Q2 2025 Superior Group of Companies Inc Earnings Call

Good afternoon and welcome to the superior group of companies. Second quarter, 2025 conference call.

With us today I'm Michael benstock chief executive officer and Mike kemple, 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 profitability.

That statements are based upon Management's, current expectations, projections estimates and assumptions, words such as expect, believe anticipate, think Outlook. Hope and variations of such words and similar Expressions, identify such forward-looking statements

Mike Koempel: Such risks and uncertainties are further disclosed in the company's 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 the quarterly report 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 are cautioned not to place undue reliance on such forward-looking statements. The company does not undertake to update the forward-looking statements except required by law. And now I'll turn the call over to Michael Benstock. Please go ahead.

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,

That's risks and uncertainties are further, disclosed in the company's periodic filings with the Securities and Exchange Commission, including but not limited to the company's most recent annual report on form 10K and the quarterly reports on form 10q.

shareholders potential investors and

To consider these factors carefully and evaluating the forward-looking statements made herein and our caution not to place undue Reliance on such forward-looking statements.

The company does not undertake the update before looking statements except required by law.

Michael Benstock: Thank you, Operator. We appreciate everyone joining us today. I'll start with an overview of current market conditions, and then I'll review our consolidated financial highlights for the quarter, along with a discussion around our three business segments. I'll then hand it over to Mike to take us through a more detailed review of our financial results. After that, Mike and Jake Himmelstein, President of our branded products business, and I will be happy to take your questions. We've seen modest improvement in the economic-related customer hesitancy that I spoke about on our last call. While many customers still await better certainty around inflation, interest rates, and tariffs, our branded products segment in particular has successfully managed the economic ambiguity by taking market share, negotiating cost relief with vendors, and leveraging a diverse supply base in order to provide our customers and prospects with a compelling value.

And now, I'll turn the call over to Michael Bento. Please go ahead.

Thank you, operator. We appreciate everyone joining us today, I'll start with an overview of current market conditions, and then I'll review our Consolidated financial highlights for the quarter along with the discussion around our 3 business segments. I'll then hand it over to Mike to take us through a more detailed review of our financial results after that Mike and Jake himself president of our branded products business and I will be happy to take your questions.

Michael Benstock: However, the administration's policies can occasionally be to the detriment of a particular segment of the economy, an example being one of our larger call center customers in the solar business that filed Chapter 11 during the second quarter. This was the last of our customers benefiting from significant government subsidies, and I'll share in a moment, our contact center pipeline is full, suggesting these customers will be replaced. Our diversity across our three business units and the different industries in which we operate plays to our competitive advantage and acts as a significant cushion in the face of macro uncertainty. During this fluid period of both tariffs and duties, we derive a similar benefit on the cost side of the equation, as our diversity of sourcing has long been a priority.

We've seen modest improvement in the economic landscape. Customer hesitancy, which I spoke about on our last call, remains as many customers still wait for better certainty around inflation, interest rates, and tariffs. Our branded product segment, in particular, has successfully managed the economic ambiguity by taking market share, negotiating cost relief with vendors, and leveraging a diverse supply base in order to provide our customers and prospects with a compelling value. However, the administration's policies can occasionally be detrimental to a particular segment of the economy. An example being one of our larger call center customers in the solar business that filed Chapter 11 during the second quarter. This was the last of our customers.

Is benefiting from significant government subsidies, and I'll share in a moment. Our contact center pipeline is full suggesting. These customers will be replaced our diversity. Across our 3 business units, and a different Industries in which we operate plays to our competitive advantage and acts as a significant cushion in the face of macro uncertainty during this fluid period of both tariffs,

Michael Benstock: This involves strategically positioning our sourcing in multiple countries across the world based on a redundant sourcing strategy, leveraging our own factories in Haiti, taking a multipronged approach to vendor negotiations, and working with our customers to consider alternative product categories. In essence, this real-time flexibility has served us well over the years, and SCC will remain nimble as international trade negotiations continue to evolve. Regardless of macro conditions, we remain hyper-focused on expense management. As we mentioned on our last call, we launched our initiative to reduce budgeted expenses during the second quarter, and we are seeing the benefit of those cost reductions, which has and will continue to position us for stronger profitability. Turning to our second quarter results, we grew consolidated revenue more than 9% year over year, even in this uncertain economic environment.

And duties, we derive a similar benefit on the cost side of the equation. As our diversity of sourcing has long been a priority. This involves strategically positioning our sourcing in multiple countries across the world based on a redundant. Sourcing strategy leveraging. Our own factories in Haiti, taking a multi-pronged approach to vendor negotiations and working with our customers to consider alternative product categories in essence. This real time flexibility has served as well over the years and SGC will remain Nimble as international trade, negotiations continued to evolve, regardless of macro conditions, we remain hyper focused on expense management. As we mentioned on our last call, we launched our initiative to reduce budgeted expenses during the second quarter. And we are seeing the benefit of those cost reductions which has and will continue to position us for stronger. Profitability.

Michael Benstock: Our largest business, branded products, significantly picked up over the past couple of months and generated 14% growth during the quarter, followed by healthcare apparel, which grew 6%. Revenues for our contact center business declined 3% versus the prior year period. On the bottom line, net income per diluted share of the second quarter was 10 cents, resulting in strong sequential improvement from the first quarter and up from 4 cents per diluted share in the second quarter of last year. Versus the year-ago quarter, a higher profitability stemmed from the stronger top-line results, while maintaining a healthy gross margin and driving a slight improvement in SG&A as a percent of sales. As Mike will discuss more, we maintained a strong balance sheet during the quarter, which puts us in a position of strength to make strategic long-term decisions around the use of capital.

Turning to our second quarter results, we grew Consolidated Revenue more than 9% year-over-year. Even in this uncertain economic environment, our largest business branded products, significantly picked up over the past couple months and generated 14% growth during the quarter. Followed by Healthcare apparel, which grew 6% revenues for our contact center. Business declined. 3% versus the prior year period.

On the bottom line, net income per diluted, share of the second quarter was 10 cents, resulting in strong sequential improvement from the first quarter and up from 4 cents per diluted share in the second quarter of last year versus the year ago quarter, a higher profitability stemmed from the stronger Topline results. While maintaining a Healthy Growth margin and driving a slight Improvement in sgna as a percent of sales.

Michael Benstock: In fact, we actively repurchased our own common shares during the second quarter, which we consider a compelling value. I'll conclude my remarks today with a review of each of our business segments, beginning with branded products. As I mentioned, we saw a meaningful pickup later in the quarter. The good news is that for branded products, our pipeline of business opportunities and our order backlog both remain very strong. Looking ahead, our growing sales team is winning new accounts, growing our wallet share with existing customers and prospects, and therefore we expect to continue expanding our still modest market share in this attractive, highly fragmented market. As a reminder, we're in the top 10 largest branded product providers nationwide out of more than 25,000.

As Michael will discuss more, we maintained a strong balance sheet. During the quarter, which puts us in a position of strength to make strategic long-term decisions around the use of capital. In fact, we actively repurchased our own common shares during the second quarter which we consider a compelling value.

I conclude my remarks today with a review each of our business segments beginning with branded products. As I mentioned, we saw a meaningful pick up later in the quarter. The good news is that for Brand Products, our pipeline of business opportunities, in our order, backlog, both remain very strong. Looking ahead, our growing sales team is winning new accounts, growing our wallet here with existing customers and Prospects.

and therefore we expect to continue expanding our still modest market share and this attractive, highly fragmented Market as a reminder we're in the top 10 largest branded product providers Nationwide out of more than 25,000

Michael Benstock: Turning to healthcare apparel, again, we're able to grow top-line revenues despite the economic uncertainty felt by our customers, which impacted our institutional healthcare apparel and our wholesale-related channels. We are carefully and strategically investing to grow both of our digital channels, that's wholesale and direct-to-consumer, and also to further spur demand for our Wink and Carhartt licensed brand products across all our channels. Similar to branded products, we have single-digit market share in healthcare apparel that continues to expand in this attractive long-term growth industry. Wrapping up our business segment discussion, our contact center segment has been more recently facing a couple of headwinds. First, as I mentioned a moment ago, one of P&G's largest customers who operates in the solar industry recently filed for bankruptcy, negatively impacting both second quarter results and future sales. Secondly, we are continuing to experience slower decision-making from prospective customers.

