Superior Group of Companies, Inc. Stock

Good morning, and welcome to the Superior Group of Companies' Second Quarter 2026 Conference Call.

With us today are Michael Benstock, Chief Executive Officer; and Mike Koempel, President and Chief Financial Officer. In addition, Jake Himelstein, President of the company's Branded Products segment, will join today's 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 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.

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 the 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.

And now I'll turn the call over to Michael Benstock.

Thank you, operator, and thanks, everyone, for joining us. We are proud to have delivered a strong quarter with consolidated revenue up 3% year-over-year, a 160 basis point improvement in SG&A, EBITDA up 27% to $7.7 million and adjusted diluted EPS of $0.21, more than doubling the second quarter of 2025. Excluding the noncash trade name impairment that Mike will discuss and reflects the progress we're making on mix margin and earnings power, our results highlight the benefit of our diversified business as we continue to navigate a choppy demand environment. Our outlook remains favorable given our long-standing and solid customer relationships, the strength of their brands and our ability to support them with advanced technology, a flexible supply chain and stellar service.

Turning to our segments. I'll start with Branded Products, our largest business. Revenue grew 6% year-over-year, driven primarily by higher volumes with existing customers. We drove gross margin expansion along with SG&A improvement as a percent of sales. Taken together, this led to a 25% increase in Branded Products EBITDA. As we look ahead, we believe our growing backlog and ongoing investments in sales talent, marketing and technology will drive continued long-term growth.

Our Healthcare Apparel revenue declined 4% and gross margin decreased by 260 basis points, largely due to a noncash inventory write-down tied to our recent strategic decision to accelerate the shift to a more focused product offering. While we were able to reduce SG&A, SG&A as a percent of sales increased slightly on the lower revenue base and segment EBITDA declined by $1 million year-over-year. The quarter was undeniably challenging, but we view the shorter-term margin pressure and the transition under new leadership as necessary steps towards stronger, more sustainable margins and a more efficient use of working capital over time.

Finally, in Contact Centers, as expected, revenue was down 4% year-over-year, but improved sequentially for the second consecutive quarter. The year-over-year decline reflects client attrition in 2025 whereas the more recent sequential improvement is driven by a net increase in agents year-to-date and stronger conversion from our significantly larger pipeline of new business than we had a year ago. Gross margin was lower due to higher human capital costs as we prepare for stronger growth ahead, which was more than offset by improved SG&A, leading to stronger EBITDA for the quarter.

To sum it up, we had a strong quarter, and we see clear opportunities ahead for both growth and margin expansion. Our solid balance sheet and growing operating cash flow give us the flexibility to invest strategically across each of our segments.

I'll now hand it over to Mike to walk through the financial details before we open the call up for questions.

Thank you, Michael, and welcome again, everyone, to the call. Second quarter consolidated revenue was $148 million, resulting in a 3% year-over-year increase for the second straight quarter. The revenue increase was driven by Branded Products, which increased 6% to $98 million from volume increases with existing customers. Revenue for Healthcare Apparel was $27 million, down 4% compared to the prior year due to tariff refunds. And lastly, revenue from our Contact Center segment was $23 million, also off 4%, but sequentially improved from the first quarter's 8% year-over-year decline.

Our second quarter gross margin of 38% was down 40 basis points compared to the year ago quarter. Branded Products drove gross margin of 36.5%, up nearly a full percentage point from the year ago quarter, driven by customer mix. The Healthcare Apparel gross margin was 32.9% due to a $2.6 million incremental noncash inventory write-down, partially offset by a $1.8 million net tariff refund benefit. The contact centers gross margin for the second quarter of 50.9% was down 170 basis points, as Michael previously described. Second quarter SG&A as a percent of sales of 34.7% improved 160 basis points from last year, driven by expense leverage in Branded Products on a 6% sales increase and an improvement in credit loss expense in the Branded Products and Contact Centers segments. Putting this all together, our second quarter EBITDA of $7.7 million improved from $6.1 million in the year ago period.

Moving further down the income statement, our net interest expense of $981,000 improved from $1.25 million in the second quarter of 2025 due to a lower weighted average interest rate and a decrease in average debt outstanding. In terms of bottom line performance, second quarter net income was $1.2 million or $0.08 per diluted share. In the second quarter of 2026, the company recognized a pretax noncash impairment charge related to trade names in the Healthcare Apparel segment of $2.6 million or $2 million net of tax, translating to $0.13 per diluted share. The charge does not affect the company's cash position or cash flow from operating activities.

On an adjusted basis, which excludes the impairment charge, second quarter net income was $3.1 million or $0.21 per diluted share, up significantly from net income of $1.6 million or $0.10 per diluted share for the year ago quarter.

Turning to our balance sheet. We ended the second quarter with $23 million of cash and equivalents after generating first half operating cash flow of $18 million, and we remain well positioned to strategically invest in growth opportunities while returning capital to shareholders through both our attractive dividend yield and opportunistic share repurchases. Specifically, we paid $2.2 million in dividends during the second quarter, and we have approximately $9 million available under our share repurchase authorization.

Turning to our full year outlook. We continue to expect 2026 net sales of $572 million to $585 million and look for adjusted diluted EPS of $0.54 to $0.66, well above the prior year's diluted EPS of $0.46. Once again, our guidance reflects a back half weighted cadence again this year, both top and bottom line.

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

[Operator Instructions] Our first question comes from Michael Kupinski with NOBLE Capital Markets.

I was wondering if you can just maybe talk a little bit about Chris Hine's operational changes at -- in the Healthcare Apparel segment. And when should those initiatives really start to begin producing some measurable revenue growth and maybe margin improvement? I was just wondering if you could just kind of outline for us and maybe give us some color on some of the changes that he's making there.

Michael, this is Mike. Thanks for joining the call. Chris, obviously, being just about 3 or 4 months into the business, but obviously spent a lot of time just getting integrated into the business and understanding the specific operations of the business. I'd say where he spent a lot of his time up to this point is really in the product and assortment part of the business. So from an operating perspective, a lot around how we're looking at collections, the merchandising, the sourcing associated with that. And the reason why that is, as you know, that's the long lead time in the business. So it's important to get to that first because given the long lead time, it takes time to have the impact on the business.

So he's really started with the product and beginning to formulate what he thinks is the appropriate assortment architecture going forward, which, as we said in our prepared remarks, is getting to what I would call a more focused assortment, so going, so to speak, narrow and deeper. So that's where he's really spent his time. You can see in the quarter, there was some margin pressure associated with beginning to make that assortment transition. We would expect some shorter-term margin pressure to continue through the balance of this year, not to the extent that you're seeing in the second quarter, but I would anticipate still some margin pressure on a year-over-year basis and then begin to see improvements in 2027.

Got you. On the Contact Centers, the EBITDA was up strongly. Can you kind of just give us a little bit more color on the margin improvement and what maybe additional efficiencies remain available there? And then also your -- it seems like you're quite positive about the new business pipeline. Are those just recent client wins and the attrition is coming down? When do you expect maybe the segment to return to year-over-year revenue growth? Is that -- are you still kind of thinking that it's going to be in like the second half, maybe the third quarter?

Yes. On the Contact Centers side, the margin improvement in the second quarter continues to reflect improved SG&A. That's in part because last year, we're lapping a credit loss reserve associated with a former customer last year, but it also continues to reflect the cost reductions and efficiencies that the business put in place. So what's really good is we continue to see that we're essentially sustaining those reductions in SG&A, which is driving an improvement in the EBITDA margin. What we said at the beginning of the year, and we're seeing it through the results is that we expect the Contact Center segment to sequentially improve in the top line, which will drive EBITDA margin improvement as we go quarter-to-quarter, again, because of the SG&A leverage that we're getting. What you see in the second quarter is gross margins were down a little bit. There were some initial investments we're making to onboard new customers this quarter that won't repeat itself.

So we'd expect the margin -- the gross margin rate to improve in the back half. So I think between continued sequential improvement in sales, continuing to manage expenses and gross margins rebounding again, we expect the EBITDA margin of that business to continue to improve as we go into the back half.

The sales growth is really, Michael, a combination of we've got some nice expansion with existing customers. So we've added some seats with existing customers, and we have an increase in the conversion of new customers the first 6 months this year as compared to the first 6 months last year. So it's still taking. The decision-making is still slow. But despite that, we were able to convert more customers this year. And again, our expectation is that will continue through the balance of the year, which again would drive incremental sales growth into Q3 and then in Q4.

