Q4 2022 Superior Group of Companies Inc Earnings Call
Yeah.
Good afternoon, everyone and welcome to the Superior group of companies fourth quarter 2022 conference call with US today are Michael Benstock, The company's Chief Executive Officer, and Mike Kimble, Chief Financial Officer. As a reminder, this conference call is being recorded.
This call may contain forward looking statements regarding the company's plans initiatives and strategies and the anticipated financial performance of the company, including but not limited to sales and revenue such statements are based upon management's current expectations projections estimates and assumptions words, such as will expect believe anticipate zinc outlook hope and very.
And does such words and similar expressions identify such forward looking statements forward looking statements involve known and unknown risks and uncertainties that may cause future results to differ materially from those suggested by the forward looking statements such risks and uncertainties are further disclosed in the Companys periodic filings with the Securities and exchange commission, including but not.
Limited to the company's most recent annual report on Form 10-K, and our quarterly reports on Form 10-Q.
Shareholders potential investors and other readers are urged to consider these factors carefully in evaluating the forward looking statements made herein and we are cautioned not to place undue reliance on such forward looking statements. The company does not undertake to update the forward looking statements contained herein, except as required by law.
That I would like to turn the call over to Mr. Benstock. Please go ahead.
Thank you for the introduction and welcome everyone to our 2022 earnings call I'll begin today by sharing the highlights of our Q4 results.
Then discuss the performance for each of our three business segments, providing an update on the macro environment and our strategy to grow the business moving forward.
After that I'll turn it over to Mike to walk us through the financial results in greater detail and to provide our outlook for 2023, Mike and I will then be available for Q&A.
We finished 2022 with continued topline growth in the fourth quarter.
Consolidated revenues were $149 million up 5% over the prior year quarter driven by growth in both our branded products and contact centers segments. As a result, we achieved full year sales of $579 million in 2022, which was near the top end of our annual guidance range.
Yeah.
Our consolidated fourth quarter, adjusted EBITDA was $3 million down from $8 million in the fourth quarter last year, primarily due to an incremental inventory write down of $6 million in our healthcare apparel segment.
Let's take a closer look now at our quarterly results by segment, beginning with healthcare apparel revenues came in at $26 million relative to $31 million. The prior year quarter reflective of the ongoing soft conditions of the broader healthcare market healthcare apparel EBITDA declined by 8 million.
Compared to prior year quarter, primarily due to the aforementioned inventory write down.
Based on our lower purchasing levels implemented in mid 'twenty, two and adjustments to our inventory valuation, we expect to see better inventory equilibrium by the end of the year looking ahead, our strategy involves capturing new customers and new markets primary.
This is an increased emphasis I should say on digital growth, including the launch of our own direct to consumer website during the second quarter.
While we recognize that it will take time and investment to build consumer awareness and demand the expansion of digital within our Omnichannel approach will enable us to grow our healthcare apparel business overall with leaner inventories and a revitalized customer facing business strategy, including an emphasis on digital growth. We're confident in the strong growth prospects for <unk>.
Their apparel and our own ability to capture market share and improved profitability over time.
We provide the widest range of products in the market with more than 2 million essential caregivers wearing our highly recognizable brands every day.
Branded products, our largest segment generated revenues of $102 million during the fourth quarter, which was up 7% year over year benefiting from a full quarter's contribution from the southern mill acquisition made during the fourth quarter of 2021 as well as the Guardian acquisition that was completed in May of 2022.
Organic demand declined mid single digits due in part to subdued demand in the current uncertain economic environment fourth quarter, EBITDA was $11 million up from $6 million last year, driven by higher sales improved gross margin rates and lapping a P. P inventory write down last.
Partially offset by an increase in SG&A from investments in talent and technology to support future growth.
<unk> products is an attractive market highly fragmented with a total addressable size of $26 billion domestically. Our compelling strategy is to continue to grow our very modest market share of less than 2% by offering unique customized and high quality products. Our contact center segment had another strong quarter.
With revenues up $21 million up 22% over the fourth quarter of 2021.
Fourth quarter EBITDA of $4 million was flat to last year as investments in SG&A related to talent technology and infrastructure to support future growth offset increase in sales and gross margin on a full year basis.
