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SG

SUPERIOR GROUP OF COMPANIES, INC. (SGC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue grew 9% year over year to $144.0M and diluted EPS was $0.10; EBITDA was $6.1M, reflecting sequential improvement and cost actions; the company declared a $0.14 dividend and continued buybacks, repurchasing ~390K shares for ~$4.0M .
  • Results beat S&P Global consensus: revenue $144.0M vs $133.3M*, EPS $0.10 vs $0.0625*, EBITDA $6.06M vs $5.75M*; momentum came primarily from Branded Products (+14% YoY), while Healthcare Apparel (+6% YoY) faced tariff-related gross margin pressure and Contact Centers (-3% YoY) absorbed a solar customer bankruptcy credit loss .
  • FY 2025 revenue guidance was maintained at $550–$575M, after being lowered last quarter; EPS guidance remains withdrawn given macro/tariff uncertainty .
  • Stock reaction catalysts: broad-based top-line beat, sequential margin improvement, visible cost controls, and AI-driven efficiency narrative; watch tariff implementation pacing and Contact Centers pipeline conversion timing .

What Went Well and What Went Wrong

What Went Well

  • Branded Products delivered 14% revenue growth and improved EBITDA ($9.0M vs $6.7M YoY) on favorable mix and operating leverage; pipeline and backlog remain “very strong” .
  • Consolidated gross margin held 38.4% and SG&A improved to 36.3% of sales, even after $1.8M credit loss reserves; EBITDA rose to $6.1M from $5.6M YoY .
  • Management highlighted AI deployment across Contact Centers (Guru Assist next-best-action, talent enablement) and AI agents for product selection/mocks in Branded Products, positioning SGC for efficiency gains and share capture: “We are employing AI in every facet of our contact centers… Guru Assist… improves accuracy, AHT and CSAT” .

What Went Wrong

  • Healthcare Apparel gross margin fell to 35.5% (from 38.4% YoY) due to higher tariff costs ahead of price increases; segment EBITDA declined to $0.8M vs $1.3M YoY .
  • Contact Centers EBITDA fell to $1.6M from $3.2M YoY; segment SG&A increased to 48.4% of revenue, reflecting a $1.1M credit loss tied to a solar customer bankruptcy .
  • Macro/tariff uncertainty continued to slow decision-making and created customer hesitancy; management maintained revenue guidance but withheld EPS guidance given sensitivity to tariff developments and timing of pipeline conversion .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$145.4 $137.1 $144.0
Diluted EPS ($USD)$0.13 ($0.05) $0.10
Net Income ($USD Millions)$2.09 ($0.76) $1.55
EBITDA ($USD Millions)$7.25 $3.54 $6.06
Gross Margin %—36.8% 38.4%

Actuals vs S&P Global Consensus

MetricQ4 2024Q1 2025Q2 2025
Revenue Actual ($USD Millions)$145.4 $137.1 $144.0
Revenue Consensus Mean ($USD Millions)*$146.5*$139.9*$133.3*
OutcomeMissMissBeat
Diluted EPS Actual ($USD)$0.13 ($0.05) $0.10
Primary EPS Consensus Mean ($USD)*$0.1733*$0.1233*$0.0625*
OutcomeMissMissBeat
EBITDA Actual ($USD Millions)$7.25 $3.54 $6.06
EBITDA Consensus Mean ($USD Millions)*$8.33*$7.07*$5.75*
OutcomeMissMissBeat

Values retrieved from S&P Global.*

Segment Breakdown

SegmentQ2 2024 Net Sales ($USD Millions)Q2 2025 Net Sales ($USD Millions)Q2 2024 Segment EBITDA ($USD Millions)Q2 2025 Segment EBITDA ($USD Millions)
Branded Products$81.30 $92.65 $6.72 $8.98
Healthcare Apparel$26.59 $28.25 $1.28 $0.79
Contact Centers$24.83 $23.98 $3.18 $1.64

Selected KPIs (Q2 2025)

KPIValue
Cash & Cash Equivalents$21.0M
Share Repurchases~390K shares for ~$4.0M; avg price $10.26; $12.3M remaining authorization
Net Leverage Ratio2.2x trailing-12 covenant EBITDA
SG&A as % of Sales36.3%; ~35% excluding $1.8M credit loss reserves
Dividend$0.14 per share, payable Aug 29, 2025

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$585–$595M (03/11/2025) $550–$575M (05/08/2025) ; Maintained (08/05/2025) Lowered (Q4→Q1), then Maintained in Q2
EPS (Diluted)FY 2025$0.75–$0.82 (03/11/2025) Withdrawn (05/08/2025) ; not reinstated in Q2 Withdrawn
DividendQuarterly$0.14 ongoing $0.14 declared for Q2 (payable 8/29/2025) Maintained
Buyback AuthorizationOngoing$17.5M authorized (03/11/2025) $12.3M remaining at Q2 end Ongoing execution

