Good afternoon, everyone. Welcome to Superior Group of Companies 2020 Fourth Quarter and Year End Earnings Conference Call. With us today on behalf of the company is Michael Benstock, the company's Chief Executive Officer; Andy Demott, its Chief Operating Officer, Chief Financial Officer and Treasurer; and from the Promotional Products Division we have Jake Himelstein, BAMKO’s Chief Operating Officer and CFO. As always, upon the conclusion of the company’s remarks there will be question-and-answer session. This call is being recorded, and your participation implies that you agree to this. If you don’t, then simply drop off the line.

Thank you. This conference call may contain forward-looking statements about Superior Group of Companies' – the company within the meaning of Securities Act of 1933, the Securities Exchange Act of 1935, the Private Securities Litigation Reform Act of 1995 and all rules and regulations issues there under. Such statements are based upon management current expectations, projections, estimates and assumptions. Words such as will, expect, believe, anticipate, think, outlook, hope and variations of such words and similar expressions identify such forward-looking statements, which includes statements on the impact of COVID-19 on the company's business, including inventory, supply chain, manufacturing capacity at the company's own and contract manufacturing facilities, service capacity and customer demand. Forward-looking statements involve known and unknown risks and uncertainties that may cause feature results to differ materially from those suggested by the forward-looking statements. Such risks and uncertainties include, but are not limited to the following; the effect of the COVID-19 crisis on the U.S. and global markets, our business operations, customers, suppliers and employees, general economic conditions in the areas of the United States in which the company's customers are located, changes in the markets where uniforms are worn, where promotional products are sold and where call center services are used, the impact of competition, the company's ability to successfully integrate operations following confirmation of acquisitions and the availability of manufacturing materials, as well as the risks and uncertainties disclosed on the company's periodic filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the year ended December 31, 2019, and the 8-K filed recently. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements may 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 contained herein to conform to actual results or changes in the company's expectations, whether as a result of new information, future events or otherwise, except as required by law. Please note that all growth comparisons that management makes today will relate to the corresponding period in 2019, unless otherwise noted.

Thank you, Hala and welcome everybody. Good afternoon. Thank you for joining us to discuss our fourth quarter results. With me today as usual is, Andy who will report on the overall SGC results and status of our operations and Jake will report today on BAMKO’s financials and the state of our current operations there. Jake previously helped lead the third quarter earnings call, if you remember, when Andy was not able to attend. As BAMKO becomes a larger and larger part of our company, we feel that the addition of Jake to speak to BAMKO’s results and answer questions is helpful. As usual, when we are done, we'll be open for questions. So let's get started. I am extremely proud to have reported our results this morning. Record results in all segments and significant increases in top and the bottom line results is positive news for our shareholders. I'm especially proud to have done so in one of the most trying years in our 100 year history to report on how we pivoted and brought to get – brought even greater shareholder value than ever. To remind you, 2020 marked the 100th anniversary of the founding of this company. My great grandmother Rose started this business on the heels of the Spanish flu pandemic entering us into the world of medical apparel in 1920. She was a bold woman. Only after she started the company was she even given the right to vote. She was a trailblazer. I have been preceded by many bold leaders; my grandfather, David Benstock, who saw the company through world War II and the support we gave to our armed troops during that time, and my father who diversified the company greatly in the uniform sphere and took the company public in 1968. Our…

Thank you, Michael, and good afternoon, everyone. I'm ecstatic with the results our team at BAMKO has delivered during such a challenging year. Our presence on the ground in Asia and our Superior Sourcing prowess distinguished us during a year marked by crisis and opportunity. BAMKO ended the fourth quarter with sales of $56.3 million, a 52.5% increase from Q4 2019. Operating margin improved to 14.6% compared to 4.5% in last year's fourth quarter. For the full year 2020, our sales were greater than $202 million, an increase of approximately 88% over 2019. We leveraged our scale to deliver 13% operating margin compared to 4.3% operating margin in 2019. This massive increase in operating margin is a testament to BAMKO’s ability to realize economies of scale as we continue on our growth trajectory. Industry-wide promotional product spend was down approximately 25% to 30% in 2020 compared to 2019. Despite these powerful industry headwinds BAMKO’s core promotional product sales actually increased year-over-year by $11.9 million or 11.1%. In fact, the fourth quarter was the largest single quarter of promotional product sales in BAMKO’s history. To reemphasize, in a year where our industry was down upwards of 30%, BAMKO was up 88% overall year-over-year, and when stripping out PPE, BAMKO’s was still up 11% year-over-year. Just a remarkable performance in a very challenging market. Core promotional product sales were steady in the first three quarters of the year, before increasing substantially in Q4 as we saw a sharp increase in employee gifting. Our backlog at year end was $45.5 million, which consisted of $5.6 million in PPE and $39.9 million in non-PPE sales. While the total backlog figure is slightly lower than prior quarters, the non-PPE backlog continues to increase, showing a resurgence in promotional product spend. It's also the largest year-end…