Contact centers finished 2022 with strong annual top line growth of 31%, achieving our highest EBITDA margin with an S. Do you see a 22% with our investments in infrastructure combined with a strong pipeline of prospective customers. We continue to see contact centers as an exciting and profitable growth business going forward.
I'll now turn the call over to Mike to take us through our financial results and outlook for 2023, Mike.
Thank you Michael and thanks, everyone for joining the call I'll start by walking through our financial results and then I'll turn to our initial full year outlook.
During the fourth quarter S. G C generated consolidated revenues of $149 million up 5% from $142 million the prior year quarter.
Our gross margin was 32% for the quarter down 80 basis points year over year due to the $6 million incremental inventory write down for healthcare apparel.
Excluding the incremental charge, our gross margin would have been 34%.
SG&A expense was 29, 8% of sales, which sequentially improved from 32% in the third quarter, but was higher than the fourth quarter of 2021 at 26, 7%.
The improved expense trend from third quarter benefited from an adjustment to employee expense accruals as well as improved leverage on higher sales and the benefit of cost reductions.
The year over year increase as a percent of sales was due to continued deleverage from the decline in healthcare apparel sales as well as our continued investments in talent and infrastructure, especially within branded products and contact centers to capitalize on compelling future growth opportunities.
Our fourth quarter interest expense was $2 $2 million.
As compared to $295000 in the fourth quarter of last year, driven by a combination of higher interest rates and a higher average debt balance outstanding during the quarter.
Net income for the quarter was $2 million or 14 cents per diluted share as compared to net income of $4 million or 27 cents per diluted share and a year ago quarter.
During the fourth quarter the company sold its corporate office building for $5 million in cash proceeds, resulting in a pretax nonoperating gain of $3 million.
Excluding the gain in the prior year fourth quarter's pension termination charge their fourth quarter 2022, net loss was $1 million or eight six that loss per share compared to net income of $5 million or 31 cents per diluted share the prior year period the.
The decrease in adjusted results was primarily driven by the incremental inventory write down and increased interest expense.
Turning to the balance sheet.
Cash and cash equivalents as of December 31, 2022 increased to $18 million from $9 million last year due in part to the sale of our corporate office near year end.
In terms of our debt position, our net leverage ratio of 3.85 times, our covenant EBITDA remains elevated.
Just on the fourth quarter inventory charge and the calendar is nation of our 2023 forecast it is more likely than not that we will exceed our net leverage covenant ratio of four times Covenant EBITDA.
As a result, we have initiated discussions with our lending agent on ways to address a potential amendment should it be needed in order to maintain compliance throughout the year.
We will continue to focus on cash flow enhancement by improving our working capital position, particularly by optimizing our inventory levels within our healthcare apparel segment as well as scrutinizing, our operating expenses and capital expenditures.
I'll conclude my prepared remarks, with our initial financial outlook for 2023.
Overall, we expect current slow economic conditions to persist and are cautiously optimistic that business conditions will gradually improve throughout the year.
With that in mind, we are forecasting full year 2023 sales to be between $585 million and $595 million versus 2022 sales of $579 million in.
And earnings per diluted share between 92, and 97 cents compared to adjusted earnings per diluted share of 62 cents in 2022, which reflected significant inventory write downs.
At the segment level, our 2023 forecast assumes that healthcare apparel sales will be up low single digits versus last year and will gradually improve throughout the year as inventory levels and customer demand returned to normalized levels.
Branded products.
We estimate segment sales to be flat to down low single digits as we expect a continuation of the challenging market conditions from the fourth quarter of 2022 into the first half of the year with meaningful growth in the back half of 2023.
Lastly, we expect a contact center segment to continue to grow well into double digits.
System with our fourth quarter performance reported today.
Given these expectations for our three business segments, we expect our 2023 results to be relatively back end loaded as underlying market conditions gradually returned towards equilibrium.
We are confident in our ability to execute on our strategic plan to capitalize on multiple growth opportunities and enhance long term shareholder value.
That concludes our prepared remarks, and operator, if you could please open the lines, we'd be happy to take questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys and interest you. All your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
And the first question will come from Kevin Spanky with Barrington Research. Please go ahead.
Hey, good afternoon.
Hi, Kevin.
