Q1 2022 Delta Apparel Inc Earnings Call

Speaker 1: I brought my spare glasses back.

I've got mistake of sandbox as we're about to begin.

Thank you and good afternoon to everyone participating in Delta apparel fiscal 2022 first quarter earnings Conference call. Please note that today's call is being recorded.

Speaker 2: Thank you and good afternoon to everyone participating in Delta Apparel's fiscal 2022 first quarter earnings conference call. Please note that today's call is being recorded.

Joining us from management are Bob Humphreys, Chairman, and Chief Executive Officer, and Simone Walsh, Vice President Chief Financial Officer, and Treasurer before we begin I'd like to remind everyone that during the course of this conference call projections or other forward looking statements may be made by Delta apparel executives, such projections and statements suggest prediction and involve risks and uncertainties.

Speaker 2: Joining us for management are Bob Humphries, Chairman and Chief Executive Officer, and Simone Walsh, Vice President, Chief Financial Officer, and Treasurer.

Speaker 2: Before we begin, I'd like to remind everyone that during the course of this conference call, projections or other forward-looking statements may be made by Delta Apparel's executives. Such projections and statements suggest prediction and involve risks and uncertainty, and actual results may differ materially. Please refer to the periodic reports filed with the Securities and Exchange Commission, including the company's most recent Form 10-K and Form 10-Q .

Actual results may differ materially please refer to the periodic reports filed with the Securities and Exchange Commission, including the company's most recent Form 10-K form 10 Qs.

Speaker 2: documents, identify important factors that could cause actual results to differ materially from those contained in the projections or forward-looking statements. Please note that any forward-looking statements are made only as of today and except as required by law, the company does not commit to update or revise any forward-looking statement.

These documents identify important factors that could cause actual results to differ materially from those contained in the projections or forward looking statements. Please note that any forward looking statements are made only as of today and except as required by law. The company does not commit to update or revise any forward looking statements.

Speaker 2: even if it becomes apparent that any projected results will not be realized. I'll now turn the call over to Delta's Chairman and Chief Executive Officer Bob Hoch.

Even if it becomes apparent that any projected results will not be realized.

I'll now turn the call over to Delta's, Chairman and Chief Executive Officer, Bob Humphreys.

Speaker 3: Thank you. Good afternoon and thank you for your interest in Delta apparel.

Thank you good afternoon, and thank you for your interest in Delta apparel I'd.

Speaker 3: I'd like to start our call today by welcoming and introducing you to Simone Walsh, our new Vice President, Chief Financial Officer and Treasurer.

I'd like to start our call today by welcoming and introducing you to some of them Walsh, our new Vice President Chief Financial Officer and Treasurer.

Speaker 3: Simone joins Delta Apparel from Novotas Incorporated, where she served as Vice President, Deputy Controller. Previously, Simone served as Chief Accounting Officer for PRGX Global Incorporated.

Simone Joyce Delta apparel from Novo's incorporate it where she served as vice President Deputy Controller previously Simone served as Chief Accounting Officer for P. R. Gx Global incorporated and held senior finance roles at several other publicly traded retail and manufacturing companies, including Sony.

Speaker 3: And held senior finance roles at several other publicly traded retail and manufacturing companies, including Sony Corporation. Coca Cola Enterprises and the Home Depot in London and in Atlanta. Simone started her career at Ernst and Young.

Coca Cola enterprises, and the home depot in London, and in Atlanta, Simone started her career at Ernst and young in this both in Australia, and British a chartered accountant. She's also a U S citizen.

Speaker 3: and is both in Australia and British a charter accountant. She's also a US citizen.

Yeah.

Speaker 3: We are extremely pleased today to tell you about our outstanding start to fiscal 2022 and strong first quarter performance which outpaced our expectations and put us in place to meet if not at seed our revenue and earnings goals for fiscal 2022.

We are extremely pleased today to tell you about our outstanding start to fiscal 2022, and strong first quarter performance, which outpaced our expectations. It put us in place to meet if not exceed our revenue and earnings goals for fiscal 2022.

Before we get to the financial results I want to take a minute to recognize and thank our nearly 9000 employees across the United States, Mexico, Honduras and El Salvador.

Speaker 3: Before we get to the financial results, I want to take a minute to recognize and thank our nearly 9,000 employees across the United States, Mexico, Honduras, and El Salvador.

The last two years have been challenging on so many fronts, but our teams have remained focused on moving our company forward by executing our business plans and providing outstanding products and innovative services to our thousands of customers across many channels of distributions.

Speaker 3: The last two years have been challenging on so many fronts, but our teams have remained focused on moving our company forward by executing our business plans and providing outstanding products and innovative services to our thousands of customers across many channels of distribution.

Speaker 3: We have a long, improved track record of success, navigating challenging industry dynamics.

We have a long and proven track record of success navigating challenging industry dynamics.

Speaker 3: Over the past several quarters, we have been faced with inflationary pressures, supply chain disruptions and labor shortages, which our teams have tackled head-on with tremendous agility, flexibility, and innovative resulting, innovation resulting in outstanding operating results for the many constituent groups we consider a part of our business purpose.

Over the past several quarters, we have been faced with inflationary pressures supply chain disruptions and labor shortages, which our teams have tackled head on with tremendous agility flexibility and innovated, resulting innovation, resulting in outstanding operating results for the many constituent groups we consider it.

Part of our business purpose.

Speaker 3: As you saw in our press release, sales for our first quarter ended July 1, 2022 for $110.7 million, an all-time record for the December quarter, and represented organic growth of approximately 17% from the prior year December quarter. Our net income of $3.6 million was also a record for the December quarter and equates to 51 cents per diluted share ahead of our internal expectations.

As you saw in our press release sales for our first quarter ended July one 2022 or $110.7 million, an all time record for the December quarter and represented organic growth of approximately 17% from the prior year December quarter.

Our net income of $3.6 million was also a record for the December quarter, and equates to 51 cents per diluted share ahead of our internal expectations.

Speaker 3: This was another quarter represented by Brawl Base Performance with Shear Holder Value Creation in both segments of our business.

This was another quarter represented by broad based performance with shareholder value creation in both segments of our business.

Salt life group achieved sales of $8 $8 million up 24% from the prior year and ended the quarter with strong orders for our wholesale channel while at the same time continuing to build direct consumer engagement on our social media platforms, which should continue to drive strong growth.

Speaker 3: Salt Life Group achieved sales of $8.8 million up 24% from the prior year and ended the quarter with strong orders for our wholesale channel. While at the same time, continuing to build direct consumer engagement on our social media platforms, which should continue to drive strong growth in our higher margin, direct to consumer channels of distribution.

In our higher margin direct to consumer channels of distribution.

Speaker 3: We opened one new Salt Life Retail Store during the first quarter in Texas City, Texas and have already opened a new store in Sarasota, Florida, this quarter. And are planning to complete store openings in Fort Lauderdale, Florida, Foley, Alabama, Hilton Head South Carolina, and Boca Raton, Florida, over the next several months.

We opened one new salt life retail store during the first quarter in Texas City, Texas. It has already opened a new store in Sarasota, Florida. This quarter and are planning to complete store openings in Fort Lauderdale, Florida, Foley, Alabama, Hilton head South Carolina in Boca Raton, Florida over there.

Next several months.

Speaker 3: We are in continuing discussions for several additional leases and are planning to end this fiscal year with approximately 20 thought-life retail stores in operation.

We are in continuing discussions for several additional leases and are planning to end this fiscal year with approximately 20 salt life retail stores in operation.

Speaker 3: For doors open five quarters or longer, we registered same store sales growth of 18% from the prior year December quarter. Consumer demand and engagement on our Salt Life e-commerce site has been strong despite going into the quarter with a limited inventory position that became more constrained as the holiday season progressed, limiting our revenue through this channel of distribution.

Four doors opened five quarters or longer we registered same store sales growth of 18% from the prior year December quarter.

Sumer demand and engagement on our salt life ecommerce site has been strong despite going into the quarter with a limited inventory position that became more constrained as the holiday season progressed limiting our revenue through this channel of distribution.

To better service this important channel and more directly interact with our consumers. We have recently strategically reconfigured space within our existing distribution center in Fayetteville North Carolina.

