Q4 2021 Superior Group of Companies Inc Earnings Call
Good day and welcome to the Superior group of companies fourth quarter and fiscal year 2021 conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
With us today are Michael Benstock, the company's Chief Executive Officer, and Andy Demott, Chief operating Officer, and Chief Financial Officer. After the Speakers' remarks, there will be a Q&A session to ask a question you May Press Star then one on your telephone keypad and to withdraw your question. Please press Star then two this call is being recorded and your participation.
Wires that you agree to this if you do not agree. Please disconnect. Your lines now I'll turn the call over to Matala else. Your Beanie senior manager director of the three part advisors, who will read the Safe Harbor statement. Please go ahead ma'am.
Thank you and good morning. This conference 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 for the private Securities Litigation Reform Act of 1995, and all rules and regulations issued thereon.
Uh huh.
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 and supply chain manufacturing capacity at the.
Company's own and contract manufacturing facility.
Service capacity and customer demand.
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 effects of COVID-19 crisis on the U S and global market.
Our business operations customers suppliers and employees.
General economic conditions in the areas of the United States in which the company's customers are located.
<unk> in the markets, where uniforms are worn where promotional products are sold and where call center services are used the impact of competition. The company's ability to successfully integrate operations. Following consummation of the acquisition and the availability of manufacturing material 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, the quarterly reports on Form 10-Q for the quarter ended September 32021, 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 herein and are cautioned not to place undue reliance on such forward looking statements the.
The company does not undertake to update the forward looking statements contained herein to conform to actual results.
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 and with that I'll turn the call over to Michael.
Thank you al good morning, everybody and thanks for joining us for our fourth quarter and fiscal year 2021 earnings call.
Today, I will discuss strategic initiatives review performance highlights and touch on the current macro environment.
After that Andy will provide an operational financial update.
<unk>, our chief strategy Officer, J, Kimball Sunset goes President and Dominic Whiting Gog's President will participate in the Q&A session. Following our prepared remarks.
We're very pleased to report that we exceeded our fiscal 2021 sales guidance, reaching 537 million of net sales as you recall, we increased our top line guidance twice during 2021 from a bottomline perspective, inflationary and other cost pressures intensified as we move through the end of the fourth quarter, which impacted.
Results. Additionally, we incurred unusual non cash charges, which Andy will discuss in more detail in his remarks. It is important to note that we took a range of pricing actions and cost control measures to mitigate the impact of future cost inflation as well as we move past 2021 and finished lapping historic revenue comps were.
We're now seeing improved activity and expect normalized comparisons to resume as we progress into 2022.
Investments in our people business processes technology and product innovation underscore our ability to withstand excel from market uncertainty 2021 was marked by supply chain and logistic challenges labor scarcity and market uncertainty with some competitors were less able to mitigate while we also.
Face. These challenges we're doing so with greater resilience many I'd like to highlight the key achievements accomplished in 2021.
2020 , one we established a chief strategy officer role and appointed Phil Cousineau braces astute vision passionate entrepreneur entrepreneurial spirit to the C suite.
We executed two acquisitions during the year first welcoming gift by designs in January and industry leader gifts by design developed corporate awards incentives and recognition programs for some of the world's biggest brands Southers mill specialties joined our team in December .
Extensive in house decoration production and engraving capabilities that further vertically integrate and elevate our unique custom offerings to expand options for our clients in the second quarter, we announced the integration of our branded uniforms and Brent Merchandize sales force and marketing teams. This combination of.
<unk> and Banco exponentially increases our reach beyond four sales reps at H B.
70, plus sales representatives from Banco who are now uncovering significant opportunities and yielding ways. We're taking a targeted approach to focus on our branded uniform core competencies and particular vertical industries, we believe developing a deeper and more focused approach will further increase our market share in the year.
Warm space in May we increased our regular quarterly cash dividend by 20%. The dividend is an important piece of our value proposition to shareholders and it's been paid consistently since 1977 overall, our organization made significant headway in strategic infrastructure investments with the preponderance of the <unk>.
<unk> is behind us.
We are well positioned against competitors and are enthusiastic as we enter 2022.
We do want to mention some recent accolades were very proud to receive including recognition in Forbes magazine 2020 to America's Best small company right.
The second year in a row to be included on the list and we are ranked number 66 out of the top 100 small cap companies.
<unk> was also recently named to Fortune magazine's 100 fastest growing companies list. Our brand building organization received many pointed recognition during 2021, thanks to our dedicated team to drive our success.