I wanted to start off by asking about the outlook.
The outlook for 2023.
Mentioned that you.
Do you expect.
Lower economic conditions to persist, but at the same time.
Hugh you expressed some optimism that business conditions should gradually improve throughout the year for healthcare apparel and that momentum will build in branded products leading to.
Significant growth in the second half of the year. So I'm just.
If you could discuss more.
Kind of a line of sight to that improvement throughout the year or what what do you think will drive that improvement.
What are you seeing a clearing up of inventory and healthcare are building pipeline and branded products I guess any color.
Color you can offer on that.
Overall outlook for 2023 would be helpful.
Sure. Thanks, Kevin.
Thoughtful question. Unfortunately, the answer is going to be a little bit longer because of the three segments. So.
It's a little different in each of our businesses.
<unk> branded products has been affected mostly by.
People holding back on buying marketing budgets are being curtailed or being put on pause.
Mostly we have a lot of clients in the tech space and gig economy.
That have experienced some mass layoffs and not spending a lot of money but.
As the year goes on and I'll say this about each of our businesses.
As the economy improves which is expected.
Later on in the year.
Certainly in the second half.
We expect to benefit from that improvement as well as you know there will be pent up demand.
You can only hold back so long before you have to buy uniforms.
For employees and before you.
I have to start gifting your employees in and looking at how you how you can create brand allegiance among your customers.
And people.
People held back now for.
For some time, we can't control.
The macro environment, obviously, we all read the diverse opinions about what to expect.
In 2023, and certainly the most the latest banking crisis, who who knows how that might impact things in the future.
Now when you get to.
Our call Center business.
We certainly feel strongly that we will have continued growth throughout the year. The demand is very strong.
It is not weakening.
Because of the current economic conditions in fact.
Is strengthening and typically in a in a recession.
And especially your recession, where it's so hard to hire.
And the I States right now, which is entry level positions, which is kind of a unique situation.
We're seeing a demand.
We haven't seen before.
Healthcare apparel.
It's all a question of <unk>.
Timing of when we're able to completely right size our inventories.
<unk> past.
What we're sitting with still an inventory turning a lot of that cash.
And being able to present a lot of newness keep in mind that the third and fourth quarter will be will be slightly impacted by our faith.
I believe by our direct to consumer launch that we spoke about.
As well as our continued omni channel approach in.
In those businesses, but we can control only what we can control.
Our view of things is it's going to be a tough year.
But it's going to be better in the second half of the year than it will be in the first half.
Alright, thanks for.
The insight there.
And also following up just on your outlook for 2023.
If you could maybe talk about assumptions you have baked in for operating margin and our interest expense you know what do you think you can get some margin expansion based on some of the cost savings actions you've taken.
How meaningful of a bike you expect interest expense to be I guess.
Hi, Kevin This is Mike be happy to answer your questions from a from a margin perspective.
As we've disclosed for this quarter and in prior quarters, obviously, we have taken significant inventory write downs this year.
Aggregate over $13 billion and in 2022.
We do not anticipate lapping those types of charges in 2023, So we certainly do expect.
The margin rate to improve particularly within our healthcare business.
In addition to that we are seeing some easing of what we've referred to as supply chain costs, which was certainly.
It increased significantly through the pandemic.
That cost has started to come down not necessarily to pre pandemic levels, but it has come down and as we sell through our inventory with those higher rates will begin to see the benefits of some of that lower cost in our inventory again more so in the back half of this year.
So I think we see again margin rate improving primarily in that business and from an interest.
The endpoint you can see already partially in the third quarter and in the fourth quarter a significant increase in interest expense, we anticipate that continuing so in our in our modeling we are expecting interest expense to still remains up significantly over 2022.
Again expecting that rates will continue to be high and while we will focus on bringing our debt down as quickly as possible based upon our average debt balances outstanding we would expect that expense to still be up fairly significantly to 2022.
Okay. Thank you and then lastly.
Mike You mentioned.
Potentially having to amend the credit agreement leverage ratio embedded in there.
What sort of line of sight do you have the.
Potentially having to amend that or confidence in being able to do that if you need to.
Sure as I mentioned in the script.