Speaker 3: To better service this important channel and more directly interact with our consumers, we have recently strategically reconfigured space within our existing distribution center in Fedville, North Carolina designed to reserve and manage inventory dedicated for availability and servicing our consumers shopping on SaltLife.com.

Designed to reserve and manage inventory dedicated for availability in servicing our consumer shopping on salt life Dot com.

Speaker 3: Saltwater continues on this journey of strong organic growth and the broad demand that our products had to celebrate it over the last six quarters.

Salt life continues on its journey of strong organic growth and the broad demand that our products has accelerated over the last six quarters.

Speaker 3: While we continue to navigate supply chain issues that face many in this current environment, as you can see from our sales results, our team has executed magnificently to allow us to deliver strong revenue growth despite these industry challenges.

While we continue to navigate supply chain issues that face. Many in this current environment as you can see from our sales results. Our team has executed magnificently to allow us to deliver strong revenue growth. Despite these industry challenges.

Speaker 3: We are shipping our spring wholesale business as we speak and are expecting continued growth and the associated margin expansion with our direct to consumer channels growth.

We are shipping our spring wholesale business as we speak and are expecting continued growth and the associated margin expansion with our direct to consumer channels growth.

Our Delta group also delivered strong sales growth across all channels of distribution and on a consolidated basis. In this segment, we grew 16% for the quarter to a first quarter record of $101.9 million.

Speaker 3: Our Delta Group also delivered strong sales growth across all channels of distribution and on a consolidated basis in this segment, we grew 16% for the quarter to a first quarter record of $101.9 million.

We are now seeing channels of distribution that had been more heavily impacted by COVID-19 start to normalize and all channels are now in a growth mode, which will ultimately help us shape, our targeted product mix. Moreover, we continue to see additional retailers and global brands seek increase.

Speaker 3: We are now seeing channels of distribution that have been more heavily impacted by COVID, start to normalize, and all channels are now in a growth mode, which will ultimately help us ship our targeted product mix.

Speaker 3: Moreover, we continue to see additional retailers and global brands seek increased production from the vertically integrated supply chain that Delta Parallel has to offer.

Auction from the vertically integrated supply chain that Delta apparel has to offer.

Speaker 3: We're currently installing additional equipment in our textile sewing and screen print locations in Central America, which will allow us to continue to increase our output as the year progressed.

We are currently installing additional equipment in our textile selling and screen print locations in Central America, which will allow us to continue to increase our output as the year progresses.

The Delta group like many in our industry continues to be impacted by limited supplies of raw materials transportation services and other supply chain bottlenecks. However to date, we've been able to manage through these challenges further building output by utilizing our vertically integrated manufacturer net.

Speaker 3: The Delta Group, like many in our industry, continues to be impacted by limited supplies, or raw materials, transportation services, and other supply chain bottleneck. However, today, we've been able to manage through these challenges further building output by utilizing our vertically integrated manufacturer and network.

Sure.

Our ability to meet customer demand has not only resulted in strong top line per board performance, but allowed us to broaden our services and offerings with both existing and new customers.

Speaker 3: Our ability to meet customer demand has not only resulted in strong top line performance, but allowed us to broaden our services and offering with both existing and new customers.

Over the last year, we have increased selling prices on the majority of our products to mitigate most of the inflationary pressures impacting our supply chain.

Speaker 3: Over the last year we have increased selling prices on the majority of our products to mitigate most of the inflationary pressures impacting our supply chain.

Speaker 3: In addition, we are now providing more value adding services, such as screen or digital printing and recalready services than any time in our history, which further increases our average selling process, resulting in increased consolidated revenues.

In addition, we are now providing more value, adding services, such as screen or digital training and retail ready services than any time in our history, which further increases our average selling prices, resulting in consolidated increased consolidated revenues or increase unit growth along with a richer mix.

Speaker 3: Our increased unit growth, along with a richer, mid-mix of services delivered, is allowing us to also increase our operating profits, our leveraging our fixed cost in our manufacturing and S-GNA areas.

Mix of services delivered is allowing us to also increase our operating profits are leveraging our fixed cost in our manufacturing and SG&A areas.

During the December quarter. We also reached a number of significant milestones in our D. T G to go business.

Speaker 3: During the December quarter, we also reached a number of significant milestones in our DTG to go business.

Speaker 3: Our revenue was a new quarterly record with growth of approximately 17% over the prior year. We were able to move from a beta test mode to a production environment on our new printing equipment while we continue to take delivery of and install additional production equipment through the holiday season.

Our revenue was a new quarterly record with growth of approximately 17% over the prior year.

We were able to move from a beta test mode to a production environment on our new printing equipment, while we continue to take delivery of an install additional production equipment through the holiday season.

Speaker 3: As previously announced, we onboarded several new customers on the DTG to go platform during the quarter. This will provide the foundation for growth as the year progresses.

As previously announced we own board at several new customers on the D. T. G to go platform during the quarter. This will provide the foundation for growth as the year progresses.

Speaker 3: Our digital first methodology, which we developed in conjunction with a number of key market participants, was implemented in the quarter. We have made significant investments in DTG to go digital first retail model, ensuring digital graph prints meet the high quality standards required for brands, retailers, and intellectual property holders.

Our digital first methodology, which we developed in conjunction with a number of key market participants was implemented in the quarter. We have made significant investments in D. T. G to goes digital first retail model, ensuring digital graph, France meet the high quality standards require for brands retailers and intellectual.

Property holders.

Speaker 3: We believe the quality, look, and fill of the garments created through this process will continue to differentiate us in the marketplace and will be a key driver of the growth we are expecting in this business.

We believe the quality look and feel of the garments created through this process. We will continue to differentiate us in the marketplace and it will be a key driver of the growth. We are expecting in this business. In addition, 55% of the D. T. G to go units we produced in the December quarter were printed on Delta garments crew.

Speaker 3: In addition, 55% of the DTG to go units, we produced in the December quarter were printed on Delta Garments, creating a more efficient operation, reduce garment cost for our customers, and lower working capital needs in the business.

Waiting a more efficient operation reduced garment costs for our customers and lower working capital needs in the business.

Speaker 3: Now let me turn the call over to Simone who will review our first quarter business highlights and financial results. And then I'll join the call prior to our opening for questions. Simone. Thank you, Bob. I'm delighted to have joined Delta Parallel at this exciting time for the company.

Now, let me turn the call over to Simone who will review, our first quarter business highlights and financial results and then I'll join the call prior to our opening for questions Simona.

Thank you Bob and good luck.

I had to have joined Delta apparel, it's exciting time for the company.

Speaker 4: Let me echo Bob's comments for both our Delta Group and Salt Life Group. First quarter fiscal 2022 result for outstanding. And we are progressing with strong positive momentum.

Bobs coming for both our Delta group and Salt Life Group first quarter fiscal 2022 results were outstanding and we are progressing strong positive momentum.

Speaker 4: Over the past year, the company completed the integration of our Sophie brand into our active web business, consolidated and modernised certain distribution operations and achieved record levels of manufacturing up.

Over the past year the company completed the integration of our safety brand into our active wear business.

Consolidated and modernize certain distribution operations and achieved record levels of manufacturing output.

In addition, extensive investments in research and development at P. P. J two got developed into our digital first strategy, which has already resulted in the on boarding of several new key customer relationships.

Speaker 4: In addition, extensive investments in research and development at DTG to go developed into our digital first strategy, which has already resulted in the onboarding of several new key customer relationships.

And the extraordinary growth we saw in salt back in fiscal 2021 has continued to accelerate and we have the foundation in place to further organic growth.

Speaker 4: And the extraordinary growth we saw in Salt Life in fiscal 2021 has continued to accelerate. And we have the foundation in place to further organic growth.

Speaker 4: Our multi-year strategic initiatives, many of which were put in place pre-pandemic, are maturing nicely and our first quarter results are reflective of our ability to capitalise on market opportunities to drive broad-based organic growth in our business.

Our multi year strategic initiatives, many of which were put in place pre pandemic are maturing nicely and our first quarter results are reflective of our ability to capitalize on market opportunities to drive broad based organic growth isn't it.

