Superior Group of Companies Q1 2026 Earnings Call - Execution Wins in Uncertainty

Operator: Good morning, welcome to the Superior Group of Companies first quarter 2026 conference call. With us today are Michael Benstock, Chief Executive Officer, and Michael Koempel, President and Chief Financial Officer. Jake Himelstein, President of the company’s Branded Products segment, will join today’s call for the Q&A session. 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. Such statements are based on 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. Forward-looking statements involve known and unknown risks and uncertainties that may cause future results to differ materially from those suggested by the forward-looking statements.

Such risks and uncertainties are further disclosed in the 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 quarterly reports on Form 10-Q. Shareholders, potential investors, and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. The company does not undertake to update the forward-looking statements except as required by law. Now I’ll turn the call over to Michael Benstock.

Michael Benstock, Chief Executive Officer, Superior Group of Companies: Thank you, operator. Good morning, and thanks, everyone, for joining us. We had a good start to the year. First quarter revenue was up 3%. Gross margin rate improved by 30 basis points. SG&A came down as a % of sales by nearly a full point, and EBITDA increased to $4.8 million from $3.5 million last year. EPS was $0.06 compared to a $0.05 loss in the first quarter of 2025. What I’m pleased with is that the improvement didn’t come from just one place. We saw progress across the business, and that tells us the work we’re doing is starting to show up in a meaningful way. The environment is still uncertain, including the added uncertainty around the Iran conflict, but we’re staying focused on execution, and we’re encouraged by what we’re seeing.

Overall, the company is in a strong position. We have a broad business mix, good customer relationships, and supply chain flexibility. Those are all important in a market like this, and that gives us confidence in our underlying strategies. Starting with Branded Products, which is our largest segment, revenue grew 5% year-over-year for the second quarter in a row, driven by volume gains within existing customer accounts. We also improved gross margin and held SG&A near 27% of sales, which helped EBITDA grow nicely versus last year. Our pipeline and backlog remains strong, and we’ll keep investing in sales talent and technology to support growth in this part of the business. Moving to Healthcare Apparel, I want to welcome Chris Hein, who recently joined us as President of that segment.

Chris has deep multi-channel apparel experience and a strong history of building successful teams and driving results. We’re excited to have him with us and look forward to what he brings to the business. In Healthcare Apparel, revenue grew 5% versus last year’s first quarter. That was driven by volume growth in existing wholesale accounts and continued progress in direct-to-consumer. Mike will discuss in more detail our lower EBITDA for the quarter. We continue to see good potential in the segment and are focused on improving execution from here with new strategies and leadership in place. Turning to Contact Centers, revenue was down 8% versus the first quarter of 2025, mainly because of prior year client attrition. On the other hand, revenue did improve sequentially from the fourth quarter, helped by existing customer expansion.

The opportunity pipeline is still at a historical high, and with easier comparisons ahead, we’re focused on converting the pipeline into year-over-year growth. We also made real progress on the cost side, with SG&A down more than 200 basis points as a % of sales compared to the year-ago quarter. This reflects the benefits of last year’s cost reduction work, including our continued focus on implementing AI and other technologies. As a result, Contact Centers’ EBITDA was down only slightly year-over-year, but the margin rate improved, which should help profitability going forward. We also maintained a strong balance sheet, which gives us the flexibility to keep investing where it makes sense while also repurchasing shares when we see the opportunity. Overall, this was a solid start to the year.

We’re encouraged by the progress we made, and we think the work underway across the business is putting us in a better position as we move through the year. With that, Mike will walk you through the first quarter financial results, and then we’ll open it up for questions.

Michael Koempel, President and Chief Financial Officer, Superior Group of Companies: Thank you, Michael, and thanks everyone for joining us today. We grew consolidated revenue by 3% in the first quarter to $141 million. As we have mentioned before, our business is typically back half weighted with sequential improvement through the year, and that’s reflected in our 2026 guidance. Looking at the segments, Branded Products, our largest segment, grew 5% year-over-year to $91 million. Healthcare Apparel, our second-largest segment, also grew revenue by 5% to $29 million. Contact Centers revenue declined 8% year-over-year as anticipated to $22 million, but we did see improvement sequentially from the fourth quarter, and we expect that to continue as the year goes on. Our pipelines remain solid, and we’re continuing to invest in sales talent and marketing to support future growth.