And carheart, license Brand Products across all our channels similar to Brandon products. We have single-digit market, share and Healthcare apparel, that continues to expand and subtracted. Long-term growth industry, wrapping up our business. Segments discussion our contact center segment has been more recently facing a couple of headphones first, as I mentioned, a moment ago, 1 of kgs, largest customers who operates in the Solar industry recently filed for bankruptcy, negatively impacting both second quarter results and future sales

Michael Benstock: While our new sales team is making good progress with RFPs and generating a record pipeline, the pace of revenue from new customers has been historically slow. With that said, we are encouraged by the record pipeline of opportunities and the strong interest from a variety of companies and industries in nearshore outsourcing. Our opportunities are at various stages of customer diligence and negotiation, and we are working diligently to close those opportunities as quickly as possible. I'll now hand it over to Mike to take us through a detailed look at second quarter results, and then we'll open the lines for Q&A. Mike?

Secondly, We are continuing to experience slower decision-making from prospective customers.

While our new sales team is making good progress with rfps and generating a record pipeline, the pace of revenue from new customers has been historically, slow.

Mike Koempel: Thank you, Michael, and thank you, everyone, for joining us today. On a consolidated basis, we grew top-line revenues 9% in the second quarter, our strongest year-over-year growth since the third quarter of last year. Our largest business, branded products, grew revenues by 14%, driven by the timing of orders delivered, organic expansion with existing large enterprise accounts, including higher tariffs, and revenues generated by 3 point following its acquisition in December of 2024. For healthcare apparel, we grew revenues by 6% over the second quarter of last year from volume increases in Wink and Carhartt products. Our contact center business saw a 3% decline in revenues versus the year-ago quarter as continued macroeconomic headwinds resulted in customer downsizing and attrition, outpacing new customer acquisitions.

With that said, we are encouraged by the record pipeline of opportunities and the strong interest from a variety of companies and industries in Nearshore. Outsourcing our opportunities are at various stages of customer diligence and negotiation. And we are working diligently to close those opportunities as quickly as possible. I'll now hand it over to Mike to take us to a detailed. Look at second quarter results and then we'll open the lines for Q&A Mike.

Thank you, Michael. And thank you everyone for joining us today.

On a Consolidated basis. We grew Topline revenues 9% in the second quarter, our strongest year-over-year growth since the third quarter of last year.

Our largest business branded products through revenues by 14% driven by the timing of orders. Delivered organic expansion with existing large Enterprise accounts, including higher tariffs and revenues generated by 3 points. Following its acquisition in December 2024,

For healthcare apparel, we grew revenues by 6% over the second quarter of last year, from volume increases in Wink and Carhartt products.

Mike Koempel: While our sales activity has picked up and our sales force drove the pipeline to a record high, we are experiencing a slower pace of new customer acquisition due to the delay in decision-making from prospective customers that Michael previously mentioned. Our consolidated gross margin was about flat versus last year's second quarter at 38.4%, but up 160 basis points sequentially. SG&A at 36.3% of sales improved from 36.9% in the year-ago quarter, despite recognizing $1.8 million in credit loss reserves across the branded products and contact center segment during the second quarter due to customer bankruptcies. The SG&A rate improvement was driven by leverage on the 9% sales increase, as well as the benefit from cost reduction action that we disclosed in the prior quarter.

Our contact center business. Saw a 3% decline in revenues versus a year ago. Quarter has continued macroeconomic headwinds resulted in customer downsizing and attrition outpacing, new customer acquisitions.

While our sales activity has picked up and our sales force drove the pipeline to a record high. We are experiencing a slower pace of new customer acquisition due to the delay in decision-making from prospective customers that Michael previously mentioned

Our Consolidated gross margin was about flat versus last year's second quarter at 38.4% but up 160 basis points sequentially.

Sgna at 36.3% of sales improved from 36.9% and a year ago quarter despite recognizing 1.8 million and credit loss reserves across the Branded products and contact center segments during the second quarter due to customers bankruptcies.

The sgna rate Improvement was driven by leverage on the 9% sales, increase as well as the benefit from cost reduction actions that we disclosed in the prior quarter.

Mike Koempel: Putting together our stronger revenue with steady gross margin and improved SG&A performance, we generated EBITDA of $6.1 million, up from $5.6 million in a year earlier period. Turning to performance by segment, for branded products, we saw a 100 basis point improvement in gross margin to 35.6%, driven by favorable customer sales mix. The SG&A rate for branded products also improved to 27.5% versus 28.3% in the second quarter of last year, benefiting from leverage on the significant sales increase for the quarter. As a result, branded products drove strong improvement in quarterly EBITDA to $9 million, up from $6.7 million a year earlier. As for healthcare apparel, our gross margin of 35.5% decreased from 38.4% a year earlier due to higher costs of goods, including the recently enacted higher tariff cost in advance of price increases to our customers.

Putting together our stronger Revenue with steady growth margin and improved sgna performance. We generated Eva of 6.1 million dollars up from 5.6 million dollars in a year earlier, period.

Turning to performance by segment for Branded products. We saw a 100 basis point Improvement in gross, margin to 35.6%, driven by favorable customer sales mix.

The sgna rate for Branded products. Also improved the 27.5% versus 28.3% in the second quarter of last year, benefiting from Leverage on the significant sales are increased for the quarter.

As a result branded products drove strong Improvement, in quarterly Eva to 9 million up from 6.7 million a year earlier.

Mike Koempel: Conversely, we were able to hold the line of controllable expenses, and SG&A came in at 35.7% of sales, which was 150 basis points better than the second quarter of 2024, driven by higher sales during the quarter. Overall, our healthcare apparel EBITDA of $800,000 was down modestly from $1.3 million the prior year. Moving on to contact centers, we drove a slightly higher gross margin of 52.6%, up 40 basis points year over year. However, the SG&A as a percentage of revenue increased to 48.4% as compared to 42.4% in the year-ago quarter, primarily due to a $1.1 million credit loss reserve resulting from the solar customer bankruptcies during the quarter. Therefore, contact centers' EBITDA of $1.6 million was down from $3.2 million a year earlier.

As for healthcare apparel, our growth margin of 35.5%. Decrease from 38.4% a year earlier due to higher cost of goods including the recently, enacted higher tariff costs in advance of price increases to our customers.

Conversely, we are able to hold the line on controllable expenses and sgna came in at 35.7% of sales, which was 150 basis points better than the second quarter of 2024 driven by a higher sales during the quarter.

Overall, our healthcare apparel EVA of $800,000 was down modestly from $1.3 million the prior year.

A 40 basis points year-over-year, however, the sgna as a percentage of revenues increased to 48.4% as compared to 42.4% in a year ago, quarter primarily due to a 1.1 million credit loss. Reserve resulting from the solar customer bankruptcy during the quarter.

Therefore contact Center's. Eva of 1.6 million was down from 3.2 million a year earlier.