Speaker 4: Now, I'll go through a more detailed review of our first quarter financial results.

Now I'll go through a more detailed review of our first quarter financial results.

Net sales for Huntington $10.7 million compared to $94 $7 million in the prior year.

Speaker 4: Net sales were $110.7 million, compared to $94.7 million in the prior year. With Delta Group's segment growth of 16.3%, and 24.3% growth in the Salt Blast Group 6.

Also grid segment growth at 16, 3% and 24.3% growth in the soapbox great statement.

Speaker 4: We saw growth across the delta grip segment in delta direct and global grounds and retail direct with strong demand across the channels of distributions we serve.

We saw growth across the Delta group segment in Delta direct and global brands and great counter Rick with strong demand across the channels of distributions who says.

Speaker 4: As a reminder, in our global brands and retail direct sales channels, we're a supply chain partner to global brands from development of custom garments to shipman-of-the-branded products with the majority of the products being sold with value added service.

As a reminder, in our global brands and retail direct sales channels. We are a supply chain partner to global brands from development of custom garments to shipment estate branded products with the majority of the products being sold with value added services.

Speaker 4: We also serve retailers by providing our portfolio of Delta, Delta Platinum and Sophie products directly to both their retail stores and through their e-commerce channels.

We also serve retailers by providing a portfolio galka delta platinum and CIC products directly to the retail stores and through the e-commerce channels.

During the quarter. We also saw increased sales in D. P J T.

Speaker 4: During the quarter, we also saw increased sales in deep TG to go with the onboarding of several customers and a strong holiday show.

We'd be on boarding of several customers and a strong holiday shot.

The growth in Salt life resulted from by strength in our wholesale business together with continued growth in our retail store sales with same store sales growing 18% over the first fiscal quarter of fiscal 2021.

Speaker 4: The growth in Salt Life resulted from both strength in our wholesale business, together with continued growth in our retail store sales, with same store sales growing 18% over the first fiscal quarter of fiscal 2021.

Speaker 4: Gross margins contracted 60 basis points from the prior year to 20.8% of sales. Gross margin contracted in

Gross margins contracted 60 basis points from the prior year to 28% of South gross margin contracted in both business segments.

Speaker 4: This was in line with expectation as we continue to see inflationary pressure in our manufacturing and sourcing plants.

<unk> was in line with expectation as you continue to say inflationary pressure in our manufacturing and sourcing platforms.

Speaker 4: Failing, general, and administrative expenses increased $1.5 million, representing 15.8% sales, as compared to 16.9% sales in the first quarter of fiscal 2021.

Selling general and administrative expenses increased $1.5 million, representing 15, 8% of sales as compared to 16.9% sales in the first quarter of fiscal 2021 .

Speaker 4: We are seeing the benefit of the previously mentioned integration of our Sophie brand into our active wear business. While also leveraging our fixed costs against increased sales.

We are seeing the benefit of the previously mentioned integration of our safety brand into our active wear business.

While also leveraging our fixed cost against increased sales.

Operating income for the quarter increased 19% to $5 $9 million with five point trade percentage of sales compared to $3 $1 million or 3.3% of sales in the prior year first quarter.

Speaker 4: Operating incomes of the quarter increase 90% to $5.9 million or 5.3% of sales compared to $3.1 million or 3.3% of sales in the prior year first quarter.

Speaker 4: Yet income for the December quarter was $3.6 million or 51 cents per diluted share. An increase of 313 per cent compared to $900,000 or 13 cents per diluted share for the same period in the prior year. Driven by higher operating profits and a lower tax rate.

Net income for the December quarter was $3 $6 million or 51 cents per diluted share an increase of 313% compared to $900000 or 13 cents per diluted share for the same period in the prior year driven by higher operating profit and a lower tax rate.

Speaker 4: Our balance sheet is solid. Their debt, including capital-based financing and cash on hand, was $139.6 million.

Our balance sheet is solid.

Net debt, including capital lease financing and cash on hand was $139.6 million.

Well our debt increased from September 2021.

Speaker 4: While our debt increased from September 2021, this was in line with expectations as we continue to build inventory to meet demand.

This is in line with expectations as we continued to build inventory to meet demand.

Speaker 4: Our inventory was $183 million at the end of the first quarter. An increase of $21 million from September . But the lower target for the spring shipping seat.

Our inventory was $183 million at the end of the first quarter, an increase of $21 million from September but below our targets for the spring shipping season.

Speaker 4: This is by an increase in the number of units on hand and a reflection of high inventory value resulting from increases in raw material, transportation and labour costs.

This is by increasing the number of units on hand, and reflection of high inventory value, resulting from increases in raw materials transportation and.

Labor cost.

We expect to remain inventory constrained as we manage through the remainder of fiscal 2022.

Speaker 4: We expect to remain inventory constrained as we manage through the remainder of fiscal 2022.

We continued to invest in the business spending $1.8 million on Capex in the first quarter fiscal 2022.

Speaker 4: We continued to invest in the business, spending $1.8 million on Catholics in the first quarter of fiscal 2022.

This amount is lower than we had planned for the quarter as we experienced supply chain delays in receiving some machinery.

Speaker 4: This amount is lower than we had planned for the quarter, as we experienced supply chain delays in receiving some machinery.

We still anticipate spending approximately $20 million on capex in the fiscal year as we continue to invest in new retail doors at salt life.

Speaker 4: We still anticipate spending approximately $20 million on Catholics in the fiscal year. As we continue to invest in new retail doors at Stolt Life,

Speaker 4: Production processes in our Central American Manufacturing Facility.

Production processes in our central American manufacturing facilities.

And the continued investments in the infrastructure at D. P. G ticker.

Speaker 4: and the continued investments in the infrastructure at DTG to go.

Additionally, we will continue to invest in infrastructure projects that support our vertically integrated supply chain platform.

Speaker 4: Additionally, we'll continue to invest in IT infrastructure projects that support our vertically integrated supply chain plants.

In the first quarter fiscal 2022.

Speaker 4: In the first quarter of fiscal 2022, under the previously announced Share Repurchase Program, the company repurchased 74,232 shares for $2.1 million, bringing the total amount repurchased to $54.6 million.

Under the previously announced share repurchase program the company repurchased 74232 shares for $2 $1 million, bringing the total amount repurchased $254.6 million at.

Speaker 4: At the end of the first quarter, the company had $5.4 million, remaining to repurchase under the existing authorisation.

At the end of the first quarter, the company had $5 $4 million remaining to repurchase under the existing authorization.

Now I'll turn the call back over to Bob for his closing comments prior to Q&A.

Speaker 4: Now I'll turn the call back over to Bob for his closing comment prior to Q&A.

Speaker 3: Well, thanks, Simone. We know what most of you are interested in is how we see fiscal 2022 progressing and how we will deal with labor shortages in the United States, supply chain disruptions, and high cotton prices.

Bob Thanks Simone.

We know what most of you are interested in is how we see fiscal 2022 progressing and how we will deal with labor shortages in the United States supply chain disruptions and high cotton prices.

Well I'll start by saying that without these headwinds our fiscal 2021 full year and our first quarter of fiscal 2022 results would have been even better.

Speaker 3: Well, I'll start by saying that without these headwinds, our fiscal 2021 full year and our first quarter of fiscal 2022 results would have been even better.

Speaker 3: We know that we will have further challenges as we progress through fiscal 2022, both known and unknown.

We know that we will have further challenges as we progress through fiscal 2022, both known and unknown.

We also know that we successfully navigated many economic cycles.

Speaker 3: We also know that we successfully navigated any economic cycles.

Speaker 3: Trade law changes, consumer behavior and fashion changes, inflationary spikes and raw materials alongside many other challenges in our 21 years as a public company.

Trade law changes consumer behavior, and fashion changes inflationary spikes in raw materials alongside many other challenges in our 21 years as a public company.

Speaker 3: That history in its experience gives us confidence as we sit here today with the highest revenues and profits in our history as being well prepared for continued challenges as we manage through the remainder of fiscal 2022 and beyond.

That history and experience gives us confidence as we sit here today with the highest revenues and profits in our history as being well prepared for continued challenges as we manage through the remainder of fiscal 2022 and beyond.

