level our M&A strategy.
Already we will continue to build upon our rich success.
Had with previous acquisitions, we have made 6 acquisitions in the last 8 years and their effect has been transformational we will be focused on maintaining a robust acquisition pipeline. So we can continue our current strategy of being extremely selective in terms of who we acquired.
Lastly on the talent front, we know that talent is everything as a global company, we have the luxury of hiring anywhere in the world. Therefore, we will be laser focused on making sure that we attract and retain the best talent in the World. This organization is an entrepreneur's playground and I feel privileged to be part of it we are called the 100 year old startup.
Strategy are continuously experiment with new ideas are culture encourages this type of experimentation and is the primary reason, we will be at $1 billion company within the next 5 years now I would like to turn the call over to Jay Kim will Stein Jay served as our CFO and COO of Banco before being promoted this quarter to become our new president.
Because banco.
Having worked with Jay for 8 years I can think of no better person to take on this role and I'm excited to watch as his exceptional leadership elevates the business to new levels Jake.
Thank you Phil this is such an exciting time for STC and per banker I'm honored and humbled to lead such an incredible team.
<unk> of now on to the quarterly review as.
As expected PPE sales slowed down substantially this quarter are extraordinary PPE sales of Q2.2020 did not recur in <unk>.
Q2, 2021 that did not come as a surprise. However, we are thrilled to report that our core promotional product business has experienced a resurgence in sales and we expect that to.
Throughout the rest of the year.
Overall pimco ended the second quarter of 2021 with revenue of $48.7 million.
Gross profit of $16 million and operating income of $5 million.
While these figures represent year over year decreases from our extraordinary PPE driven Q2 of 2020 when.
Continuing on the anomalous nature of our PPE sales a year ago. This quarter's results were phenomenal.
I'm, particularly happy to report that this quarter's promotional product revenue was at an all time high at $47.7 million promotional product revenue made up over 98% of total quarterly revenue.
Perhaps most impressively this is.
When you're 85 per cent increase over the same period last year.
This now marks the third consecutive quarter that our division I've set a new all time high watermark from promotional product revenue on a quarter.
This is our core business it does come back with a flourish and it's exciting that we continue to trend upwards to even greater heights.
With the rollout of.
On the vaccine in the U S and the easing of Covid restrictions the promotional products industry started to see an increase in spend during Q2.
Clients on the entertainment and travel sectors have increased their spend much quicker than we anticipated.
Marketing budgets have started to open back up and we have already seen companies planning for year end employee gifting.
While the promotional.
As an industry as a whole was up about 3 years to 4% in the first half of 2021 compared to the first half of 2020, it remains down by about 20% when compared to pre COVID-19 levels.
Our backlog at June 30th was $67.6 million almost entirely made up of core promotional products.
This backlog is 66% higher.
At March 31.
Another sign of the continued resurgence in promotional products spend.
We've discussed our ability to create operating leverage with scale on prior calls and this quarter continues that trend with the very strong operating margin of over 10%.
Overall, our banker team executed well during the first 6 months of 2021 posting.
Higher than 6% sales gain compared to an exceptionally strong first half of 2020.
We benefited from continued market share gains PPE customer conversion to branded merchandize customers and sales contribution from our January 2021 acquisition of <unk> credit line.
On the M&A front, we are seeing more opportunity surface as a result.
On a systemic related impacts as well as potential tax law changes.
The pipeline is robust, including many unsolicited proposals seeking out S. G C.
From a potential partner.
In Q2, we altered our approach on cross selling promotional product and employee I D uniform programs now, allowing Bam coast 70, plus sales reps.
<unk> sell uniform programs to both new and existing clients. This move made sense given promotional product and Brendan uniform programs typically have the same buyer groups within our customers.
This represents a vast expansion of the team selling large corporate uniform programs and has already yielded many significant opportunities that otherwise would.
To read them covered.