Thank you, Jake. Good afternoon, everyone. Our team performed at an exceptional level in the midst of unprecedented times and delivered four quarters of impressive results. Timely cost cutting moves and an aggressive austerity strategy, in addition to profitable sales growth allowed us to improve our cash flow for the year. We continue to improve our liquidity and debt leverage position, bringing our debt to EBITDA ratio to 1.4 times in December 31, 2020 down from 4 times at the end of 2019. This highlights nearly a full year in which we are in line with our historically desired range of 1 to 2 times debt EBITDA and well under our covenant limit. For the year, we reduced outstanding debt by $31.6 million. We do our business through a long-term lens strategy for continuous improvement across our operational and financial platforms. And as a matter of prudent corporate governance, we filed a universal shelf registration statement of $120 million on October 30, 2020. This gives us greater financial flexibility for acquisitions and large sales opportunities as they arise in the future. We also increased our revolving credit agreement by $15 million at very favorable terms and extended the maturity to 2026 to support our continued growth. During the year, we continued to make business process investments to greatly elevate our technology and automation, bolstering cross functional collaboration and driving enhanced efficiencies and fulfillment capabilities. I'll briefly highlight some key accomplishments. We finalize the implementation of SAP in CID, completing critical software upgrades across our organization that further optimize our shared resources model. All of our uniforms segment businesses are now fully operational on SAP. We continue to expand our manufacturing presence in Haiti with more production being sourced from our own factories, giving us a distinct advantage over our competition.…

Thanks, Andy. Our performance in 2020 can only be described as epic, as a result of the tremendous gains we achieved in all segments of our business. We reached several milestones in the midst of a global crisis that impacted nearly every facet of our lives, and we excelled the ways that will be sustainable for the long-term. The year highlighted our core competencies and delivering product and services to essential and non-essential businesses. At BAMKO, we differentiated ourselves across traditional promotional products by showing our sourcing agility to pivot to PPE. At TOG, we provided critical support to our customers during a pandemic, and to do so from home in emerging storm was nothing short of a miracle. As we look ahead, we're excited about the efficiency and the agility that we continue to display as a company. Let me recap some initiatives that we're excited about that we haven't greatly covered so far in this call. We hope that you saw SanMar's recent press release announcing their new custom WonderWink offering, gaining access to their customer base of over 21,000 companies with hundreds of thousands of feet on the ground, selling our special design products via this very important B2B channel. It's a terrific win for CID. The realignment of our design and product development teams and our uniforms segment was timely. And we will be augmenting those teams with even more talent as we forge ahead to take more market share. As Andy mentioned, our third-facility in Haiti will considerably increase our near-shore production capabilities. As a matter of fact, in 2020, our own factories in Haiti manufactured 13% of our total uniform production. All factories in Haiti, including our contract factories currently manufacture about 25% of all of our units. All of this is done in…

We will now begin the question-and-answer session. And the first question comes from Kevin Steinke with Barrington Research. Please go ahead.

Good afternoon, everyone. I wanted to start-off by asking about CID. And I know you touched on this on your call last quarter, but you again talked about the international growth strategy and opportunity there. Maybe could you just talk about the market dynamics in Europe and internationally compared to what you see in the U.S. for CID similarities, differences, and why now it feels like it's a good time to move internationally with CID.

Okay. CID has been selling internationally even before we purchased them in 2018 on a very small scale mostly in South America, a little bit of business in Europe, and a little bit of business in Australia that has increased as time has gone on, given with very little effort or very little marketing on our part. Though there’s demand in all of those markets for fashion scrub products, I think scrubs, maybe they weren't always ubiquitous, but healthcare workers around the world that is what they're wearing today, and they want fashion scrubs. Very conscious of that healthcare workers are in short supply all over the world, and generally healthcare workers make more than their peers and can afford fashion scrubs. And even when hospitals supply scrubs, oftentimes nurses are taking them home depending on the country to launder them. So, it's really a mix. It's very different by country. What we find is there's a certain consistency across Europe, and we've been selling in some CID WonderWink product nearly into every country. In Europe, with a single retailer here or a broker there, sometimes with a middle person in between us, but the thing that has prevented us from really growing that dynamic is having product on the ground in Europe. Once you have product on the ground in Europe, you can ship across most borders, very, very freely. There's no duties between those borders. When you have products sitting in Texas and you've got to ship it to Europe, or you've got to ship it to South America, you're faced with how do you price that, you've already paid duty on United States. Of course, you can get duty drawbacks and get some of that duty back when you are shipping it to another country, and they're…

Okay. Yes. That's helpful. Do you – have that your competitors, who've already moved into Europe, do they have that same kind of differentiation in terms of the fashion, fit, comfort, et cetera, that the CID products bring or do you kind of feel like you have some differentiation or first-mover advantage from that perspective?