When you look at the combination of our fourth quarter charge and again the calendar is Asian of our 2023 forecast. We view. This really is creating short term compression from a covenant perspective, and so that's why we took the obviously the proactive approach of of reaching out to our lending.
With that said, Kevin obviously, I can't speak for the lending group, but we're certainly looking forward to working with them on a mutually beneficial outcome.
Over the over the coming weeks.
Okay. Thanks, I'll turn it over and get back into queue.
The next question will come from Tim Moore with E. F. Hutton. Please go ahead.
Thanks, and thanks for providing sales and EPS guidance for this year is definitely nice to see the SG&A operating leverage in the December quarter.
You know I have my own sales guidance questions.
Question scenario.
Similar to what was just asked you know if I look at the sales guidance range.
It seems to be a once a 3% increase despite having about 7 million, possibly of sales from the first four months of this year from the Guardian acquisition before that lapse.
We anniversary on me.
First so you know what I kind of back into math it looks like zoom.
About one 6% organic sales growth for this year when you factor in the Guardian do you think that could be a little bit too conservative in light of maybe some pricing power and you know probably the likely natural rebound in healthcare in the second half of this year and.
Yeah, Michael doesn't mind speaking a little bit more towards what type of scenario. So it may be trigger upside beyond that top end $595 million guidance, because I'm now I'm wondering if it's really the swing factor is would you would you say the biggest swing factor might be in the branded side and bansko.
Hi, Tim This is Mike I'll start and then Mike will Ken can add we certainly hope its conservative as you're as you're calling out.
You know there is as we said in our prepared remarks, we're cautiously optimistic about the year, but as Michael mentioned before.
Theres varying points of view on the economic outlook and so we're obviously, we believe that our range is is realistic.
We are certainly as a management team going to work very hard to exceed that range, but we believe it's a realistic.
Our range as we as we look ahead for the year.
As you called out we've taken a number of price increases, which which started earlier in 2022 and and that is that is factored in and we are factoring in to our thinking that the healthcare apparel business will have a rebound.
As we mentioned, there's we expect some softness to continue in the branded products segment here in the first half of the year with with that rebounding in the back half, but again I think overall, we feel that it's a it's a realistic range based on what we what we know today and again, it's a team B b.
Working very diligently to exceed that.
Pass it over to Michael.
Yeah.
Let me speak about each of the segments. So.
You know, what what could create more upside to that.
I'll give some color to that.
A portion of the question.
Banco as we've said on previous calls is accelerating.
Their efforts with respect to recruiting sales representatives.
So far I can tell you this year they've been very successful up through the first two months.
Seeding the number of reps that they've been able to recruit.
In any two month period in the past so.
If they can continue at the rate they are that could possibly.
Help our branded products revenue in the second half of the year.
And even our projections.
Projections.
Oh Gee, we wish.
As our contact centers, we have.
Employ some new sales strategies and some new <unk>.
<unk> talent.
That's up to speed now and we believe that.
Those strategies.
<unk>.
Should they be more successful than we even have projected conservative way that that could help us.
And then of course on the healthcare apparel side, we're launching DTC in.
We're being cautiously optimistic with respect to our level of success.
But we realize there's a ton of market share there to be taken.
We have put together I think the dream team.
With respect to people who can.
Execute on on a D to C strategy, both from a branding side and the digital side consumer facing side from the president on down.
In that organization.
And.
They could be wildly more successful than we projected.
But we wanted to give a realistic guidance.
Just on more of the current economic conditions than what we might be wildly successful at.
In the future.
That was very helpful color on the scenarios and thanks for those details on our sales reps at Bam Carolyn.
B to C launch healthcare.
For for contact centers. The office Gurus, you know hows, the call center and the Dominican Republic been ramping up since it opened in October .
Good question.
That's a beta site for US is every new call center is especially when it's in a new country.
It.
It has yet to prove.
That.
What it can do for us it's too early in the process really for us to fully understand.
Whether it's going to be as successful as we've been in believes in El Salvador and Jamaica.
We have plenty of capacity within all of our centers because a great deal of our people are still working from home.
And our customers most of our customers don't mind them continuing to work from home. So there's less pressure on us to push the Dominican sooner than it needs to be pushed right now where we are.
We're controlling our costs there.
Doing a very slow ramp up.
