Stran & Company Inc. 2022 Earnings Call

Yes.

Good morning, everyone and welcome to the <unk> company fiscal 2022.

Earnings call at this time, all participants are in a listen only mode.

Answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your phone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Alexandra Schultz Vice President of Crescendo Communications Alexandra you may begin.

Good morning, and thank you for joining strong companies 2022 year end financial results and business update conference call on the call with US today are Andy shape, Chief Executive Officer, and David Brown, Our Chief Financial Officer. The company issued a press release today March 32023, containing its 2020 to fourth quarter.

And year end financial results, which is also posted on the company's website. If you have any questions. After the call or would like any additional information about the company. Please contact crescendo communications at 2126711020.

The Companys management will now provide prepared remarks, reviewing the financial and operational results for the three and 12 months ended December 31 2022.

Before we get started we would like to remind everyone that during this conference call. We may make forward looking statements regarding timing and financial impact of a strong ability to implement its business plan expected revenues and future success. These statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future.

IMAX competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond <unk> control with that we will now turn the call over to Andy shape, Chief Executive Officer. Please go ahead Debbie.

Thank you Allie and thanks to everyone for joining us today as we discuss the meaningful progress and financial milestones achieved during 2022.

Throughout 2022, we maintained a steady growth trajectory, resulting in revenue of approximately $59 million for the fiscal 2022 year of 48, 5% increase compared to 2021.

Shortly we returned to profitability for the fourth quarter of 2022, achieving a record revenue of $18 3 million and net income of 903000, which we believe is significant.

It can financial milestone given are important.

First within the business and expect to gain significant operating leverage as we continue to grow that business at the same time I'm proud to report that we preserved our solid balance sheet with a combined $25 million of cash and short term investments as of December 31, 2022, and no long term debt.

Importantly, we implemented business initiatives during the year to accelerate our growth. This included carefully managing expenses purposeful investments advancing M&A and completing the implementation of the first phase of that suite for improve operational efficiencies and scalability are proud to say we are effectively executing on all fronts, resulting in a return to profitability in the fourth quarter.

While establishing a strong lead generation team borne out the acquisitions within 13 months and inflammation implementation of that suite. We believe these activities will prove to be invaluable as we strive to increase our revenue and profit in the near and long term.

The promotional products industry continues to be very fragmented in order to gain competitive advantages in the industry and set ourselves apart we have invested in sophisticated technologies as well as acquired meaningful companies that have a proven track record of sales and success along with an established customer base.

Towards this end, we announced four acquisitions within the last 13 months and each brings strong unique advantages and opportunities while completing our business operations, improving our capabilities, increasing our recognition within the industry and expanding our national footprint.

First we announced the closing of GAAP promotions of full service promotions agency.

With an established customer base comprised of many of the world's leading beverage and consumer packaged good companies by compounding gaps expertise in point of sale display in rats, with our knowledge capabilities and technology.

To aggressively pursue opportunities within the beverage industry by cross selling and up selling through both our combined organization existing clients as well as attracting new clients.

Given gaps previous revenues of $7 2 million for 'twenty.

2021, and consistent profitability since inception, we are extremely pleased to have onboard and fully implemented the gap business and successfully merge GAAP employees into strong while broadening our presence and recognition in the northeast in fact, GAAP help us in reaching our nearly 50% growth in sales for 2022, as we acquired them in <unk>.

In 2022.

Second was the acquisition of trend brand solutions trend was a strategic acquisition as it was headquartered in <unk>, Texas, just outside of Houston, allowing us to enter new geography, and truly expand our national footprint.

<unk> has a demonstrated track record of delivering customers brand marketing needs and is effectively evolve overtime as customer needs change and to create efficiencies trying to establish a distribution center located in Houston, Texas area as well as in international factory partnerships to source.

Close to the end user while it well maybe willing shipments worldwide.

As I've highlighted before trend broadens our exposure in the south, especially in the Houston area, which is home to 2000, and fortune 500 customers companies and ranks third among metro areas and Fortune 500 headquarter locations make an ideal fit for strong. We believe this acquisition demonstrates our commitment to our growth strategy by acquiring companies with an established platform.

Customer base, while allowing us to target high profile clientele given their location.