Speaker 3: The opportunities Delta has to grow its top line and further expand profitability are probably the strongest we have seen in our history.

The opportunities Delta has to grow its top line and further expand profitability are probably the strongest we have seen in our history.

While the current economic conditions present challenges for us the changing global dynamics are providing many opportunities.

Speaker 3: While the current economic conditions present challenges for us, the changing global dynamics are providing many opportunities.

Our key go to market strategies, Salt life Delta direct retail direct global brands and D. T. G to go combined with our vertical supply chain network provides us with a powerful business platform, which is in strong demand and provides us with many avenues for further growth.

Speaker 3: Our key go-to-market strategies, Salt Life, Delta Direct, Retail Direct, Global Brands, and DTG2GOV combined with our vertical supply chain network provides us with a powerful business platform, which is in strong demand and provides us with many avenues for further growth.

Speaker 3: On our last earnings call, when we reviewed our full year fiscal 2021 results, we reported that we expected top line growth and operating profit expansion across fiscal 2022 quarters, resulting in all-time record revenue and earnings per share.

On our last earnings call. When we reviewed our full year fiscal 2021 results. We reported that we expected top line growth and operating profit expansion across fiscal 2022 quarters, resulting in all time record revenue and earnings per share.

Speaker 3: Subsequently, we reported that we expect double-digit revenue growth for the full year.

Subsequently, we reported that we expect double digit revenue growth for the full year.

Speaker 3: Our first quarter results reflect the building momentum that we have in our business and positions us well to reach our full year objectives that we previously announced.

Our first quarter results reflect the building momentum that we have in our business and positions us well to reach our full year objectives that we've previously announced.

Speaker 3: And now operator you can open up the call for any questions we may have.

And now operator, you can open up the call for any questions. We may have.

Speaker 2: Thank you. If you'd like to ask a question, please signify pressing star one on your telephone keypad. And if you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach your equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.

Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad and if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for questions.

And we will go to Dana Telsey with Telsey group.

Speaker 2: I good afternoon everyone and congratulations on the results. Couple things. Can you unpack inflation, what type of price increases are you passing on, how it's changed, how you're expected to change going forward, and with supply chain, how are you thinking about your inventory levels in order to meet demand as we go through the upcoming quarters with the double digit revenue growth.

Hi, good afternoon, everyone and congratulations on the results.

Can you unpack inflation what type of price increases are you passing on how it's changed how you expect that to change going forward.

With supply chain, how are you thinking about your inventory levels in order to meet demand as we go through the upcoming quarters with the double digit revenue growth assumptions.

So Dana if you look at our overall our price.

Speaker 3: So Dana, if you look at overall our price, our average selling prices, particularly on basic product, or up about 20% over the last five quarters. And I would say about 15% of that is probably driven by just price increases where we are passing along costs.

Our average selling prices, particularly on basic products.

Or up about 20%.

Over the last five quarters.

And I would say about 15% of that is probably driven by just price increases where we're passing along costs.

And maybe about 5% of that is due to increased services that we're providing and changing in mix.

Speaker 3: and maybe about 5% of that is due to increased services that we're providing and changing in mix.

Speaker 3: You know, there's more price increases that are going into effect in the basic at once business As as we speak that you know, it seems like people are rolling them out in the calendar first quarter

You know, there's a more price increases that are going into effect in the basic at once business.

As as we speak the you know it seems like people are rolling them out in the calendar first quarter.

We've seen price increases or along other areas of our business and our global brands and retail direct businesses, where we price them on a more forward looking when deliberate process and partner with our.

Speaker 3: We've seen price increases along other areas of our business, you know, in our global grants and retail direct businesses.

Speaker 3: where we price them on a more forward-looking, when-delivered process and partner with our...

Speaker 3: you know, in customers own cotton pricing and those other raw material prices that have to be moved along. So I think, you know, a bit more to come and certainly wage rates have not abated. Energy rates have not abated. Cotton.

In customers' own cotton pricing in those other raw material prices that have to be moved along so I think you.

You know a bit more to come and certainly wage rates have not abated.

Energy rates have not abated.

Cotton.

Speaker 3: you know, it's still volatile right now. So it's just something that we have to look at and manage through really, you know, almost on a daily basis we talk and think about what increases we have and how we're gonna manage through that and.

<unk> is still volatile right now so it's just something we have to look at and manage through really you know almost on a daily basis, we talk and think about what increases we have and how we're going to manage through that then.

Speaker 3: You know, I'd say so far so good. But continue to work ahead.

No I'd say so far so good.

But continued work ahead of us.

Got it.

Speaker 2: And then on the supply chain constraints, anyway, and how do you see it at all normalizing, or what are you looking at over the next few quarters? And is this at all hindering your ability to get new customers for DTG to go? Because it certainly sounds like you are getting new customers.

Then on.

Hum.

The supply chain constraints.

The way in how you do you see it at all normalizing or what how do you. What are you looking at over the next few quarters and is this at all hindering your ability to get new customers for D. T. G to go because it certainly sounds like you are getting new customers.

Yeah, So I'd say a couple of different things that the thing that's been really interesting is you've had a for what we see and I think other.

Speaker 3: Yes, so I'd say a couple of different things. The thing that's been really interesting is you've had for what we see and I think, you know, other...

Speaker 3: Apparel manufacturers and probably other types of business are seeing these supply chain.

Apparel manufacturers and probably other types of business are seeing the supply chain.

Speaker 3: problems be bubbles that move through the system. So, you know, as soon as we get it fixed in one area, then suddenly, you know, there's another shipping issue somewhere else or a labor issue somewhere else or, you know, equipment failure or a plant down. And so, it's kind of been almost laughable if it wasn't so serious and we didn't have to spend so much time on it, you know, where it's gonna pop up next. But that's where...

Problems be bubbles that moves through the system. So you know as soon as we get it fixed in one area. Then suddenly you know theres another shipping issue somewhere else or a labor issue somewhere else or you know equipment failure or a plant down.

So.

It's kind of been almost laughable if it wasn't so serious and we didnt have to spend so much time on it.

Where it's going to pop up next but that's where.

Speaker 3: You know, I really just call out our manufacturing and planning team.

I really just call out are.

Our manufacturing and planning teams that have worked tirelessly through this you know even in the depths of the pandemic the amount of products, we were able to get out of El.

Speaker 3: that have worked tirelessly through this, you know, even in the depths of the...

Speaker 3: pandemic the amount of products we were able to get out of El Salvador to service our global brands You know how we were able to start up our manufacturing facilities and keep our people safe Just a lot of workarounds, you know our distribution centers in the US kept operating our DTG to go print operations kept operating You know limited schedules or with you know different groups of people so

El Salvador to service our global brands.

How we were able to start up our manufacturing facilities and keep our people safe just a lot of workarounds you know our distribution centers in the U S. GAAP operating our D. T. G to go print operations kept operating.

No unlimited schedules or with different groups of people. So you.

Speaker 3: You know, all that added together has allowed us to keep operating and, you know, have sequential quarters of nice growth, which...

You know all that added together has allowed us to keep operating and have sequential quarters of of nice growth, which.

Speaker 3: Each time we get to the end of one we kind of think well how are we going to do that next quarter and our folks have been figuring that out The you know demand is there for our products, so

Each time, we get to the end of one we kind of think well how are we going to do that next quarter and our folks have been figuring that out the demand is there for our products. So.

Speaker 3: You know, we'll just have to continue down this path. As far as DTG to go, goes we were successful in onboarding several key strategic customers during the holiday period. We had all hands on deck to get that done and great partnerships with equipment providers and these customers working hand in hand to get it done, develop new techniques, new levels of

You know, we'll just have to continue down this path as far as D. T. G to go goes we were successful in Onboarding.

Several key strategic customers.

During the holiday period.

We had all hands on deck to get that done and great partnerships with equipment providers and these customers working hand in hand to get it done develop new techniques new levels of quality ships.

Speaker 3: Shipment expectations so still a work in process

Shipment expectation, so still a work in process.

We've opened up additional facilities this quarter already that are certified in our digital first process for customers and we have one more facility that will be adding equipment to a later this quarter that will do the same thing in.

Speaker 3: We've opened up additional facilities, this quarter already that are certified in our digital first process for customers.