Mike Koempel: Turning to net interest expense, the second quarter was $1.3 million, which compares favorably to $1.5 million in the second quarter a year ago, benefiting from a lower weighted average interest rate. Putting it all together, we returned to profitability this quarter with net income of $1.6 million, up from the prior year's second quarter's net income of $600,000. On a per-share basis, we produced earnings per diluted share of 10 cents, up from 4 cents compared to the year-ago quarter. Moving on to the balance sheet, at the end of June, we had $21 million in cash and cash equivalent, up from $19 million at the beginning of the year. We continued to actively buy back our own common shares during the quarter as an attractive use of capital, repurchasing about 390,000 shares for approximately $4 million, resulting in an average purchase price of $10.26 per share.

Turning to net interest expense. The second quarter was 1.3 million which compares favorably to 1.5 million in the second quarter a year ago, benefiting from a lower weighted average interest rate.

Putting it all together, we returned to profitability this quarter with net income of 1.6, million up from the prior year, second quarter, net, income of 600,000 dollars.

On a per share basis. We produced earnings per deleted, share of 10 cents up from 4 cents compared to the year ago quarter.

Moving on to the balance sheet at the end of June, we had 21 million dollars in cash and cash equivalents up from 19 million dollars at the beginning of the year.

Mike Koempel: We ended the quarter with $12.3 million remaining under our current buyback authorization of $17.5 million. Taking into account our operating cash flow, share repurchases, and consistent dividend, our net leverage ratio at the end of June was 2.2 times trailing 12 months covenant EBITDA, consistent with the first quarter and up from 1.7 times at the start of the year. We have significant liquidity to execute on our growth plan while continuing to return capital when possible to shareholders, and we remain well within our covenant requirements. I'll wrap up with our full-year outlook, which is unchanged from last quarter, as we still expect revenues to be in the range of $550 million to $575 million, suggesting year-over-year growth at the high end of about 2%.

We continue to actively buy back, our own common shares, during the quarter. As an attractive use of capital. Repurchasing about 390,000 shares for approximately 4 million resulting in an average purchase price of $10.26 cents per share.

We ended the quarter with 12.3 million remaining under our current buyback authorization of 17.5 million.

Taking into account our operating cash flow, share repurchases, and consistent dividends, our net leverage ratio at the end of June was 2.2 times trailing twelve months Covenant, which is consistent with the first quarter and up from 1.7 times at the start of the year.

We have significant liquidity to execute on our growth plans while continuing to return Capital when possible to shareholders and we remain well within our covenant requirements.

I'll wrap up with our full-year outlook, which is unchanged from last quarter. We still expect revenues to be in the range of $550 million to $575 million, suggesting year-over-year growth at the high end of about 2%.

Mike Koempel: While our clients across all three business lines continue to face uncertainty regarding inflation, interest rates, tariffs, duties, and other macro factors, we're well positioned to support their needs regardless of the economic environment, given our strong liquidity and the costs we've already removed from the business while continuing to invest in our own favorable growth prospects. And now, Operator, if you could please open the line, Michael, Jake, and I would be happy to take questions.

While our clients across all 3 business lines, continue to face uncertainty regarding inflation, interest rates tariff duties, and other macro factors, we're well, positioned to support their needs, regardless of the economic environment. Given our strong liquidity and the cost we've already removed from the business while continuing to invest in our own favorable growth prospects.

And now operator, if you could please open the line Michael Jake and I would be happy to take questions.

Operator: Thank you. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. If you wish to cancel your request, please press star two. And if you're on a speaker phone, please pick up the handset to ask your question. Your first question comes from David Marsh from Singular Research. Please go ahead.

Thank you.

If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. If you wish to cancel your request, please press star 2. And if you're on a speakerphone, please pick up the handset to ask your question.

Your first question comes from David Marsh, from singular research, please go ahead.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Taking the questions, and nice to hear you guys a lot more upbeat than you were last quarter. So congrats on the quarter.

Taking the questions and, uh, it's nice to hear you guys a lot more upbeat than you were last quarter. So uh, congrats on the quarter.

Jake Himmelstein: Thank you.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): So first question, Mike, I guess this is for you. I just wanted to zero in on the SG&A a little bit. I see as a percentage of revenue that it is down nicely sequentially and year over year, but you know on a gross dollar basis, it's up, and I'm guessing it's up driven by the higher revenues. So I was just wondering if you might be able to help us kind of quantify as a percentage, like what percentage of SG&A you know is tied to increases and decreases in sales and you know kind of what percentage is more you know kind of fixed recurring type costs.

Um, thank you. So, first first, first question, um,

Mike, I guess this is for you. Um just wanted to zero in on on the sdna a little bit. Um,

I see as a percentage of Revenue that it's it is down um nicely sequentially and your rear. But um you know on a gross dollar basis it's up and I'm guessing it's up driven by the higher revenues. So I was just wondering, if you might be able to help us kind of quantify as a percentage, like what percentage of sgna you know, is tied to, uh, increases in decreases in sales and, you know, kind of what percentage is more, you know, kind of fixed recurring type costs.

Mike Koempel: Sure. You know I would just call out, Dave, from, as we mentioned, our prepared remarks within SG&A for the quarter. So our SG&A is 52.2 million for the quarter. That does include $1.8 million of credit loss reserves charges, so you know more like one-time charges. So if you were to take that out, our SG&A would have been about 35% of sales, so even you know better leverage for the quarter relative to those sales that we drove for the quarter. So again, we would have had a much, much better rate there. You know commissions, particularly within the branded products segment, you know are variable, and they are included within G&A. And we've got some other variable expenses related to sales, obviously.

Mike Koempel: But again, you know by and large, with those credit loss charges, that's what kind of impeded some of the otherwise you know strong improvement in G&A that we would have realized.

Um, again, we would have had a much much better rate there, um, you know, commissions, uh, particularly within the Branded product segment, you know, our variable. Uh, and they are, you know, included within GNA. Um, and and we've got some other variable expenses related to sales, obviously. Uh, but again, uh, you know by and large with that, uh, with those credit loss charges this where that's what kind of impeded, some of the otherwise, you know, strong Improvement in GNA that we would have realized

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Got it. Got it. Thank you very much for that. That's helpful. You know a lot of talk this quarter on different conference calls and different industries about the impacts of AI on business. You know trying to understand you know if there are any opportunities for a superior group to take advantage of AI, you know perhaps to reduce the costs in some of the business lines. Could you just talk about what those opportunities might be?

Got it, got it. Thank you very much for that. Uh, that's helpful. Um, you know, a lot of talk this quarter, um, on different conference calls and different Industries about, uh, the impacts of AI on business. Um, you know, trying to understand, you know, if there are any opportunities for um, Superior Group to uh, to take advantage of AI, um, you know, perhaps um, to reduce costs in some of the business lines. Could you just talk about what those opportunities might be?

Michael Benstock: Yeah. It's a long conversation. I'm going to try to get through it quickly. I'll speak to our contact centers in particular, but then jump over to some of the other businesses. We are employing AI in every facet of our contact centers: talent acquisition and development, onboarding people, enabling agents to build confidence, readiness before even reaching the production floor. In our sales and marketing enablement, we've been identifying high-value prospects, optimizing outreach strategies, really contributing to a more target-efficient go-to-market approach using AI. We have a product called Guru Assist that basically does real-time next-best action guidance to agents on the phone, improves their accuracy, the average handle time, and customer satisfaction, which makes our customer particularly pleased because it's a much more efficient process for them.

Yeah. Uh,

It's a long conversation. I'm going to try to get through it quickly. I'll speak to our contact centers in particular, uh but then jump over to some of the other businesses. We are employing, Ai and everything.

Michael Benstock: In addition to that, you know we've got insights from AI and reporting from AI that's enhanced our ability to really be a whole lot more effective in our business. Our clients are reporting measurable improvements in interaction quality, effectiveness, and overall customer experience. And we're seeing our satisfaction scores, which were already high, even higher than ever. Then you know, you go and you jump into Jake's business. I'll let Jake jump in, and since he's on the call, tell you what we're doing in our branded products business in AI.