Great. And if I could slip one more in on Branded Products. Obviously, you've had growth now for 3 consecutive quarters. I was just wondering if -- and you indicated that you have the strongest pipeline that you've seen for a while. You indicated this quarter that it was driven mostly by existing customers. And I was just wondering if you can talk a little bit about how you see the growth for the rest of the year? And then on the margins were obviously structurally higher. It looked like 11.4% margins, that was well above what we had in 2024. I was just wondering if you could talk a little bit about what's driving the margin improvement there? And then if you can just talk a little bit about the customer mix and just how things are shaping up for the balance of the year?

Michael, this is Jake Himelstein. I'll try to unpack those questions. And if I miss any, please let me know. But we'll start with the margins. Margins were largely driven by favorable customer mix. We also had some improved sourcing on some larger programs that we're able to deliver. And overall resulted in really strong gross margins, which ultimately dropped into our EBITDA margins. You mentioned pipeline. Pipeline is strong across the board, both with existing customers and new customers. We mentioned in the past couple of quarters that pipeline has continued to be really strong. We've seen some of that pipeline start to convert into programs that we've won that are delivering revenue both now and are going to continue to roll out into the rest of '26 and even into '27.

So even though something we've mentioned before, decision-making is slower on RFPs, a big pipeline results in wins even with slower RFP decisions. So the pipeline continues to be strong even when we win programs or programs fall out of the pipeline, we're replenishing them with new opportunities, which has been really great.

And yes, you're right. On the current quarter, much of the growth has been volume driven from existing customers, expanding current programs and increasing volumes with existing clients, which has been great. And then we're layering in some of those wins. So we're excited about where things stand. We have a really strong pipeline coming into the back half of the year. So yes, seeing those results are really exciting for us, and we're looking forward to the rest of the year.

Congratulations.

The next question comes from Keegan Cox with D.A. Davidson.

I just wanted to ask, you delivered a nice 2Q beat. I was just wondering if you can kind of walk through any of the assumptions embedded in your guidance. I guess, what leads you to keep the guidance unchanged despite a solid beat on top line and on EPS?

Sure. The guidance where we're reflecting, obviously, on the upper end of guidance, Keegan, we're reflecting, again, the back half weighted growth. And that would really be based on the fact that our Healthcare business, which has become a little bit more cyclical heavier in the third quarter. So it just reflects the fact that we've had typically a larger second half in Healthcare. And then also, I mentioned in Mike's questioning that we expect sequential improvement in the Contact Centers business, which again would drive incremental growth in the back half. I think we also recognize, again, touching on a prior question that we are going through a transition on the -- in the Healthcare business.

And so again, you see some margin pressure here in the second quarter we expect some margin pressure in the back half of the year. To some extent, that will depend, obviously, on the demand in the market as we -- as again, as we make changes in our assortment. So I think the guidance reflects the fact that, again, there could be some variability associated with that transition as Chris is making changes in the business. And so we felt halfway into the year with still a lot of business to go that it was just appropriate to hold guidance. We're still obviously very optimistic about the business, and we'll certainly relook at guidance as we get through the third quarter.

Got it. And then a follow-up for me is on Branded Products. I know we've kind of talked about some competitor weakness there before. Does it make sense to kind of go make an acquisition there now given the business is kind of growing in that healthy mid-single-digit growth range. I guess, are you still gaining share in the space organically is kind of the real question there?

Yes, Keegan, we're gaining share organically, and we'll continue to do that. Whether we make an acquisition or not, we're going to aggressively pursue organic growth, both winning new clients and growing existing clients. That said, we're always on the hunt for acquisitions. And if a good one shows up, lands on our doorstep, we're certainly open to doing it. As Michael likes to say, we have to kiss a lot of frogs to find the right company, but we are constantly in conversation with our competition, trying to find the next great target. And if we do, we'll certainly look at it.

I'll add some color to that. Keegan, I'll add some color that. Mostly what we're looking for are businesses that help expand our ability to service customers. Things we're not doing for customers, and there's a lot of areas in the promotional side of our business that we're not doing. It's not our skill set without buying a company or it would take too long to grow it ourselves. And it could be a channel that we're not in. It could be a customer base or a geography that we're not in. It would be related, of course, to branded merchandise in particular. But I don't think we have a -- or another area we'd be very interested in is digital. I don't think we have much of an appetite to buy your run-of-the-mill promotional company that basically is selling out of a catalog somewhere, and just has a couple of good customers. And that's not really what we're looking for. We're looking for something that's very additive to our business.

And so as Jake just reminded you, we kiss a lot of frogs because a lot of people for to be able to do a lot more than just the run-of-the-mill type of work that promotional merchandise companies usually do. And then when we get under the covers, we can find out they're very, very normal and there's nothing special about them. So it will take time.

And Keegan, by way of example, I mean, if you look back a little over 4 years ago, 5 years ago almost, we acquired a company called Guardian Products, and that was an area where we were not in. It was promotional products and branded merchandise for auto dealerships. It's tangential. It's related to what we're doing. We were not in that market. We acquired our way into that market and have now grown it substantially since we acquired it organically. And that's the exact type of acquisition that's really beneficial for us. And it's in our space, but not something that we're currently doing. And it provides a great blueprint or road map for what we want to do in the future.

Got it. And then one more, if I can. We've kind of talked about the dynamic of hospitals and other institutional customers bearing leaner inventories. I guess, as we look at this Healthcare Apparel transformation, is there any impact? How are inventory replenishment trends evolving? Is there any risk to kind of missing out on that trend as you focus that assortment?

Not -- this is Michael. Not really. I believe that in the past, we've spoken about the institutional side conserving cash and with all the uncertainty around them and not knowing what the reimbursements were going to be from the government and everything else. I think most of that is behind them now. Their business has become very, very normalized. So -- and we're starting to see that rev up a little bit to more normal situation. I don't -- I think the bigger impact, one of the truth has to -- is on the consumer. With consumer paying what they're paying for food and gas, it's -- and rent and everything else that's gone through the stratosphere. I think a lot of the caregiver community doesn't have as much to spend as they might have a couple of years ago. And so they're being prudent.

The good news with respect to that is our consumer product area, which is basically the Wink and the Carhartt scrubs that we sell, we have a good, better, best and even a value channel for that. So if they're looking to spend less, they can go from best down to better or better down to good. We can service them at all levels. And if they're already loyal to our brands, it makes it that much easier for them to make the transition since their awareness is so high.

Keegan, you there?

Yes. Great. That does answer my question.

Our next question comes from Jim Sidoti with Sidoti & Company.

So Branded Products, this is third strong quarter. What are you hearing from your customers there? Are you starting to get the sense that they're a little bit more confident in the economy and what's going on? Or just overall, what's the customer sentiment?

Jim, this is Jake. I think the tariff situation becoming a little bit more normalized has certainly helped, right? We had a couple of quarters last year where there's a lot of uncertainty around tariffs and that created client uncertainty, which created buying uncertainty. That has helped us certainly. Additionally, us just pushing for more business within our existing clients to grow who we're working with, right? Remember with the HR department, well, if we push into marketing or we push into HR or we push into legal, that helps us, right? Every department in a company -- in a large company is buying branded merchandise, whether it's uniforms or promotional products or gifting. So a lot of it is improved customer sentiment, but a good part of it is also just us expanding share of wallet within existing customers, which a lot of times we tell our sales team that our best customer is a current customer because there is a lot of potential at our existing customers to continue to grow.

And on the Contact Centers business, this is the second quarter with sequential improvement. do you think that trend continues throughout the year? Or do you think you hit the low watermark, I guess, at the end of last year, and do you expect that business to continue to grow every quarter?

We do expect, Jim, for it to continue. And as I mentioned earlier, our guidance reflects the continued sequential improvement in Contact Centers. So I'd say we're -- like I said, when we started the year, we expected Q1 to be better than Q4, Q2 better than Q1, and it's working out that way, and we're seeing some improvement in conversion and just growth within existing customers. So we're optimistic. And again, the team has done a great job staying focused on managing expenses with that growth. And we talked about before, we're leveraging technologies internally to not only improve the customer experience through various AI solutions, but we're also leveraging it to create more efficiencies, which again is helping to keep expenses in check and drop incremental growth to EBITDA.