Speaker 3: and we have one more facility that will be adding equipment to later this quarter that will you know do the same thing and

Speaker 3: You know all you gotta do is look at the weather patterns in the US over the last few weeks in different parts of the country shutting down and you know we had facilities that we could transfer production to and continue

All you got to do is look at the weather patterns in the U S. Over the last few weeks in different parts of the country shutting down and you know we had facilities that we could transfer production to and continue to.

Speaker 3: to print so it's just I think a great testament of you know our ability and having

To print. So it's just I think a great Testament of our ability and having nine different print locations, where we can continue to operate and you know it's just a great example, I think of what in a new economy.

Speaker 3: nine different print locations where we can continue to operate and you know it's just a great sample I think of what in a new economy.

Speaker 3: our customers and consumers are looking for, you know, to keep things moving forward. So we are in good shape with the customers. We have onboarded

Our customers and consumers are looking for work.

To keep keep things moving forward so.

We are in good shape with the customers we have onboard it there's a couple of others that we believe will grow significantly as they reevaluate their own current supply chain.

Speaker 3: There's a couple of others that we believe will grow significantly as they reevaluate their own current supply chain during the quarter, but I'd say

During the quarter, but I'd say our.

You know our vision for the rest of this fiscal year in D. T. G to go Oh, no we're not.

Speaker 3: You know, our vision for the rest of this fiscal year in DTG to go, you know, we're not needing to go recruit a lot of new customers. There's growth on the table for us to execute against and manage together. And they're expecting that promise. Thank you.

Not needing to go recruit a lot of new customers there's growth on the table for us to execute against in a managed together and they're expecting that promise.

Thank you.

And we'll move next to Bill Vogel of D V advisors.

Hello can you hear me.

Speaker 5: Yes, Bill. How you doing? I'm doing okay. How's it going, Bob? Great.

Yes, Bill How're you doing.

I'm doing okay. It hasn't gone up.

Great quarter.

Really.

Spectacular performance.

Speaker 5: your tax alert performance so amazing to me. You guys are trading like a value company putting up these sort of numbers. But it's just a couple of questions. First, are you still capacity constrained and how can we look towards that capacity coming online as you go throughout the year? And I think kind of a related question is, you kind of talked about.

What amazes me.

And you guys are trading like a value company, putting up these growth numbers.

Just a couple of questions first.

Are you still capacity constrained and how.

How can we look towards that capacity coming online as we go throughout the year.

Kind of a related question as you kind of talked about.

Speaker 5: You know, double-digit growth this year in revenues, and you're on target for that. Can you give us a little more linearity, clarity on that? I mean, clearly this quarter year at 17% to expect these. So it's a number or, you know, it's a kind of monitoring. And then finally, just on margin, how do we expect the progression of margins to be as we go through that to you? Thank you. Sure.

Double digit growth this year in revenues and you're on target for that.

Can you give us a little more linearity clarity on that I mean.

This quarter you are at 17% do you expect these sorts of numbers or is it kind of moderate.

And then finally just on margins how do we expect the progression of margins to be as we go.

So throughout the year. Thank you.

Sure so.

Speaker 3: As far as capacity, so we've been talking about for a couple of quarters, we have some new equipment on order that will go into our Central American facilities that will, what we call, deep bottleneck, you know, remove bottleneck processes in our textile facility there that will add about 10% output.

As far as capacity. So we are you know as we've been talking about for a couple of quarters. We have some new equipment on order that will go into our central American facilities.

That will what we call deep bottleneck remove bottleneck processes in our textile facility there that will add about 10% output.

That equipment is a little bit late but it's all about moving towards us. So we expect that to affect our back half of this year with more production capability I will say a R.

Speaker 3: that equipment is a little bit late, but it's on a boat and moving towards us. So we expect that to affect our back after this year with more production capability. I will say our...

Speaker 3: our leaders and employees in that area continue to come up with innovative ways to produce more product along the way and so we have done that and producing a little bit more now that we were expecting so

Our leaders and our employees in that area continue to come up with innovative ways to produce more product.

Along the way and so we have we have done that and producing a little bit more now that we were expecting so oh.

Again, there are some constraints around raw material delivery.

Speaker 3: Again, there's some constraints around raw material delivery and you know, that sort of thing, but we do expect to continue to, you know, increase our output as we go there. We have additional screen print equipment on order for El Salvador in Mexico. It's been kind of interesting to us.

You know that sort of thing, but we do expect to continue to increase our output as we go there we have additional screen-print equipment on order for our El Salvador, and Mexico, Spain kind of interesting to us.

You know when we first started in digital print we thought it would you know one day, maybe eliminate screen printing and you know it's amazing house evolve, but we are now screen printing more units than any time in our history.

Speaker 3: you know, when we first started in digital print, we thought it would, you know, one day maybe eliminate screen printing and you know, it's an amazing house of all, but we are now screen printing more units than any time in our history and see stronger demand for that. And we, you know, we love having the additional value adding services, so we'll be screen printing over a million impressions a week in this quarter. Maybe not every week when we're building to that.

And see stronger demand for that and we you know we love having the additional value adding services. So we.

We will be screen printing over 1 billion impressions a week in this quarter, maybe not every week, we're building to that.

Speaker 3: And so, you know, we expect as we sit here today, you know.

Uh huh.

And so we expect as we sit here today you.

You know setting.

Speaker 3: setting aside a shock to the supply system where something you know is shut down and really hurts our production that you know we can achieve you know low double digit growth rate in totality for the full year

Setting aside a shock to the supply system, where something you know was shut down it really hurts our production.

No we can achieve.

Low double digit growth rate in totality for the full year.

And Ma.

Speaker 3: General expectation is that we're going to have gross margins for the year at a similar level to what we had in the first quarter. There might be some ups and downs through that. There's some more pricing increases that are rolling out in some areas of the marketplace, but obviously that's a dynamic that a lot of participants ultimately influence. So, too soon to tell there.

General expectation is that we're going to have gross margins for the year.

At a similar level to what we had in the first quarter there might be some ups and downs through that there's some more pricing.

Increases that are rolling out in some areas of the marketplace, but obviously, that's a dynamic that.

A lot of participants ultimately.

Influence so too soon to tell there.

Speaker 3: Obviously if we can hold gross margins and In lever our fixed costs then that you know helps our bottom line results and that's what we're shooting for and plan on the chief

Obviously, if we can hold gross margins in and lever our fixed costs and that helps our bottom line results.

That's what we're shooting.

Shooting for and planning on achieving.

Yeah.

Speaker 3: Yeah, an operating margins throughout the year, because you had some good control of those expenses, discord, I should we expect those to turn. Yeah, yeah. So, I think our operating margins are gonna be, again, in a full year similar to last year, but over higher revenue.

Operating margins.

Throughout the year, but you had some good.

Hi, good control of those expenses this quarter also we expect goals.

Yeah, Yeah. So.

You know I think our operating margins are going to be again in the full year are similar to last year, but over higher revenue.

Speaker 5: Okay. And maybe I'll just try to corner you a little bit before I let you down. Double digit, double digit, low double digits. I mean, that kind of is a big kind of range. It's low double digit.

Okay.

And maybe I'll just try to corner you a little bit before I, let you go.

Is it a low double digits I mean that kind of is.

Is it the kind of range is low double digits.

Speaker 3: 10 to 15 or 15 to 20, 10 to 20. Can you get that at all? Yeah. Yeah. Yeah, I can, I can narrow that range for you. So again, we would, we would be proud of anything north of 10%.

10 to 15 or 15 to 20.

Tend to try to keep that at all.

Yeah, I can I can narrow that range for yourself.

Again, we would we would be proud of anything north of 10%.

Speaker 3: for an organic revenue growth at this stage of where we are in our capacity constraints. And I think we can't sustain the 17% that we had in this quarter.

For you know an organic revenue growth at this stage of where we are in our capacity constraints.

And.

Thank you.

We can't sustain the 17% that we had in this quarter.

Based on what we see today is not.

Speaker 3: based on what we see today is not possible with our manufacturing. Although it appears that the man would be there.

Not possible with our manufacturing, although it appears that the demand would be there.