Now, let's speak to some segment highlights our core uniform revenues for fiscal 2021 increased two 3% over 2020, excluding PPE sales and decreased 8%, including PPE at fourth quarter 2021 core non PPE uniform sales increased $15 four per.
Compared to fourth quarter 2020, interestingly the quarter showed strength early on but takes much slower in the second half of the quarter uncertainty related to the spread of the omicron Byron burying rather.
Customer hiring challenges and supply chain issues.
Appeared to drive the slowdown in customer activity during the latter portion of the quarter.
Though we are seeing elevated activity is accelerating.
Rebounding uniform sales as we move forward, we are optimistic and expect our core uniform sales to continue to grow throughout the year. We are seeing weakening competition in the uniform segment with two significant competitors exiting the space that competes with HDI.
And the view lately more than a few consolidations of competitors in the health care space that will narrow the field of choices for our customers.
Keep in mind.
That our greatest value proposition to customers, who have uniforms needs is that we offer the widest range of work wear apparel than any of our competitors. We are differentiated in that we design manufacture and distribute both institutional and fashion health care apparel as well as non healthcare identity.
Uniforms.
The integration of our branded uniforms of branded merchandize sales force in the second quarter of 2021 is proving very beneficial as I said earlier to HDR, yielding big opportunities and significant wins that will translate to increased revenue later in this year.
Our branded merchandise sales grew by an exceptional 65% for full year 2021, compared to 2021, excluding <unk> sales net sales for the fourth quarter was $63 million growing approximately 12% when compared to fourth quarter 2020 and by almost 41%.
Alluding PPE sales perpetuating a strong trajectory as our fastest growing revenue segment, driven by both organic and inorganic growth turning to the office gurus.
Our remote staffing solutions segment.
<unk> posted a record breaking year in terms of revenue growth reporting a net sales increase.
454% year over year, we continue to add new agents at an unprecedented pace to meet the robust demand from existing and new customers, our excellent reputation to meet customer needs drives the business growth.
With the exceptional culture drives high retention internal promotion rates I wanted to know.
During 2021, we celebrated 361 promotions added nearly 1000 employees. We also began.
Our recent expansion into the Dominican Republic, and welcomed the seasoned vice president of human resources onto the team back to STC for ammonia moment. The continued dynamic operating environment prevents challenges as well as opportunities.
While we are excited about taking market share more pragmatic about the headwinds we and most companies across the globe are currently face, including labor scarcity, ryzen logistics and freight costs and supply chain issues.
These costs impact the bottom line for everybody and we are continuously working to mitigate these impacts of ourselves and our customers I will now turn the call over to Andy to discuss operational financial highlights in more detail Andy. Thank you Michael and good morning, everyone.
Overall, we ended the year on strong footing, both operationally and financially we completed a number of capital investments across our distribution and manufacturing facilities to drive automation and technology enhancements expand manufacturing capacity reduce our costs and improve overall customer service. This includes robotics that our city Dallas distribution Center.
The nearly completed upgrades.
Nearly completed upgraded robotics, and our Eudora, Arkansas Center, and additional nearshore manufacturing capacity at our third facility in Haiti.
Financially our teams executed well, while managing through the effects of global macro events consolidated fourth quarter net sales were $142 million compared to $145 4 million in Q4 last year. The two 3% decline was largely due to the higher PPE sales reported in Q4 of 2020 as expected PPA.
Sales trended lower in Q4 of this year at $3 $9 million, while Q4 through 2020 included $37 9 million. Excluding these PPE sales our consolidated net sales increased by 28, 4%.
For the year consolidated net sales exceeded our expectations up $10 $3 million or two point.
Our 2% to $537 million, excluding <unk> net sales for the year increased by 26%.
Turning to our segment results for the fourth quarter uniforms and related products net sales declined by 19% to $63 $3 million compared to 2020.
We saw a return to the more normalized legacy PPG sales levels of $1 million versus the Q4 2020 spike in PPE sales of $24 2 million.
Excluding <unk> sales our net sales in this segment increased by 15, 4% in the fourth quarter and as Michael mentioned mid fourth quarter, we did see a slowdown in activity across both healthcare and non health care uniforms due to the overall market uncertainty.
Our promotional product into Q4 with sales of $63 million.
Note that Q4 had less than $3 million in total PPE sales compared to $14 million in the same period last year and excluding <unk> sales sales for the quarter were up 41% year over year.
<unk> continued to produce high double digit growth in the quarter with net sales up almost 45% to $15 $7 million another very impressive report.
On a consolidated basis, our gross margin.
Q4, 'twenty, one was 31% compared to 35, 7% in the 2024 quarter. The variance was due to a number of factors in addition to product mix changes.