Finally, I'm proud to announce that <unk> was ranked number 11 in the latest listing of top promotional product distributors in North America.
8 spots this year from our position at number 19 last year and we achieved the biggest growth rate of any company on the entire list.
This speaks to the strength of our customer value proposition and the incredible.
<unk> Banco team, which continues to receive high industry honors.
<unk> was also named as 1 of 2020 one's greatest companies to work for in the promotional products industry for the fourth consecutive year.
I'll now turn the call over to Andy for his operational and financial review.
Thanks, Jay and good afternoon, everyone. We're on.
<unk> pays for capital.
Would not occur on initiatives across our distribution facilities at our Eudora, Arkansas Center beta testing a new upgraded robotics are slated for Q4 with the global go line launch early next year. The consolidation is expected to yield approximately $2 million of annual savings as well as provide significant technology advantages and efficiency, we continue to reap the benefits.
On <unk> improved efficiencies, resulting from higher automation and robotics in our Dallas distribution center as well.
And our third manufacturing facility in Haiti is now beginning operations.
Turning to the financial highlights consolidated net sales exclusive of PPE sales increased by $23 million or approximately 43%.
Compared to the second quarter of 2020, as we continue to see a rebound in markets and we continue to take additional market share.
Including PPE consolidated sales declined 18% compared to the prior year quarter to $138 million. This decrease in PPE sales was in line with our expectations.
Uniforms.
Benefits related products net sales, excluding PPE decreased 7% or $4.5 million compared to last year.
<unk> sales were $5.8 million versus $8.9 million a year ago.
Additionally, second quarter 2020 sales in non PPE health care products, including an extraordinary surge in demand that has been reduced.
Reported as we move through the pandemic, we were successful in adding new business and channels to offset the bulk of this change and are well positioned to continue to capitalize on this growing part of the market.
We are seeing on offset to the higher PPE health care uniform demand.
Second quarter last year with a resurgence in demand for non health care recovering industries, especially.
Due to Susquehanna on transportation to the hospitality industry.
As we progressed through the pandemic, we felt it was critical to provide backlog information each quarter to provide transparency on the PV business that had been book, but not yet delivered now the crisis PPE is not expected to be a significant portion of our uniform revenue moving forward.
Our backlog per uniform sales because it's primarily of orders that were shipped very quickly and is not meaningful for evaluating the state of the uniform business.
Jay has already reviewed Bam COVID-19 resolved, so I'll move to the office gurus.
The team reported tremendous growth and exceeded expectations with net sales after intersegment eliminations up an impressive 70.
Such as rent to $13.9 million growth is attributed to expanded customer relationships and on boarding new customer engagements at an incredible rate.
We continue to have tremendous tailwind in this segment.
For the quarter consolidated gross margin as a percentage of sales increased to 36, 1% on 1.
3 percentage point improvement from 35, 1% in second quarter of 2020.
Our total SG&A expenses decreased approximately 7%, reflecting a decrease in bad debt expense of $2.8 million and as a percentage of sales SG&A was 25, 9% versus 22, 8% in second quarter last year due.
Due primarily to the lower PPE sales on the current period.
Income from operations for the second quarter was $13.3 million.
Compared to $19.6 million in 2022nd quarter operating margin was a solid 10, 1% compared to 12, 3% last year.
During the second quarter, we terminated.
<unk> hundred based non contributory qualified defined benefit pension plan, which were fully funded.
Consequently, we recognized a settlement charge of $6.9 million.
During the 3 months ended June 30, which represents the acceleration of deferred charges previously included within the accumulated other comprehensive loss and the impact of re measuring the plan.
Our 2 and obligations as termination.
The pension plan termination did not require cash outlay by the company.
Net of the recognized tax benefit of $6 million. This charge resulted in a reduction of diluted earnings per share of <unk> 39 cents during the second quarter of 2021.
Our effective tax.