Speaker 3: We are telling customers no to business.

We are telling customers no to business.

Speaker 3: you know, particularly the ones that are looking for a place on our vertical supply chain, you know, manufacturing and service platform.

Particularly the ones that are looking for a place on our vertical supply chain manufacturing and service platform.

Speaker 3: you know, major customers are asking us to provide.

Major customers are asking us to provide more production.

Speaker 3: more production, you know, in the back half of this year, and at this point, we're having to tell them, we can't do that. So, demand is strong. Again, I think a lot of changing world dynamics.

In the back half of this year and at this point, we're happy to tell him. We can't do that so demand is strong, but again I think a lot of changing world dynamics a lot of relationships that we've built a lot of confidence that companies have in our people's ability to deliver and so I think it just.

Speaker 3: a lot of relationships that we build, a lot of confidence that companies have in our people's ability to deliver.

Speaker 3: And so I think it just modes well for our ability to organically grow Delta apparel into TOTALIS.

Bodes well for our ability.

80 to organically grow delta apparel in totality.

Speaker 5: Great. Thanks so much for your time and I guess given that you're completely good-passed, constrained and seemingly sold out, maybe you know, you might kick about I'm sure you are thinking about being more aggressive on the price inside.

Great. Thanks, so much for your time and I guess, given that you are completely capacity constraint and accumulate sold out maybe.

You know you might think about I'm sure you are thinking about being more aggressive on the pricing side.

Speaker 5: because if you have people who are turning away, maybe if you raise the price a little bit, yeah, it might help. But anyway, thank you so much, great quarter, we'll be in touch.

Is it you have people you carry on the way.

Maybe if you raise the price a little bit yes.

But anyway. Thank you so much great quarter, we'll be in touch.

And we'll go next to Jamie Wilen of Wilen management.

Speaker 6: Impressive for cell cellos. Three different questions. First, could you tell us about Central American and the operation cell, Salvador and Honduras? Do you have the same difficulty that we have in the states with the availability of labor and the cost of labor?

Our impressive results fell as three different questions first could you tell us about the Central America and Antelope.

Operations, El Salvador, and Honduras do you have the same difficulty that we have in the states with the.

The availability of labor and the cost of labor.

Speaker 3: We don't have the problem with availability on labor. And I think I hate the quota number because I don't keep up with it, obviously. Every day, but I think unemployment rates in those countries are still in the 25 to 40%, probably still haven't recovered from pre-COVID question rates.

We don't have the problem with availability of labor and there.

Thank God I hate to quote a number of calls I don't keep up with it obviously.

Every day, but I think the unemployment rates in those countries are still in the 25% to 40% probably still haven't recovered from.

Pre COVID-19 .

Production rates.

You know we have a growing group of educated leaders in those countries are all of our almost all of our leadership from management, our VP of manufacturing plant managers engineers, what abbvie or from the region anyway and Oreo.

Speaker 3: You know, we have a growing group of educated leaders in those countries, almost all of our leadership from management of the PMA manufacturing, plant managers.

Speaker 3: Engineers what have you or you know from the region anyway?

Speaker 3: or else I've lived there and worked for long periods of time. And so, and my point of this is, is just really...

So I've lived there and work for long periods of time and so in my point of this is just really comforting and encouraging to see the work ethic and the enthusiasm they have for our company in their country and in house to make all of that better so.

Speaker 3: comforting and encouraging to see the work ethic and the enthusiasm they have you know for our company and their country and and how else to make all of that better so uh... you know we don't have that problem uh... you know the infrastructure is not as good you can have transportation problems you can have electricity problems uh... you know in other things in a less developed country but uh... labor is not one of

We don't have that problem.

Infrastructure is not as good you can have transportation problems you can have electricity problems.

Those things in a less developed country, but labor is not one of them.

Got you on the Salt life side your same store sales growth was 18%.

Speaker 6: Got it true. On the Salt Life side, your same store sales growth was 18%. How does that, how do you look at that with the maturity of stores? Does most of that growth happen early on as you open up new stores from year one to year two, or do they turn similarly throughout all your stores? And secondly, within Salt Life, gross margins of 53%.

Yeah.

How does that how do you look at that with the maturity of stores.

Does most of that growth.

Early on as you open up new stores from year, one to year two.

Or do they trend similarly throughout all your stores and secondly, within Salt life.

Gross margins of 53%.

Sounds sound rather impressive is that a number that you can still achieve and then the last one on salt life is.

Speaker 6: sound rather impressive, is that a number that you can still achieve? And then the last on Salt Life is, you're still mentioned availability of product, even with getting same store sales at 18%. Could they have been even better?

You were still mentioned availability of product, even with getting same store sales up 18% could they have been even better.

Speaker 3: Yeah, it's like two or three things on that. You know, where are we?

Yeah, I'd say, two or three things on that.

Where are we.

Speaker 3: Really suffered the worst on not having product was in our e-commerce business because

Really suffered the worst I will not have an product was in our e-commerce business, because our stores were sucking out the merchandize, our wholesale customers were coming in and dropping orders that sucked up that merchandise and that was the reason that our management team down there said, hey, we got to do something better than this and so we will have merchandise.

Speaker 3: Our stores were sucking out the merchandise. Our wholesale customers were coming in and dropping orders that sucked up that merchandise. And that was the reason that our management team down there said, hey, we gotta do something better than this. And so we will have merchandise specifically being for support of our e-commerce business. We don't want that to be.

<unk>.

BN for support of our E Commerce business, we don't want that to be.

Speaker 3: uh... inventory constraint i would say particularly a stesteries and think that we can't make so you know

Inventory constrained I would say, particularly assessor east and things that we can't make so you know February is a good example bags.

Speaker 3: have wears a good example bags. We were inventory light very light during the quarters. So I think yes, we could have had higher.

We were inventory light very light during the quarter. So.

I think yes, we could have had higher a higher revenue as far as same store sales goes really interesting.

Speaker 3: Our revenue is for the same store sales goes really interesting

Speaker 3: Um, you know, if you dig in by store, uh, there's kind of a story behind each one. But basically what we do, just as a measurement is try to go look at, hey, for stores that were already open before our measuring pierced started. What was their growth for the, uh, for the quarter? And we do that, you know, stores come into that as we open these stores. But I think, uh,

Well you know if you dig in bass door, there's kind of a story behind each one but basically what we do just as a measurement is try to go look at hey for stores that were already open before are measuring period started what was their growth for the for the quarter and we do that stores.

Come into that as we open new stores, but.

Daytona Beach is a great example, that you know we open I don't know maybe two two and a half years ago now it was a new outlet.

And exit that was being developed.

Speaker 3: and the same store sales growth there is really outstanding, but if you go ride by that exit now, there's a lot of stuff that has been added to it. So, you know, what we're seeing is these destination areas where people are going there, we're going to get our fair share of business. So, the more people who do stop in those areas, the more, you know, opportunity we have to sell them something. So, um,

And the same store sales growth there is really outstanding but if you go right by that exit now Theres a lot of stuff that has been added to it. So you know what we're seeing is these destination areas where people are going there we're going to get our fair share of business. So the more people who do stop in those areas the more.

You know opportunity, we have to sell them something so.

Speaker 3: You know, I'd say, you know, our only thing with our stores is getting them open quickly and efficiently and our team's doing a good job of that. Usually our longest hold up is getting a building permit to do whatever we need to do. And then having, you know, enough product in there to

I'd say, our only thing with our stores is getting them open quick.

Quickly and efficiently and our team is doing a good job of that easily our longest hold up is getting a building permit to do whatever we need to do.

And then having enough product in there too.

Speaker 3: Yeah, service our customers and again, our planning teams are being more aggressive to make sure we have those kinds of products available for our consumers when they shop there.

You know service our customers and again, our planning teams are being more aggressive to make sure. We have those kinds of products available for our consumers when they shop there.

Speaker 6: Okay, and also on the Salt Life, put the L look on the wholesale channel as you see your orders in line for this season.

Okay and also on the Salt life, what's the outlook on the wholesale channel as you see your orders in line for the season.

Unbelievable.

Speaker 3: so the demand for teleroatics, very strong and

The demand for salt product very strong and.

You know our wholesale customers will more and more of it.