Asset of our contact centers Talent acquisition and development. Uh, onboarding people, uh, enabling agents to build confidence Readiness before even reaching the production floor in our sales and marketing enabling enablement. Uh, We've, uh, in, identifying high-value prospects optimizing Outreach strategies, uh, really contributing to more Target. Efficient. Go to market approach, uh, using AI. We have a product called, uh, Google Guru assist that basically does Real Time. Next best action guidance, uh, to agents on the phone, uh, improves their accuracy, the average handle time and, and, and customer satisfaction, which makes our customer uh, particularly pleased. Uh, because it's a much more efficient uh process for them. Uh in addition to that uh you know, we've got insights uh from AI uh and Reporting from AI. That's enhanced our ability to

To really be a whole lot more effective in our business. Our clients are reporting measurable improvements in, uh, interaction quality, uh, effective than an overall customer experience. Uh, and we're seeing our satisfaction scores which were already high, uh, even higher than ever. Uh, then, you know, you go and you jump into uh, into Jake's business to let Jake jump in and since he's on the call and uh tell you what we're doing in our branded products business in AI.

Jake Himmelstein: Yeah. Thanks, Michael, and nice to meet you, Dave. So what I'd say is on the branded products side, the thing that takes the longest amount of time for us to do by far is product selection. Someone comes to us and says, "We're having a trade show. We're having an event. We're doing a holiday party. Go select items for us." That is by far the most time-consuming and labor-intensive aspect of the branded products business. We're putting AI agents into our technology to allow us to basically do product selection and mockups using artificial intelligence rather than human beings.

Yeah, thanks Michael and uh nice to meet you, Dave. So what I'd say is on the on the Branded products side, the thing that takes the longest amount of time for us to do

Jake Himmelstein: So you might ask, "Hey, I need a holiday gift for 500 employees, and it's been $100 an employee." Rather than one of our people going and going to 10 websites and finding items and mocking them up, we can use an AI agent to do all of that for us and present ideas that, quite honestly, are going to select better ideas than any human being can select because it's going through all the history of what you've ordered in the past, what's trending now in the marketplace. And that is better for us from an employee leverage perspective and also a better experience for the client. So that's a huge advantage for us that the rest of our industry just doesn't have the technical wherewithal nor the financial capability of putting something like that in place.

By far is product selection, right? Someone comes to us and says we're having a trade show. We're having a uh, you know, an event we're doing a holiday party, go select items for us. Uh that is by far the most time-consuming and labor intensive aspect of the Branded products business. Uh we're putting AI agents into our technology to allow us to basically do products selection and mockups using artificial intelligence rather than human beings. So you might ask, hey, I need a holiday gift for 500 employees. I'm going to spend a hundred dollars in employee rather than 1 of our people going and going to 10 websites and finding items and mocking them up. We can use an AI agent to do. All of that for us and present ideas, that quite honestly are going to select better ideas than any human being can select. Because it's going through all the history of what you've ordered in the past what's trending now on the marketplace and that is better for us from a employee leverage perspective and also a better experience for the client. So you know that that's a huge Advantage for us that

The rest of our industry, it doesn't have the technical wherewithal, nor the financial capability of of putting something like that in place.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): That's super helpful and sounds very positive for the outlook going forward. I just, if I could sneak one more in before I turn it over, you guys reiterated some revenue guides for the year. That range looks quite reasonable given where you are here halfway through. Are you feeling a little bit better about visibility in the back half of the year? And is that giving you the confidence to reiterate that range here?

That's, uh, that's super helpful and, uh, sounds very positive for, uh, for the Outlook going forward. Um, I just, if I could sneak 1 more in before I turn it over, um, you guys reiterated some Revenue guidance for a year, um, that, you know, that range, uh, you know, looks you know quite reasonable given where you are here halfway through, um, are you, um, you know, are you, are you feeling a little bit better about visibility in the back half of the year and and and you know, is that giving you the confidence to to reiterate that range here?

Mike Koempel: Sure. I think, Dave, you know the message I think you get from the prepared remarks is you know we're seeing mixed results, mixed reactions to the current environment. You know clearly, in our branded products segment, very strong quarter. You know good growth in healthcare top line as well, but you know feeling some of the initial impacts of tariffs. So I think that you know I think we're feeling you know obviously very comfortable with the range that we have, which is why we reiterated the range. But there's still you know a level of uncertainty out there. China still you know has the possibility of changing. Obviously, there was a tariff update given last week, which does provide a little bit more certainty in certain other countries.

Sure. I think Dave, you know, the, the message, I think you get from the prepared remarks is, you know, we're seeing mix, we're seeing mixed

Our branded products have been segmented, very strong quarter, uh, you know, good growth in, uh, in healthcare Topline as well. But, but, you know, feeling some of the initial impacts of tariffs.

Mike Koempel: So it's still some uncertainty, but I would say that you know the performance of the second quarter being you know improved sequentially and up over last year gives us obviously a little bit more confidence you know as we head into the third and fourth quarter. And we're certainly working very diligently to keep that momentum going into the back half of the year.

So I think that, you know, I think we're, we're feeling, you know, obviously very comfortable with the range, uh, that we have, which is why we reiterated the range, but there's still, you know, a level of uncertainty out there. Um, China is still, you know, has the possibility, um, of changing obviously the, the there was a tariff, uh, tariff update given last week, which does provide a little bit more certainty in certain other countries, so still some uncertainty. But I would say that, you know, the performance of the second quarter being, you know, improved sequentially and up over last year, gives us obviously a little bit more confidence. You know, as we head into the uh the the third and fourth quarter, and we're currently working uh very diligently to keep that momentum uh, going into the back half of the year.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Thanks, Mike. Appreciate those comments. I'm going to yield the floor. Thanks a lot for taking the questions, guys. Appreciate it.

Thanks, Mike, appreciate that. Co those comments. Um, I'm going to yield the floor. Thanks a lot for taking the questions, guys. Appreciate it.

Operator: Thank you. Your next question comes from Keegan Cox from DA Davidson. Please go ahead.

Thank you. Yeah, next question comes from Keegan Cox from da Davidson, please go ahead.

Jake Himmelstein: Yeah. Nice quarter, guys. My question is going to be on everyone's favorite topic, tariffs. I was wondering if you guys saw any customer pull forward related to tariffs this quarter and then also what you're seeing in inventory because I see you had a little bit of a build. Yeah. Keegan, this is Jake Himmelstein. I'll start there with what I'm seeing in the branded products segment. You know, certainly from a tariffs perspective, it puts some cost pressures and supply chain challenges around the business. You know, I think that with some of the more recent deals that have happened from the US with a place like China and Vietnam, it's eased a little bit of that pressure. You know, we've responded to these tariffs with very strategic inventory buys, leveraging long-term supplier relationships, leaning on our suppliers to get better pricing in some cases.

Yes, nice quarter guys.

Um, my question is going to be on, uh, everyone's favorite topic: tariffs. I was wondering if you guys saw any customer pull forward related to tariffs this quarter. And then also what you're seeing in inventory, because I see you had a little bit of a build.

Jake Himmelstein: And the beauty of the branded products business is the vast majority of it is made to order, meaning the orders come in and we price them to order. And so if there are tariffs there, we will add in that tariff cost and for the most part be able to pass it through to our clients. So while certainly tariffs are a headwind, we've been very proactive, and we've been able to kind of use it as a competitive advantage in the environment. Our competition, shockingly, has basically buried their head in the sand the last four or five months on the tariff side. And we've been very aggressive, doubling down, picking up new clients, picking up new sales reps from some of our competitors.