To make sure that it is what we want it to be.
So I would say.
We.
Our operational in our building.
I don't know the exact number I believe it's less than 30 people right now.
And doing a multitude of tests were for a multitude of customers.
But.
Give me about six more months and I'll be able to answer that question more definitively.
Sure that makes sense.
Great prospects, there and it looks really good probably year or two out on revenues you.
And my next questions about it.
Have you seen for Banco.
Is the order size stabilized recently year to date or is or are you seeing maybe not stabilized because with technology customers are pulling back, but you're seeing possibly share of walking and share of wallet at your existing clients of Banco.
Yeah.
We're not.
What I can tell you is we're not losing any customers.
A lot of our customers have pulled back on how much they are ordering in.
The correct conclusion that if they have fewer employees and theyre buying employee gifting or whatever they're buying less.
So our order size has come down on the other side of that when you get into these periods of time and uncertainty you see a lot more RFP activity.
Than you normally would see it because everybody is doing their their price checking out in the marketplace. So we are responding to.
A great deal of Rfps right now.
We have a big team who is just on Rfps.
And the success of a few of them.
A few wins there could make a very big difference.
In our year.
That makes sense. Thanks.
Thanks for that color and I actually have a question for Mike.
You know how much like do you think you estimate the excess or buffer inventory might be I'm trying to wrap my head around or maybe triangulate your free cash flow of potential for this year and it seems like you'd have a good tailwind for working capital and if you get those inventory levels more normalize by June .
Have you ever kind of calculated.
The number on that.
I think the more normalized.
Sorry, Tim.
From an inventory perspective, and we've I think mentioned this in the prior call.
It's going to take us the better part of 2023 to really get inventory down to a level to our targeted levels.
And obviously when you take into account.
Inventory is down.
Because of the elevated levels, we've had but at the same time fueling some of the growth of the business.
We would be targeting inventories by the end of the year to be down about mid single digits again that would be a combination of bringing healthcare down, but then also fueling some of the.
The growth in the business that we're seeing across the other segments. So.
Certainly, bringing the inventory down will help drive an improvement in free cash flow and working capital, which has been our focus.
We feel as Michael mentioned in his prepared remarks with the reserves that we've taken and reducing some of the pricing we can achieve that target and that's our goal for the year.
That makes sense.
So my last question is is there any seasonal dip in the gross margin in the December quarter, you mentioned, which is helpful with a gross margin.
And would have been.
34% or so backing out the inventory.
And I know you had a write down December quarter or the year before I was just wondering if there's ever any kind of seasonal spending drop in marketing drop at the end of the year by Banco.
Pam cover customers, what do you think maybe more of a drop this year was tied to some of those technology customers and layoffs.
Yes, there is.
Not typically much seasonality in the business.
Obviously as I called out the big impact to us here in Q4.
It was was the inventory charge, but typically.
Across across the businesses there is or is that too much of an impact as Michael called out specifically in the fourth quarter.
And within the branded product segment, there was a lapping of of some of the charges that were taken in Q4 of last year, which which gave branded products and improvement and then I would just add also within branded products. There is there is a margin rate improvement that we've seen just in the quarter as some of the lower.
Margin customers had been eliminated.
But again I wouldn't characterize that as a seasonal.
Just more of the timing of when those actions took place.
No fair enough that's it for my questions and thanks for answering them.
Yeah.
The next question will come from Mitra Remco, Paul with Sidoti. Please go ahead.
Yes, good afternoon, and thanks for taking the questions first I was wondering if maybe you can help us in terms of Capex of 23.
And.
You mentioned the elevated.
Net.
Capital ratio leverage ratio would that impact your ability or willingness to spend.
Spend this year, whether it's on technology head count et cetera, and also maybe even on consolidation opportunities.
Hi, Mitra its Mike nice to nice to hear from you.
From a from a capex perspective.
We had a significant capital investment year in 2021.
Over $17 million and as a company, we typically will have a heavier investment year every four or five years.
Capital you can see in 2022 was down to $11 million and as we look forward to 2023 and the projects to continue to support the business. We actually are our budgeted capital expenditures for 'twenty three to be down about 30% from 2022.
That still enables us to make what we believe are the appropriate investments to support the growth of the business, but at the same time also recognizes.
