Q1 2025 Stran & Co Inc Earnings Call

Okay.

Speaker Change: Greetings and welcome to the Strand and company first quarter 2025 earnings call.

Speaker Change: At this time all participants are in a listen only mode.

Question and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.

Alexandra Shield: I'll now turn the conference over to your host Alexandra Shield you may begin.

Andy Shape: Good morning, and thank you for joining strong and companies 2025 first quarter financial results and business update conference call with US today are Andy shape, Chief Executive Officer, and David Brown, Our Chief Financial Officer.

Andy Shape: The company issued a press release yesterday may 15th 2025 detailing its financial results for the first quarter of 2025.

Andy Shape: The release is also available on its website. If you have any questions. Following today's call or would like additional information. Please contact crescendo communications at 2126711020.

Andy Shape: Today's remarks will include a review of strong financial and operational performance followed by a Q&A session. Please note. The company may make forward looking statements during the call that involve risks and uncertainties many of which are outside of its control. We encourage you to review <unk> filings with the SEC for full discussion of these risk factors.

Andy Shape: That I will turn the call over to Andy shape. Please go ahead Andy.

Andy Shape: Thank you Ali and good morning, everyone I'm thrilled to share the excellent results strong company delivered in the first quarter of 2025, marking a strong start of the year. Our performance reflects disciplined execution strategic vision and the growing momentum of our business as we continue to strengthen our position as an industry leader.

Andy Shape: For the first quarter ended March 31, 2025, we achieved a remarkable 52, 4% year over year revenue increase reaching approximately $28 7 million up from $18 8 million in Q1 2024.

Andy Shape: This growth was driven by a combination of robust organic performance and the impactful contributions from our August 2020 for acquisition of the Gander group assets.

Andy Shape: Notably our core strong segment delivered 11, 2% organic revenue growth a testament to the resilience and competitive strength of our business, particularly in a challenging market environment, where many peers have faced contraction.

Andy Shape: Our gross profit also saw significant growth rising 51, 1% to $8 5 million, representing 29, 6% of sales compared to $5 6 million or 29.8 of sales in Q1 2024. This performance is especially impressive given the initially lower margins associated with the Gander.

Andy Shape: Group acquisition.

Andy Shape: Encouragingly, we've already driven modest improvements in the gross profit margin is strong loyalty solutions or Sos. This segmented compensating the former Gander group business and we are actively working to align these margins with strong historically strong profile, which reached 32, 4% for the strong segment in Q1 2025.

Andy Shape: A key milestone this quarter was the completion of our re audit process, which consumes significant resources in prior periods with this behind US we've restored timely financial reporting and shifted our focus to driving growth enhancing margins and creating long term shareholder value.

Andy Shape: The successful launch of our Netsuite ERP system in January 2025 has been a game changer. In this regard this enterprise wide rollout is already delivering tangible results, including automated workflows real time visibility to operations and centralized process control net suite enhances our ability to scale efficiently respond to client.

Andy Shape: Needs with greater speed and accuracy and manage operations with precision.

Speaker Change: She knows for sustained operational excellence.

Speaker Change: The integration of Gander group assets continues to progress, bringing meaningful meaningful scale diversification and cross selling opportunities to our platform the.

Speaker Change: The acquisition has expanded our presence in the high growth hospitality and gaming verticals and open new revenue channels through deep client relationships. We are realizing early synergies in sourcing logistics and client engagement and see significant potential to further leverage these capabilities to enhance customer services and our value proposition.

Speaker Change: These efforts are laying a strong foundation for continued revenue acceleration and long term value creation.

Speaker Change: On the macroeconomic front, we are proactively addressing global trade dynamics, particularly the evolving tariff landscape.

Speaker Change: <unk> proven track record of agility and operation operational discipline and navigating complex.

Speaker Change: International sourcing environments to mitigate potential tariff uncertainty, we are accelerating our diversity diversification strategy, expanding our global manufacturing footprint.