Yeah, this is this is Jay Kimmel Stein. I, I'll, I'll start there with what I'm seeing in the Branded products segment. Uh, you know, certainly from a tariff perspective, there it puts some cost pressures and supply chain challenges around the business. Uh, you know, I I, I think that with some of the more recent deals that have happened, uh, from the US with, uh, just like China and Vietnam, it's eased a little bit of that pressure. Uh, you know, we've responded to these tariffs with very strategic inventory, buys, leveraging, long-term supplier, relationships leaning on our suppliers, uh, to get better pricing in some cases. Um, and and the beauty of of the Branded products business is the vast majority of it is made to order, meaning the orders come in, and we price them to order. And so if there are tariffs there we will add in that tariff cost and uh for the most part be able to pass it through to our clients. So while certainly tariffs are a headwind, we've been very proactive.

Jake Himmelstein: And you know, it's kind of been our MO throughout our history that when things are challenging, when there's a difficult economic environment, you know, we get more aggressive. And it's been really beneficial for us.

Um and we've been able to kind of use it as a competitive advantage in the environment. Our our competition I I shockingly is basically buried their head in the Sands, the last 4 or 5 months on the Tariff side and we've been very aggressive doubling down. Picking up new clients picking up new sales reps from from some of our competitors and uh, you know, it's kind of been our Mo throughout our history. Is that when when things are challenging, when there's a difficult economic environment, you know, we get more aggressive and it's been really beneficial for us.

Michael Benstock: I'll add something.

Jake Himmelstein: And Keegan, we did encourage our customers to try to order early, particularly with merchandise that was sitting in the US already from some of our suppliers that would get low-volume shipped to them. I have to tell you, I would have expected more to have jumped on that opportunity and saved a boatload of money doing it. But you'd be surprised how few did. Enough did it that it definitely helped a little bit. I wouldn't say it was significant though. And then in our healthcare business, I don't think that happened at all. I think quite the contrary. On the institutional side of the business, I think everybody's just holding off, waiting to see what's going to happen. And I think they're waiting to see what's going to happen with Medicare and Medicaid reimbursements in healthcare too as well.

Jake Himmelstein: That's on the institutional side and how they're going to spend money and what hospital sentences are going to be and what's going to be covered and what's not. But on the consumer side, we were very encouraged by what we saw. Foot traffic in retail has improved with our scrubs channel, and our direct-to-consumer also was quite robust. So you know, a little bit of a mixed bag. Obviously, the office gurus was not really impacted. There was no pull forward.

Oh, oh. And we do, we did encourage our customers to try to order early particularly with merchandise that was sitting in the US uh already from some of our suppliers uh, that would get loaded and shipped to them. I I have to tell you, I would have expected more to have jumped on that opportunity, uh, and save the boatload of money doing it. Uh, but you'd be surprised, uh, how few did, uh, enough did it? That, it, it definitely helped a little bit. I wouldn't say it was significant though and then in our Healthcare business. Uh, I I don't think that happened at all. I think Quite Contrary on the institutional side of the business, I think everybody's just holding off waiting to see what's going to happen. Uh, and I think they're waiting to see what's going to happen with Medicare and Medicaid reimbursements and healthcare too as well. Uh, that's on the institutional side, uh, and how they're going to spend money, and what hospital census are going to be and what's going to be covered, and what's not. Uh, but on the, on the consumer side,

Uh, we're very encouraged, uh, by what we saw foot traffic in retail, has approved, uh, with our, with our scrubs channel, uh, and uh, and our direct to Consumer, also, uh, was quite robust. So, uh, you know, a little bit of a mixed bag to obviously, uh, the officers was not really impacted, uh, there was no pull forward.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Got it. And then Keegan, did you have a question about inventory overall?

Got it. And then, oh,

And then taken, did you have a question about inventory overall?

Jake Himmelstein: Yeah. Just the build there this quarter.

Mike Koempel: Yeah. Okay. Right. I'll hit that. So we did have a build in inventory primarily within our healthcare business. You know, that's due as we're looking for a stronger back half pickup in trend in healthcare. And then last year, we did experience stockouts, particularly on the institutional side of our healthcare business, so filling in inventory where we felt necessary to support sales. Again, to some extent, this is, call it, seasonal or cyclical. So again, we're building in preparation for an upward trend in the back half of the year consistent with our overall guidance. And then obviously, we would expect those inventories to normalize on the other side of those sales as we move forward.

Yeah, just to build this quarter.

Um you know, that's that's due as we're looking for a stronger, you know, back half, you know, pick up in Trend uh in healthcare. Um and then last year we did experience.

Stockouts, uh, particularly on the institutional side of our Healthcare business. So filling in inventory, where where we felt necessary to support sales, um, again, to some extent, this this is call it, seasonal or cyclical. So again, we're, we're building in preparation for, uh, an upward Trend in the back half of the Year consistent with our overall guidance. Um, and then obviously we would expect uh those inventories to normalize um on the other side of of those sales as we move forward.

Jake Himmelstein: Got it. And then just to follow up, I wanted to get your guys' thoughts on the outlook given the recent weaker employment report and job revisions, and then if you've noticed any changes in customer order patterns.

Follow up. I wanted to get your guys' thoughts on the Outlook given the recent weaker employment report and uh job revisions. And then if there if you've noticed any changes in customer order patterns

Michael Benstock: I would make a comment that you know there hasn't been a great reduction in healthcare in hiring. As a matter of fact, there's still a huge shortage of healthcare workers. So healthcare really hasn't been impacted very much. It's quite the contrary. As we've said on previous calls, a lot of our retail customers, particularly you know grocery, fast food, are trying to automate as much as they can. So they've been doing very little hiring except to replace employees over the past year and a half. But yeah, there's a little bit of an impact on that. No doubt that some of our customers are holding back because you know they're seeing things slow down a little bit. But you know grocery is still doing well. But I mean, we've all been in grocery stores where they're trying to get customers to do their own checkout now.

I I I would make a comment that, uh, you know, there hasn't been a great reduction uh, in health care uh in hiring. As a matter of fact, there's still uh, a huge shortage of healthcare workers, so Healthcare really hasn't been impacted very much. Uh, is quite contrary uh, as we've said on previous calls, a lot of our retail customers particularly

Michael Benstock: And some are successful, and some have actually gone away from that because the shrinkage was too great from theft. So it's kind of a mixed bag. I have not seen anything that indicates to me that our business has been significantly impacted by any kind of labor reductions in the workforce.

Grocery fast food are trying to automate as much as they can, so they've been doing very little hiring, uh, except to replace employees, uh, over the past year and a half. Uh, but uh, yeah, there's a little bit of an impact on that. No, no doubt that, uh, that some of our customers, uh, are holding back, uh, because, uh, you know, they're they're saying, uh, things slow down a little bit. Uh, and, uh, but, uh, you know, grocery is still doing well. Uh, but, uh, grocery. I mean, we've all been grocery stores where they're trying to get customers to do their own checkout now, uh, and uh, and, and, and some are successful and some have actually gone away from that because the, the shrinkage was too great, uh, from theft, uh, so it kind of a mixed bag. It's I, I have not seen anything that indicates me that that our business has been significantly impacted by any kind of Labor. Uh,

Jake Himmelstein: And Michael, one thing that I'll add to that is on the branded products side, we do quite a bit with technology companies. And with AI, there's a lot of money flying around, and there's a lot of hiring. And that has been very beneficial to us, where we've seen a lot of our technology clients come out of the tariff situation has maybe not fully resolved, but at least normalized. We've seen a lot more spend and decision-making open back up, which has been very beneficial for us. Thank you.

Reductions in the workforce.

And and Michael 1 thing that I'll I'll add to that is on the Branded products. I would do quite a bit with the technology companies and and with AI, there's a lot of money flying around and there's a lot of hiring and that has been very beneficial to us or we've seen uh, a lot of our technology clients, uh, come out with tariffs situation has maybe not fully resolved, but at least normalize we've seen a lot more spend and and decision-making open back up.