All right. And then last one for me. Even with the $2.6 million write-down for Healthcare Apparel inventory, inventory is down at a little over $90 million. It hasn't been down this low in at least 6 or 7 quarters. What's going on there? Is that a trend that continues?

We -- there's still opportunity, Jim, in our view, to create more efficiency in the Healthcare inventories. So we're still focused on bringing those inventories down overall. With that said, as you might imagine, there's pockets of inventory that we're also chasing. So not all inventory is created equal. And I think that we see overall the opportunity to bring inventory down, but we also want to be very thoughtful around not reducing too much and negatively impacting sales. So there'll be some decreases and again, certain categories, and we'll continue to make investments in others based on demand. But again, overall, we see that being a continued, I'll say, source of cash to us as we look at our cash flow projection going forward.

Our next question comes from Frank DiLorenzo with Singular Research.

Just a follow-up to M&A opportunities. Can we expect any new acquisitions or even partnerships for the balance of this year?

I'll answer that, Frank. As we've said we have a certain level of urgency in our Contact Centers business. And either we will have an acquisition done this year or we will find ourselves doing a start-up of a call center in the Philippines. -- that will begin this year and begin to provide revenue next year. Other than that, I would say at this point in the year, there would probably be no other acquisitions other than one in the Contact Centers business that might happen.

Okay. Also maybe not directly related to the business, but the cyclospora outbreak, can you talk about that a little bit? Has that had any impact whatsoever on any of your businesses?

Not yet. Not yet.

That wraps up the questions, Bailey.

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

Thank you all. Thanks, operator. We appreciate you joining us today. We always appreciate your interest in Superior Group Companies and look forward to updating you as we move through the back half of the year. As always, please don't hesitate to reach out with any additional questions, and we look forward again to seeing many of you at upcoming conferences. Thanks again.

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

Good morning, and welcome to the Superior Group of Companies First Quarter 2026 Conference Call. With us today are Michael Benstock, Chief Executive Officer; and Mike 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.

And now I'll turn the call over to Michael Benstock.

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 percent 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 technology to support growth in this part of the business.

Moving to health care apparel, I want to welcome Chris Hein, who recently joined us as President of that segment. Chris has deep multichannel 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 percent 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. So overall, this was a solid start to the year. We're encouraged by the progress we've 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.

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 3 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 Center's gross margin was 52.2%, down 140 basis points due to higher labor costs. SG&A as a percent 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 pipeline 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. Therefore, 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 equivalents 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 to $585 million and diluted EPS of $0.54 to $0.66. That would be meaningful improvement versus the $0.46 we generated last year. And 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 will be happy to take your questions.

[Operator Instructions] The first question comes from Michael Kupinski with NOBLE Capital Markets.

Yes. 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, given that we -- 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 in terms of softening and so forth. If you could just kind of give us some flavor of what you're seeing in branded products.

Michael, this is Jake Himelstein, Happy to answer that. We have a pretty diversified customer base. We are 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. 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 were pretty insulated to any given company or industry having layoffs or weaker sales.

So our pipeline has been really, really strong. Our RFP pipeline at the close of the first quarter was the strongest it's been in memory. And some of these opportunities will close out in the second quarter and beyond. So we're looking forward to seeing some of that activity come through in the rest of the year.

Yes. And on the contact center, it's good to see that sequential quarterly improvement there. Are we kind of like now kind of 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, 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 have seen conversion up during the quarter. And so as I mentioned in my prepared remarks, we do expect sequential improvement.

I mentioned that we did expect the comparison in the first quarter to be challenging. So that's not a surprise. But as I mentioned, we did have sequential improvement from the fourth quarter. So we're moving in the right direction. I'd say again, I'd say we're cautiously optimistic as we move forward. And also the comps as we move forward, get easier as well. So we would expect to see growth in the back half of the year for contact centers.

Got you. And then last question, I know I let others ask questions. I know in the past, you had mentioned that you felt like content 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 that have opened up to make acquisitions in other areas? Are you still focused on the contact centers at this point?

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 haven't. And 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, were early adopters of a lot of AI. So we're small, but we're mighty. And I believe we're a great candidate for 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 may be complicated because you have so many choices, but you should expect to see some movement on our part and keep in the next year or so.

Keep in mind that we also are very disposed to having a center in a lower-cost environment. And so it's a combination of a couple of things that we're looking for that in particular.

The next question comes from Jim Sidoti from Sidoti & Company.

So I just wanted to talk a little bit about Healthcare Apparel. I think you said you have a new leader for that division. You saw good top line growth there. Has there been a change in the strategy or some of the initiatives there?

Jim, this is Mike. There will be some shift of the strategy. Chris just joined us about late March. So as you can imagine, he's very early in terms of getting up to speed with the business. So [ Crystal ] is evaluating the business. And again, we would expect some changes in strategy as we move forward, and we'll certainly share more about that as he gets deeper into the business.

And branded products really kind of what the led the charge growth 5%, 200 basis point expansion in gross margin. Is this the start of a trend?

I certainly hope so. Jim, this is Jake. 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 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. But yes, it's been really strong, and we're happy with the efforts we're taking.

Let me just make one and add to that. For the last 6 years, we've been operating in this crazy uncertain environment, starting with a pandemic. And we've had to pivot so many times, whether it was supply chain issues, it was a pandemic. It was -- and it slightness over and over again, it was tariffs. It's all these other -- it's almost like we've gotten really great now operating in with all this uncertainty and maybe uncertainty is the new norm gen. And I think we're very, very good at operating during uncertain times better than a lot of our competition.

So we're welcoming the fact that there is uncertainty because we think we're better than other people in this environment. So time will tell.

And then the last one for me. On the tariffs, some other companies have reported they started to file for refunds. Is that something you're doing? And is that material for you?

Jim, we initiated the refund process like a lot of companies for certain applicable tariffs, not all tariffs qualified under what I would call this initial round of applications. So 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 second phase, if you will, hasn't been defined or determined.

So still a lot of uncertainty. I mean, we're certainly hopeful that we can successfully collect the refunds and we're going to -- we're obviously monitoring the situation very closely, and we'll do everything we can to collect. And 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.

The next question comes from Keegan Cox with D.A. Davidson.

I just wanted to ask kind of where EPS came in versus your expectations. And I'm wondering if we can get any help on how we should expect it to flow through for the rest of the year.

EPS came in a little bit higher than we had expected. The -- 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. So that's going to be just, again, a timing shift between quarters to some extent. And then expenses were also favorable as well. Some of that is true reduction. Some of it is, again, going to be a shift between quarters. Again, like we had mentioned in our prepared remarks, we still expect a similar trend of progression of EPS growing throughout the year, still being back half weighted.

Again, we're encouraged by the start, but it's only $0.06, then we have a lot more EPS to deliver the rest of the year. So 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.

Got it. And my follow-up goes back to what Michael was talking about with the uncertainty you've seen in the past 6 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?

We just had our team in China where we buy a lot of raw materials and that's the largest -- it's a very large portion of our costs.

Certainly, we've all seen logistic costs rise. And we've also seen that. But it wouldn't have impacted first quarter. Our inventory on the shelf was -- has been on the shelf long before the Strait of Hormuz were closed. But there's going to be continued pressure. And we're working with our vendors to mitigate as much of that as possible. It's not enough that we would materially change our outlook for the year, but we're going to continue to monitor it. And we're putting in a lot of effort into our sourcing strategies as this pricing environment evolves.

So stay tuned. 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.

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

Thank you, operator, and thanks, everyone, for joining our call. As usual, we appreciate your interest in Superior Group Companies. We will 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.

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

Good afternoon, and welcome to the Superior Group of Companies' Fourth Quarter 2025 Conference Call.

With us today are Michael Benstock, Chief Executive Officer; and Mike Koempel, President and 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. Such 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.

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 the 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.

And now I'll turn the call over to Michael Benstock.

Thank you, operator, and thanks, everyone, for joining our call. I'll begin with an overview of our fourth quarter results, followed by a discussion around market conditions. I'll also cover at a higher level how each of our business segments is performing along with some of our go-forward strategies. Mike will then walk us through a more detailed financial review before we open it up for Q&A, for which we'll be joined by Jake Himelstein, President of our Branded Products business.

For the fourth quarter, solid growth in our Branded Products segment helped drive SGC to an overall modest year-over-year increase in revenues, while we also lowered expenses despite this growth. As a result, we generated 19% higher EBITDA than the year ago quarter, and our EPS nearly doubled to $0.23.