Speaker 3: You know, our wholesale customers won't more and more.

And then say we agree on.

Speaker 6: and is it geographical, expand your number of doors? Where's most of that coming from?

We will expand the number of doors, whereas whereas most of that coming from.

Yes, it's very broad based I mean still.

Speaker 3: Yeah, it's very broad based. I mean, you know, it's still strong in the South East, but it continues to grow more with retailers who have opened up in, I'll say, non-traditional areas. You know, the amount we're shipping to California continues to increase up the East Coast Midwest. So...

Strong in the southeast, but it continues to grow more with retailers, who have opened up in I'll say non traditional areas.

You know the the amount.

Our mountain where ship into California continues to increase.

The East Coast Midwest So.

Speaker 3: Our retail customers won't salt life product in there. And I think it's probably a pretty good example of this whole omnichannel model that has worked for a number of people and it's working for us and it's resonating with a salt life consumer. And so right now, all of our channels are growing with only e-commerce being limited by our life of product to get out there to consume.

Our our retail customers won't salt life product in there and I think it's probably a pretty good example of this whole omnichannel model that has worked for a number of people and you know is working for us and it's resonating with the salt life consumer.

And so right now all of our channels are.

Our growing.

With only e-commerce being limited by our lack of product to get out there to consumers.

Speaker 6: And on the DTG to go side, two questions. You talked about new facilities in digital. I thought you had already done your footprint. Does that mean new facilities within?

Got you and on the <unk> side two questions here, you talked about new facilities in digital I thought you had already done your footprint does that mean new facilities within.

Speaker 6: as you did within a hot topic distribution center or not sure what that is and also could you talk about?

As you do that and within the hot topic distribution center or I'm not sure what that is and also could you talk about the on boarding of several new customers are they different in nature than your existing customers and unto themselves what percentage of revenue growth condition customers achieve for you.

Speaker 6: The onboarding of the several new customers are they different in nature than your existing customers and unto themselves what percentage of revenue growth can these new customers achieve for you who didn't exist last year that existed today?

This last year that exist today.

Speaker 3: So I probably was not clear about new facilities. So is our new digital first equipment in existing facilities. So we have that equipment in three now, one to go. It was in two at holiday and the third one has birth. And we have people who have already certified that production. That's in our Dallas facility. And so the in this is.

Yeah, So I, probably was not clear about new facilities. So is our new digital first equipment in existing facilities.

So we have that equipment in three now want to go it was into at holiday and.

And the third one has.

And we have people who've already certified that production that's in our Dallas facility.

And so the and this is I think key.

When you think about this business and really understand it and the go to market strategies, but these customers are different in that they are not just E retailers or primarily E retailers, but our larger customers, who either have extensive license agreements or extensive IP.

Speaker 3: When you think about this business and really understand it and go to market strategies, but these customers are different in that they are not.

Speaker 3: just e-retellers, or primarily e-retellers, but you know, are larger customers who either have extensive license agreements or extensive IP that they own, or retailers or global brands all onboarding on that. And I think the thing that really sets the stage is the digital first. And I think the thing that really sets the stage is the digital first.

That they own.

Or retailers or global brands, all onboarding on that and.

And I think the thing that.

It really sets the stage is the digital first.

Quality.

And it's not just the quality is the statics.

Speaker 3: and it's not just the quality, it's aesthetic.

Speaker 3: where even industry experts cannot really differentiate between

They're even industry experts cannot really differentiate between how this government is printed whether it's digitally or some combination or screen printed and so you know when you get to that level first of all you have the quality.

Speaker 3: how this garment is printed, whether it's digitally or some combination or screen printed. And so, you know, when you get to that level, first of all, you have the quality.

Speaker 3: Conquert if you own a brand or an IP that you want that level of quality and the consistency and the acceptance of the customer that that's what they're expecting and so we can make very high quality and we still do and will for a long long long time own You know the digital equipment that we Previous

For it if you own a brand or you know an IP that you want that level of quality.

And the consistency and the acceptance of the customer that that's what they're expecting and so we can make very high quality and we still do and will for.

A long long long time AUM you know the digital equipment that we previously had but then it's a matter of I might like it better than you might not like it as well versus having a standard that's really indistinguishable from how it's produced.

Speaker 3: But then as a matter of, I might like it better and you might not like it as well, versus having a standard that's really indistinguishable from how it's produced.

Speaker 3: So lots of good stuff there. I think these customers will, you know, no doubt. There's, you know, three already onboarded that will be the majority of our growth this year.

So lots of good stuff there I think.

These customers will no doubt there is.

Three already onboard it that will be the majority of our growth this year and.

And over time will help reduce the seasonality further but that business, which is also key.

Speaker 3: And over time, we'll help reduce this feasibility further for that business, which is also key. Excellent. Thanks, Bob.

Excellent Thanks, Bob.

Mhm.

And we'll hear next from Chris Reynolds of Neuberger Berman.

Yes. Thank you Bob for taking my question.

Speaker 3: Yes, thank you Bob for taking my question.

Speaker 3: Now, two questions. One, what exactly does it mean when you say you have to put some equipment into new facilities? And what kind of equipment is that and how expensive is it?

Yep.

Two questions one what.

Exactly does it mean when you say you have to put some equipment.

Into two new facilities.

And what kind of equipment is that and how expensive is it.

Speaker 3: Then the second question is on the buyback. And I like the buyback. A great deal. You've had a consistent record of doing that. What's the philosophy for stock repurchase? Because obviously the growth rate of your company has gone up a lot.

Yes.

Second question is on the buyback I liked the buyback a great deal you have had a consistent record of doing that what's the philosophy.

For for stock repurchase because obviously the growth rate of your company has gone up a lot.

Speaker 3: but your multiples low. So I assume you'll keep buying your shares, but you know, things have changed, over the last three to five years in terms of how your company's positioned. Thank you.

But your multiples low so I assume you will keep buying your shares but you know.

Things have changed.

Over the last three to five years in terms of how your company's position. Thank you.

Speaker 3: Yeah, so, you know, this new equipment is new technology. You know, there's some confidentiality agreements and I'm not familiar exactly where they start and stop off the top of my head. So I'll just say it's new equipment. We were the beta test site. We've got basically first right of repusal for...

So.

You know this this new equipment is a new technology.

There's some confidentiality agreements and I'm not familiar exactly where they start and stop off the top of my head. So I'll just say, it's new equipment.

We were the beta test sites, we've got basically first right of refusal for most of their production for some significant period of time. They are gearing up beyond that so there will be other people that have the equipment, but as we've talked about and in digital print and printing for a decade now is not just the equipment is.

Speaker 3: most of their production for some significant period of time. They are gearing up beyond that, so there will be other people that have.

Speaker 3: the equipment, but as we've talked about in digital printing for a decade now.

Speaker 3: It's not just the equipment. It's understanding the R&D, it's understanding a peril, it's having the technology for the equipment to then know what type of garment is on the machine and how to adjust everything automatically is the technology to manage the art and how that's gonna be applied to the...

Understanding the R&D is understanding of payroll is having the technology to for the equipment to then know what type of garment is one the machine and how to adjust everything automatically as the technology to manage the art and how that's going to be applied to the the.

Speaker 3: the garment and then managing where that garment is and ultimately into the final delivery to the customer.

The garment and then managing where that garment is and ultimately into the final delivery to the customer so.

Speaker 3: There's a lot that goes into it, a significant.

There's a lot that goes into it.

A significant part.

Speaker 3: part of what we have that differentiates us from competitors. One is our technology and systems that we've developed over 12 years now, and then secondly,

Part of what we have that differentiates us from competitors one is our technology and systems that we developed over 12 years now and then secondly, having.

Speaker 3: you know, right now, nine different print locations where we can electronically move garments to where we have the garment to print on or what's closest to the end consumer, you know, which lowers the shipping cost and is the speed to the consumer. So there's a lot of components here that we've been working on that really, I think, separates us from the majority of the players out there.

You know right now nine different print locations, where we can electronically move garments to where we have the garment to print home or what's closest to the end consumer you know, which lowers the shipping cost and as the speed to the consumer so theres a lot of components here that we've been working on that really.