We expect all three segments to contribute to our growth trajectory in 2026. Our gross margin rate improved 30 basis points on a consolidated basis to 37.1% for the first quarter. Branded Products posted a gross margin of 34.1%, consistent with the fourth quarter, but up 210 basis points from last year due to a weaker margin related to customer mix in the year ago period. The Healthcare Apparel gross margin rate was down 160 basis points to 35.6%, mainly because of growth with lower margin customers. The Contact Centers gross margin was 52.2%, down 140 basis points due to higher labor costs. SG&A as a % of sales improved to 35.8% in the first quarter, compared to 36.5% last year.

Total SG&A expense for the quarter was $50 million, including $1 million in severance costs, and was essentially flat year-over-year despite our top line growth. Our resulting first quarter EBITDA was $4.8 million, up from $3.5 million a year ago, with EBITDA margin improving 80 basis points to 3.4%. Net interest expense came in a little over $900,000 for the quarter, down from more than $1.2 million last year, driven by our improved net debt position and a lower weighted average interest rate. All the factors that I just mentioned contributed to net income of about $800,000 in the first quarter versus a net loss of about $800,000 in the year-ago period.

Diluted EPS was $0.06 compared to a $0.05 loss per share last year. On the balance sheet, we remain in strong shape with $23 million of cash and cash equivalent at the end of March. We generated more than $9 million of operating cash flow in the quarter on top of the $20 million we produced in 2025. Between cash on hand and availability under our revolver, we have sufficient liquidity to support the business and return capital to shareholders. During the quarter, we paid $2 million in dividends and repurchased $700,000 worth of stock. We ended March with $9.4 million still available under our share repurchase authorization. To close, based on the solid start to the year, we’re maintaining our full year guidance.

We expect 2026 net sales of $572 million-$585 million and diluted EPS of $0.54-$0.66. That would be meaningful improvement versus the $0.46 we generated last year. As a reminder, we still expect results to be weighted toward the back half, similar to previous years, both for revenue and EPS. With that operator, Michael, Jake, and I would be happy to take your questions.

Operator: The first question comes from Michael Kupinski with Noble Capital Markets. Please go ahead.

Michael Kupinski, Analyst, Noble Capital Markets: Yeah. First of all, congratulations on your good start to 2026. A couple of questions. I was just wondering in terms of just looking at Branded Products, you know, given that we, you know, this is kind of an interesting economy where we’re starting to see some layoffs, particularly in the restaurant industry. I was just wondering if you can talk a little bit about your weight towards that sector. I know you have a few customers in that industry. If you could just talk a little bit about what you’re seeing in terms of shifts in customer ordering behavior, things of that nature. Any signs of segments that are showing some strongest demand versus some that might not be, you know, in terms of softening and so forth.

If you could just kinda give us some flavor of what you’re seeing in Branded Products.

Jake Himelstein, President of Branded Products Segment, Superior Group of Companies: Hey, Michael, this is Jake Himelstein. Happy to answer that. We have a pretty diversified customer base. We’re across a bunch of different industries. We don’t have any concentration in any given industry. Certainly, right, the macro environment is a bit choppy, but our activity remains really healthy. Our focus has been really execution oriented this quarter. We’ve converted a lot of our RFP pipeline. We’re ramping up new sales reps that we brought on and focused on growing existing accounts. You know, there’s areas certainly where things are softer, things are a little bit busier across clients, but it is so diversified across different industries that we’re pretty insulated to any given company or industry having, you know, layoffs or weaker sales.

Our pipeline’s been really strong. Our RFP pipeline at the close of the first quarter was the strongest it’s been in memory. Some of these opportunities will close out in the second quarter and beyond. We’re looking forward to seeing some of that activity come through in the rest of the year.

Michael Kupinski, Analyst, Noble Capital Markets: Yeah. On the Contact Centers, you know, it’s good to see that sequential quarterly improvement there. Are we kind of like now that the pipeline is looking like it’s improved now, are we likely to see further sequential quarterly improvement out of the Contact Centers?