Following trend, we announced the acquisition of Premier NYSE with over 30 years of experience Premier has developed expertise in creating and implementing successful solutions for its customers, which include a number of marquee well known customers, especially in legal and professional service verticals that have long standing relationships with Premier Premier further strengthens our leadership.

Our position in the northeast and enables us to enter into new verticals again, hitting key aspects of our growth initiatives.

Most recently, we announced entering into definitive agreement to acquire T. R. Miller company. Dr. Miller brings a successful track record spanning over 47 years, serving a broad portfolio of top tier customers, including a big four accounting for firm Fortune 100 insurance provider global sportswear manufacturer, leading beverage and coffee.

Conglomerate in an online food ordering and delivery platform.

This acquisition is expected to enhance our operational fulfillment capabilities through the addition of Dr. Miller's two.

20000 square foot distribution and processing fulfillment center fulfillment center located in Walpole, Massachusetts.

Dr. Miller has a long history as an industry leader in ended their 2022 fiscal year with approximately $19 million in revenue. We expect this acquisition to close in the second quarter of 2023.

We are extremely proud to be adding such quality companies are strong in effectively advancing our M&A strategy, which we believe will improve our operations and capabilities expand our national footprint and increase our recognition in the promotional products industry. Additionally.

Additionally.

We structured these actual acquisitions very favorably for us.

With much of the consideration on an earn out basis, allowing us to revert preserve cash as well as encourage growth and success.

Beyond the goals, we've reached with M&A. We also saw a meaningful contracts in 2022, our customers have sought us out to provide differentiated promotional products that allow them to incentivize consumers and drive behaviors.

Specifically, a large national health care company selected us to create distribute branded promotional items educate occasional collateral and unbranded medical devices to program participants, which included pregnant women and people suffering from hypertension or high blood pressure.

This multi year contract is projected to generate over $5 million in annual revenue with potential for expansion opportunities that we intend to fully pursue with this customer I'd also like to note that the health care industry is a huge untapped market that is increasing the usage of promotional products as marketing tools to engage with consumers.

We also secured a major contract with a leading north American infrastructure service company to assist in increasing our market awareness and customer loyalty. We're currently executing on this contract is expected to generate over $1 million annually.

And recently, we signed a contract with a multinational direct selling beauty products company to support the customer's North American incentive based merchandise loyalty program. This company is one of the largest beauty product direct sales companies and we launched a new customer branded e-commerce merchandise store for them this quarter with over 4 million beauty Influencer. This E.

Commerce stores easy to use and provides influenced fluids is access to merchandise with the expectation of bolstering their loyalty program.

These contracts are meaningful to our bottom line with opportunities for expansion. We're very pleased to have secured the significant shocks contracts I believe we can meet and satisfy our customer needs.

As their demand increase.

In addition to the contract Satish mentioned, we also expanded our customer facing technology offerings by launching more than 37 online stores for various other customers throughout the year.

Online stores preferred provide long term value to our customers and help us deliver them.

Develop them into repeat programmatic customers. Furthermore, we are witnessing continued demand for our products and services as a result of our enhanced lead Gen generation and digital marketing program led by an experienced team of industry veterans.

Dedicated lead generation team will be further supported by an integrated.

An aggressive digital marketing strategy in paid search advertising efforts. We believe this initiative will enable us to expand into new markets and industry verticals by building sales and marketing campaigns that promote strong through social media search engine optimization hub spot inbound marketing and other alternative channels.

We are in active discussions with potential customers of that secured over 41, new customers from this initiative.

This program has validated our belief that there are untapped markets for our promotional products and huge opportunities for strong that we tend to take advantage of them.

Looking to the first quarter of 2023, we are seeing strong bookings with nearly $15 million in or secured year to date and what is seasonally our lowest quarter in terms of revenue. It's important to reiterate that these numbers are reflected as billed revenue until the products are delivered over the next few months. So reinforces our continued traction in the market we believe the <unk>.

<unk>, we are undertaking will further solidify our leadership position within the promotional products industry, which is valued at over 25 billion.

We're extremely proud of the product progress we have made throughout 2022 and are beginning or at.

At the beginning of 2023 and expect these trends to continue and assist.

Furthering our growth.