No. I think we had – I think they have the same advantage that we have. I mean, these are the same people we compete with in the United States. Many of them are great companies who do a good job who were constantly – we are constantly trying to outdo each other from a product standpoint. Except for the Indie Line, which is totally unique, this except for some of the channels we might sell through that they don't. Our product certainly isn't the same. We do everything we can to see that our product is unique or else why would somebody buy it in a shop or online. So, I think we're – it's a level playing field. I don't think they have a terrific advantage over us except getting there first. And quite frankly, some of these companies have been in business 20 years and started in the United States first too. CID took a lot of market share from them in the United States. We intend to do the same thing in Europe.

Okay, great. And then you referenced your new partnership or I guess it's the WonderWink partnership with SanMar Corporation. It seems like this is the channel you're excited about. So, can you just talk a little bit more about that and are there similar types of opportunities in the pipeline that you see?

There are – we're constantly working to become as omni-channel as we can while continuing to support our retail base of customers. And so, SanMar was a big win for us. We’ve been working on that for a long time in collaboration with them, making sure we had the right products. So, they could take big inventory positions to be able to service what is essentially the entire United States and 21,000 plus competitors. And those competitors, you understand are mostly promotional product companies who might sell into doctors' practices and dental practices and so on. That actually competes with BAMKO interestingly. The lines are pretty blurry between all these companies in terms of who's the supplier and who's not, but SanMar is probably – it's the most highly regarded customer servicing in that industry with apparel. And they have a very multi catalog that essentially probably 20 – probably a 100,000 salespeople in the United States walk into their customers with, to show them different apparel. And now, there'll be some pages allocated to scrub apparel in our apparel. So, they made the announcement to their sales force back in December, they did a press release last month. We're very excited about it. It opens up a whole new world for us. We have multi-year commitments from them. We think we're going to – it's going to turn into something. Quite frankly, we believe it's additive to what we're already doing. We believe in the end, it will be – it will support all of – all the efforts that we're putting into our marketing, and we'll help support them as well. But no, it's an exciting channel for us and they're smart business people, and they made the right choice choosing us to be their partner.

Okay, fantastic. I'm just trying to put some pieces together here. So it's interesting to talk about SanMar and then the international expansion for CID. And then as you mentioned the WonderWink moving into the laundry channel, I saw the announcement that you referenced there. It's public information UniFirst had that press release out about their partnership with WonderWink. But frankly, I'm interested in talking about all this or more about this, because I had a little bit of pushback from investors at post your last call, thinking that 12% organic growth target you put out there for uniforms seemed aggressive. But it sounds like these types of opportunities or new channel partners, et cetera, that you're adding are really are, is what's going to kind of build up to that ability to grow 12%. So any more color on that or what – how you kind of build up to that that targeted growth rates that you put out there?

Sure. Well, we felt pretty confident in a lot of these opportunities on the last earnings call, and our growth projections took that into account, although the announcements hadn't been made yet. So yes, this has been taken into account in our last growth projections both of those opportunities, as well as our larger entree into the rest of the world, particularly Europe. We were very excited about it. I hope we can come to future earnings calls and giving better guidance. But for that, we feel very comfortable with the guidance we've given. And we tend to be conservative in nature. People know that about us. We wouldn't put out a 12% growth number unless we felt pretty confident about it. I think you could see that, we've usually exceeded expectations of the market over the last few years. So we hope to continue to do that.

Great. That's helpful. You did mention briefly there some later RFP activity on the HPI side of the uniform business, can you just clarify, was that for the non-essential customer set? Or was that just kind of across the board and maybe a little more of what's going on there? I know you said, you expected it to pick up but can just say more color on that.