In addition, as expected, fourth quarter results reflected the back-end weighted nature of our business with revenues up 6% sequentially and diluted earnings per share up more than 28%.

Our outlook for SGC for 2026 that Mike will share in a moment reflects solid growth expectations for the year, again, with a back-end weighted cadence due to expected order patterns and anticipated new customer growth in our Contact Centers segment.

Turning to market conditions. There remained a degree of economic uncertainty amongst customers and prospects across all of our business lines. Nevertheless, we were able to grow consolidated revenues during the fourth quarter.

Again, the progress we've made in driving efficiencies and containing costs, as you see from our bottom-line performance reported today, should prove beneficial once macro conditions normalize and stronger demand returns.

Taking a step back, our overarching strategy is to emerge stronger from these currently uncertain economic and geopolitical times, with even greater market share as we have through past complex macro cycles. Our leadership team will accomplish this by continuing to strategically invest in growth while at the same time driving efficiencies and removing unneeded costs from the business.

Moving on to our business segments. Branded Products, our largest segment, had 5% year-over-year growth during the quarter or a 14% sequential increase despite the challenging tariff environment's impact on customer order patterns throughout the year. Our pipeline and order backlog remains solid and have already generated some large new wins this year.

Looking ahead, we'll be focused on growing our market share further in this attractive, highly fragmented market. Specifically, we anticipate further expanding our sales force as well as leveraging technology to make new and existing reps even more efficient.

Turning to Healthcare Apparel. Revenue was off 5% year-over-year in the fourth quarter, which reflects macro uncertainty for both our wholesale-related consumer channels and institutional healthcare apparel. Similar to Branded Products, we're investing to grow demand, in this case, to support our Fashion Seal, Wink and Carhartt brands, while at the same time keeping a watchful eye on expenses.

In fact, versus the year ago quarter, despite continued marketing investments, we were able to drive a slight decline in SG&A, resulting in a positive outcome for EBITDA. Going forward, we see opportunities to grow our digital and brick-and-mortar wholesale channels as well as our own direct-to-consumer channel, which continues to have momentum.

Our third business segment, Contact Centers represents 15% of consolidated revenues and saw an 8% annual decline in the top line driven by the downsizing and loss of existing customers from earlier in the year that have not yet been outweighed by new customer growth.

Prospective customers have been slow to commit given the economic uncertainties, but our pipeline remains solid even after producing customer wins early this year and should translate into further growth, particularly in the back half of 2026.

In addition, we're again controlling what we can. We reduced SG&A for Contact Centers by nearly $1 million or 10% versus the prior year quarter, driven by streamlining our cost structure, including the strategic use of AI.

In closing, we're cautiously optimistic about the year ahead, and our strong balance sheet that Mike will discuss allows us to intelligently navigate current market conditions, while positioning SGC for long-term success. We also brought back a significant number of shares during the quarter, reflecting our belief that our stock has a compelling long-term value.

Mike will now take us through a more detailed review of fourth quarter results, then we'll open it up for Q&A with Mike, Jake and myself. Mike?

Thank you, Michael, and thank you again, everyone, for joining today's call. During the fourth quarter, we generated consolidated revenue of $147 million, which was up 1% year-over-year and up 6% sequentially from the third quarter, demonstrating the back-end weighted cadence of our revenue as expected.

Our largest segment, Branded Products grew revenue 5% over the prior year quarter to $97 million, primarily driven by revenue growth from the 3Point acquisition in December 2024, followed by modest organic growth. Sequentially, Branded Products grew quarterly sales by more than $10 million, fulfilling our back-end weighted expectations.

Healthcare Apparel is our next largest segment, which produced revenue of $29 million relative to $30 million a year earlier as the macro uncertainty for wholesale-related consumer and institutional healthcare apparel channels that Michael mentioned continue to weigh on growth.

Rounding out our segments, revenue for Contact Centers was $22 million as compared to $24 million in the prior year period as customer losses and reductions with existing customers exceeded gains from new customers, although, we have started 2026 with early momentum driven by a few conversions of our pipeline opportunities, as Michael mentioned.

We are cautiously optimistic that additional new opportunities will provide meaningful benefit starting in the latter part of the second quarter and drive year-over-year growth in the back half of the year.

Looking at the bigger picture, continued tariff and economic uncertainty notwithstanding, our business pipelines across all our business segments remain solid to end the year. And as mentioned, we have yielded some important new wins in early 2026 thanks to our attractive competitive positioning and the investments that we've made in sales talent and marketing strategies.

Assuming macro conditions continue to normalize with some improvement in economic uncertainty ahead, we expect sales growth for all 3 segments in 2026, as I'll speak to in a moment.

Moving down the income statement. Our consolidated fourth quarter gross margin of 36.9% was nearly flat with the prior year quarter's 37.1%. On a more granular basis, our Branded Products gross margin came in at 34.4%, up 50 basis points versus the prior year despite higher tariffs.

Our Healthcare Apparel gross margin of 33.6% was nearly flat, off just 10 basis points. And for Contact Centers, gross margin was down about 2 percentage points to 52.6% due to higher agent costs and a shift in our revenue mix associated with the July closure of our lower-cost Jamaica center, which was more than offset by SG&A reductions.

Overall, SGC made good progress reducing SG&A compared to the year ago quarter by about $1.4 million despite overall positive revenue growth. As a result, SG&A as a percent of sales came in at 33.2% for the fourth quarter, an improvement relative to 34.4% a year earlier.

In fact, we were able to reduce SG&A across all 3 business segments. Putting it all together, our fourth quarter EBITDA of $8.6 million was up from $7.3 million in the year earlier period, with our EBITDA margin improving by 90 basis points to 5.9%.

Turning to net interest expense. It was $1.3 million for the quarter, an improvement relative to $1.5 million in the fourth quarter of 2024, benefiting from a lower weighted average interest rate.

Lastly, our fourth quarter net income of $3.5 million was up from $2.1 million in the prior year period, and this equated to $0.23 of diluted EPS, up from $0.13 in the year ago period.

Shifting gears, our balance sheet remains solid with $24 million of cash and cash equivalents at year-end, which was up $5 million versus the start of the year. We generated $20 million in positive operating cash flow during the year, and we remain well within covenant compliance.

Our total liquidity, including cash and availability under our revolving credit facility is over $100 million, allowing for the continued execution of our growth initiatives, while also returning significant capital to shareholders.

In fact, during the fourth quarter, we paid out $2 million in dividends and another $2 million to repurchase our shares, which we consider a compelling value. We ended the year with approximately $10 million still available under our share repurchase authorization.

Turning to our outlook for 2026. We're setting an initial full year revenue range of $572 million to $585 million, which assumes no significant change in macro conditions due to geopolitical or other events and implies 3% growth at the high end. Taking these factors into consideration, we are also expecting full year earnings per diluted share to be in the range of $0.54 to $0.66, suggesting significant improvement over $0.46 in 2025.

Consistent with prior year, we expect a back-end weighted cadence to 2026 for both the top and bottom lines. We feel confident in our outlook given our recent momentum, competitive advantages, growing pipelines of new business and the attractive nature of the end markets we serve.

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

[Operator Instructions] And the first question will come from Michael Kupinski with NOBLE Capital Markets.

Congratulations on your quarter. A couple of questions. I know that you've been investing in your Wink and Carhartt brands for some time. And I was wondering if there are some green shoots on how those investments have been paying off. And so I was wondering if you can give us an update there.

And in addition, can you give us an update on the market environment for the Healthcare Apparel sector overall, both from the standpoint of the direct-to-consumer side and also from the institutional uniform side of the business?

Michael, this is Mike. I'll take your questions. What we're seeing on our Branded Healthcare Apparel, the Wink brand and then obviously, the license we have with Carhartt is still overall positive. I mean, we're continuing to see growth of those brands in our direct-to-consumer channel. I know at this point, we have not disclosed specifics on that. And at some point, we will down the road as it continues to get bigger.

But we continue to see significant growth, again, in both of those product lines, again, largely within direct-to-consumer, but then also with our wholesale-based customers as well. We had a little bit of softness in Q4 with a couple of customers, which is why you saw the comp in Healthcare Apparel down in Q4, but we're seeing more positive momentum with those brands and in the retail environment as we started off for 2026, which is why, as I mentioned in my prepared remarks, our expectation is growth overall in the Healthcare Apparel segment.