Demonstrating our confidence in the outlook of the business, we implemented and executed a share buyback program back in February of 2020 to date, we have repurchased approximately 178 million shares that totaled about $3 $3 million in share repurchases. We believe this will help drive long term share shareholder value ensure we are completely aligned with.

Shareholders.

Our growth strategy has not only been successfully executed but it has also brought us back to profitability for the fourth quarter of 2022, despite all of our investments in the business to propel long term growth.

In parallel we have a tenant industry and investor focused conferences throughout the year.

And we're acknowledging president presented awards for our ability to execute.

Lastly, I'd like to announce that we formally appointed Dave Brown as our chief financial.

Financial Officer, David as part of a strong team since 2012 and began serving as our interim CFO last year, giving us long relationship with the company and successful financial performance. We believe David is a perfect fit for strong in achieving our growth objectives.

Overall, we developed and executed the business growth strategy, resulting in increased awareness and strong and expanding national footprint as well as bolstered our customer base at this point I'd like to turn the call over to our Chief Financial Officer, David Brown or to go over the financials in detail. Please.

Please go ahead David.

Thank you Andy.

<unk> increased 48, 5% to $59 million for the year ended December 31, 2022 from $39 7 million for the year ended December 31, 2021, the increase was primarily due to the higher spending from existing clients as well as business from new customers. Additionally, we benefited from the.

<unk> of the GAAP promotion assets in January 2022, the trend brand solutions assets in August of 2022, and the Premier NYSE assets in December 2022.

Gross profit increased 40% to $16 6 million or 21, 8% of revenue for the year ended December 31, 2022 from $11 8 million or 29, 8% of revenue for the year ended December 31, 2021, the increase in the dollar amount of the gross profit was due to increased sales partially offset.

By an increase in purchasing costs operating loss for the year ended December 31, 2022 was $1 5 million compared to an operating loss of 438000 for the year ended December 31 2021.

The decrease was primarily attributed attributable to the higher general and administrative expenses expenses, which was primarily due to additional expenses related to the acquisition of the GAAP promo assets the trend brand solutions assets in the Premier NYSE assets as well as the implementation of the new ERP system on oracles net suite platts.

<unk> ongoing public company expenses and the organic growth within our business.

Operating expenses as a percentage of revenue was 37% for the year ended December 31, 2022 down from $39 39 in the year ended December 31 2021.

Net loss for the year ended December 31, 2022 was <unk> 8 million compared to net earnings of zero point $2 million for the year ended December 31, 2021. This decrease was primarily due to a lead generation initiatives integration expenses related to the acquisition of the GAAP promotions and trend brand.

Solutions assets ongoing expenses related to being a public company and higher cost with purchases.

However, we did have a record revenue of $18 3 million and a net earnings of 303000 for the fourth quarter of 2022.

At December 31, 2022, the company had $25 million of cash and short term investments and no long term debt given.

Given the strength of our balance sheet, we implemented a share repurchase program of up to $10 million in February 2022 for.

For the year ended December 31, 2022, we repurchased a total of $1 million 777657 shares and returned $3 million 332000.

$405 in value to stockholders under trading plan.

At this point I will turn the call back over to Andy.

Thank you David.

To wrap up we have successfully executed on our growth strategy, which has resulted in increased revenue and profitability for the fourth quarter of 2022, we continue to witness strong revenue growth quarter to quarter that we're expanding and growing our business. We're excited to see what the rest of 2023 has in store for us and will continue to provide updates as developments unfold I'd like to thank you for joining us.

Our call today at this point, we'd like to open up the call to questions operator.

Thank you Andy at this time, we will be conducting a question answer session. If you would like to ask a question. Please press star one on your keypad.

Time will indicate your line is in the queue. You May press Star two if you would like to remove your question from the queue for participants using any speaker equipment. It may be necessary to pick up your handset before pressing the keys.

The poll for questions.

Thank you. Your first question is coming from Edward Riley of.

Edward Your line is life.

Hey, guys congrats on reaching profitability.

Talk macro for a second.

Seeing some cutbacks in marketing budgets I'm, just wondering maybe what the majority of your customers are getting right now in terms of marketing budgets for the rest of the year.

Sure. Thanks, Ed good to hear from you thanks for calling in.

Yes, so some customers are pulling back, whereas we've seen others that are not slowing down I think there is at a macro level.