First due to market saturation of PPE products, we determined that it was necessary to take the markdowns on the remaining PPE inventory that we in the fourth quarter of $1 6 million.
Just as a reminder, in total we sold almost $170 million of PPE and 2020 and 21.
Additionally, air in freight logistics costs were significantly higher in 2021 versus last year. Therefore, airfreight alone was $500000 higher than Q4 'twenty one.
Our consolidated SG&A expenses held flat and as a percentage of sales total SG&A expenses was 26, 7% versus 26% in fourth quarter last year, our income from operations for the fourth quarter was $6 million versus $14 1 million for the fourth quarter of 2020 are.
Operating margin was four 2% compared to 19, 7% in the prior year quarter net income was $4 million or 25 cents per diluted share compared to $12 $5 million 79 in.
In Q4 when.
The PPE inventory write down reduced alerted diluted earnings per share by approximately <unk> <unk>.
And net income was reduced by a noncash charge of <unk> $9 million related to the wrap up of the pension plan termination of our two non contributor contributory qualified pension plans, which were fully funded this noncash pension termination charge reduced fourth quarter earnings per diluted share by <unk>.
Turning to fiscal year 'twenty, one segment highlights our uniform net sales declined eight 1% $263 9 million.
Due to a decrease in PPE sales from lower volumes and lower market demand for health care related apparel compared to the significantly high pandemic related demand in 2020.
Excluding <unk> sales our uniform segment net sales grew two 3% despite the supply chain challenges and lingering effects of the pandemic.
Promotional products net sales increased 6%.
8% $215 8 million.
Reflecting an increase of $77 4 million and our core branded merchandise, partially offset by the decrease of $63 $7 million in PPE sales.
Clearly PPE sales banker was up a stellar six 5% year over year, despite heightened market uncertainty related to the pandemic late in the year.
Overall, our integrated sales strategy leveraged a returned to core promotional program launches.
Growth of our customer base and market share gains. Additionally, the acquisitions, a gift by design et cetera as mill in 2021 contributed $16, one or $16 $9 million to net sales for the year ended December 31 of 'twenty one.
Our promotional product backlog at 12, 31 was $74 3 million made up of $2 $7 million in PPE sales and $71 6 million and non PPE. This is the largest backlog in our company's history, resulting from huge bookings of promotional products in the fourth quarter of 2021, which are expected.
To deliver in 2022.
<unk> executed extremely well throughout the year with net sales, finishing with a 54% increase which is a record breaking year for <unk> in terms of sales growth in dollars.
For the year consolidated gross margins was 34, 6% compared to 35, 8% in fiscal 2020.
Again in addition to product mix changes, our gross margin was impacted by significantly higher air freight as well as logistics costs in 2021 versus last year with air freight contributed to increase in cost of $1 $2 million and 21, the full year impact of the write downs associated with the PPE inventory previously discussed was 2 million.
Yeah.
Consolidated SG&A expenses increased by four 1% to $142 1 billion, primarily due to an increase in personnel expenses, partially offset by a decrease in bad debt expense of $4 $5 million as a percentage of sales. Our total SG&A expense was 26, 5% versus 25, 9%.
In 2020.
Income from operations was $44 million compared to $52 $3 million in 2020.
And our operating margin was eight 2% compared to nine 9% last year and well ahead of 2019 operating margin of five 7%.
Our effective tax rate for the year was 17, 8% compared to 23, 23% a year ago.
The variance was primarily related to favorable impacts of compensation related items and uncertain tax positions of 4% and 1%, respectively, partially offset by a 3% impact of the pension plan termination charge.
Net income was $27 2 million or $1 69 per diluted share compared to $41 million or $2 65 per diluted share last year. The PPE inventory write downs reduced diluted earnings per share by approximately <unk> 10 in 2021, and net income was reduced by the noncash.
Charge of $7 $8 million related to the wrap up of the pension plan termination of our two non contributory qualified pension plans.
Clearly the impact of the noncash pension termination charge, our full year 2021 earnings per diluted share would have been $2 14.
Moving to the balance sheet and cash flow highlights we continued to generate solid cash flow supported by a healthy balance sheet. While net borrowings at December 31, 2021 were up $28 5 million from year end 2020, our debt to EBITDA ratio remained very strong at two times, which is in line with our desired range and well under our company.
Limits.
Cash and cash equivalents at year end was $8 $9 million and increased $3 8 million or.
Our capex for the year was $17 $7 million with investments primarily related to facilities and technology enhancements across our distribution manufacturing locations. In 2022, we expect to continue capex investments, but at a lower level than 2021.
Yes.