Uh, which has been very beneficial for us.

Thank you.

Operator: Thank you. The next question comes from Kevin Feinke from Barrington Research. Please go ahead.

Thank you. The next question comes from Kevin Stein key from barington research, please go ahead.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Great. Thank you. I just wanted to dig a little bit more into the strong growth in branded products and just kind of apportion the drivers of that. You talked about market share gains. I think you also mentioned timing of orders, maybe an improvement, you know, in terms of customer sentiment. Yeah. So I just, if you could talk about really, is that most of that growth been driven by the market share gains? Like you said, competitors really pulling back, or have, you know, customers have become more comfortable with moving forward in this environment despite some of the uncertainties?

Great, thank you. I just wanted to dig a little bit more into the

The strong growth and branded products. Um, and just uh,

Kind of a portion. You know that the drivers of that, um, you talked to about market, share gains. I I think you also mentioned timing of orders, maybe an improvement, you know, in terms of customer sentiment. Yeah. So I just if you could talk about really is that most of that growth been driven by the the market share gains, like you said competitors really pulling back, um, um, or had

You know, customers have become more comfortable with moving forward in this environment, despite some of the uncertainties.

Jake Himmelstein: Hey, Kevin. Yeah, this is Jake. I'm happy to talk about that. It is really a combination of all of those things. And earlier, we talked about how pipeline and backlog were extremely strong. And so even in spite of the tariff environment, we saw that pipeline and backlog and knew that was going to pull through. And sure enough, it did. And we've been really happy with those gains. And our pipeline still remains very healthy, continuing to see a lot of organic expansion with some of those key enterprise accounts, particularly on the tech side that I spoke about earlier. But yes, look, we did have some Q2 pull forward, some orders that we're maybe going to deliver later in the year that pulled forward. A lot of this was potentially looking at tariffs and trying to pull orders a little bit earlier.

Hey Kevin. Uh, this is Jake. I I have to talk about that. It it is really a combination of all of those things. And, you know, order we talked about how Pipeline and backlog were extremely strong and so even in spite of the, you know, tariff environments. We saw that Pipeline and backlog and knew that was going to pull through and and sure enough it did uh and and we've been really happy with that.

Jake Himmelstein: But really, that's, in my view, a testament to the strength of our operations team and being able to pull orders into the second quarter. But you know, I still think we're going to have a really solid second half of the year. Things look very strong. Pipeline backlog both very, very encouraging. And yeah, we're starting to see those decisions open up again where people were very apprehensive in the second quarter because of the tariffs. Starting now into the third quarter, we've seen really encouraging signs of momentum from our clients across all industries.

The pull orders a little bit earlier, but, you know, really, that's in my view, a testament to the strength of our operations team, um, and and being able to pull orders in to to the second quarter. But, uh, you know, I, I still think we're going to have a really solid second, half of the year, uh, things look very strong pipeline backlog, both very, very encouraging, uh, and yeah, we're starting to see those decisions. Open up again, where people were very apprehensive in the second quarter, uh, because the tariffs starting now into the third quarter, we've seen, uh, really encouraging signs of momentum from from all our clients across all Industries.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Okay. Yeah. Thanks for the insight on that. And you mentioned when talking about healthcare, expecting a stronger second half of 2025. Again, I think you talked about better trends in, I guess, retail and direct-to-consumer. Is that where you're expecting the favorable trends to continue? You know, it sounds like the institutional is still pretty slow and uncertain. But any more comment on that would be helpful.

Okay, yeah, thanks for the Insight on that. Um, and you mentioned, um,

When talking about health care.

Um, expecting a stronger second half.

Of 2025. Um,

again, I think you talked about better Trends in

Michael Benstock: Yeah. We expect the institutional side to pick up. There's only so long they can go and process the same uniforms in their laundry before they basically come to end of life and have to replace them, Kevin. So you know they brought down their inventories for sure. There's some of the shelf stock inventory. Maybe they haven't bought as much reserve inventory to feed that, to feed what is really, you know, a huge need in their laundries. But we expect that to return. We expect consumer to, you know, the second half of the year generally is better. You had a lot of holidays.

I guess retail and and and direct to Consumer is that where you're expecting the favorable Trends to continue? You know, it sounds like the institutional is still uh, pretty slow and and uncertain. But any any more comment on that to be helpful, is it

Michael Benstock: You've got all Prime Days, and you've got all the, you know, Black Friday or Turkey 12 and all these other, you know, selling periods in the second half of the year that always felt very helpful, as well as holiday gifting and so on. So we expect that the second half of the year in healthcare to be better. I think there's, you know, it's no great secret that Amazon is a large customer of ours, and Amazon has made some decisions with respect to how much inventory they're going to carry on the shelf. And so they're carrying less inventory on the shelf. I mean, that's been widely publicized. And as a result, they've been able to get by by not ordering as much in the prior quarters. But that, too, will come to an end, and we expect that to pick up as well.

Yeah, we we expect the institutional side to pick up. Uh, there's only so long, they can go and process the same uniforms in their laundry before they basically come to end of life and have to replace them. Kevin. So, yeah, they brought down their inventories for sure. There's some of the Shelf stock inventory. Uh, maybe they haven't bought as much Reserve. Inventory to feed that uh to feed. What is really, you know, a huge need uh, in their, in their laundry. Uh but uh, we expect that to return. Uh, we expect consumer to even, you know, the second half of the Year. Generally is better. You have a lot of holidays. You've got uh, you know, we got all prime days and you've got all the, all the, you know, uh, Black Friday or turkey, 12, and all these other, you know, selling uh periods in the second half of the year that are always felt very helpful as well as holiday gifting and so on. Uh, so we expect that the second half of the year in healthcare to be better. I think there's uh uh, you know it's

No great secret that Amazon uh, is a large customer of ours in Amazon, has made some decisions with respect to how much inventory. They're going to carry on the Shelf.

Michael Benstock: So all things look good for healthcare for the second half of the year.

Uh, and, uh, and so they're carrying less inventory on the Shelf. I mean, that's that's been widely publicized. And as a result, they're, you know, they've been able to to get by, by not ordering as much in the, in the prior quarters. Uh, but that 2 will come to an end, uh, and we expect that to pick up as well. So, uh, all things look, good for for healthcare for, for a second half of the year.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Okay. Good. And just also on contact centers, you mentioned the strong pipeline there, but kind of historically slow decision-making. You know, what do you think it takes to get that pipeline moving and converting again? Is that, I mean, again, is that something that your clients eventually need to do, or they can kind of hold off on that? And then definitely, you know, I think there'd be some aspect of that perhaps being an efficiency play or a cost-savings play for them in some respects. But I don't know. Any thoughts on that?

Okay, good. And, uh, just also on contact Center's, you mentioned the strong pipeline there, but

Kind of historically slow decision-making. Um, you know what? What do you think it takes to get that pipeline moving and converting again? Is that, I mean, again, is that something that...?

Michael Benstock: It's a good question. We think we're there. When you say, you know, what can we do to improve the pipeline? We're spending more money on marketing ever to drive people to us organically. Our sales force is bringing us more opportunities than ever. We're using lots of technology to data mine, to be able to find new customers both in all the verticals that we're already in and even some new ones. We're not leaving a stone unturned. The good news is that, you know, we measure where things are in our pipeline. And I can tell you that I'm not talking about opportunity pipeline.