<unk> for the quarter was 17, 3% compared to 19, 6% a year ago. The effective rate for second quarter 'twenty..1 was favorably impacted by $8 million of windfall tax benefits from stock options exercised during the quarter and.
And point $6 million of stranded tax benefits that were recognized as a result of the.
Tax rate on the pitch plans.
These benefits were partially offset by the nondeductible pension termination charge.
Net income was $4.6 million per 28 cents per diluted share compared to $15.2 million or $1 per diluted share in quarter 2 last year.
Moving the impact on the pension termination charge and related.
Related tax benefit net net income would have been 67 per diluted share in the second quarter of 'twenty 1.
Also of note our second quarter 2020 represented the highest quarterly earnings in the company's 100 year history.
We are on a strong liquidity position as of June 30, we had cash and cash equivalents of.
$7.5 million and increased $2.4 million of the current year cash.
Capex for the first half of the year was $11.3 million.
We are on target with our Capex investments in automation and efficiencies and still expect to be in the range of $16 million to $17 million for 2021.
In recognition of our continuing.
<unk> strong performance the board of directors increased our regular quarterly dividend by 20% in the second quarter to <unk> 12 per share.
In total for the 6 months ended June 32021, and 2020, we paid $3.4 million and $1.5 million respectively on dividends.
I'll now turn the call back to Michael for his closing.
<unk> remarks on a general outlook.
Thanks, Andy that was long, but a lot of information in there.
Those of you who have been with us before.
We are you know that we're always laser focused on our future.
And our top priority still remains having a disciplined execution of our long term strategy.
You spoke to organically and via targeted acquisitions.
STC is on its best footing ever and I'm confident that our talented hardworking passionate leadership from workforce will take us to new heights in the coming year. We strongly believe we have the right plans in place to grow beyond being a $1 billion business and less than 5 years from now.
Now these are very exciting times for STC with that we'd like to open the call for your questions.
I will begin the question and answer session to ask a question you May Press Star then 1 on you touched on phone from.
You're using a speakerphone please pick up your handset before pressing the keys.
Yes.
I would draw.
Your question. Please press Star then 2.
At this time, we'll pause momentarily to assemble the roster.
First question comes from Tim Mulrooney, William Blair. Please go ahead.
Yes.
Michael Andy filling Jake good afternoon. Thank you for taking my questions.
Youre welcome.
Yes.
So.
On the uniform business, excluding <unk> I think the uniform business was down about 7% on a tough comparison.
But I do think those comparisons start to get easier in the back half of the year, so with that in mind.
Based on what you know today would you expect.
To see year over year growth from this business from the second half of 2021, excluding PP&E.
Alright.
Jumping on that yes.
Michael.
Thanks for the question is a good 1.
With the resurgence we're seeing of.
It was considered non essential businesses.
During the pandemic.
And the fact that.
We're playing catch up at this point I think we've pretty well explained that from a service standpoint. These logistical nightmares.
I've been quite unusual and also.
Our customers ordering 2 or 3 times, what they normally ordered.
Quarter.
<unk> has left us pretty shy of some safety stock.
In some areas so as we catch up.
We're going to see.
A quick reset.
A resurgence of that business on the other hand, we're starting with a health care business was starting to come down a little bit although we're in new channels and we are selling.
Certainly our fashion Scrubs, and a lot new channels of Walmart dot com at target Dot com.
Got it.
Zappos Dot Com recently, there's a new 1.
<unk>.
On the institutional side, a lot of that will depend on what happens with the pandemic.
<unk>.
Hospital censuses are going up.
We expect to see somewhat of a resurgence in our scrub apparel, our patient apparel, even our isolation gowns barrier coats and all the items that were bought in.
Great quantities last year, so, yes, we expect our uniform business to be.
To have leveled off by the end of the year certainly to have made up the difference.
We're working to to create the environment, where we will even go beyond that.