Lastly, we paid dividends of 46% per share and in total we've returned $7 $2 million in cash dividends to our shareholders during 2021 compared to $6 $1 million in 2020.
Our fourth quarter and full year results reflect our team's tremendous agility to manage through the challenges and opportunities while building a sustainable profitable growth I'll now turn the call back to Michael for closing remarks.
Thanks, Andy I'm glad you have to do that portion of the script in that mix.
So.
To wrap up.
We're very proud of our 101 year old company.
<unk> Award winning.
More global than ever serving some of the largest brands in America.
Our core business continues to grow posting consistent long term growth.
Double digit topline.
20% EBITDA and EPS.
CAGR since 2015 in terms of our growth.
Our adaptability, our long term strategic planning and I believe our entrepreneurial mindset are key strengths of our business.
Executing more than ever against a clear strategic vision.
Superior future growth.
Scaling our organization to leverage higher margin opportunities, capturing market share and expanding our multichannel reach and amplifying our brand solution offerings.
I'd like to update our guidance to ensure the most accurate reflection of our outlook moving forward. We do this periodically it's appropriate we do it now having pass through 2021.
With all its.
Diversion of PPE, and non PPE and I know it can be somewhat confusing some time, but here's how we feel about the future our previous guidance for the period from year end 2021 through 2025 was based on the assumption that 2021 sales would be approaching 502.
$5 million.
That's where we set the floor with final net sales of $537 million in fact in 2021. Our updated guidance is as follows. The uniform segment is expected to grow organically at a CAGR of at least 10% through 2025% driven by continued growth in the healthcare <unk>.
<unk> of the uniform segment as well as taking market share in the non healthcare <unk> division and leverage the <unk> sales team to increase our penetration of the market Banco is projecting at least an 11% CAGR during the same period and.
As expected to grow at a increased CAGR of at least 23% through 2025, we expect at least a 12% CAGR breast GC on a consolidated basis through 2025, and including acquisitions, we expect to see $1 billion in net sales by 2025 and <unk>.
Operating margins to consistently exceed 10% by 2024.
With all that.
That said.
We'll now open the line for questions I want to remind you that we have.
Dominic from Doj and James from Banco <unk>.
Bill who is our chief strategy Officer unwind. So if you want to direct any of your questions at any one of us.
Go ahead.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
And our first question will come from Kevin Steinke with Barrington Research. Please go ahead.
Hey, good morning, everyone.
I wanted to start off by asking about.
I'm, a cron variant and you obviously called it out in relation to your uniform segment and it doesn't seem like it had much of an impact here given the strong sales.
In the quarter, but did you see any impact at all on your other two.
Businesses that has been co or the office gurus in the quarter or early in 2022.
Good question.
Kevin Let me, let Jack answer the Banco portion of Dominic sure he'll answer the Doj portion of it.
Hey, Kevin how are you.
It certainly as it relates to <unk>, we saw some headwinds in the fourth quarter right a lot of events canceled.
In person meetings canceled due to the omicron variant.
And that certainly had an impact obviously our results were great. Nonetheless, but we're seeing that come back in a big way, we've never seen people as excited about in person events big conferences as they are right now.
Now that omicron is largely past us.
We think the tailwind are huge so the headwinds we faced in Q4 have turned into a tailwind in.
In Q1, and we're really excited about what that means in terms of you know conference event giveaways in person meetings.
Back to in person RFP meetings, which is all really exciting to us.
Yeah, Dominic wanted to jump in on <unk> sure Hi, Kevin Yeah. We were definitely affected we started seeing higher levels at <unk> of absenteeism Omicron Hadar locations late in fourth quarter and some of that carryover until just recently.
We saw our absenteeism rates double or even more than double in some cases, which obviously that affects our recruiting which limited our ability to effectively backfill for that absenteeism.
Fortunately, though like here in the U S. We've seen a steep decline in COVID-19 cases over the past several weeks in all the countries that we operate from so now we're back to normal absenteeism levels.
Alright.
Helpful commentary on both months thanks.
So I wanted to ask about inflation you know obviously, we've been hearing that its been worsening.
Yeah.
How do you feel about your ability to.
Catch up or mitigate inflation or are you seeing any stabilization. You know you mentioned last quarter that you did a price increase in the fourth quarter.
And then I think you said price increases.
This call. So are you implementing more than just <unk>.
How are you feeling about your ability to mitigate inflationary pressures.
Great I'll take that one.
Four four.
For all of our businesses really it's.
We did for the uniform segments.
To put a price increase that was largely effective on December one.