Your clients eventually need to do or they can can kind of hold off on that. And then definitely, you know, I think there'd be some aspect of that, perhaps being an efficiency player, or a cost savings. Play for them in some respects but um, I don't know. Any, any thoughts on that? Do you have a question? Uh, we think we're there when you say, you know, what can we do to improve the private pipeline? Uh, we're spending more money on marketing, ever, to drive people to us. Uh, organically, uh, our sales force is bringing us more opportunities than ever. Uh, we're using lots of Technology, uh, to data mine to

Michael Benstock: I'm talking about customers who we are at least 95% certain we're going to win their business because we've exchanged contracts, pricing has been agreed to at this point, we've redlined back and forth, and we are very, very close to consummating a lot of deals, which will impact mostly fourth quarter, but even more so first quarter of next year. But we're very encouraged by both our, I would call that backlog, and as well as opportunity pipeline, which is growing, and as Mike said earlier, is the largest we've ever seen.

Uh, which is growing and as Mike said earlier, uh, is the largest we've ever seen.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Okay. Well, that's good to hear. Thanks for taking the questions. I'll turn it back over.

Okay. Well, that's good to hear. Uh, thanks for taking the questions. I'll, I'll turn it back over.

Jake Himmelstein: Thank you, Kevin.

Thank you. Kevin.

Operator: Thank you. Your next question comes from Jim Sadussi from Sadussi Inco. Please go ahead.

Thank you. Your next question comes from Jim sudati from sudati in car, please go ahead.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Hi. Good afternoon. Thanks for taking the questions. So Mike, you know, you called out that 1.8 million of credit loss reserve, you know, which would bring your SG&A down to the, you know, around 35%. Is that a good metric for the end of the year? Do you think SG&A right around 35% is realistic?

Hi, good afternoon. Thanks for taking the questions. So Mike, you know you called out that 1.8 million of credit loss Reserve you know which would bring your estimate down to the, you know, around 35% is? Is that a good? Uh, is that a good metric for? Uh, the end of the year? Do you think sg&a right around 35% is realistic?

Mike Koempel: I think that's a reasonable target, Jim. You know, I mean, obviously, it depends on where we fall into that range. But I think when you take into account, you know, the cost reductions that we talked about in the first quarter call that have begun to kick in during the second quarter, obviously, we'll see more of a benefit of that going forward. You know, that should enable us to get overall a little bit of leverage for the full year.

I I think that's a, you know, that's a reasonable Target. Uh, Jim. Um, you know, I mean, obviously depends on where we, we fall into that range, but I think when you take into account, um, you know, the cost reductions that we talked about in the first quarter, call that have begun to kick in during the second quarter, obviously, we'll see more of a benefit of that going forward. Um, you know, that should enable us to get, uh, overall, a little bit of Leverage, uh, for the full year.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): All right. And you also mentioned that the three-point acquisition was starting to contribute to branded products. Are there other three points out there? And you know, how aggressive are you at this point on the acquisition side?

All right, and you also mentioned that the 3-point acquisition, we started to contribute to branded products. Um, are are there other 3 points out there? And you know how, how aggressive are you at this point on the acquisition side?

Jake Himmelstein: Yeah, I could take that one. This is Jake. Well, there are... I want to take it.

I can take that 1. This is Jake. Uh there there are

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Go ahead, Jake.

I want to take it like,

Jake Himmelstein: Yeah. There are, look, there are 25,000 companies in our industry that are distributors just like us, Jim. So you know, there are quite a few other three points out there. I would say at this point, we're opportunistic. If there's a great opportunity out there, we'll certainly look at it. But we are going to kiss a lot of frogs. We're going to talk to a lot of companies that are not the right fit, and we will be very selective to find the right ones. But the easy answer to the question is that there are a lot of companies just like three-point out there that have owners that are aging out that want to look for an exit, and we are a very appealing landing spot for them.

like,

Oh yeah. There are. There are like their 25,000 companies in our, in our industry that are Distributors just like, uh, just like us, uh, Jim. So, you know, there are there are quite a few, other 3 points out there. Uh, I I would say at this point, we're opportunistic. Um, if there's a great opportunity out there, we'll look at it. But we are, uh, we are going to kiss a lot of frogs, we're going to talk to a lot of companies that are not the right fit and uh we will be very selective to find the right ones. Uh, but the easy answer to the question is that there are a lot of companies just like 3 point out there that have uh owners that are aging out, that that want to look for an exit. And we are a very, very appealing, landing spot for them.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): And then let me add to that, Jim Simmons, Michael, that you know we spoke about on the last couple of calls our reluctance to jump into any acquisitions, you know, considering all the uncertainty around us. But I think you should get a sense from this call that we're past that now. And we're, you know, we had one bad quarter this year, first worst quarter we've had in a couple of years, in many years, but maybe decades. But you know, having an operational loss the way we did. But now that we're on the right path, I think we are very serious about trying to partner with the right companies and find the right opportunities. But we're going to, as Jake just said, we're going to be very selective.

This is Michael that, you know, we spoke about on the last couple calls are reluctant to, to jump into any Acquisitions. You know, considering all the uncertainty around us, but I think uh you should get a sense from this call that we're past that now. Uh and we're, you know, we had 1 bad quarter this year. First first quarter we've had in a couple of years. Uh many years

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): They have to be quickly creative, and they have to not distract us from organic growth because we believe, as proven this quarter, we're able to organically grow. And obviously, that's the best thing we can do for our shareholders. Okay. And then the last one for me is on tariffs. You know, India has been in the news, I guess, the last day or so. Potential tariffs there. Is India a supplier for any of your components? Could that be an issue for you?

But maybe decades, uh, but uh, you know, having an operational loss, the way we did. Uh, but uh, now that we're on on the right path, I think we are, we are very serious about trying to uh, partner with the right companies and find the right opportunities. Uh but we're going to as, as Jake just said, we're going to be very selective. They have to be quickly accredited.

They have to, you know, not distract us from organic growth because we believe the organization has proven this quarter, uh, we're able to organically grow. Uh, and obviously, that's the best thing we can do for our shareholders.

Okay. Uh and then last 1 for me is on tariffs, you know. Uh, India has been in the news uh I guess the last day or so uh, potential terrorists. There is is India. Um, a supplier for any of your components. Could that be an issue for you?

Michael Benstock: Very, very little. And they're not exclusive. In some cases, we could, in a moment, switch to other countries, which we will. We do a little bit of knit shirts there and a couple of other products, but very, very little. We do have an office in India, as you know, with over 400 people, and it's supporting particularly branded products, but from a programming standpoint, really supporting all of our businesses. But that has not been impacted at all.

Very, very little and, and they're not exclusive in some cases we we could in in a moment, uh, switch to other countries which we will. Uh, you know, we do we do a little bit of mid shirts there and, and a couple other products, but very, very little. Uh, we do have an office in India, as, you know, with over 400 people and its supporting, uh, uh, particularly branded products. But from a programming standpoint really supporting all of our businesses, uh, but that has not been impacted at all.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Okay.

Michael Benstock: All right. Thank you.

Okay, all right. Thank you.

Operator: Thank you. Your next question comes from Michael Kempinski from Noble Capital Markets. Please go ahead.

Analyst (various: David Marsh, Keegan Cox, Kevin Feinke, Jim Sadussi): Thank you, and congratulations on your good quarter. A couple of questions. So in the last call, you indicated that there would be some mitigation efforts to offset tariffs. And I know we talked a little a lot about tariffs, including the prospect of manufacturers taking a portion of the tariff impact. Can you just add a little color on how those mitigation efforts went? Have all of those mitigation efforts been implemented at this point? And were there price increases already factored into the second quarter?I'll

Thank you. Your next question comes from Michael Capinski from Nobel Capital Markets. Please go ahead.

Already factored into the second quarter.