Speaker Change: Okay.

Speaker Change: Domestic maybe USA production and partnerships in Vietnam, Cambodia, Taiwan, India, Bangladesh and other regions. Our sourcing teams are negotiating with suppliers to optimize our pricing, ensuring we maintain competitive offerings, while preserving our profitability our top priority remains delivering continuity valley.

Speaker Change: <unk> and quality to our clients.

Speaker Change: Looking ahead, our priorities for 2025 are clear accelerating organic growth expanding margins and driving sustained profitability. We are implementing disciplined expense control streamlining workflows and leveraging our scalable infrastructure to capture more value from our revenue growth.

Speaker Change: Broader industry continues to present compelling opportunities as companies increasingly prioritized brand visibility customer engagement and loyalty.

Speaker Change: Strong is uniquely positioned to meet this demand with an expanding platform enhanced systems and a customer centric culture that enables us to deliver high impact integrated solutions across diverse verticals.

David Brown: I want to express my deepest gratitude to our employees for their unwavering dedication to our clients for their trust and partnership and to our shareholders for their continued support we believe 2025 will be a transformative year for strong defined by financial growth operational excellence and strategic expansion with that I'll turn the call over to David Brown.

Speaker Change: Our CFO to review our financial results in greater detail David. Please go ahead.

David Brown: Thank you Andy and good morning, everyone. I am pleased to provide a detailed overview of our financial performance for first quarter of 2025, which reflects the strength and scalability of our business model.

David Brown: Sales increased 52, 4% to approximately $28 7 million for the three months ended March 31, 2025 from approximately $18 8 million for the three months ended March 31 2024.

David Brown: Sales from the Strand segment increased 11, 2% to approximately $20 9 million for the three months ended March 31, 2025 from approximately $18 8 million for the three months ended March 31, 2024 sales from the SLS segment, which consists of the former Gander group business increased to approximately.

$7 8 million for three months ended March 31, 2025 from zero for the three months ended March 31, 2024, the strained segment.

David Brown: For the <unk> segment the increase in sales was primarily due to higher spend from existing clients as well as business from new customers for.

David Brown: For the SLS segment, the increase was due to the acquisition of the Gander group assets in August of 2024.

David Brown: Gross profit increased 51, 1% to approximately $8 5 million from 29, 6% of sales for the three months ended March 31, 2025 from approximately $5 6 million for or 29, 8% of sales for the three months ended March 31 2024.

David Brown: Gross profit of the Strand segment increased to approximately $6 8 million for the three months ended March 31, 2020, 2025 from approximately $5 6 million for three months ended March 31 2024 gross.

David Brown: Gross profit for the SLS segment increased to approximately $1 7 million for the three months ended March 31, 2025 from zero for the three months ended March 31 2020 for the.

David Brown: The increase in the dollar amount of the total gross profit was primarily due to the acquisition of the Gander group assets in August of 2024.

David Brown: The <unk> segment for the <unk> segment the increase in the dollar amount of the gross profit was due to an increase in sales of approximately $2 1 million, which was partially offset by an increase in cost of sales of approximately 0.9 million.

Speaker Change: But the SLS segment the increase in the dollar amount of the gross profit was due to the acquisition of the Gander group assets in August of 2024.

Speaker Change: The decrease in the gross profit margin to 29, 6% for the three months ended March 31, 2025 from 29, 8% for the three months. The three months ended March 31, 2024 was primarily due to the acquisition of the Gander group assets in August of 2024.

Speaker Change: Which operates at a lower gross profit margin than the strained segment.

Speaker Change: The gross profit margin for the Strand segment increased to 32, 4% for the three months ended March 31, 2025 from 29, 8% for the three months ended March 31 2024.

Speaker Change: The gross profit margin for the SLS segment was 21 eight for the three months ended March 31 2025.

Speaker Change: Operating expenses increased to 43, 6% to approximately $9 million for the three months ended March 31, 2025 from approximately $6 3 million for the three months ended March 31 2024.