And we feel that that on a go forward basis covered all the inflationary challenges that we were seeing up to that point in the marketplace and that we could foresee over the coming months in terms of.
Pricing, we have seen a little bit of a settling down in prices.
<unk> down much or hardly at all.
But at least they've settled down too.
A level that that we feel comfortable that we are well covered.
We're not anticipating at this point.
Any other price increases.
<unk>.
It will largely be watching that to make sure that we're staying ahead thats on the airborne side.
On the <unk> side, you know every one of their deals is priced based on current prices that they are able to lock in.
For each deal so in their case.
At least for for more than 80% of their business.
They are able to cover their price on every single deal and ensure that they can.
Have the gross margin that they hope to get.
<unk> raised.
Prices to their customers as domenick pointed you speak to that a little bit sure.
So yes, we were seeing inflationary pressure also so we gave like Michael said, we implemented our first widespread.
Rice increase actually this quarter for the first time in our history.
Which is going to allow us to recover most of what we've experienced so far and then we will just continue to make necessary adjustments as we go forward.
J P. Do you have anything to add.
Tobacco.
I think you got it.
Alright, great.
The office Gurus is that just labor.
Labor cost inflation that you're experiencing is that kind of the main area or.
Yeah. Good question. So labor is part of it but it's also technology. We were seeing increased prices from just about every vendor that we deal with the labor is a piece of it but it's also from our vendors as well.
Okay. Thanks.
It's important to note Kevin.
Interestingly.
We're not in the habit of doing price increases.
Apparel, you know on the uniform side has been in a deflationary cycles in the last 30 years.
So for the opportunity to be able to raise prices.
We do.
You would expect there would be some pushback in the marketplace.
The fact that we're doing that but not in the uniform business norm Dominic's business, nor <unk> have we seen.
Any pushback from our customers with respect to our price increases I mean, they are seeing it in everything they buy.
And every service.
They buy not just products and services as well so it's not.
It's not unheard of.
It's kind of course of the day, we're hoping that the effects of what's going on.
Russia, Ukraine right now.
Even more price increases but.
But if they do I think we'll be prepared to do them and I think again, we will have very little pushback from customers.
Alright.
For that and then.
So so you obviously talked about the slowdown in the second half of the fourth quarter for the uniform segment related to omicron, but now you're seeing activity.
Pick up again, you had talked on last the previous quarters call about.
Expecting to see some significant RFP activity.
In 2022 is that still the case do you believe.
Thank Ben.
Or has anything been thrown off meaningfully.
Yeah, I'll speak to the slowdown and what what these guys jump in on on what they're seeing but.
<unk>.
So we definitely did see a slowdown I don't think it was only related to on the ground I think it was also related to the fact that many of our customers who stockpile during the early parts of the pandemic, we're bleeding off some of their inventories.
And bringing their inventories down to more normalized levels and we are seeing.
The benefit of that so on the uniform side of the business, we're definitely seeing more rfps than ever.
We're also seeing a fair amount of consolidation within that business. So.
We're.
Offering ourselves out there I mean, the great thing is we are sitting with pretty large inventories.
So we're able to service people, even though there is all kinds of supply chain issues I believe in most instances we're in better shape.
And much of our competition is so.
It's great to be at an RFP and also have products sitting on the shelf when your customers needed.
Dominic and Jake jump in on their businesses.
And protected.
I've been real quick Tom so on the on the banquet side I think one of the things. We're seeing here is that there are a lot of procurement and marketing departments, who are quite often just anxious about.
What the future holds for for their providers and branded merchandise and I think that the.
The entire last two years of Covid is open their eyes is.
As our provider going to be here long term and I think we provide a really strong alternative not just because we have all the technical capabilities, whether it be sourcing our technology, our distribution, but also the strength of our balance sheet.
Really appealing to procurement department, so we really like where we're positioned the RFP activity has been strong as we've seen in the last two years.
A lot of companies going out to bid and we continue we expect to continue to see that over the course of 2022.
Yeah.
Yes for the office Gurus, we continued to capitalize on tremendous.
Tremendous tailwind in terms of demand for our services, we continue to see a lot of activity from existing clients, who are growing their business with us as well as new opportunities.
A big part of that is just.
One of the things that Covid made companies realize it doesn't really matter, where the work is being performed as long as it's being performed well and our team continues to step up and just do a great job in providing great service to our clients in it.
Resulting in more activity.
Yes, Phil Crazy.
At peak rate towards built to actually speak to whats happening in the world. The people trying to get their branding messages out there and how fewer alternatives. They have today. So can you jump in on that.
Yeah.
So when you look at the overall landscape of incorporation trying to get their message out.