Great for the color. And then on the Contact Centers side, it appears that the revenue stabilized in the quarter. And I know that you indicated that the pipeline has improved. Is there -- are we still seeing some macro-driven hesitancy there? I was just wondering are we starting to see some of that abate in the first quarter? Can you just kind of give us some sense of how new business is -- the environment is kind of improving there?

I know that you're saying that it looks like it's back half weighted there as well, but I was just wondering if you can give us a sense of how the pipeline is improving for that segment.

Mike, it's Michael Benstock. I'm going to jump in and say something then I'm going to turn it over to Mike, who I think will have a more direct answer. But overall, in all of our businesses, we're still seeing this whole pattern of customers' decisions, ordering, deal closing velocity, just to us seems constrained. I sat in a meeting with other CEOs yesterday, a large group of CEOs, and that was the consensus. Everybody is feeling the same constraints.

And the constraints are coming from the geopolitical climate, obviously, and the economic uncertainty. And had I said that a week ago, you would have said, well, it's getting better. But in the last week, a lot has happened to probably elevate that uncertainty for even a longer period of time. I think customers are waiting for clear market signals before making decisions.

Now having said that, we're seeing some very positive signs on the Contact Centers business. I'll let Mike get into that a little bit.

Sure. I would say, Mike, the best way to put it is we're cautiously optimistic. I mean, we certainly don't want to get ahead of ourselves, but I think that we -- as you know, from following us quarter-to-quarter in 2025, there was a significant amount of hesitancy and we weren't seeing that pace of new customer growth that we had seen historically yet, again, as we spoke about in multiple quarters, had a really strong pipeline.

So we're encouraged by some of the movement we've seen here at the beginning of the year on the new customer front. We're feeling also, at the same time, right now positive about the status of our existing customer base.

Again, you might recall last year, we did have some challenges with respect to bankruptcy, some bankruptcy customers in the Contact Centers space. Again, as of this point, we don't see that type of risk. So we're cautiously optimistic. And as I mentioned in my prepared remarks, we would expect to see some growth in the latter part of Q2, which would then bode well for us to drive a stronger growth in the back half of the year.

Got you. One last question. On the Branded Products side, you mentioned about expanding the sales force. And I was wondering, we saw some nice growth in this quarter. I was wondering in terms of the increase in revenue that we saw in the quarter, was that a result of the expanded sales force? Or were there other things at play in the revenue growth that we saw in the quarter?

Michael, this is Jake Himelstein. To answer that question, it's a variety of factors. It certainly is part of our recruiting efforts to bring in additional salespeople. We've talked about it before, but we're a very desirable landing spot for salespeople in our industry. There's 100,000 people that sell products -- Branded Products across the country, and we are a very desirable landing spot because of the breadth of capabilities we have.

But it was also because of some really good underlying fundamentals. We had great program wins, really strong orders. Our Q4 does tend to be traditionally a very strong quarter in the Branded Products segment because of employee holiday gifts, and this year was no exception.

The next question will come from Jim Sidoti with Sidoti & Co.

I think the most impressive part of the quarter was you were able to basically double your EPS on flat revenue. So it shows you have done a pretty good job adapting to the current business environment. But looking ahead, you expect to grow revenue maybe about 2% or so next year, and you're looking for some pretty healthy EPS growth. Where do you expect the margin expansion to come from on the gross margin or on the SG&A line? Or can you give us a sense?

Jim, this is Mike. I'll take the question. We'd expect it to see it in 3 areas. We do expect some gross margin improvement. We expect to see some of that improvement really in each of the business segments. So I think gross margin expansion will drive some level of improvement.

A little bit of improvement on the SG&A line. I think that, obviously, there are some variables at play there depending upon the level of revenue that we drive and the investments we might need to make in marketing as well as in some human capital. But then I'd say, the third piece is we are expecting lower interest expense as well. We expect to drive, again, some continued improvement in working capital. We know that we can bring inventories down, which we've demonstrated in the past can drive a lot of cash flow. So we're expecting to get a benefit out of lower debt outstanding as well as interest rates versus 2025.

I did notice your accounts receivable ticked up in the fourth quarter. Has that already started to come down? And do you think that will come back to historical levels in Q1 and Q2?

Yes, there's nothing unusual there, Jim. It's really just the timing of sales. I mean, December was a really strong month for us. And so it's really just the timing of orders year-over-year. And so we'll collect those receivables within our normal pattern and will be cash flow positive for us here in the first half of the year.

And can you comment on what the acquisition environment looks like? Or are there more targets out there than there were 12 months ago or less? Or is it pretty much the same?

It's a deck a day. It's quite a robust field out there. And Jake, in particular, is fielding a lot of these. Most of them, quite frankly, we have no interest in. They're either too small or they're too broken, and they have no great value to us. But we are always looking. And we -- I can't say we're in really serious discussions right now with anybody on that side or -- and the same thing is true on The Office Gurus' side. We have companies that we like. We have companies that we're talking to. We have companies we're digging into a little bit. And particularly, as we said, with The Office Gurus in the Philippines, we do want a presence there, and we have been looking for a path for that.

Absent finding that path, we will open up our own center in the Philippines, but we feel like we can do it faster and cheaper by purchasing another company. But it's a very robust market out there. I think everybody is worried. It's not only the macro environment. It's people worrying about how AI is going to impact their business because they've invested nothing in it. And they see us as a way, a path forward because they know we have and feel like we'll be one of the last men standing in this race in all of our businesses. So it's a good time. It's definitely a buyer's market at this point.

All right. And then last one from me. CapEx has been around $4 million or $5 million the past couple of years. Do you anticipate any big expenditures this year? Do you have to make any big investments? Or do you think that's kind of a good run rate for 2026?

We're not -- Jim, we're not expecting any major departure from what we've been running. We're planning for something in '26 that's a little bit higher. But again, there's nothing that I would call at this point that's individually significant in nature. I think that we made a big investment a few years ago, which we're able to leverage. And so again, not expecting anything significant next year.

The next question will come from Keegan Cox with D.A. Davidson.

I just wanted to ask, you kind of talked about the AI piece of the business, especially helping improve sales and then in your Contact Centers business. So I guess, what kind of AI tools are you guys currently using across the platform?

We're using many tools, some we wouldn't disclose on this call. We don't necessarily need all of our competition knowing what tools we're using. Some of them are proprietary. But essentially, we're monitoring just about every call that we're taking, which are hundreds of thousands of calls a week, and we're able to score them immediately. We're able to coach the agents on the spot as the call is progressing. We're able to set up all kinds of coaching opportunities afterwards.

We're doing accent smoothing. We're doing noise cancellation. I mean we're doing a lot, but some of which I really would prefer not to disclose. I mean, obviously, when we get into customer presentations or prospect presentations, we do disclose it because that's what helps us win the business.

But I can tell you, we are not behind the curve at all when it comes to AI and call centers. Most people are talking a good game about what they should do and are having a terrible time trying to implement their -- the different solutions that they found. We, in fact, have become the implementation partner for a couple of AI companies to help them implement it in other places that are not competitors of ours. And that -- and only because we've done it so many times. You can imagine that when we implement an AI solution or a group of AI solutions to our centers, we're doing to 20, 30, 40 customers, and every one of those is unique.

Remember, they're all operating on different technologies. They bring their own technology to our center. So our implementation has to integrate with their technologies, and we've been able to do dozens of these. So they see us as a great path to creating a better implementation, which is what most people are struggling with right now.

And then a follow-up. I just wanted to talk a little bit about the margin improvement in Branded Products. As I look, it's almost 250 basis points, 300 basis point improvement sequentially, better gross margins on a full year basis than in 2023 despite tariff pressure. I was just kind of wondering if you could parse out how much of the margin improvement you guys are seeing is on pricing versus cost reduction?

It's both, right? I don't think you can really split it out between the 2. And it really does come from both. We are aggressively going out and searching for not just the lowest cost, but the best vendors globally. So when the tariff environment changes in one region or another, we'll move production between regions, and we do that better than just about anyone out there on the Branded Products side.

So Keegan, we definitely see it as it relates to the cost side, but we're also really purposeful about exploring price ceiling and making sure that we're selling at the highest price we can. And not all business is good business. And the clients that work best for us, the ones that see the value in what we're able to do and ones that appreciate what we do. And so we're not in a race to the bottom. And that's not our business model on the Branded Products side.