Okay. Yeah. Thank you Michael and you kind of adjusted My next question, which was going to be specifically on the healthcare opportunity because you mentioned new channel, helping to make up for some of the the.
The difficult comparison with <unk>.
<unk>.
My question was going to be are these new channel is mostly on the institutional side or on the retail side, but you named a bunch of retail channel. So is it fair to say that.
Is that is that where the larger opportunity is for you guys. Moving forward is it mostly on the retail side when it comes where the growth is going to come from.
Cash.
It's really a mixed bag.
On the retail side for sure, but we also have the new distributor press release, a couple of months ago Sanmark.
Who knows.
Moving our product through the branded.
Branded merchandise customers. If there is the 22000 customers of theirs.
Alright.
We have.
<unk> product, which is kind of a crossover between fashion seal healthcare NCI.
That I believe unit first and others have announced that they are adopting.
As their fashion product for the institutional health care side of the business.
So it is a very mixed bag.
It really is going to come from both of them.
Okay. Thank you and I wanted to say congratulations to fill and Jake.
On your promotions.
Thank you Ms Jacobs Youre welcome Jake to specifically you know it looks like the backlog at Bam co is very strong.
And I know I know you helped out a lot of folks during the pandemic with PP&E, including a lot of new customers that you hadn't previously engaged so I guess my question is how much of this increase in backlog. If any do you think is the result of converting some of those PP&E customers into traditional promotional products customers.
<unk>.
Yes.
Certainly there is some of that right. We we've said it before and it stays pretty consistent we've converted about a third of our.
P P only customers in 2022 promo customers right.
We were there and they trusted us in their toughest times when they needed PPE and we've been able to convert about a third of those.
Those into promotional product customers and we continue to work with these customers to find to find additional opportunities to penetrate and get the promotional product business and we think that's only going to continue to expand I think across the board. Our backlog is really strong and then you mentioned in the script, but the most impressive part of it is that virtually none of that is PPE at.
All promotional products and branded merchandise and that's what's most exciting is that we're seeing that resurgence coming into what we think is going to be a really strong holiday season as well.
Okay. Thanks.
Thanks for that commentary if I could just sneak 1 more in I don't know if this would be for.
Michael or Andy or Phil, but it's on PP&E.
So you expect <unk> to be.
I guess about $45 million this year down from $130 million last year.
But still well above the $4 million or so that you generated in 2018 on 2019.
Is this level this $45 million kind of what you would expect.
Specced moving forward <unk> revenue to be much lower than the peak in 2020, but still remain elevated relative to pre COVID-19 levels.
Yes.
I think the $45 million and it does include a little bit of crisis PPE that we've already that.
We had is it really more in the first quarter or expecting right. Okay, and then let me back up a little bit.
Part of the PPE products that we're selling has kind of become part of uniform programs for starter kits for.
The gig economy type of people, we're going to be I think.
Going forward people are going to have hand sanitizer in there starting.
Starting Ken they're going to have a mass is going to have.
Some of that book.
Youre, just going to be in our normal product and not really show up as being PPE, but from an ongoing basis.
I think your your pure PPE, non Chrysler side, you're probably talking somewhere in $5 million to $10 million.
Got it okay. Thank you Andy and thank you all for taking my questions. Thank you Tim.
Thank you next question comes from Tim Hearts on free investments. Please go ahead.
Yeah.
Great quarter.
I had 2 questions.
Cash flow outlook for <unk>.
2021it looked like in the first half for you here there was a big use of working capital and you mentioned that Capex was share heavily weighted there. So I was wondering if you could just sort of address how that cash flow or free cash flow will go for the full year of 2021 and the second question was what is the address to Phil just to talk a little bit more about.
On the specifics around the technology strategy and the customer experience, which we are the first 2 items you highlighted in your focus.
Okay.
Notice that the cash flows will be the first half of the year I'm really included some extraordinary incentive type payments that were based off of last year relative.
Really executive in sales comp across the company as.