You saw pretty dramatic shifts.
Over the last probably 10 years from traditional advertisement PV or Billboard AD magazine ads from newspaper ads to digital advertisement.
And what we've seen over the last year.
<unk> is actually quite a dramatic shift.
Out of some of the digital and when you look at it when we got the benefit of that earlier move over the last 10 years in the sense that people were saying <unk> is no longer the powerhouse that it wasn't so therefore marketing dollars and corporate messaging dollars are going elsewhere.
But now we're getting the secondary benefit I think when you look at it from the standpoint of everything that's happening with Apple privacy laws, and how that's affected Facebook and Instagram ability to actually target customers.
But Google is doing with the cookies.
Changes theyre, making.
It is getting harder and harder to target customers and therefore, it's getting more expensive to target customers with messaging. So.
I think we've seen the benefit of that I think will continue to see the benefit of that in there.
The next year or two to come as the digital advertising just becomes a bit less targeted and effective as it were.
Private.
Okay, that's really interesting color. Thanks.
So obviously Bam cozman posting strong results here.
And the outlook sounds very favorable so just with regard to the updated guidance.
Yes.
Very slightly.
Lowered the outlook for Pam Coe to 11% from 12% over the.
The long term timeframe here or is that just again a function of the higher base of.
Revenue you saw in our 2021 versus our original expectations.
Absolutely, yes, you nailed it.
The 11% from 2022 and 2026 that we're now projecting is due to the fact that we exceeded guidance in 2021, so basically raising the floor that we're using just what you suggested.
Okay. Thanks, I wanted to ask on the.
Health care side of the uniform business.
How much.
No.
Clinical labor shortages.
Especially nurses how that.
Please enter your ability.
To sale to sell into the health care institutions.
It's actually helping your pipeline because.
You know maybe health care institutions view.
Really good uniform product as a way to attract or retain.
Nurses and other clinicians.
I think <unk> got our marketing down Pat now Kevin.
Absolutely so.
Yes, there's a huge shortage there is less healthcare workers in the marketplace. There's been a lot of retirement exits.
To the tune of.
Recent stat, I read something about a $5 million less than they were a 12 million healthcare workers when the actual media somewhere around $15 million I know the healthcare.
<unk> programs R. R.
Schools are pumping out looking to expand to.
To meet that need as well as the medical colleges and universities around the country, but yes. It is a strategy too.
Increased employee retention and they use many methodologies to do so I mean, obviously pay scales have come up.
But uniform is an important component of that as well and whether it's giving somebody more sets or providing their uniform. So they don't have to actually buy or providing them a more fashionable uniform in the case of whether it's in the or it <unk> bought at retail.
All of those options are on the table and hospitals certainly are.
Health care workers.
We are looking at things differently than they might have some time ago, we still feel that.
As well as the prognosis is for the future for <unk>.
For Banco Banco in a lump with that HCI, because our sales efforts are together now, but in our healthcare uniform space, particularly.
At CIB.
With.
International being a major focus of theirs omnichannel being absolute focus of entering all channels will be important in all levels of our customers' buying decision.
I think youre going to see.
That division of ours.
Over the long haul piece.
Very very some very stellar growth from that we.
We have high hopes that we will we will certainly be talking more about that future.
Releases in earnings calls and so on the healthcare market is something that we feel is growing.
Got it.
We might have in virtual health care pretty mature business, but the market itself is not mature it's evolving.
Greatly.
The price points people are paying and the diversity of product that they're looking for.
And for the partners that Theyre looking for.
Help them get to the next level.
Thanks, that's helpful. I wanted to ask is again in relation to the uniform segment.
Do you feel like that business is on track for 2022, specifically to.
Year round that longer term, 10% organic growth rate or should we think about maybe that business more kind of ramping up.
Towards that growth rate more gradually.
<unk>.
Over over the longer term timeframe that you discussed.
Yes, Kevin Our guide is really is that 10% as an average for the five years.
I'd say that while we as Michael mentioned, we are seeing tremendous increases in the RFP activity is banned as tobacco sales team start to penetrate the market as well as a number of opportunities we're working on but it's going to take a little bit of time into the year for that to start hitting our revenues. So I would go with the ramping up.
Model that you've referred to.
I don't think we're going to be all that far off.
The expectation.
You're asking us to set.
Our goal is to certainly over the long haul to exceed all of these numbers Kevin.
And it would be nice too.
To get started.
With a great year, we have some opportunities that working on that could certainly get us there.
And.
Some of those are later in the year some of those earlier in the year, but.
We'll keep you posted.
See our results as we continue the year.
<unk>.