But yes, it really does come down to both things you said. It's making sure that we're selling at a fair but the highest price that we can offer and then also negotiating the best possible cost globally with our supplier network.

Got it. And then the last question is on, if you guys are expecting any margin impact from investing in salespeople in the Branded Products segment. I guess, how do you balance adding salespeople with ongoing cost saving SG&A reductions?

Yes. So Keegan, the best way to think about it is there's 2 types of salespeople that we look at. Some are commission only, which means that they only get paid if they sell, and there are some that are salaried. And as we bring on people with salaries, which we have done and will continue to do, there is an investment period.

And that investment ramp up can be a year to 18 months until they're actually seeing revenue come in the door. We are constantly bringing on new salespeople, both commission only and salaried to build that base of salespeople, right? The more people we have out there selling our product, the more opportunities we have with large enterprise opportunities.

So you hit the nail on the head. We are actively investing in new salespeople and sales management to be able to grow our future sales. And again, that doesn't pay off today. It pays off 12 to 18 months from now.

The next question will come from David Marsh with Singular Research.

Congratulations on the quarter. It's really, really good print. So yes, I just wanted to run through each line and a couple of specific questions. On the Branded Products side, I mean, it's a really nice year-over-year number. I mean, could you talk about how that breaks down between like new customer wins and share with existing customers in terms of growth with existing customers?

We really look at growth across the board. And the reason I say that, is if you get to these large, large companies in our space, we're talking like Fortune 100 companies, a lot of them, we have so much potential to sell more to them that you get to a new department or to a new buyer, and it's almost like bringing on a new client. And so a lot of times, when we're talking to our sales team, we're telling them the best new client is an existing client. We can grow so much with existing, and there's so much opportunity there.

But the other side of that is we are actively involved in RFPs to bring on new logos. So we are preaching both. It's expand share of wallet with existing, right, might be selling them uniforms, but we also want to sell them promotional products. We also want to sell them point of purchase and point-of-sale displays.

But we also are actively involved in RFPs and trying to bring on new logos. Our pipeline is really, really strong relative to recent periods. Exiting Q4, our RFP pipeline was meaningfully higher than the same period last year. And the good news is that the skew is like -- mix of the skew of it is towards larger enterprise programmatic clients. That's the clients we want, ones that are spending significant money, we're building programs for them.

So we've already seen some of these RFPs in the pipeline convert in Q1, and we expect a couple more to convert, which will drive revenue growth through 2026.

Let me add to that.

That's great color.

Yes. I don't know if you've -- in the last few quarters, we've said that our average order size has actually come down. But we are -- we've actually been able to grow the business. So when you look at that, I mean, the only conclusion you can draw from that, if your average order size is coming down, but somehow you've grown the business, yes, some of that could come from pricing for sure. But most of that is just increased market share.

And we should see when things get back to normal, all these customers who are ordering less, ordering less expensive items, ordering fewer items, they get back to normal, we should be cranking on all cylinders.

Appreciate that, Michael. That's -- that's great color. Turning to the Healthcare side. Can you just talk about the state of the business? I mean, it just feels like this business at some point needs to show some growth overall. I mean, can you just talk about your assessment of your own market share and kind of the behavior of your competition in the marketplace? And I mean, we have to be adding more nurses and more doctors, I would think. And you think you would see some growth here overall in the market. Just talk about what your expectations are there and the market dynamic?

Sure. I mean, we're still very positive about the market overall. As you said, there's a shortage of healthcare workers, which is certainly going to be a benefit to this business over time. And we feel there's an opportunity for us to get an additional portion of that market share.

What we've seen more recently, as I mentioned, I think with an earlier question, we've seen a little bit of softness on the retail side of the business, with a couple of customers in the digital space in the fourth quarter. We see that actually starting to improve here as we start 2026. So feeling more encouraged by that.

And then we have, I think, over the last couple of quarters, seen some pressure on the institutional healthcare side where spending by hospitals has been a little bit constrained just given some of the uncertainty and some of the government actions that have taken place. And so we're hopeful that that improves on that side of the business as we head into 2026.

But we're focused on continuing to drive brand awareness for our Wink brand. As I mentioned before, we're very happy with our exclusive license with Carhartt and the growth of that business, and we believe we can continue to grow those brands.

And again, as I mentioned before, we're starting to see some of the retail challenges that we experienced in Q4. We're starting to see some, I guess, you would call green shoots in terms of positive change in trend as we're heading here into 2026.

Got it. Appreciate that. And then just lastly on the Contact Centers business. In terms of -- just in terms of kind of overall business outlook for that segment, obviously, you guys took a hit with a customer bankruptcy, but it seems like -- I'm guessing that the rest of the portfolio has held up pretty well. But I mean, you just having a tough time backfilling that significant customer loss? And just could you just kind of assess kind of overall competitive dynamic of that marketplace?

Sure. We have had the challenge with not having the pace of new customer growth that we've historically had to offset some of the losses. There's always going to be a level of churn in the business, as you would expect in any business. And we had 2 challenges. We had a higher level of turnover due in part to the bankruptcies than we've seen before and just the decision-making of prospective customers had just been extremely slow. Two dynamics we had not seen before in that business happening at the same time.

Again, as I mentioned in prior remarks, we're seeing that shift. We believe that the base of our customers is more stable. We don't foresee any major bankruptcies or things of that nature based on what we know today. And we've already had some conversions of what we call pipeline opportunities, which, again, we believe will lead to growth starting in the latter part of the second quarter into the second half.

So like I said, we're cautiously optimistic. We're encouraged, whichever words, I guess, you prefer. But I think we're happy to see that we're seeing a shift here as we start the year, and we're going to stay focused on converting as many opportunities as we can in that market.

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

Thank you, operator, and thanks, everyone, for joining us today. As always, we appreciate your interest in Superior Group of Companies. You heard today that, we will continue buying back our stock as we believe it is grossly undervalued, and it's in our shareholders' best interest that we do so.

I want to thank our hardworking team for their outstanding efforts in a really challenging macro environment. They just have done a wonderful job to continue making the most of what they were able to of 2025 and now into 2026. And of course, we thank our loyal customers for the business they give us and the trust they have in us each and every day.

As a firm, we will always try to do what we can do in our attractive businesses to create significant shareholder value. We look forward to seeing many of you during upcoming conferences and road shows. And in the meantime, please don't hesitate to reach out with any additional questions. And thank you again for your interest in SGC and enjoy the evening.

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

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" NOBLE Capital Markets, Inc., Research Division

" Sidoti & Company, LLC

" D.A. Davidson & Co., Research Division

Good afternoon, everyone, and welcome to the Superior Group of Companies' Third Quarter 2025 Conference Call. With us today are Michael Benstock, Chief Executive Officer; and Mike Koempel, President and 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, included, but not limited to, sales and profitability. Such 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.

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 the 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.

And now I'll turn the floor over to Michael Benstock.

Thank you for the introduction, operator, and welcome, everyone, to our call. I'll start by discussing evolving market conditions, followed by a review of our third quarter consolidated financial highlights as well as our revenue performance by business segment. Then Mike will take us through a more detailed review of our financial results before we're joined by the President of our Branded Products business, Jake Himelstein, to take questions.

Our third quarter earnings were solid, came in as expected, and represents sequential improvement from the second quarter. Also, today, we're adjusting our full year revenue outlook range to reflect a higher midpoint. As we pointed out last quarter, we had a significant pull forward of branded product revenues into the second quarter of this year. In addition, as you know, we had a very robust quarter 1 year ago for the many reasons we've discussed at the time. Both these factors affect the year-over-year comparison we reported today, but again, this was as expected, and we continue to execute and show sequential progress with pipelines that continue to build.

Currently, there is still a significant level of uncertainty and caution among our customers and potential new prospects across all of our business segments. This has caused a significant uptick of promising near-term opportunities in our pipelines. And as our prospective customers gain clear insights into trade policies, inflation, and interest rates, we will be well positioned to achieve stronger growth with solid margins. We remain committed to leveraging our sales capabilities effectively while maintaining tight expense management in this uncertain environment.