Operator: start with the last portion of that. Price increases mostly kick in during the third quarter, the very end of second quarter, some of them, and most of them third quarter. as far as the mitigation activities, we were, successful in what we contemplated we would be able to push back and, and adjusted our pricing to our, to our, customers accordingly, not trying to take unfair advantage of them. but, we feel like we've landed in a really good place. and, from a competitive standpoint, I don't want to get too specific about what we did. but, I I feel we're we're in very good stead. And really, I believe that going forward, you know, we we protected our margins pretty much.

uh,

I'll start with the last portion that price increase is mostly kick in during the third quarter. The very end of second quarter 7, the most of them third quarter. Uh, as far as the mitigation activities, uh, we were uh, successful and what we contemplated we would be able to push back and uh and adjusted our pricing to our to our uh, customer's accordingly. Uh, not trying to take unfair advantage of them. Uh but uh, we feel like we've landed in a really good place.

Uh, and, uh, from a competitive standpoint, I don't want to get too specific about what we did. Uh, but, uh, I feel we're in very good stead, and really, I believe that going forward, uh, you know, we protected our margins pretty much.

Michael Kempinski: And it seems like you're pretty sanguine about the outlook. But obviously, given where the trend lines are, you're still a little cautious about the second half. Is that largely because it seems, at least, that the tariff impact largely would fall in the second half, right? Because most lead times and shipping and things like that probably wouldn't affect it the second quarter as much as it probably would like maybe the third quarter or the fourth quarter. I was just wondering if you can just discuss those mitigation efforts as it might impact the margins. And I know you talked a little bit about SG&A, but I was just wondering, where's the sense of caution that you have? Is it on the margin or is it on the revenue side as we kind of look towards the second half?

And it seems like you're pretty sanguine about the outlook, but obviously, given where the trend lines are, you're still a little cautious about the second half. Is that largely because it seems at least that the tariff impact would fall in the second half? Right? Because most lead times and shipping things like that probably wouldn't affect it as much in the second quarter as it probably would, like maybe the third quarter or the fourth quarter. I was just wondering if you could discuss those mitigation efforts as they might impact the margins. And I know you talked a little bit about SG&A.

But I was just wondering where's this sense of caution that you're you you have is it on the margin or is it on the revenue side? Um, as we kind of look towards the second half

Operator: Yeah. If you take the first half of the third quarter of this year, very little impact from margins except in Jake's business, of course, on the branded merchandise side of his business. You know, a lot of ad hoc orders there that we already price in the tariffs into every single order as they come up. But remember, we're keeping, for the most part, at least six months of inventory on the shelf. So, you know, the impact to our most of our inventory is still sitting on the shelf at pre-tariff ranges. And, but we'll start seeing some impact in the fourth quarter. although the fourth quarter is usually from the uniform side of the business, it's probably a slower quarter for us. you know, most retailers are are more focused on on driving their sales in the fourth quarter and spending money on new uniforms.

Operator: so, I don't I don't think tariffs are going to play a huge part in the second half of this year. you know, we have raised prices to the extent we thought they would, and and kind of spread it out over over the second half of the year. and we'll look at it again next year to see if we need to raise prices yet again. it's a very fluid situation. generally, we have to give 90 days' notice to most of our customers on raising prices. And we'll get to the end of this year and we feel we need to do another price raise, we will.

Yeah, if you take the first half for the side, you know the third quarter of this year uh very little impact from margins except in Jake's business, of course on the Branded merchandise side of his business, you know, a lot of ad hoc orders there that we we already priced in the tariffs into every single order, uh, as they come up. But remember, we're, we're keeping for the most part 6, at least 6 months of inventory on the Shelf. Uh, and so, uh, you know, the, the impact to our lot, most of our inventory is still sitting on the Shelf at pre- tariff, uh, ranges. Uh, and uh, but we'll start seeing some impact in the fourth quarter. Uh, although the fourth quarter is usually from the uniform side of the business is probably a slower quarter for us. Uh, you know, most retailers are are more focused on on driving their sales in the fourth quarter than spending money on new uniforms. Uh, so uh I I don't I don't think terrible

Actually going to play a huge part in the second half of this year. Uh, you know, we have raised prices to the extent. We thought they would uh, and kind of spread it out over over the second half of the year. Uh, and we'll look at it again next year to see if we need to raise prices yet again. Uh, it's a very fluid situation. Uh, generally we have to get 90 days, notice the most of our customers on raising prices and we get to the end of this year and we feel we need to do another price raise we will

Michael Kempinski: Gotcha. And then in terms of the call centers, what was, and maybe you may have said this and I apologize, what was the impact from the solar company in terms of revenue? What was the revenue impact in the second quarter?

Gotcha. And then in terms of the call centers, what would? And maybe you may have set this and I apologize. What was the impact from the Solar Company in terms of Revenue? What was the revenue impact in the second quarter?

Mike Koempel: The revenue impact in the second quarter was was relatively, small. we started to, pull back, on that, particular customer. We'll be, you know, transitioning, out of that customer, over time. But the impact in in Q2, the the biggest impact, was, was again the the credit loss that we had to take on on prior, prior services. But we continued to service them, post-petition, albeit at a smaller scale. So again, some impact, but not major. The impact will be felt more significantly from a revenue standpoint as we move forward.

The, the revenue impact in the second quarter was was relatively, uh, small. Uh, the start we started to, uh, pull back um, on that. Uh, particular customer will be, um, you know, transitioning, uh, out of that customer, uh, over time. But the impact in in Q2 the, the biggest impact, um, was, uh, was again the, the credit loss that we had to take on on prior, um, prior services, but we continue to service them uh post petition, uh, albeit at a smaller scale. So again some impact. Uh but not major, the impact will be felt more significantly from a revenue standpoint as we move forward.

Michael Kempinski: Can you, kind of quantify what that revenue impact might be going forward? And it seems like just from your commentary, you anticipate maybe the third quarter to still to be down, maybe, and the fourth quarter to be up given the pipeline that you have, or maybe you can just clarify that.

Can you kind of quantify what that revenue impact might be going forward?

And it seems like, just from your commentary, you anticipate maybe the third quarter is still to be down, maybe in the fourth quarter to be up, given the pipeline that you have. Or maybe you can just clarify that.

Mike Koempel: I mean, I I I can't give specific, on on specific revenue by customer, but I would say that, you know, as we look at the contact center, you know, forecast for the balance of the year, certainly, there's a a headwind, if you will, associated with the bankruptcy. But as Michael alluded to, the team's working to convert what's sitting in the pipeline as quickly as possible. Again, a lot of that might will will will generate revenues next year, but but there's also certainly the possibility that the conversion of that pipeline could offset some of that softness here in the third and partially in the fourth quarter.

Why that might will will uh will generate revenues uh, next year. But but there's also uh certainly the possibility that the conversion of that pipeline could offset some of that softness uh here in the third and and partially in the fourth quarter.

Michael Kempinski: Gotcha. All right. That's all I have. Thank you.

Gotcha. All right. That's all I have. Thank you.

Michael Benstock: Thank you. That does conclude our time for questions. I'll now hand back to Michael Benstock for closing remarks.

Thank you that does conclude our time for questions. I'll now hand back to Michael benstock for closing remarks.

Operator: Thank you, operator. We certainly appreciate everyone being on the call. I want to thank our loyal customers and our dedicated employees for delivering an improved performance this quarter. Despite the ever-changing macroeconomic and political conditions, we remain focused on what we can control and ultimately achieving our goal of delivering long-term growth across our three businesses. We'll keep you updated as we move through the year, and please don't hesitate to reach out with any additional questions. Thanks again for your interest in SGC and enjoy the evening.

Thank you, operator. Uh, we certainly appreciate everyone being on the call, want to thank our loyal customers and our dedicated employees for delivering, and improved performance this quarter, despite the Ever Changing macroeconomic political conditions, we remain focused on what we can control and ultimately achieving our goal of delivering long-term growth growth or 3 businesses. We'll keep you updated as we move through the year, and please don't hesitate to reach out with any additional questions. Thanks again for your interest in SGC and enjoy the evening.

Michael Benstock: Thank you. And that does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you. And that does conclude our conference for today. Thank you for participating. You may now disconnect