Think separates us from the majority of the players out there and create huge barriers to entry and then you add to that that you.

Speaker 3: and create huge barriers to entry. And then you add to that that, you know, a number of them are sitting in our DCs.

You know a number of them are sitting in our Dcs, So where we've got garments there for them to use in print one we eliminate an extra shipping costs to get garments to wear the printers are and the only way you can really compete with that and so getting the apparel businesses, which is pretty daunting for most people who are digital.

Speaker 3: So we've got garments there for them to use in print on. We eliminate an extra shipping cost to get garments to where the printers are. And the only way you can really compete with that is go getting the apparel business, which is pretty dawning for most people who are digital printers. So say, I'm going to be a vertical t-shirt producer so I can compete with Delta Apparel.

Printers per se.

One would be a vertical T shirt producers. So I can compete with delta apparel. So you know that.

Speaker 3: So, you know, those are the things that, you know, make that work for us and, you know, we expect that to continue.

Those are the things that you.

Make that work for us and.

We expect that to continue.

Speaker 3: was was there second part of your question i'm sorry all that rambling up for god well that was very helpful it sounds like you've almost you know major plants mobile in many sense

Was there a second part of your question I'm, sorry, I'll, let rambling I forgot.

Well that was very helpful. It sounds like you've almost major.

Plants mobile in many sensus.

Speaker 3: So you're able to shift the production to where the demand is. So that's very helpful for me. But your Stock Repurchase Program, you've been opportunistic over the years and bought stock. And that's been terrific. But it seems like the growth trajectory of your company has changed. And I'm wondering, what's the philosophy of Stock Repurchase? Has that changed at all?

So youre able to shift our production to where the demand is so that's that's very helpful. For me, but your stock repurchase program you've been opportunistic over the years.

<unk> stocking.

It's been terrific.

Yes.

Seems like the growth trajectory of your company has changed and I'm wondering what's the philosophy of stock repurchase has that changed at all.

Speaker 3: It certainly has evolved over time. And back in the day when we were doing a lot of acquisitions, I mean, it was an easy kind of and fun math to do. Well, we can fire ourselves or we can fire somebody else. And it pretty much told you what you could pay for in acquisition. And no need to get to it, because our little joke internally was to do acquisitions, you got to work weekends, and you can buy your stock back during the week. So if in doubt, do that.

It is certainly you know has evolved over time and you know back in the day. When we were doing a lot of acquisitions I mean, it was an easy and.

And fun math to do well, we can buy ourselves, where we can by somebody else and it pretty much told you what you could pay for an acquisition and no need to get too excited because you are a little joke internally was to do acquisitions, you got to work weekends and you can buy your stock back during the week. So you know if in doubt do that.

Speaker 3: And I just happen to see something today.

And I just happened to see something today.

For a different reason, but I think it was 2014, we had about 8 million shares outstanding and today, we have about 7 million shares outstanding I don't know off the top of my head exactly what our average prices share repurchases are probably about.

Speaker 3: for a different reason, but I think it was in 2014, we had about eight million shares outstanding. And today we have about seven million shares outstanding. I don't know off the top of my head, exactly what our average price of share repurchases are, but probably about, you know, probably less than half of our current trading values. So I believe for shareholders that works out pretty good.

Probably less than half of our current.

Trading value so I believe for shareholders that works out.

Pretty good.

Tom.

So.

Our philosophy on that is really you know use of capital and return for our shareholders.

Speaker 3: Our philosophy on that is really, you know, use the capital and return for our shareholders. I would say...

I would say.

You know, we see where the stock is trading versus where we think are the intrinsic value of the company is and then look at that versus opportunities for for our organic growth, particularly.

Speaker 3: You know, we see where the stock is trading versus where we think our the intrinsic value of the company is. And then look at that versus opportunities for our organic growth particularly.

Speaker 3: You all know as well as I do the value of what organic growth can do for per share earnings when we can lever other calls. So if we continue to see, you know, the man for production and all, then we'll put that into our formula of how much we can expand.

You all know as well as I do the value of what organic growth can do for per share earnings when we can lever our other call. So if we continue to see.

Demand for production in all then we will put that into our formula of how much we can expand in.

Speaker 3: You know, buy back our shares versus, you know, expand our manufacturing output. I will say, you know, at quarter end, I think our debt to EBITDA was really the lowest that...

Buyback our shares versus.

Expand our manufacturing output I will say you know at quarter end I think our debt to EBITDA was really the lowest that it's been in modern history about two and a half times debt. So.

Speaker 3: It's been in modern history about two and a half times that so we have good flexibility to, you know, organically grow our business and in our stock still.

We have good flexibility to.

Organically grow our business and.

In our stocks still.

Speaker 3: thinly traded or thinly than we think it should be and so You know we like to have programs out there to buy shares when there's more selling pressures than buying pressure

Stanley trade it more thinly than we think it should be and so.

We like to have programs out there to buy shares when there's more selling pressure than buying pressure.

Thank you.

And we have a follow up question from Bill Vogel of D V adviser.

Speaker 2: And we have a follow-up question from Delfogal of DV Advice.

Yes.

Speaker 5: Yes, just one follow up. Given where the stock is, I mean, obviously, the pieces, stock body, DTG to go, probably worth a lot more than the current market cap of the company is, would you consider at some point a sale or spin of either of those entities?

One follow up.

Even where the stock is I mean, obviously the pieces salt life.

<unk> go.

Probably.

You know a lot more than the current market cap of the company is would you consider.

At some point of sale or spin.

Either of those.

Entities.

Speaker 5: Maybe it's not the right time, there's a still growing so quickly, but just not even what your thoughts don't matter

Maybe it's not the right time is they start growing so quickly, but I'm just wondering what your thoughts on that.

Yeah, we always consider all of those things.

Speaker 3: You know, we always consider all those things.

You know and again I'll just look back over our history. We've done I think three divestitures, we've consolidated some things.

Speaker 3: you know and again i just you look back over our history we've done i think three to best of yours we can follow that it's some things you know when we feel like either uh...

Now when we feel like either.

We don't have a future view of success, but maybe someone else does we will sell the business and take.

Speaker 3: We don't have a future view of success, but maybe someone else does, we'll sell the business and take that capital. I just how we got capital for DTG to go in Salt Life by selling businesses that had been good. We sold them above our caring value and had made money over the years and allowed us to harvest those profits to redeploy them somewhere else. And I think looking back now.

Take that capital and that's how we got capital for D. T. G to go in Salt life. This by selling businesses that had been good we sold them above our carrying value and had had made money over the years and it allowed us to harvest those profits to redeploy them somewhere else and I think looking back now at Salt life in D. T G.

Speaker 3: at Salt Life and DTG to go that worked out well for all of us.

To go that worked out well for all of us.

Speaker 3: You know, I would also point out, you know, there is significant tax consequences to selling, you know, businesses that are valued much over their carrying value.

I would also point out you know there is significant tax consequences to selling.

Businesses that are value much over their carrying value. So you got to take that into account too and we are still a relatively small public company and you got.

Speaker 3: You got to take that into account too and we're still a relatively small public company and you got some amount of fix being public costs and suddenly you might be spreading that over you know a smaller remaining business but that's you know

Some amount of fixed being public coughs, and suddenly you might be spreading that over a smaller remaining business, but that's normal.

Speaker 3: conversations around here, you know, whether it's in the board room or the water fountain.

Conversations around here, whether it's in the boardroom or the water film.

Thank you very much.

Mhm.

And with no other questions in the queue I will now turn the call back over to Bob Humphreys for any additional or closing remarks.

Speaker 2: And with no other questions in the queue I will now turn the call back over to Bob Humphreys for any additional or closing remarks.

Well. Thank you all for your interest and questions and we look forward to.

Speaker 3: Well, thank you all for your interest and questions. And we look forward to meeting with you telephonically and a few months and talking about second quarter results. this also plays out in real.

Meeting with U telephonic Lee in a few months and talking about second quarter results.

Hope you have a good one.

And this concludes today's call. Thank you for your participation you may now disconnect.

Speaker 7: And this concludes today's call. Thank you for your participation. You may now disconnect. Could you talk about Lyca?

Yes.

[music].

Speaker 7: And is.