Let's review our third quarter results, which reflect our successful navigation of the demand environment just described. While our consolidated revenue declined by 7% compared to the same period last year, we also managed to reduce SG&A expenses by 7% or $3.9 million. In fact, all 3 segments saw improvements in SG&A, which started to take hold in Q2 and have been fully realized during Q3. I applaud our business leaders for focusing on this while not losing sight of repeating our strong history of coming out of uncertain economic times with larger market share. In other words, we have encouraged our leadership team to be especially cost-conscious. However, in areas where we have significant opportunity to drive long-term growth, we continue to aggressively invest.

Next, let's talk about our largest segment, Branded Products. We experienced an 8% revenue decline due to factors we discussed on prior calls, such as sales pull forward, lower employee turnover among customers, smaller average order sizes, and delayed ordering. However, when we consider combined second and third quarter results, branded products revenue has, in fact, increased compared to last year, supported by a stronger pipeline and order backlog. That is something truly remarkable when you consider the macro headwinds.

As shareholders, you need to know that we remain laser-focused on expanding our market share in this attractive, highly fragmented market. Our strategy continues to include recruiting more sales representatives as well as developing and leveraging software automation to make sales representatives and customer interactions more efficient. These initiatives will drive the acquisition of new accounts and help expand our wallet share within our existing customer base.

Next up is Healthcare Apparel, which saw a 5% decline in revenue relative to the third quarter of 2024 as macro uncertainty weighed on both our wholesale-related consumer channels and institutional health care apparel. Recognizing the softness in demand, we reduced expenses while continuing to invest in demand-driven activities to support our Wink and Carhartt licensed brands. These efforts are not only resulting in the growth of our own direct-to-consumer channel, but also an increased footprint in the retail stores of certain wholesale customers that will provide an opportunity for further growth as the economy heats up when uncertainty dissipates. The healthcare apparel industry has significant secular growth drivers on which we are well-positioned to capitalize over time.

Turning to our third business segment. Contact center revenue declined 9% relative to the third quarter of 2024. Consistent with the prior quarter, the downsizing and loss of existing customers outweighed new customer growth as prospective customers are slow to commit, given the economic uncertainties that I described. Despite the short-term effect, our pipeline remains strong, and we're beginning to realize new customer conversions. I'll wrap up by mentioning that our balance sheet remains strong, which Mike will provide even more details on in just a moment. This allows us to wisely invest and strategically execute our plan to profitably grow market share across our entire business.

With that, Mike will now walk us through a more detailed review of the third quarter results before Mike, Jake, and I take your questions. Mike?

Thank you, Michael, and thanks, everyone, for being with us today. Our third quarter consolidated revenues came in at $138 million, up 7% relative to the year-earlier period. Branded Products, our largest segment, produced revenue of $85 million, down from $93 million in the year-ago period. As we mentioned in August, this was due to $8 million in timing of orders delivered in the prior quarter in order to navigate the tariff environment, as well as lower sales volume and pricing related to certain customers. These decreases were partially offset by a $2.9 million increase resulting from revenue generated by 3 Point following the acquisition in December 2024.

Our next largest segment, Healthcare Apparel, had revenues of $32 million, a 5% decline relative to the third quarter of 2024 from lower volume with certain customers due to heightened wholesale and retail customer uncertainty. Revenue for contact centers was up 9% to $23 million for the quarter, driven by lower volume, as Michael previously described. Despite the short-term challenges, our sales efforts and competitive differentiation across all 3 of our businesses continue to make for robust pipelines of business. And we're confident that once market conditions normalize, we will be able to capitalize and drive profitable growth, leveraging our existing investments and recent cost reductions.

Our consolidated third quarter gross margin of 38.3% was down from a peak of 40.4% in the year-ago quarter, but sequentially consistent with the second quarter. The Branded Products segment's gross margin rate of 34.8% was down 140 basis points, driven by customer sales mix. The Healthcare Apparel segment's gross margin rate of 38.5% was down from a peak margin of 41.8% in the year-ago quarter due to product cost reductions last year, but its margin rate is up sequentially from the first and second quarters.

While the gross margin rate for contact centers of 52.9% was consistent with the prior quarter, it was down from 54.9% last year, driven by higher agent costs and unfavorable margin mix associated with the closure of our Jamaica center.

Overall, we improved third quarter SG&A expenses year-over-year by $4 million to $48 million, resulting in SG&A as a percent of sales of 35%, flat to the year-ago quarter despite the quarterly sales decline. SG&A costs declined across all 3 segments, driven by lower employee-related costs, cost reductions initiated in the second quarter, and a credit loss reserve recognized in the contact center segment in the year-ago quarter. Based on these results, our overall EBITDA of $7.5 million was up sequentially from $6.1 million in the prior quarter, although still off from $11.7 million in the prior year. Again, our growing pipeline of new business enterprise-wide suggests that as sales conversion improves, we should be able to generate attractive, profitable growth given our improved cost structure.

Moving on to net interest expense. This was $1.4 million for the third quarter, improved from $1.6 million a year earlier, reflecting a lower weighted average interest rate. And turning to the bottom line. We generated net income of $2.7 million, up sequentially from $1.6 million in the second quarter, but down from $5.4 million in the strong year-ago quarter. This equated to earnings per diluted share of $0.18, up from $0.10 in the second quarter but compared to $0.33 in the third quarter of 2024.

Our balance sheet remains healthy as we continue to maintain a strong cash and cash equivalents balance, which was $17 million as of the end of September. Therefore, the combination of our cash and cash equivalents plus the available capacity under our revolving credit facility provides SGC with over $100 million of liquidity to execute our growth plans while continuing to return capital to our shareholders, such as through our quarterly dividend and our share repurchase authorization, which had approximately $12 million available as of September 30.

I'll close our prepared remarks with an update to our full-year outlook. Specifically, we're tightening our revenue outlook, resulting in a new range of $560 million to $570 million compared to the previous range of $550 million to $575 million, translating into a higher midpoint and slight growth year-over-year at the high end of our range. As we've mentioned earlier, while the growth environment remains subdued across our 3 businesses, our pipelines remain strong, and we are focused on converting these pipelines while maintaining expense discipline. The investments that we've made to date have positioned us for growth as economic uncertainty dissipates and will enable us to capture additional market share across our 3 attractive lines of business.

With that, operator, Michael, Jake, and I will be happy to take questions. If you could please open the line.

[Operator Instructions] And our first question today comes from Michael Kupinski from NOBLE Capital Markets.

First of all, congratulations on your impressive SG&A reductions, pretty impressive in a challenged environment. A couple of questions. First of all, on Branded Products, you just -- can you just kind of describe the environment? Is it kind of one of hesitancy in buying, and kind of like the shifting sands of trade policy? Or do you feel like you're kind of getting back towards a more normalized environment?

It's a great question. This is Michael. I'm going to turn it over to Jake since he's with us today. As I said, Jake is the President of our largest segment, our Branded Products segment. So Jake, take it away.

I would say that the market has been challenged over the last couple of quarters because of the tariff environment. Look, in an industry where large proportion of stuff that we're bringing in comes from overseas. Tariffs are clearly going to have an impact. And so macroeconomic uncertainty, tariff-related volatility, it does exist, and it influences customer behavior. So clients are being selective about where they place their dollars, focus on value and speed to market.

So the new tariff announcements that came out over the weekend are definitely positive. We see that across the organization. They're a positive announcement that will hopefully normalize things a bit and provide some stability. And when we see things like this come when there's a little bit more certainty, orders follow quickly behind. And so we talk to our clients really weekly about these updates and already hearing very positive things.

The nice thing about where we're positioned versus our competitors is we are proactive from the start and been very, very, very communicative with our clients on this. lean into demand where it existed, been able to source things in lower tariff jurisdictions, and expand share of wallet with customers because we're at the forefront and talking to our customers day in, day out about what's going on, not just bearing our heads in the sand. So we've actually seen it as an opportunity to build pipeline and build a backlog, which we've done to date.

If you don't mind, if I can squeeze in a couple more? I believe in the last quarter, you mentioned that you purchased inventory for Branded Products in healthcare in advance. I was just wondering where you are in working off that inventory, and maybe kind of give us your thoughts on potential cost increases of inventory going forward.

Why don't you jump on the branded product side of that, Jake?

As it relates to inventory, we've been opportunistic where we can bring in inventory from lower tariff jurisdictions and have them on the shelves or bring them in from domestic sources. We've done that. So there are some instances where we've said, look, tariffs are high from outside jurisdictions. We'll bring them in from domestic sources and sell Maiden USA products. We've been opportunistic about that, but try to be smart about it and really work as partners with our clients to tell them, hey, look, this is an area where we should slow down buying, or we should speed up buying and build up inventories in certain instances.

