Superior Group of Companies, Inc. (NASDAQ:SGC) Q3 2023 Earnings Call Transcript

Michael Benstock: Brand products, we have added people. We will continue to add people. It’s one of our revenue growing strategies. It’s right up there with the best of them, including other sales strategies that we have, Jim, including some inside sales strategies to try to go after smaller accounts, appointment centers, all kinds of things that we’re doing right now differently than we’ve done before. But it is our intention to continue to grow branded products. So we’re going to have to have more muscle behind us to do it, and it’s going to take more people to do it. We’re recruiting actively and even added some talent to our recruiting pool to help recruit more people faster.

Jim Sidoti: Right. And then with regard to capital allocation, I mean you did a great job of generating cash and paying off debt in the third quarter. Should we see a similar trend in the fourth quarter? Or are there opportunities out there inorganic opportunities that you might pull the trigger on?

Michael Benstock: For the balance of the year, Jim, we’re going to remain focused on working capital. There’s — I would say, you can tell from the first 9 months, we drove significant improvement. I think, obviously, our working capital is starting to normalize. So I would not anticipate a similar result in Q4. But with that said, we’re going to remain focused on that for the balance of the year as like what I have said previously, we really are targeting a net leverage ratio in the range of 2 to 2.5 times. So we’re obviously getting closer. And so that’s our focus here through the balance of the year. And then obviously, we’ll begin to continue to look at our allocation priorities going forward once we achieve that net leverage objective.

Jim Sidoti: All right. And then you look at your three businesses, you think that are pretty definite growth drivers in all three businesses, different drivers in the different businesses. But out of the three businesses, what one do you think – are you most – you feel invest about at this point in this current line?

Michael Benstock: That’s a hard question because I’m feeling pretty good about all of them. So like asking me which kid I love more. But look, long term, I believe health care has tremendous potential, and it’s one of the smallest of our businesses, and it’s right there in the middle, but it has two segments of wholesale and a retail and now consumer [indiscernible] it. But if you look at the growth of health care workers in the coming years, you look at the fact that it’s not as price-sensitive a business. Most of it isn’t the wholesale side is, but the retail side is not. You look at our capability to grow direct-to-consumer in the coming years and the continued choice of health care workers is going to have to be built at one point or we’re going to get out, we’re all going to get old and not have anybody to take care of us.

So the schools are going to have to fill that gap, whether it’s through the schools or through integration or wherever they solve it, and that will bring millions of more health care workers into the workforce. Some feeling great about that, but it’s – I would say that our call center business is basically in its infancy, if you want to know the truth. I mean, we’re a small call center business doing right now under $100 million. That has great opportunity. It provides great free cash flow for us to invest more in it as time goes on. And we’ve invested greatly in new strategies. We put on our first sales executive this year, putting on a second one, building out a sales team around that. First, marketing dollars we’ve really ever spent will be this year and more so into next year and not be so reliant on others to bring us business.