People, maybe are planning differently, but we have not based on our bookings that we've had year to date, we haven't seen a significant slowdown.

Overall as I mentioned, some customers may be pulling back in certain sectors.

Specifically financial services, maybe pulling back.

But there are other ones consumer brands or health care or some of the other verticals.

Entertainment and gaming we've seen.

Increases in that so some of our customers look at this as an opportunity to capture market share.

So increase their spend during times of uncertainty because others.

Possibly arent spending so.

It's been a balanced but we've seen our bookings continue to remain fairly strong.

This year so far.

Okay got it thanks, and then on the onetime ERP costs.

Wondering if you could maybe give us a rough amount.

How much of that was included in operating expenses.

For the fourth quarter.

I know this is phase one and phase two is likely coming up.

Just maybe how much additional expense, we should we should expect throughout the year.

So in 2023 I'm sorry.

2022, the total cost to implement our ERP Oracle's next week.

Was approximately $138 million so it wasn't inexpensive.

And that was done.

We've been working on that and that was included the seat licenses that we needed to have for the ERP, which we did launch.

Successfully we are running orders through net suite right now.

And as well as the implementation and integration as well as the it services so that won't go away, but it will definitely be a frac.

Assuming that will be.

Quite a bit less than that well under $1 million closer to probably half a million moving forward.

Because we've done all the heavy lifting of preparing.

To have a scalable platform that can be used well into the future.

Okay, great. Thanks.

And then last one for me just maybe what Youre seeing.

With regard to your acquisition pipeline for 2023.

Sure so with the biggest concentration we're having right now is tier Miller, So we announced that we are signing a definitive.

We announced the signing of a definitive agreement right now we're in the process of doing our due diligence trying to onboard them and looking to close as quickly as we can within the next.

Within the next few weeks or months.

So our major concentration is to get that finalized and then look at additional acquisition opportunities.

But in.

In full transparency, we're not as aggressive as we were since this will be our fourth acquisition in.

In 2018.

Less than 18 months.

And we want to concentrate on integrating them in growing that business that doesn't mean that we're not active in that we're not.

Looking and in discussions with different M&A opportunities. It's just we want to make sure that we give this the attention peer Miller since that.

$19 million in revenue.

It's a lot of.

Moving parts to it and we want to make sure that we do it correctly and capitalize on the business that we're buying so that we integrated properly and then can effectively grow that business as well so.

So hopefully that answers your question about.

May be slowing down.

Last year.

Finalized three of them with.

With TR Miller this year, we may see one or two more this year, but.

We won't probably be as active as we were in 2022.

Okay understood. Thanks.

Thank you very much just as a reminder, if anyone does still have a question or comment you can press star one on your keypad.

Okay. We do appear to have any further questions in the queue I will now hand back over to Andy for any closing.

Got another question, if you want to take it from.

Sure.

Okay, Ed Your line is live.

Great.

Sneak one more in just on the beauty products company.

Could you maybe give us some indication as to maybe how big this is.

And maybe unpack your comments around the opportunities for expansion.

Sure. So the beauty products, we are launching a program for their north American first and we're in the process of launching that program right now.

That in of itself should be.

We're estimating that it should be 77.

Seven figures, but once we launch that our expansion includes going globally with that brand and offering.

Products globally, both through our direct relationships with factories and distribution.

Overseas as well as through partnerships that we have with other third party logistics providers or manufacturers in different regions. So.

We're not we're not exactly sure how much of it.

It could be but considering that they have over $4 million.

Global beauty product.

Influencers, we feel that it could be several million dollars.

Topline revenue overtime.

Okay, great. Thank you.

Thank you very much if there will be no further questions.

Back to Andy for closing remarks.

We're proud of what's drawn thank you everybody for listening we're proud of what's drawn has done in 2022 I think we've delivered on what we.

Our plan on what we told shareholders, we were doing of growing our business growing top line starting to concentrate on profitability and really looking at expanding to become a true leader within the $25 billion promotional products industry. Thank you everyone for listening and we look forward to sharing.

Additional information as things develop and as we report additional earnings in the future. Thank you for your time.

Thank you everybody. This does conclude today's conference call. You may disconnect. Your lines at this time and have a wonderful day. Thank you for your participation.

Yeah.