So for us, it's really about communication, and there are certain instances with clients where it makes sense to build up a larger inventory position. And there are certain instances where we say, hey, we should hold off right here, and we should wait to see what happens. Like a month ago or a couple of weeks ago, when the 100% tariff announcement came out of China, we told our clients to pause and wait and see what happened. And sure enough, now, a couple of weeks later, we're in a better environment where we are picking up some of the inventory buys to fill that backlog.

And then, Michael, this is Mike. On the healthcare side, this is really where we're able to leverage the advantage of our Haiti sourcing as a company, because in terms of duty, certainly more advantageous than other countries. So on the health care side, we really didn't have too much of a, what I'll call, prebuild in advance of tariffs. because we're able to leverage the advantage of Haiti. And then just in general, in terms of managing the tariff pressure in general, just as Jake has done, our healthcare business has also been able to adjust pricing to offset the tariffs that we are incurring with respect to Haiti and some of the other locations where we're sourcing our healthcare product.

And sorry for my last question here. I know that in the last quarter, you indicated that you lost a client in the call center and that it would impact this quarter. I was just wondering if you can quantify that impact and then maybe just talk a little bit about the pipeline and if you kind of think whether or not you might see kind of swing towards growth in that call center business, and maybe give us your thoughts about that pipeline.

Sure. The impact of the solar customer on an annualized basis about a couple of million dollars on an annualized basis. With that said, that business is still going through a transition. So it's quite possible that there's an opportunity for us to grow or retain portions of that business. So that's a little bit of a moving target as we speak, but that will just kind of give you, Michael, some just general sense of the impact.

As it relates to the contact centers, it's really, I would say, consistent with what we've described in the previous quarter and also mentioned in our prepared remarks. We're still seeing what I would call elongated decision-making. We are starting to see, what I'll say, some green shoots. I mean, as companies are feeling the pressure to get efficient as they're looking for opportunities to improve margin, we're starting to see some movement in the pipeline that we have, which we believe will benefit us in 2026.

And our next question comes from Jim Sidoti from Sidoti & Company.

Can you talk about your pricing power? Do you think you'll be able to maintain price or approximately increase price over the next couple of quarters? And where do you think that goes?

Jake, do you want to start with Branded Products, and then I can jump in on the other segments?

Sure, Jim. So we've been able to increase pricing in spots where costs have increased. So if you look at the Branded Products segment, the majority of the segment has orders that are priced to order. So someone orders a product, and then there's a price that goes along with it for that specific order. And so if there's tariffs associated with it or there's additional duties or general cost increases, those typically get passed along to customers. And it might hurt the overall buying power, or how much someone is buying, or the customer behavior. But typically, those prices are getting passed through.

On longer-term contracts that have set pricing, we have largely put through pricing increases to offset the impact of tariffs. And in very, very rare instances that we've been forced to eat the cost of those tariffs. But as public as it is, everyone sort of knows the environment we're in, which has allowed us to pass through virtually all of those cost increases to our customers.

And then, Michael -- I'm sorry, Jim, on the health care side, we initiated price increases starting in July and then again in August. So what we did see in the third quarter is that we were able to largely offset the tariff impact in Q3. You might recall, we did have a tariff impact in Q2 because the tariffs were implemented before we put price increases in. So we had sort of an initial impact. Our expectation going forward would be that we can continue to offset those tariffs, obviously, depending upon whether the tariff environment changes. But based on what we know today, we would expect to continue to be able to offset that pressure in healthcare.

In the contact center business, obviously, you don't really have the tariff impact. And so not really any changes, I would say, from a pricing standpoint as it relates to our contact center business.

And then if I take the midpoint of your guidance, it looks like your revenue will be up about $7 million sequentially in the fourth quarter. Do you think that's primarily in the Branded Products business? Or is that spread throughout Branded Products and healthcare? And is that just the normal seasonality that you're factoring in?

Jim, it would be primarily related to the Branded Products segment. And maybe, again, I can just push it over to Jake to sort of highlight a couple of the drivers there.

Thanks, Mike. Bookings are strong, Jim. The pipeline is strong, a lot of new opportunities. As I mentioned before, in an environment where a lot of our competitors are kind of turning their head or paring their head in the sand, we're getting a lot more aggressive. So while conditions are unsteady or uneven, we're seeing really good activity levels across key accounts. And as we continue to bring on new accounts, we feel very good about the prospect for the future, right? Our customer attrition is extremely low. And what that means is that revenue on a client-by-client basis can vary based on a number of factors, right? It can go up or down based on macroeconomic, employee turnover, the company, our clients' performance. But as we continue to add more logos or add more clients to our roster, as things get more normalized and recover, we're just going to see more and more revenue come along with those new logos.

Our next question comes from Keegan Cox from D.A. Davidson.

I was just wondering if you could give any color on your sales trends kind of by month, or what areas you're seeing strength in each segment?

Keegan, this is Mike. I'll take your question. What I would say about the fourth quarter is that we would see sales building month-to-month, with December really being our largest month. And I would also -- back to the prior question, what we're seeing and expecting is a build from Q3 to Q4, really in the Branded Products segment for the reasons that Jake articulated.

And then I guess my follow-up would be, what are you guys seeing on the acquisition opportunities at the moment? I know you kind of talked about a better environment, and you guys seem to hold on to cash this quarter. So wondering what your view is there.

I would say it's a very rich playing field. There's a lot out there. Always with uncertainty comes a lot of people decide this may be the time to call it quits and be part of a larger organization, or they back want to cash in and take some of their chips off the table. No different. It's become more and more prevalent. And I would say valuations are not at their highest, which is good for a buyer. We're looking at a lot of decks that come across our tables. I know Jake is -- there's a few every single week.

And unfortunately, we have to kiss a lot of frogs along the way. And we have a very specific criteria for what we're looking for. And if it doesn't meet that criteria, we quickly take a pass on it. We do get into some deep discussions along the way. And sometimes that helps us learn more about the whole process and who else we might be approaching and what other verticals they may be in, which could be helpful to us. But we're -- I can tell you, we're being as aggressive as we need to be. I don't think it's about conserving cash for any period of time.

Our leverage ratios are very much in line for us to do an acquisition now or any time for the rest of this year or next year, but it's got to be the right deal. So clearly, we've said in the past that most of that opportunity is going to come from the branded products side of the business; having 25,000 competitors makes that a richer playing field. We would be looking on the contact center side for businesses like us that were smaller than us, more, I would call them mom-pop shops that may have a great geography serving verticals that we don't service that could get us into some new types of business.

But mostly, we'd be looking for the right geography that would be a lower-cost geography. There's plenty like that. They're a little bit harder to uncover. I think Jake could probably get a list of the 25,000 competitors tomorrow, whereas on the call center side, that data really doesn't exist quite in the same format. And a lot of people -- for a lot of people, they have 1, 2, 5 customers, and they've made a business out of it, but they made a good business out of it. So I'm spending a lot of my time now that Mike is President on the acquisition side. And I would expect that we'll see something happen in the next year for sure.

And if I can sneak one more in, and I might have missed this on the call, but how much did the cost savings program help this quarter?

Sure. The cost savings, so when you look at -- we had about $4 million in reduction in G&A. And I would say about half of that was related to our cost savings. And as Michael said in his prepared remarks, those have been fully executed, phasing in, and all of those are currently executed and driving benefit for us each month.

Yes. We said a couple of quarters ago that we anticipated on an annualized basis against budget that we would save $13 million. So some of the savings had to do with us not spending money that we had intended to. And so about half of that is against actual results.

And ladies and gentlemen, at this time, we will be ending today's question-and-answer session. I'd like to turn the floor back over to Michael Benstock for any closing remarks.

Thanks, operator, and thanks, everyone, for being on today's call. We certainly appreciate your interest in Superior Group of Companies. I want to thank Jake for joining us today. I think he's able to give insights that really was very, very clear. I want to congratulate Mike again for his ascension to President of SGC. I'm very excited about that. We'll continue, I can assure you, to make strides across all 3 of our very attractive businesses, positioning SGC for the creation of significant shareholder value over time. Look forward to seeing many of you during the many upcoming conferences and road shows that we'll be doing. And in the meantime, please don't hesitate to reach out with any additional questions. Thanks again for your interest.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.