Michael Koempel, President and Chief Financial Officer, Superior Group of Companies: Hi, Michael. This is Mike. Yes, that is in fact the case. We’ve seen the pipeline, just like Jake mentioned in Branded Products and Contact Centers, is also very strong. It has been. We’ve really been working on conversion of that pipeline, and we’ve seen conversion up

During the quarter. As I mentioned in my prepared remarks, we do expect sequential improvement. You know, I mentioned that we did expect the comparison in the first quarter to be challenging, so that’s not a surprise. As I mentioned, we did have sequential improvement from the fourth quarter. We’re moving in the right direction. I’d say again, we’re cautiously optimistic as we move forward. And also the comps as we move forward get easier as well. We would expect to see growth in the back half of the year for Contact Centers.

Michael Kupinski, Analyst, Noble Capital Markets: Got you. Last question, let others ask questions. I know in the past you had mentioned that you felt like Contact Centers looked like there were opportunities to make some acquisitions there. I was just wondering if you could just talk a little bit about the M&A environment, if there are other opportunities, you know, that have opened up to make, you know, acquisitions in other areas. Are you still focused on the Contact Centers at this point?

Michael Benstock, Chief Executive Officer, Superior Group of Companies: Hey, Michael, this is Michael Benstock. Yes, it’s a very rich environment. There is a flurry of M&A activity happening across the entire industry. A consolidation of sorts of people who have embraced technology and people who haven’t. The smaller centers are finding it very difficult to compete with the larger centers with respect to the investments they need to make in AI and other automation. We, of course, we’re early adopters of a lot of AI, so we’re small, but we’re mighty. I believe we’re a great candidate for, you know, other centers to smaller centers to join us. At any given time, we’re looking at a few opportunities.

We’re going to make sure it’s the right one, in the right geography and gets us to the right place. It’s never been a richer environment. Sometimes that makes it complicated because you have so many choices, but you should expect to see some movement on our part, and keep in mind in the next year or so. Keep in mind that we also are very disposed to having a center in a lower cost environment. It’s a combination of a couple of things that we’re looking for, that in particular.

Michael Kupinski, Analyst, Noble Capital Markets: Great. That looks great. Thanks, guys, and good luck for the rest of the year.

Michael Benstock, Chief Executive Officer, Superior Group of Companies: Thank you, Michael.

Operator: The next question comes from James Sidoti from Sidoti & Company. Please go ahead.

James Sidoti, Analyst, Sidoti & Company: Hi. Good morning. Thanks for taking the questions. Just wanted to talk a little about Healthcare Apparel. I think you said you have a new, a new leader for that division. You know, you saw a good top line growth there. Has there been a change in the strategy or some of the initiatives there?

Michael Koempel, President and Chief Financial Officer, Superior Group of Companies: Hi, James. This is Mike. There will be some shift of the strategy. Chris Hein just joined us about late March. As you can imagine, he’s very early in terms of getting up to speed with the business. You know, Chris Hein is evaluating the business. Again, we would expect some changes in strategy as we move forward. We’ll certainly share more about that as he gets deeper into the business.

James Sidoti, Analyst, Sidoti & Company: You know, Branded Products really kind of led the charge. You know, growth 5%, 200 basis points expansion in gross margin. You know, is this the start of a trend?

Michael Koempel, President and Chief Financial Officer, Superior Group of Companies: We hope.

Michael Benstock, Chief Executive Officer, Superior Group of Companies: Go ahead, Jake.

Michael Koempel, President and Chief Financial Officer, Superior Group of Companies: I certainly hope so.

Jake Himelstein, President of Branded Products Segment, Superior Group of Companies: Jim, this is Jake. You know, we’d like to think that things are trending well, and it was a good first quarter, and we’re starting to see the right things happening, right? We talked before about, you know, RFP activity being really strong and first quarter margins were strong, consistent with Q4 and up from Q1 last year due to some customer mix. Yeah, no, it’s been really strong, and we’re happy with the efforts we’re taking.

James Sidoti, Analyst, Sidoti & Company: You know.

Michael Benstock, Chief Executive Officer, Superior Group of Companies: All right.

Michael Koempel, President and Chief Financial Officer, Superior Group of Companies: Sorry.