<unk>.
We spoke about the second half of first quarter being.
Kind of just a slowdown.
To an extent because of all the factors that we've spoken about we saw a little bit of that in the beginning of first quarter as well I can tell you that.
Middle of March Middle February rather through.
To date.
Things are looking much more normalized.
And even.
We're hoping to be able to take care of some pent up demand as well.
Okay, Great. That's helpful and lastly, I just wanted to ask about.
Sure.
New efforts in Europe with regard to.
Driving sales for CIB.
Any update on that and any potential disruption there.
Given the.
Events going on in Ukraine.
Actually you know our warehouses in Poland.
Where theres been a great influx of Ukrainians.
We've done some things in.
Our actual.
European sales.
<unk>.
It has done some things to help.
Some ukrainians.
People, who own uniform shops in Ukraine gets settled in Poland and Hungary.
But we are seeing a little.
A lot more increased activity and interest in our home warehouses result.
Obviously all of these 2 million people.
Ukraine being dispersed throughout still mostly eastern Europe , but we expect to make their way west.
They're going to be more health care workers to help those people and some of those people themselves are health care workers, who will find deployment locally.
But we are seeing increased activity.
We don't expect.
A negative impact.
Quite frankly, we weren't selling a lot in Russia.
Russia.
So the fact that we can sell in Russia, now because whatever bands there might be.
It isn't going to hurt us at all.
And as a customer and we don't expect Poland.
Two.
To be diminished at all Ukraine.
We had a couple of relationships that we're working on we werent really embedded in Ukraine as we would like to we are.
Our warehouse is up and running now.
Fully stocked with product and it is servicing.
Yes.
In Europe .
I'd like to see a shift to them from Europe .
Okay. Thank you for all the insight as usual appreciate it.
Okay, Kevin Thank you.
Again, if you have a question. Please press Star then one our next question will come from Tim Hart with memory investments. Please go ahead.
Good morning, I was wondering two questions. The first whether you could just talk a little about cash flow guidance for 2022 and.
And second just going back to the core uniform business and you were just talking about the 10.
10% growth target.
Maybe talk about are you expecting to gain share market share are you are you as customer attention going well and when will we actually start seeing more of that.
10% growth materialize.
So I'll speak about the uniform side, a bit more and then I'll turn it over to Andy for the cash flow side. So.
On the uniform side.
Our retention rates are still very high.
They have been over 95%.
On a year over year basis for many many years.
On average.
While there are more rfps out there and even more rfps with respect to the business that we've owned for a long time now keep in mind that when you have.
5% market share approximately.
<unk>.
95.
You don't have if.
If it's going out to RFP, you actually have an opportunity.
To grow your business and that's how we look at it we think we're in a very admirable position I don't believe there's anybody out there.
That we compete with was lower cost sourcing capabilities, who has.
Managed through logistical challenges.
As well as we have.
Who.
As people on the ground to make sure that what they promise to their customers can actually happen.
In all of these countries that we operate in so I'm not concerned about business retention I believe we're going to maintain as we have in the past 95% of our customer base.
Loose some of course will we gained more than we lose.
Absolutely confident of that so.
The second half of this year I think Andy spoke about particularly in our branded uniform business youre going to see.
Some improvement.
We know that because we've already won business that will ship in the second half of the year.
Our sales cycles are pretty long one but these.
These are sales that materializes.
Revenue that will come about in the second half of the year as a result of efforts that.
Began almost a year year and a half ago.
So we feel confident on the API side that we've got this year covered in the back half and that.
Next year should.
It should be very strong.
And with Hei.
His efforts, which began about.
Eight months ago or so.
We should start seeing that turn into revenue.
In the next year.
On the healthcare side.
We are employing a lot of new strategies a lot of omnichannel.
It is paying off our health care businesses in fact growing.
We bought CIB.
They were.
$58 million trailing 12 quote me on that number but somewhere.
Yes actually.
To external customers and so on.
We have.
We have.
Runway ahead of us.
With respect to our healthcare channel and I think with buying habits changing.
With.
With price points being higher price points than we've experienced in the past.
People are willing to spend.
We should we should get there, we don't give guidance on a quarter by quarter basis, or even an annual basis.
That's not really how we run our business we run our business from a long term basis of what we can do.
Over a longer period of time and I realize we try to keep it we're trying to keep it now in the four year range.
<unk> of saying, where it will be in 2025.
We prefer to do that.
There will be some years, where we will greatly exceed that and will be some years, where we might not but on average we believe that that's what we get.
On the <unk>.
Second part of your question or the first part actually the cash flow when you look at where we're at going into the year.