Our needs to generate cash and bring our debt levels down so we feel good about.
Our capital budget for this year and we've also thought very carefully about the timing of that spend so as we talked about before as our as our financial forecast is more backend loaded. We've also been careful to plan our capital expenditures.
More towards the latter half of the year. So that we can react appropriately if conditions are better or if they happen to be.
Unfavorable we have the agility to adjust that if necessary.
Hello.
Does that answer your question Mitra.
Yes, sorry, I think I lost you for a moment there no that's great.
And actually just curious in terms of our capital allocation.
And obviously M&A is going to be.
Source for that but how should we think in terms of priorities as it relates to debt repayment.
Dividends share by potential share repurchase.
Mitra are our focus.
In terms of just first of all again driving.
An improvement in our free cash flow and then the priority really being to bring our debt levels down.
Obviously, we recognize.
The importance of the dividend to our shareholders and and that will be evaluated every quarter with our capital Committee of the board.
Going forward, but our first priority will be to manage the debt levels.
And maybe I'll pass it to Michael from a mergers and acquisition standpoint.
As we said on the last call Mitra merger and acquisitions are not on the table right now.
Obviously with our with our debt levels, we don't think it's prudent to do so.
Will there be opportunities worth pass up on possibly.
Or what to put on the backburner for another time.
Perhaps later in the year or next year.
But right now, we're really focused on creating efficiencies within the business.
And.
Turning more of our balance sheet into cash and.
That is our main focus if you go out to our website, we will have out there soon our new.
Our investor deck, and you can see we've taken the M&A off.
One of the things that were.
Looking at as a driver for the business for the at least for this coming year.
Good.
There will be opportunities.
Later on and we think that we are a good acquirer.
But it's.
It's time for us to really focus on driving efficiencies and we've been doing that since since mid last year.
Looking for opportunities to rightsize, the business to automate to create all kinds of efficiencies whether it's.
From a gross margin standpoint or from an SG&A standpoint.
And we think.
Our success.
In that light depends on largely on how much we're focused on it so it would be 100% focused on that.
Great. Thanks, and then finally I think in the past you've mentioned.
In periods of.
Well, you have prolonged inflation and high interest rates et cetera, you've been able to take share.
Especially.
In an economic downturn and I was just wondering.
Based on the guidance for the second half of the year.
And I know you're being a little conservative.
But I'm, assuming you still expect that trend to continue as it relates to continuing to take share from competitors.
I can say that.
That is our goal.
Surely that.
The thing that will get us closer to where we want to be from a debt level standpoint.
And where we need to be.
From a shareholder value standpoint is growing the business profitably.
And.
That is a correct assumption.
Whether it's conservative or not.
You'll be the judge of that.
We intend to deliver on the on the guidance that we've given.
That we're giving you today.
Okay. Thanks, again for taking questions.
The next question will come from Vijay Cook with singular research. Please go ahead.
Hey, Thanks, guys just a couple quick ones here.
On the inventory side.
Write downs are noncash can we assume that that's just promotional pricing to get inventory back on track.
Is there more to that.
As we get on track for the rest of the year.
Can we expect any more on the downside.
The the the write downs certainly we're we're into Q4 based on our evaluation of a future selling prices. So you're writing that inventory Dow will.
In essence enable us to in essence liquidate some of their underperforming inventory more aggressively.
And take some margin pressure off of the healthcare business in 2023, which is as I've mentioned before as is.
Where we see upside in the business for 2023 from a from a margin perspective.
So in essence, it does help with the markdowns and helped declaring through different channels, both through our digital channel as well as with our wholesale customers.
Okay. Thanks.
We can see opt.
Optimistic 2023 guidance and you broke out revenue.
I'm, just kind of curious given the dynamic environment, where kind of it and now everybody is at now.
From a profit perspective.
The guidance is going to shake out similar to it has in the past or is or are you going to see some this year.
I'm, sorry, you're breaking up a little bit, but I think you're asking about profit guidance by segment.
Yeah, that's right.
Sure.
Our guidance, obviously is on a consolidated basis from an earnings from earnings perspective, what I would say just as additional context is.
Given again, the the the down trending that we've experienced in healthcare in 2022 combined with the significant write offs that we've taken within that segment.