Michael Benstock, Chief Executive Officer, Superior Group of Companies: Let me just make one comment and add to that. You know, for the last six years, we’ve been operating in this crazy uncertain environment, you know, starting with a pandemic. We’ve had to pivot so many times, whether it was supply chain issues, it was a pandemic, it was, you know, supply chain issues over and over again. It was tariffs. It was all these other. You know, it’s almost like we’ve gotten really great now at operating with all this uncertainty. Maybe uncertainty is the new norm, Jim. I think we’re very, very good at operating during uncertain times, better than a lot of our competition. You know, we’re welcoming, you know, the fact that there is uncertainty because we think we’re better than other people in this environment.

Time will tell.

James Sidoti, Analyst, Sidoti & Company: The last one for me. On the tariffs, you know, some other companies have reported they started to file for refunds. Is that something you’re doing and is that, you know, material for you?

Michael Koempel, President and Chief Financial Officer, Superior Group of Companies: Jim, we initiated the re-refund process like a lot of companies, for certain applicable tariffs. Not all tariffs, qualified under what I would call, you know, this initial round of applications. The, the filing process has begun, but there’s still a lot of uncertainty, in terms of if and when we receive, the refunds that we have applied for. The timeline for filing refunds for those tariffs that didn’t initially qualify, a quote, second phase, if you will, hasn’t been defined or determined. Still a lot of uncertainty. I mean, we’re certainly hopeful, that we can successfully collect refunds and we’re obviously monitoring the situation very closely, and we’ll do everything we can to collect.

We’ll share more about that as we, again, get deeper into the year and have more certainty as to what that could look like.

Michael Benstock, Chief Executive Officer, Superior Group of Companies: All right. Thank you.

Operator: The next question comes from Keegan Cox with D.A. Davidson. Please go ahead.

Keegan Cox, Analyst, D.A. Davidson: Hey, guys. Thanks for the question. excuse me. I just wanted to ask kinda where EPS came in versus your expectations? I’m wondering if we can get any help on how we should expect it to flow through for the rest of the year?

Michael Koempel, President and Chief Financial Officer, Superior Group of Companies: Keegan, EPS came in a little bit higher than we had expected. There was, to some extent, some timing associated both on the revenue side, within Branded Products. We had some revenue that came in earlier than we had originally planned. That’s gonna be just, again, a timing shift between quarters to some extent. Then expenses were also favorable as well. Some of that is true reduction. Some of it is again, gonna be a shift between quarters. Again, like we had mentioned in our prepared remarks, we still expect a similar trend, a progression of EPS, you know, growing throughout the year, still being back half weighted.

You know, again, we’re encouraged by the start, but it’s only $0.06, and we have a lot more EPS to deliver the rest of the year. That’s why we feel comfortable with our guidance, and again, expect to build with the back half to represent the majority of our earnings for the year.

Keegan Cox, Analyst, D.A. Davidson: Got it. My follow-up goes back to what Michael was talking about with the uncertainty you’ve seen the past six years. Obviously, the Strait of Hormuz, I have to ask if you guys are feeling any impact from higher oil costs, any impact from like freight surcharges or the like.

Michael Benstock, Chief Executive Officer, Superior Group of Companies: You know, we just, we just had our team in China, where we buy a lot of raw materials and, yeah, it’s a very large portion of our costs. Certainly we’ve all seen logistic costs rise, and we’ve also seen that. It wouldn’t have impacted, you know, first quarter. Our inventory on the shelf, you know, has been on the shelf long before the Straits of Hormuz were closed. There’s gonna be continued pressure, and we’re working with our vendors to mitigate as much of that as possible. Not enough that we would materially change our outlook for the year, we’re gonna continue to monitor it, and we’re putting in a lot of effort into our sourcing strategies, as this, you know, pricing environment evolves.

Stay tuned. You know, right now I think we’re in a pretty good position compared to our competition, and we’ll have to adjust pricing as time goes on if it has any kind of impact on us.

Keegan Cox, Analyst, D.A. Davidson: Got it. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Michael Benstock for any closing remarks.

Michael Benstock, Chief Executive Officer, Superior Group of Companies: Thank you, operator, and thanks everyone for joining our call. As usual, we appreciate your interest in Superior Group of Companies. We’ll keep you updated as we move through the year. Please don’t hesitate to reach out with any additional questions, and we look forward to seeing many of you during the upcoming conference circuit.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.