As well as significant earn out for from some of our acquisitions, primarily in the promotional products arena as well as paying income taxes on those items. So there was a heavy use of that during the first half. We also as Michael mentioned, we did.
Beef up our inventories a bit due to the supply chain.
And just to be prepared for that as we go forward, we would expect to see that start leveling off and work its way back down now.
Supply chain continues to work its way out from a capital expenditure perspective as I mentioned in my remarks, we do expect for the year that number is.
Is going to be somewhere between 16 and $17 million. So we would expect from here, we should be positive from a cash flow per se.
I heard you want answered or no and Phil was the second part of it wasn't cash here.
Yeah, I'll take the second part of that question. So.
On that without disclosing too much on.
Technology front.
We've been heavy into technology for quite some time.
And I would say we've been well ahead on.
On the technology curve in our industries in our respective industries for quite some time the exciting part now as it were.
Being more and more ability to integrate technology further into our business so over the.
On the last couple of decades, I would say the technology has been an advantage and it had been an advantage that we've been able to sales.
To stay ahead of our competitors on but we believe that we can widen that gap by embracing some of the newer technologies out there that are really making advancements in permitting various interest industries across the board you know you mentioned AI and machine.
Of course, running and advanced robotics and block chain on the supply chain side.
And that's something that we're already are already working towards and in many cases, we already have some pretty advanced robotics right now on our warehouse and we have some pretty good pretty good direction in terms of how AI AI it might affect our business in the coming years and so.
Machine, we're looking forward to seeing that really come through because we think that will widen the gap between us and our competitors on the technology front on.
On the customer side to the second part of your question.
Focusing on client experience and making sure that.
What we've done in the past on what we deliver from an experiential perspective.
So in the future debt.
That's first and foremost I mean, I think that that's something that.
And any business out there that that's worth their salt is going to be focused on on on their customers' experience and making sure that their customer.
Not only goes and is is happy with what they've got on what the services that will.
But are actually fans of our business and I think more and more we get we get business from referrals and the main reason why is because of the fact that we've actually developed sands within our customer base and so that's really our focus is how do we go and make this experience. So good that we're not only going on making the customer happy but also the rent in a raising 2 to various debt various folks.
Providing business to us in the future.
Can you measure customer retention and sort of fan level among the customer base.
That's something that we measure and will continue to measure.
Great.
Good Thanks a lot.
Thank you.
Again, you have a question please press.
She went from them on.
Yeah.
Our next question comes from Kevin speaking.
Research. Please go ahead.
Hey, good afternoon, everyone.
I wanted to.
Start off by asking about Michael I think you mentioned in your in your prepared.
<unk> comments.
Seeing more opportunities to.
But on new uniform programs and can you just expand on that a little bit on what's what's driving that.
The pick up.
Okay.
Oh I see I think there there are so.
So many factors driving it but let's let's start with the fact that.
Everybody is struggling to get new employees right now.
The low wage jobs that people are most people are wearing uniforms.
So they are enticing them by.
Putting them into more uniform par levels have improved.
We've been told instead of giving an employee 2 sets of uniforms they might be getting 345.
Also turnover has increased so.
You hire an employee 2 weeks later.
Decides to go somewhere else.
You've read the jobs reports about people, leaving their jobs.
So.
So they have to go get a new uniform for the new person they hire.
There's another sale for us.
Hi.
I think health care workers have been working on the retail side have been working crazy hours of overtime that made a lot of money doing it.
They're buying more more fashion scrubs.
Alright.
I think we've spoken about this before Kevin that whenever we come out of the recession, which is really our only context year, we've never come out of a pandemic or at least not that I remember, what we did 19 twenties.
Whenever we come out of recession, we always come out stronger we always see a flurry of marketing dollars being spent.
Make overs of stores.
They have been very very slow everybody's about branding rebranding themselves, we see people doing new logos, new logos required new rfps.
Re colorations of their current logos in their stores require new rfps for uniform.