Sure. The essential side of the business is so busy right now. They're not even – they're not worried, they're just buying uniforms and we've seen some extension of some contracts very happy to get those extensions, rather than going through all kinds of redesigns right now. And we're not seeing the essential side doing a tremendous – doing tremendous RFP activity right now. I think they're focused on different aspects of the business of trying to service their customers and trying to get reconfirmed themselves whether it's – even some of the non-essential side, I mean, what we see in quick service, restaurants for instance, is they're all trying to figure out how to make their take out more efficient and how to make their, when you pull up to a window, drive in more efficient and how to scale their business so they can make better use of the large space they have that nobody's eating inside. So it's kind of a funny time where we're just not seeing the RFP activity. It's not out there. I'm not saying it's not out there at all. It's just out there to a much lesser degree. I think a lot of companies, especially on the non-essential side, Kevin, world is still worried about survival, have been worried about survival, thankful for what they got in PPP money, but still trying to figure out what they're going to be when this is all over. And first of mind is not – the front of mind is not uniforms. It's fine. We have uniform programs with them. We will likely get extensions of contracts beyond the initial periods that we're in – or some cases in the 10 extension of some contracts. And that's fine with us. I'd rather, we have customers…

Okay, fantastic. I guess, I wanted to move on to BAMKO. And you spoke about the 11% growth in traditional promo products in 2020 while the industry is down 25% to 30%, you mentioned BAMKO being less event-based. Maybe more color on what’s allowing you to outperform the industry so significantly. Is it just your overall financial strength your ability to customize supply chain, I guess, it’d probably be a little bit of everything. But just maybe speak to that more in terms of the traditional promo products and the overall strength there.

I’ll let Jake respond. Jake, you’re on the call and Jake runs our Sales and Operations and CFO of BAMKO. The Jake of all trades, so go ahead, Jake.

Thank you again, Kevin. So I think when you look at our industry and the Promotional Products segment, there’s 21,000 companies, many of which are really small and struggle through something like COVID. I mentioned it before down 30% in 2020 over the prior year. I mean, the truth is we’re able to capitalize on opportunities that are our competitors can’t do. We pivot quicker, more diversified in our supply base. And a lot of our competitors have been held up by PPP loans, some minor PPE sales when those dry up, they may not be around and we’re there to pick up the pieces. And we’ve been very successful. 80% of the PPE we sold with the non-customers and now that we converted 30% of them to promo customers. We continue to work with these customers to find additional opportunities to penetrate and get their Promotional Product business. So we’re seeing the ability to do that. And it all stems from being agile, having boots on the ground, forward-thinking and being ahead of the rest of the industry. And we were like, we’re positioned going forward here for 2021 and beyond.

Great. Also with regards to BAMKO, you spoke particularly about employee gifting being a benefit to growth in the fourth quarter and made their gifts by Gifts By Design. So what’s the trend you’re seeing there? What’s attractive apart, that particular niche that you saw growth in and that you’re investing in through this recent acquisition.

Yes. We’ve always done employee gifting throughout our history of BAMKO. We’ve always done at-home gifting or in-office gifting, acquisition programs for customers. It just wasn’t a core focus and it was something we did when customers would ask, hey, make us a employee retention program that speaks to our employee base. We do it. But this makes us substantially stronger on the employee and customer engagement side of the business. Gifts By Design works with a huge customer base of blue chip companies that we didn’t have access to before and the ability to sell into these customers and kind of know the speak and be able to walk the walk and talk the talk about employee gifting and customer engagement programs. And we don’t expect this to go away quickly, right? None of us really know what happens with the work at home model going forward. But what we do know is that a substantial portion of employees are going to continue to work at home post-pandemic, and we want to be there to capitalize on that. And we have shipped more at-home or direct to home gifts probably in the month of December then we did in all of 2019 combined, it’s phenomenal. The need and desire for this to connect with employees. And as Michael said, coming out of pandemic, coming out of a recession, you kind of want to do that more and more. They got to keep employees, they want to connect to them, they want to keep their people engaged.

Well, that’s really interesting. Okay, great. Okay. So you mentioned M&A activity is robust. You mentioned that the recent shelf registration, so are you seeing larger acquisition opportunities in the pipeline that would necessitate perhaps raising capital or is this to be prepared on all fronts? What’s the size of the opportunities you’re seeing in the pipeline? I guess, I’m putting a lot in there, but I just want to get more perspective on the robust nature of the M&A pipeline and the size of candidates you’re seeing.