Speaker Change: Operating expenses of the Strand segment increased to approximately $6 9 million for the three months ended March 31, 2025 from approximately $6 3 million for the three months ended March 31 2020 for.

Speaker Change: Operating expenses for of our SLS segment increased to approximately $2 2 million for the three months ended March 31, 2025 from zero for the three months ended March 31 2024.

Speaker Change: As a percentage of sales operating expenses decreased to 31, 4% for the three months ended March 31, 2025, or 33, 4% for the three months ended March 31 2024.

Speaker Change: As a percentage of sales operating expenses of our of our Strand segment decreased to 32, 8% for the three months ended March 31, 2025 from 33, 4% for the three months ended March 31 2024.

Speaker Change: As a percentage of sales operating expenses of our SLS segment were 27 seven for the three months ended March 31 2025.

Speaker Change: For the Strand segment the increase in the dollar amount of operating expenses was primarily due to expenses relating to strains and that suite enterprise resource planning system implementation acquisition and integration of the Gander group assets and legal and legal and accounting expenses related to the <unk>.

Speaker Change: Got it of our historical financial statements for.

Speaker Change: For the SLS segment the increase in the dollar amount of operate are of operating expenses was due to the acquisition of the Gander group assets in 2020 'twenty four.

Speaker Change: Net loss for the three months ended March 31, 2025 was approximately zero point $4 million compared to approximately 0.5 million for the three months ended March 31 2024.

Speaker Change: This change was primarily due to an increase in gross profit partially offset by an increase in operating expenses.

Speaker Change: Turning to our balance sheet. We ended Q1 2025 with a strong liquidity position holding approximately $12 2 million in cash cash equivalents and investments and no long term debt the reduction in cash from $18 2 million at December 31, 2024 was primarily due to a 5.1.

Speaker Change: <unk> decrease in our rewards program liability.

Speaker Change: The successful execution of that load of those loyalty programs.

Speaker Change: Total assets stood at $52 2 million compared to $55 1 million at year end 2024, and stockholder equity of $31 3 million, reflecting our solid financial Foundation.

Speaker Change: In summary, our Q1 'twenty twenty-five results demonstrated strong revenue growth improved operational efficiencies and disciplined approach to managing our financial position.

Speaker Change: We are well positioned to continue executing our growth strategy, while maintaining financial flexibility.

Andy Shape: I'll now turn the call over to Andy for closing remarks.

Andy Shape: Great. Thank you David.

Andy Shape: As highlighted throughout this call strong at 2025 with remarkable momentum achieving 52, 4% year over year revenue surged to $28 7 million in the first quarter, a testament to our strategic focus and disciplined execution.

Andy Shape: With compliance efforts successfully completed the Gander group integration advancing and our enterprise wide Netsuite ERP system fully operational we are now sharply focused on accelerating organic growth expanding margins enhancing operational efficiency and driving sustained profitability. Additionally, we are proactively addressing global <unk>.

Andy Shape: <unk> dynamics implementing robust contingency plans to mitigate potential tariff risks, our unwavering commitment to deliver innovative high impact branded solutions with agility consistency and resilience throughout 2025 and beyond we are energized by the opportunities ahead and confident in our ability to deliver sustained growth operational X.

Andy Shape: <unk> and enduring value for our shareholders. Thank you for joining us today and for your continued support of strong with that well now open up to the call to questions operator.

Speaker Change: Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your questions from the queue.

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Speaker Change: One moment, please while we poll for questions.

Speaker Change: Your first question for today is from Bill Jordan with TSA capital.

Bill Jordan: Hey, guys. Congratulations on the nice quarter, just a couple of questions with the reorder process behind you now are you expecting accounting and compliance costs from that process do you go down in 2025 and as a second question regarding the re audit.

Bill Jordan: So those expenses associated with that re audit hit your financials in the first quarter of 20 plus.

Bill Jordan: Great.