The guidance certainly assumes an improvement.
And the healthcare apparel results.
Pretty significant improvement.
Just in 2020 to allow we took about over $10 million of charges in the healthcare apparel segment, which again, we would not anticipate to to repeat and in 2023.
And as Michael touched on it from from the other segments.
We anticipate that our contact center business will continue to grow.
Profitable as it has in the past.
The EBITDA margin approximately 20% so still a strong EBITDA margin.
And we would expect our branded product segment to hold its margin going forward.
It moves through the year.
Oh great.
Yes.
The next question will come from Kevin Steinke with Barrington Research. Please go ahead.
As I said a couple of follow ups.
You mentioned, the accelerated sales force hiring and Banco.
And that's actually tracking ahead of.
Your targets.
Yeah, just how quickly can new salespeople ramp up and start contributing and.
I guess that could be a factor in you taking share and.
Potentially contributing to the.
The growth in the second half that.
That's your.
As we've discussed.
Good question.
The salespeople that we recruit.
Come from the industry.
<unk> come to us with a book of business.
Or at least most of their book of business and our <unk>.
Mostly commissioned.
Salespeople, so our cost to bring them on we have to onboard them of course, we give them some support.
From our office in India, primarily which.
<unk> is a very low cost support and support that they hadn't had.
At all at their previous employer usually.
And generally we get about 18 months in their entire book of business.
Transfer over to us so it's on an escalating basis.
But it does vary by salesperson, Kevin I mean, some people come to us with a $1 billion book of business and immediately within within a couple of months.
We're writing on an annualized basis.
That much business and some people.
To us with a $1 billion book of business and it takes six months to start tracking half that but in 18 months our expectation as we brought at least all of that over I mean, the ultimate reason why these people come to work for US is because they think they can.
We've proven that by by aligning themselves with us they can actually grow their book of business significantly more than they can at their current employer, so somebody who might come to us with a $1 billion book of business, what we're hoping and what we're working towards is getting them to a $2 million book of business.
Within.
2018 to 24 month period of time.
Alright, that's helpful and then lastly.
Direct to consumer website launch.
Targeted for the second quarter within healthcare apparel.
Can you just talk a little bit more about.
Our expectations for that.
Our strategy and.
Yeah, how quickly youre, assuming that could that can kind of ramp.
It's.
We kind of it's going to be a very slow ramp.
You go out first.
It's a site that we will tweak and have to gain a lot of knowledge from the analytics, we get from that side on who's buying and who's clicking in.
How we incentivize people to sign up.
At the site for products and so on.
So it's a slow ramp we're not projecting much in the way of revenue in 2023.
What we want to do in 2023 is just build awareness.
For our product among.
Among those who are already loyal to our product building a higher level of loyalty.
So that we can bring in all their friends and other caregivers associates onto the site.
Escalate.
Growth, but this is a this is a year.
Year to really build awareness.
In 2024 is the first year, where we believe that we will see.
Some some meaningful impact to our sales.
Okay. That's that's helpful insight appreciate it that's all I had thank you.
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 Sir.
Yeah. Thank you all today for all the great questions.
To have a few beyond here asking questions from different directions, we certainly appreciate it.
I want to thank you all for joining us, but before I end the call.
To send a special note of gratitude to someone who has contributed tremendously to the STC over a long period of time and the demand as we announced last year is heading into retirement. After 25 very productive years with STC since joining us in 1998, as our CFO and more recently our CFO he.
Was here through a period of unprecedented expansion diversification and change and has been a tremendously valuable business partner, it's been a true pleasure to work with Andy and we're credibly pleased that he is continuing to serve on our board of directors, which means we will continue to benefit from his experience and valuable perspective.
Sadly, we also announced last month, the passing of our chairman of the Board Sydney Kirshner as part of his distinguished career Cid first joined our board more than 25 years ago and served as chairman for the past 11, we benefited greatly from his insights and I personally consider it Sidney and incredible individual valuable mentor to.
Dear Dear friend there'll be deeply missed by all of those whose lives. He touched. Thank you again for joining our call. We will keep you posted on our progress throughout the year and please don't hesitate to reach out with any questions. Thanks, again and speak to you next quarter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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