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Tariffs/MacroCustomer uncertainty, trade war risks highlighted Guidance lowered; tariff volatility; redundant sourcing strategy; pass-through intent Tariff costs press Healthcare margins; pricing actions mostly in Q3; some pull-forward; proactive vendor negotiations Stabilizing with mitigation; full impact phased-in
AI/Technology InitiativesOngoing tech/innovation focus “Cutting-edge technology” to enhance CX in Contact Centers AI widely deployed: Guru Assist for agents; AI agents for branded product selection and mock-ups Expanding deployment; efficiency and CX gains
Supply Chain & SourcingBalanced approach; investments Redundant sourcing; limited China exposure in Healthcare Diverse multi-country sourcing; Haiti manufacturing; flexible category substitution Diversification as competitive advantage
Segment PerformanceBack-end weighting persists Branded pipeline strong; Healthcare institutional softness; Contact Centers growth Branded +14% YoY; Healthcare +6% YoY (GM pressure); Contact Centers -3% YoY (credit loss) Branded strength; Healthcare mixed; Contact Centers converting pipeline
Inventory & Working CapitalStrong balance sheet Seasonal payables; cash flow dynamics Healthcare inventory build for expected H2 demand; normalization expected Positioned for H2
Regulatory/LegalGeneral risk disclosures Tariff uncertainties Solar customer bankruptcy (credit loss); minimal India supplier exposure Isolated impacts; contained

Management Commentary

  • “We grew consolidated revenue more than 9% year over year… Branded Products… 14% growth… Healthcare Apparel… grew 6%… Contact Center… declined 3%” .
  • “Our consolidated gross margin was about flat versus last year's second quarter at 38.4%, but up 160 basis points sequentially… SG&A at 36.3% of sales… despite recognizing $1.8 million in credit loss reserves” .
  • “We are employing AI in every facet of our contact centers… Guru Assist… improves accuracy, the average handle times and customer satisfaction” .
  • “We repurchased about 390,000 shares for approximately $4,000,000… $12,300,000 remaining under our current buyback authorization” .
  • “Our full-year outlook… revenues… $550,000,000 to $575,000,000… unchanged from last quarter” .

Q&A Highlights

  • SG&A leverage: reported 36.3% includes $1.8M credit loss; excluding, ~35% of sales; commissions variable in Branded Products .
  • AI initiatives: Contact Centers employing AI across talent, agent guidance, reporting; Branded Products using AI agents for product selection/mocks based on history/trends .
  • Tariffs/pull-forward: Some customers advanced orders; Branded Products can pass through tariffs on made-to-order pricing; Healthcare institutional customers remain cautious; price increases largely effective in Q3 .
  • Inventory: Healthcare inventory build to support H2; expected normalization as sales convert .
  • Contact Centers outlook: Bankruptcy impact more on revenue forward; record pipeline conversion targeted for late Q4 and into next year .

Estimates Context

  • Q2 beat across the board: revenue $144.0M vs $133.3M*; EPS $0.10 vs $0.0625*; EBITDA $6.06M vs $5.75M*; prior quarters (Q1 2025, Q4 2024) were mixed-to-miss, underscoring Q2 inflection in Branded Products and cost management .
  • Given tariff pass-through timing (mainly Q3) and Contact Centers conversion lag, Street estimates for H2 may drift higher on Branded strength but should factor Healthcare margin recovery cadence and Contact Centers headwinds .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Broad beat vs consensus with sequential margin improvement; Branded Products is the core engine near term, supported by AI-enabled sales/operations .
  • Healthcare Apparel top-line growth masks margin pressure from tariffs; price actions are phasing-in in Q3—monitor gross margin recovery trajectory .
  • Contact Centers EBITDA reset from credit loss; record pipeline suggests revenue backfill, but conversion timing skews to late Q4/Q1—model conservatively .
  • Strong liquidity and active buybacks ($4.0M in Q2; $12.3M authorization remaining) plus steady dividend ($0.14) support capital return while maintaining flexibility .
  • Guidance: FY revenue maintained at $550–$575M; EPS withdrawn—implies sensitivity to tariffs and pipeline conversion; near-term narrative driven by execution on pricing and new wins .
  • Watch tariff developments (China, India) and customer behavior (pull-forward/deferrals); SGC’s diversified sourcing is a cushion, but mix/price dynamics will affect margins .
  • Trading setup: momentum from Q2 beat and AI narrative vs tariff/Contact Centers overhang; catalysts include Q3 margin recovery, Branded share gains, and pipeline conversions .