Interest that will match all debt.
It's the normal flurry, we saw post the big recession.
A decade ago.
More than a decade ago, and it's something we've got used to and I think because we were so active during.
This recession during this pandemic reached.
<unk> out to prospective customers.
We didn't get lost while a lot of other people I think duck their head in the sand collected their PPP money.
And said I just got to make it through this period of time, we got even more aggressive.
Our strategy with respect to that we described with respect to <unk>, who is now going from 5 salespeople to 75.
5 salespeople is huge there is an opportunity in this country that debt, we will not uncover.
I believe and many more than we could have in the past.
And we're training those people up but quite frankly, we have a big team behind that group of 75 people, that's ready to start getting in front of customers.
Customers and presenting on.
And all of those 75 people have to really do is get us face to face appointments or in today's world zoom appointments.
So I think I think everything is everything is moving in the right direction.
From a standpoint of RFP activity.
Yes, I think.
People will let down during the pandemic to needed good service and this logistical nightmare.
It is truly that but I do think that we're in a much better position than most of our competitors to deal with this logistical nightmare.
That's out there.
It's pretty nightmarish, you're talking about what used to take 45 days, taking 90 days now.
And when customers ordering patterns pick up and suddenly you find yourself short of inventory because of that but you can't get an inventory in any faster.
I think it is hurting a lot of our competitors.
So I think it is.
It's.
I call it the perfect storm, but for US it's like it's like the Rainbow.
We just have to follow it to the pot of gold.
That's what we're doing.
Okay, yes that sounds great.
Sure.
I wanted to follow up on just.
You are now targeting say.
<unk> in 2021 approaching $525 million.
Compared to about $500 million previously is that.
Increase being driven by any specific business or is it just kind of across.
Crossword strength in all your segments.
Kevin it's really it's across all of them.
We feel very good about where we're at with all of the businesses.
Michael Jordan talked clearly about how well <unk> is doing Jay covered on Banco and.
In the uniform businesses.
It's bouncing back stronger so we feel very comfortable.
Clearly, there's going to be across the board.
Great. Thanks, and then.
I think something that you didn't.
You mentioned on the call unless I missed it was.
You know last quarter or 2 you've talked about C. I.
And there are plans to expand internationally.
Can you just provide us an update on that initiative and where you stand with that.
Sure.
Provide a little bit to you without giving away any competitive advantage.
We are.
Starting to ship.
I D take orders for our Poland warehouse.
We have hired.
A person away from.
A consulting firm that was working for us where they agreed to what that person.
For us directly yes.
As an employee.
We have.
Shifting.
Resumed.
Our strategy of going to trade shows in Europe.
And whereas last year, we did know tradeshows.
The year before we did.
Keep in mind that.
Our business.
Last year for international.
Already was about $30 million overall across all of our segments.
So yes.
We're looking to turn debt quite frankly into a $100 million business.
And the next few years and we think we've got the makings to do that we've got the right people we brought another sales executive.
<unk>.
Into our international group were.
Doing well.
Some very serious deep strategic planning right now.
To make sure that we're focused on the right areas of Europe.
We are actually engaging.
Some experts in that area to help move us into the right places so we don't.
We don't waste a lot of money doing it and so that's essentially.
On how we're going to get there.
Okay. Good.
You talked again about this logistics.
Logistics and supply chain issues and how they are rippling through the economy and.
Have you seen any.
Sort of loosening or improvement on that front.
Any updated thoughts on that and I guess also related to debt also inflation.
I know you implemented some price increases.
Around this time of.
On your last call on the uniform business do you see the need to do that again going forward or just kind of any update on those those various macro issues.
Hi.
We're looking at whether we need to have price increases again or regularly wouldn't be the only wants to do so.
On the street.
We initiated our price increase is pretty early to cover ourselves as I said, we've taken long positions on inventory to try to protect our customers as much as possible so that at least what it what.