Bill Jordan: Thank you for the question.

Speaker Change: Yeah. So in terms of the the costs in 2024, we did incur significant expenses multi millions of expenses for the re audit between.

Speaker Change: Accounting audit accounting consultants other consultants compliance legal multi millions of dollars so that should definitely automatically reduce since we're in a much better cadence with both our.

Speaker Change: Internal accounting firm are in Carroll County team as well as our auditors, so where do much better cadence and we should see a significant drop in that moving forward in 2025, we did incur still some of those expenses because some of the 'twenty 'twenty four compliance was completed in 2025 through Q1.

Speaker Change: I don't have the exact number but.

Speaker Change: It was it was somewhere accounting in legal just in Q1 alone was close to $800000. So you know again, we look at that and say well, we're pretty proud of our revenue growth. We did have a loss some of that coming from the majority of that coming from the new Gander acquisition.

Speaker Change: Try to get that integrated in and get that profitable but.

Speaker Change: Even with that with with $800000 worth of legal compliance and audit work in Q1, we had $393000 loss. So so yes that that those costs did hit this year and we're looking for them to significantly decrease throughout the year.

Speaker Change: Well, thanks for thanks for providing that color that's helpful.

Speaker Change: Two other just two quick questions are you planning on restarting a share buyback anytime in the future.

Speaker Change: Yes, so we have an author.

Speaker Change: The board has authorized us initially $10 million and we still have about $6 million available on that to go buy in the market and yes, we are going to.

Speaker Change:

Speaker Change: We established that and buy where by within the market. There are blackout windows that we need to do.

Speaker Change: Here too so that as well as restrictions on how much we can buy based on the trading volume, but yes. We are planning on doing that as soon as the window opens next week.

Speaker Change: That's great news and I guess the last question I have is could you just explain a little bit put a little context around the drop in cash and how it relates to the rewards program liability.

Speaker Change: Sure Yeah. So the cash what we we do have a rewards program, where we issue for one of our clients. We issue out a prepaid debit cards to customers is as a form of incentive and loyalty program that we run and as a result, we received cash from that customer that we hold in a in a ring fence the cow.

Speaker Change: That is dedicated to that and that fluctuate drastically as we execute the loyalty rewards program. So in Q1.

Speaker Change: We sent out $5 million with a cards, which we had to load with that that value. So that's the drop in cash we have.

Speaker Change: Lately gotten additional capital from them, so they'll they'll see it we will see another spike in Q2 with that capital since its it fluctuates, but you know.

Speaker Change: That's just as is a direct correlation to that rewards program that we run because we have to prepay we have to fund the prepaid card. So hopefully that explains that well enough, but that just is the drop in cash its not from operations its problem.

Speaker Change: Just the flow of money, but when it leaves and when it comes back in.

Speaker Change: Great. Thanks, Ed that did clearing up I'll I'll jump back into the queue. That's all I got for right now thanks. Thank you.

Speaker Change: Your next question for today is from Brooklyn, do go with candor in.

Andy Hay: Andy Hay David.

Speaker Change: I just wanted to sort of follow up on on the.

Andy Hay: E.

Andy Hay: Sort of ongoing expenses versus one time expenses do you think at some point are you or.

Andy Hay: Or are you planning to start reporting numbers that are kind of split that out for us to give us a sense of you know what the real earnings of the business.

Andy Hay: Ex those expenses.

Andy Hay: Yes. So we are planning on doing that we have a draft of that.

Andy Hay: That we have nearly completed that's going through <unk>.

Andy Hay: Compliance and regulatory we just want to make sure that what we put out there and publish is is accurate.

Andy Hay: Quantifiable that we put out there. So yes, we do have that nearly ready to go but we're just we want to make sure that what we put out there is is approved by our legal counsel, our accounting audit teams and everyone else, but yes, we are planning on putting out there that shows.

Andy Hay: Ongoing public expenses, our adjusted EBITDA that will show what the one time expenses were mainly related to the audit and also.

