SUPERIOR GROUP OF COMPANIES, INC. (SGC)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 results slightly down year-over-year on revenue and profitability: net sales $145.4M (-1% YoY), EBITDA $7.3M (5.0% margin), diluted EPS $0.13 (vs $0.22) as mix and higher Healthcare sourcing costs weighed on margins .
• 2025 guidance introduced: revenue $585–$595M and diluted EPS $0.75–$0.82, with a back-end weighted cadence similar to recent years; management expects improving interest expense and continued cash generation .
• Capital allocation catalysts: Board approved an additional $17.5M share repurchase authorization and amended credit agreement increases annual restricted payments capacity to $30M from $20M, enhancing flexibility for dividends and buybacks .
• Segment dynamics: Healthcare Apparel grew 8% on digital strength; Contact Centers grew 4% with 54.7% gross margin; Branded Products declined 5% due to timing of uniform program rollouts; management reiterated focus on cost control, operational efficiency, and technology enablement .

What Went Well and What Went Wrong

• What Went Well

  • Healthcare Apparel revenue +8% YoY, driven by digital channels and favorable non-digital timing; management highlighted continued investment in sales, branding and marketing to grow brand awareness .
  • Contact Centers: revenue +4% with gross margin at 54.7% (consistent with Q3 and higher than 1H), supported by pricing actions and technology adoption; “we’re implementing some of the very latest technology to not only enhance the customer experience, but to optimize our own cost and long-term profitability” .
  • Balance sheet and cash generation: 2024 operating cash flow $33.4M; year-end outstanding debt reduced to ~$86M; net leverage ratio improved to 1.7x TTM covenant EBITDA .

• What Went Wrong

  • Branded Products revenue -5% YoY on lower volume in Branded Uniform programs due to timing of customer rollouts; EBITDA in segment down to $8.9M from $11.7M .
  • Healthcare Apparel gross margin pressure from higher sourcing costs tied to Haiti manufacturing and year-end inventory adjustments; segment EBITDA $1.1M vs $1.4M .
  • Consolidated profitability compressed: EBITDA fell to $7.3M (5.0% margin) from $9.9M (6.7%); diluted EPS $0.13 vs $0.22 amid mix and cost headwinds .

Financial Results

Quarterly trend (oldest → newest):

Q4 YoY comparison:

Segment breakdown (Q4 2024 vs Q4 2023):

KPIs and balance sheet/cash flow highlights:

Notes:

• Management cited consolidated gross margin of 37.1% in Q4 (down ~70 bps YoY) and SG&A at 34.4% of revenue (+~100 bps YoY) .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic focus: “We are committed to tackling the aspects of our business that are within our control… cost management, operational efficiencies, customer experience and driving innovation” .
• Segment dynamics: “Healthcare revenue 8%… digital channels” and Contact Centers “4% top line growth” with new customer wins offsetting existing customer declines; Branded Products down on uniform program timing .
• Tariffs/supply chain: “We are very well positioned for whatever is going to happen from a tariff standpoint… we’ve diversified our supply chain greatly… negotiated with vendors and logistics to reduce costs” .
• Capital allocation: Additional $17.5M buyback authorized; credit amendment increases capacity for dividends/repurchases; Q4 repurchases ~72k shares for ~$1.1M .

Q&A Highlights

• Small acquisition: ~$4M Branded Products acquisition added blue-chip customers and talent; expected to contribute to 2025 growth .
• Healthcare margin pressure: Higher sourcing costs in Haiti and year-end inventory write-offs reduced gross margin; some costs expected to persist into 2025 .
• Pricing power: Price increases largely sticking across businesses; prepared to pass through tariff-related cost increases; diversified supply chain and vendor negotiations support cost control .
• Leverage and uses of cash: Comfortable at 1.7x; prioritizing buybacks/M&A within capacity while targeting 2.0–2.5x and sub-2x over time via free cash flow .
• 2025 cadence: Expect a more gradual build, still back-end weighted; Q3 remains important .

Estimates Context

• Wall Street consensus (S&P Global) for Q4 2024 was not retrievable at this time due to access limits; as a result, we cannot quantify beats/misses vs consensus for revenue or EPS in Q4 2024 at this time. Values retrieved from S&P Global were unavailable due to daily request limits.
• On the call, an analyst noted EPS guidance appeared “a little bit lower” vs the Street; management emphasized cost dynamics (e.g., Haiti sourcing) and expects improved interest expense in 2025 .

Key Takeaways for Investors

• 2025 setup: New guidance calls for mid-single-digit revenue growth and double-digit EPS growth at the high end, with a familiar back-end weighted cadence; monitor order flow into Q3 as the key inflection .
• Segment traction: Healthcare digital momentum and sustained high Contact Centers margins provide offset to timing variability in Branded Uniform programs; watch mix effects and margin recapture in Healthcare .
• Margin bridge: EBITDA margin compressed YoY in Q4; recovery hinges on segment mix normalization, cost controls, and continued pricing discipline amid potential tariff headwinds .
• Balance sheet/cash: Solid OCF and low leverage (1.7x) enable incremental buybacks and selective M&A without stressing the balance sheet; debt down to ~$86M year-end .
• Capital return: Additional $17.5M authorization and expanded restricted payments capacity ($30M/year) provide a near-term support to EPS and sentiment, contingent on valuation and market conditions .
• Execution watch items: Uniform program rollout timing in Branded Products, Healthcare sourcing cost evolution (Haiti), and pace of new customer adds/seat expansion in Contact Centers .
• Narrative drivers: Visible cash returns plus operational discipline and technology enablement in Contact Centers are likely to be the primary stock catalysts ahead of Q3 seasonality .