We have on our pipeline.
We will be debt.
As the lowest cost of goods.
Possibly but it's not going to change the fact that.
Freight costs.
Ocean Air everything has more than doubled in some cases more than tripled.
So.
The first part of your question no. We don't see any easing of the logistical problems they seem to.
Not be easy.
Using at all in fact, Theyre getting worse, which I think helps us quite frankly, because we're still on a better position than any of our competitors.
We are about people struggling out there very very badly.
And many of our competitors customers are are reaching out to us so.
Sure in places where.
No.
Specific places where were not servicing our customers up to the level that we'd like to even though we're being very transparent revenue constant communications with our customers not bearing our heads in the sand.
And I'm sure there's some of that activity going the other way also but.
As I said in the past.
Particularly with Hps pie.
<unk>.
Whatever it is 6 or 7% market share.
There is still a 93% of the market. They don't have a share of net.
So.
If more of our competitors' customers, who are upset and our customers in the end we would.
And that's essentially where we see it I don't think from everything I read I don't think were going to see any easing of this logistical problem. This year at all and it might be mid next year before it gets resolved theres not enough. There's not enough ships people have learned to Internet shop. There is this whole still this.
Capability of ordering something online.
To your house and having it shipped from Asia.
And that's taking up a lot of cargo space now because if it's under $800. It comes into this country.
On pay duty on it.
So there's a lot of people who have kind of re.
Their own businesses to be able to ship directly from Asia here, but it's taking up a lot more container space.
In doing so so I don't see an easing of it.
Eventually it will become too expensive for some folks and their customers won't want to pay the bounty that they have to pay to get products and those people.
<unk> will become hopefully our next prospects and opportunities.
Okay, great well, thanks for the update and then I wanted to lastly ask about.
Yes.
You mentioned.
I think I think it was checked that talked about more.
With M&A.
M&A opportunities Bubbling up in the promotional product space.
As you look at those opportunities and you mentioned quite a few inbound.
Calls about potentially combining with <unk>.
You look at that pipeline.
More.
How many of those do you think would kind of represent really solid candidates that you maybe you want to.
Partner with.
I know you try and maintain a high bar when youre looking at opportunities but.
Just kind of maybe talk about.
The actual opportunities that you think can arise that would be nice quality opportunities.
As a result of this.
Challenging environment for <unk>.
Competitors.
Yeah. Thanks, Thanks for the question, Kevin, Yes, I mean look we're looking at acquisitions across all.
The business.
All of our divisions all of our companies in each share of the business has opportunities.
Certainly banko has a robust pipeline, but there are opportunities elsewhere as well and Youre right. We have a high bar for what we look forward for acquisitions has got to be accretive to the bottom line easy to integrate good for culture.
Areas that bring us into new lines of business right and we saw that with gifts gifts by the time, we did earlier this year in Q1 hit all those.
Different targets that we needed in order to be the right acquisition. So.
We're in discussion with a number of companies from which we've been talking to for 3 years.
And we've always held Kevin net debt we.
Have to be talking to a lot of different targets.
In order to find the right ones and there could be dozens and dozens that we're talking to just to find the right 1 and so we're not going to jump at it on an opportunity just because it presents itself to us and more often not people, calling us there's just not the right opportunity.
But we're being opportunistic and then you never know when the Time's right for some of these so.
We're certainly going on kind of keep looking at them as they come in and as we solicit new opportunities.
Okay. That's helpful. Thanks for taking all the questions I wanted to add my congratulations to Phil and Jake on your new roles.
Okay.
Thank you so much thank you.
I appreciate it.
A question and answer session.
It sounded like they are on the conference back over to Mr. Michael Benstock for closing remarks. Please go ahead alright.
I'll make this real quick and it's been long for all of you. Thank you very much for joining US today, we're very excited about where our business is that and hope to report to you next quarter.
<unk> great results.
We'll see you in October.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.