Stran & Company, Inc. (SWAG)·Q3 2025 Earnings Summary

Executive Summary

• Strong top-line, softer margins: Q3 revenue rose 29.0% YoY to $26.0M, but gross margin compressed 230 bps to 27.2% on lower-margin SLS mix and tariff cost passthrough limits; net loss improved YoY to $(1.2)M from $(2.0)M .
• Sequential step-down vs Q2: revenue fell QoQ from $32.6M to $26.0M and operating margin turned negative as tariff-driven costs and mix weighed on profitability .
• Integration/mix update: SLS (Gander) is scaling as planned (Q3 SLS revenue +139% YoY), but runs structurally lower gross margin; Stran core remained resilient with +5.9% YoY Q3 growth .
• Liquidity/capital returns: Ended Q3 with ~$11.8M cash and investments; repurchased ~267K shares for ~$408K during the quarter under the $10M program (remaining authorization ~$6.1M as of 9/30) .

What Went Well and What Went Wrong

What Went Well

• Sustained top-line momentum: Sales +29.0% YoY to $26.0M; nine-month sales +56.7% to $87.3M as both existing and new customers contributed, with SLS scaling rapidly post-acquisition .
• Operating leverage despite growth investments: OpEx as % of sales fell YoY to 34.1% in Q3 (from 40.4%), aided by lower legal/accounting expenses post-reaudit and ERP go-live .
• Capital returns and balance sheet: Repurchased ~267K shares at $1.45–$1.81 for ~$408K; ended with ~$11.8M cash/investments and no debt, enabling continued buybacks and M&A option value .

Management quote: “We’re executing with focus, managing the business responsibly, and positioning Stran to deliver sustainable value for years to come.”

What Went Wrong

• Margin compression: Gross margin fell to 27.2% (from 29.5%) given higher SLS mix and tariffs; SLS operates below core Stran margin profile, weighing consolidated GM .
• Tariff impact and demand hesitation: Elevated tariffs increased direct import costs (not fully passed through) and introduced buyer hesitation in loyalty/casino segments; management cites >$1M of direct costs not recovered .
• Sequential profitability pressure: Versus Q2’s positive operating income and net profit, Q3 swung to operating loss $(1.8)M and net loss $(1.2)M on lower revenue and margin headwinds .

Financial Results

Quarterly trend (oldest → newest)

Q3 snapshot vs prior periods (oldest → newest)

Segment breakdown (revenue)

KPIs (Q3 2025 unless noted)

Guidance Changes

Management reiterated it does not provide formal guidance; however, they expressed confidence entering Q4 (historically strongest quarter) and aiming for sustained profitability while avoiding quantitative guidance .

Earnings Call Themes & Trends

Management Commentary

• “Sales increased 29.0% year-over-year to $26.0 million…These results demonstrate the scalability of our platform and the steady demand we continue to see from both new and long-standing customers.” — CEO Andy Shape .
• “Gross profit increased 18.8%…Gross profit margin decreased to 27.2%…primarily due to the acquisition of the Gander Group business…which operates at a lower gross margin than the Stran segment.” — Q3 release .
• “During the quarter, we also repurchased approximately 267,000 shares…for a total of $408,000…With a strong balance sheet of $11.8 million in cash, cash equivalents and investments, we remain well-positioned to fund growth initiatives.” — CEO .
• “During the third quarter, elevated tariffs led to a meaningful increase in product costs…not all could be offset…creating buyer hesitation, particularly in the loyalty and casino segments.” — CEO, call .

Q&A Highlights

• Tariff accounting and passthrough: Management noted slight revenue uplift where tariffs could be passed through, but costs rose more; direct impact just over $1M not passed through; timing of orders constrained repricing .
• Profitability outlook: While avoiding formal guidance, management aims for sustained profitability and feels good about Q4, historically the strongest quarter, but reiterated no quantitative outlook .
• Macro sensitivity: Business has low capex, diversified verticals; many programs embedded in clients’ core marketing; balance sheet strength positions company to navigate downturns and pursue acquisitions .
• M&A sourcing: Strong inbound from fragmented industry; focus shifting to more impactful, quickly accretive targets; disciplined approach continues .

Estimates Context

• S&P Global consensus: Analyst consensus for Q3 2025 EPS and revenue was not available; coverage appears limited for SWAG’s size, so a beat/miss comparison cannot be determined at this time.*
• Actuals used herein: Revenue $26.0M, EPS $(0.07) from company filings and press release .

*Values retrieved from S&P Global.

Key Takeaways for Investors

• Top-line trajectory intact, but mix and tariffs pressured Q3 margins; watch for gross margin stabilization as tariff rates ease and SLS efficiencies accrue .
• Sequential reset vs Q2 likely reflects timing (Q4 strongest), tariff overhang, and mix; Q4 should show seasonal uptick if demand normalizes, though no formal guidance is provided .
• Structural OpEx progress (NetSuite, lower non-recurring costs) supports medium-term operating leverage as revenue scales .
• Capital allocation remains shareholder-friendly with continued buybacks and $11.8M liquidity; residual authorization ($6.1M) provides flexibility .
• SLS is a durable growth engine in casino/hospitality but carries lower margins; monitoring segment GM and cross-selling synergies is key to the consolidated margin narrative .
• Tariffs are the main external risk to near-term margins and demand cadence; management is diversifying sourcing and engaging customers on pricing, but some impact persists .
• Potential catalysts: Q4 seasonality, margin progress (Stran GM stability, SLS improvement), continued buybacks, and M&A updates could drive sentiment .

Appendix: Additional Data (YoY and YTD context)

• Q3 YoY: Revenue +29.0%; Net loss improved to $(1.2)M from $(2.0)M; GM 27.2% vs 29.5% .
• 9M 2025 vs 9M 2024: Sales $87.3M (+56.7%), GM $25.4M (+49.3%), net loss $(1.0)M vs $(3.6)M; EBITDA $(0.4)M vs $(3.2)M .