Andy Hay: The main expenses were related to audit acquisition costs as well as the implementation of our ERP.

Speaker Change: Oh, great. Thank you and just a just a quick follow up.

Andy Hay: With a lot of the tariff noise that we've had last month Oh.

Andy Hay: I saw that that inventory, it's picked up a little bit is that just a part of the natural cadence of the business or is that in some part you know.

Andy Hay: Just trying to get ahead of tariffs.

Andy Hay: It's just the natural cadence of the business typically increase.

Andy Hay: Increase in inventories is a good sign for us because it shows that our customers are committing to that inventory. The majority if the majority of the major majority 90 plus percent of our inventory is not bought on stack. It's bought on behalf of our customers with an inventory commitments from our customers. So we're not just buying inventory in the hopes that we sell.

Andy Hay: We're buying inventory with a guarantee that our customers are going to buy it in the majority of our cases, so it's a good sign when our inventory goes up.

Andy Hay: The tariffs are our H E R.

Speaker Change: Our real.

Speaker Change: It's something that's real and we've talked about it many times with you as well as other investors and internally.

Speaker Change: The fluidity, how it's fluid right now, where it's changing where last week, we have a town hall every minor at what first Monday of every month that we had it last week and when we prepared it they were at 145% when we came out on Monday morning, there were 30% so the tariffs from China.

Speaker Change: It's very fluid and where we're doing.

Speaker Change: I think a very good job of communicating that with our customers.

Speaker Change: And with holding some of our core values, which one of them. It includes integrity and going back in and telling them exactly whats going on communicating.

Speaker Change: Trying to work with them on a on a.

Speaker Change: A reasonable resolution if prices have increased our direct import orders so it's.

Speaker Change: It's really only affecting US right now on direct import orders from China, which is you.

Speaker Change: You know not a it's.

Speaker Change: It's a significant part of our business, but less than say, 20% of our overall business. So the domestic stock that we normally use for our day to day business has not necessarily been affected negative or it hasnt increased quite yet it will increase slowly over time, but we're negotiating with our factories changing manufacturing locations.

Speaker Change: We talked about to other regions like.

Speaker Change: Vietnam, Taiwan, Bangladesh, India too.

Speaker Change: To try to avoid that long term as well as made in the USA, but we're very on top of it a lot of our contracts also allow us to increase prices based on what our factories and what our vendors are charging so we're a little bit protected or were very protected in that way. It's just more on these transactional orders, where we're doing a direct import where when we priced it.

Speaker Change: It may have been at one price now it's a different price, we're going back to our customers and the majority of the time our customers are reasonable because we have such strong partnerships with them that they are willing to work with US same thing with our vendors, we have such strong partnerships with our vendors that they're willing to work with us our customers are willing we kind of sharing it all together, where it's not really making as big of an impact, especially as it's gone down to 30.

Speaker Change: The other thing to make note of for the tariffs is the 30% is really only on the product a lot of the cost is associated with the product of bringing it in from China, whether it's the.

Speaker Change: The development of the product or most importantly, the the freight to get it here. So that is not terrible as well as the profit that our factories may be using so the 30% may may come down as well, maybe some 30 down to say 20 or 15, and then we can negotiate from there. So we're very conscious of it we're actively negotiating with.

Speaker Change: Both our customers and our vendors and have seen very good outcomes for that where we're at.

Speaker Change: To be honest, we're creating even a stronger relationship with both our customers and our vendors.

Speaker Change: Got it thank you.

Speaker Change: As a reminder, if you would like to ask a question. Please press star one.

Speaker Change: We have reached the end of the question and answer session and I will now turn the call over to Andy shape for closing remarks.

Andy Shape: Great. Thank you everyone for joining thank you for your continued commitment to strong I believe in what we're doing and we're excited to finish out the year strong in and talk to you.

Andy Shape: In a few months when we do Q2, thank you everyone and have a great day.

Andy Shape: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.