I mentioned, our Capex is very high due to the current year I would expect that we would be back to a more normalized just a little bit more than our normalized 2% number.
Revenues on that basis from a working capital perspective, I think we've talked a little bit over the last several quarters about the substantial amount we invested in inventory.
To be prepared for what was going on in the pandemic and I think we are definitely in a very strong position from our inventory levels. We will begin to work down in 2022.
That will be a much more favorable impact versus the <unk>.
2021, I mean, our inventories that added $21 million or we used $21 million of cash to build inventory I would expect that would kind of turned to go. The other direction I don't know if that will bring down $20 million in the year, but it will we will work towards that.
From the other items from a cash flow perspective, I mean, obviously, we will continue to pursue acquisitions.
Those of you I can say per se, what those amounts will be but we will use money on that and of course, the dividend perspective, I mean, as Michael mentioned, we do recognize that as a important part of our value proposition I would expect we would continue to pay dividends and if our results performed appropriately we'd look to increase it at the right time, but thats a decision of the board.
It will make it.
Move through the year.
Great well, maybe one final question just on <unk>.
That business is that is phenomenal.
The last couple of years and the guidance is very positive is there anything specific you are doing to try to.
Maybe just a little more commentary on specifics on what we should look forward to make sure that business is on track.
Dominic jumped and tell you about some of the infrastructure things we're doing.
Things are going from a customer standpoint, too to grow and retain jump in yeah, great question Tim.
Michael mentioned last year was a record setting year for <unk>.
Really excited about the future as well so what we're doing from a capacity standpoint to make sure that we can continue to support our growth.
Last year, we started looking at additional buildings in all three countries that we operate from El Salvador believes in Jamaica, and then we signed leases there to increase our capacity in center capacity and we also as Michael mentioned, we're entering the Dominican Republic.
Gather with the Dominican and the expansion in our current countries, we're going to increase our in center capacity by about 1500 seats.
As we enter the BR, we always enter a new territory conservatively, we're going to answer was about a couple of hundred feet in Santiago.
Once we prove that we can hire the same caliber of employees that we hire today to support our customer base.
Then we will look to expand into Dominican as well.
And from a customer standpoint.
What are you doing to grow your customer base.
Yes, so we.
Fortunately for us.
We have been able like I mentioned earlier, we've seen a lot of activity and demand for our services I mean, I think nearshore in general there is a lot of demand.
<unk>.
But the support that we've been providing to our current customer base validated I think our status and our brand amongst our brokers, who bring up new business, we're seeing a tremendous amount of activity from new customers in specific industries that we're going to look to grow this year than our current client base.
Have grown exponentially with us also so.
That's a real testament to our team and what they do day in and day out to provide excellent service to our clients.
And I, just don't see that slowing down I think there is another part of this is Dominic did mention the auto brag a little bit but.
It's not just brokers who were bringing this business our reputation is bringing us business as well.
The word is getting out about what we do what we do well the awards we win.
Well, we treat our people, how we service our customers and whether it's through social media that we posted or just word of mouth. Among people who are in a position to buy our services.
We're seeing more and more opportunities than ever come to us that arent through brokers.
We have literally no sales expense sport.
Is the gating factor on growth the ability to add the qualified sheets.
Yes, that's absolutely right certainly set so we're spending a lot of time now and strategic planning on where we are next how we grow it how far ahead of the curve do we want to stay.
I think I remember speaking about <unk> and speaking about we're going to grow our business by 6% by 8% by $4 million by $5 million by $10 million a year, you know up in much bigger numbers, which requires a lot more people.
Dominic spoke about adding having the capability of adding 500 seats.
Roughly $45 million of revenue just north of $45 million in revenue.
Hi.
We've got to stay ahead of it at least by 18 months, because we do get Pops every once in a while a couple of hundred seat somebody wants a 100 seats or someone wants to grow.
Multiple customers, who each want to grow at 50 or 100 or 200 seats.
It's been a very dynamic environment.
And.
Dominic can every cases exceeding whatever numbers he's ever put out there.
We expect to you all in the future too.
Great well. Thank you. Thank you very much and keep up the good work.
Thanks.
Okay.
This concludes our question and answer session I would like to turn the conference back over to Mr. Michael Benstock for any closing remarks. Please go ahead.
Thank you.
I appreciate your time today I know, it's a lot to absorb it.
In a short amount of time.
With PPE without PPP, all the divisional differences I think we've done everything we can to try to make it.
As easy for our investors to understand.
Where we're headed.
Look forward to speaking to you next quarter.
And thank you for your continued support and we really do appreciate it take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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