There are a lot of companies for sale. There’s a lot of companies for sale in all markets. During the pandemic, we’ve had a chance to look at many and quite frankly, on some of them were in such trouble that it really wasn’t interesting to us. Some of them, the only profit they made was – or the only way they were able to keep their business even open to sell it wasn’t because they received PPP money. There’s all sizes out there, Kevin. I’d say, ranging from probably – we don’t look that low. We tend to draw kind of a line in the sand at about $10 million. Even that’s a little bit small for us unless it brings to us something from a standpoint of something it does, that we don’t currently do or has really great people that we can bring into our organization to help them, help grow the entire business all the way up to $100 million. There aren’t that many $100 million promo companies, quite frankly, there aren’t that many $100 million uniform companies, but there are few. And some of them have gotten in trouble. Some of them are just stead up, this pandemic has taken a toll on people. We’re lucky we’ve been energized and we’ve moved forward and the grips done an incredible job, probably we never worked harder. It’s never had more fun doing it. And during the time when it was – from a family standpoint, it was most devastating for everybody. So, we think we’re in a unique position with all of our systems in place now with most of our – well, all of our integrations done, we’re expanding our warehouses, but our integrations are done to be a great platform in each of our businesses, medicals, the call center business. No, the call center business is a pretty small business to begin with. So maybe their threshold is something under $10 million. But we have looked at businesses and we’ll continue to look at businesses, is that we feel add value or get us into a space that we’re not currently.

Okay. No, that’s helpful. This is just a little more of a numbers question here, but on the last call you had mentioned that maybe CapEx would be a little lower than you thought in 2020 around $8 million, and you came in close to $12 million mark. So did you just have some catch up there or timing wise, you were able to accelerate things a little more? I know you’re looking for a ramp up next year, but maybe just talk a little bit more about CapEx this year and next.

Yes, Kevin. I mean, there were a couple of things that we ended up adding in late in the year. Michael mentioned the third facility in Haiti, with getting ready on down what essentially is a prepaid lease but does run through capital expenditures. We also invested in the robotics in Dallas, which based on the very quick payback we get off of that, it was a project that we brought to us and made sense to add in. And earlier in the year, we really did take a very cautious perspective on CapEx and slowed things down a little bit. But that was all really pre our very successful pivot to PPE. And we really saw it as an opportunity to get a headstart on some things that will have very nice paybacks for us going forward.

Okay, great. And lastly, I just want to ask about – Michael, you were talking a bit about the – at the end there about just bringing in new management and talent as you really scale up here and the business is really ramping up. What’s the environment like for finding good management and talent? I know we’re still in a labor market recession, but are you seeing a healthy pipeline from that perspective as well? Because I know that’s an important aspect of a business that’s maybe not talked about as much. So any thoughts there would be helpful?

Yes. We’ve already doubling, more than doubling our recruiting department. Yes. The greatest thing is, it’s a recruiting rich environment today because a lot of the paradigms of yesterday that somebody had to live near the office because they were going to come in the office every single day are gone. We know that we can continue to work from home. We know that we do want people in our offices, but they don’t need to be there every day. And some people don’t need to be there at all. Where teams need to collaborate like design and product development or marketing and design, yes, they need some time together in the office, but they don’t need all their time together in the office. That opens up a pretty rich target environment for us people who, first of all, our reputation at BAMKO and in our uniform business is very, very strong. So if somebody comes out of the promotional business or comes out of the uniform business, even out of the apparel business, or even out of the supply side of the promotional business, while the different suppliers, despite companies like BAMKO, distributors like BAMKO, those are great candidates for us. If I’m looking for somebody in project management, they don’t have to be in Seminole, Florida, or Cattell Texas. They can be anywhere. They can be anywhere in the U.S. and quite frankly, a lot of them can be anywhere in the world. That goes proven that model over the years with their India and China office as we have it in El Salvador. What we want is the best talent we can find anywhere to work for us. And quite frankly, a lot of those people don’t have the opportunities locally, wherever they may live would be very happy to come work for us. So we think it’s a target, a lot of people are employed right now. Great people, usually aren’t unemployed very long. And so we’re going to have to go out and actively recruit great people. But they’re out there and we think we got an awful lot to sell when we’re pitching them in our company.

Okay. Thanks. And congratulations on a great results in 2020 in such a difficult environment and also congratulations on your 100 years of business.

Yes. Kevin, I do want to clarify one thing, just so everybody understands when Michael thoughts about our guidance and nothing having changed. In the third quarter, the guidance we’ve given was that we expected 2021 to be about $450 million based on what we had in PPE orders that we already knew of at that point, we really were giving the base business. As Michael mentioned earlier, we are continuing to book a fairly significant PPE business as we go forward. And when he said nothing had changed, I did want to clarify the part about that with the acquisition of Gifts By Design, that was not something that we had contemplated into that $450 million number. So that would be added to that number, but then going forward, it would be within the organic growth comparable rates to what we’ve got across the rest of the form of business.

Okay. So the base is still $450 million and just layering on Gifts By Design. How sizeable is that roughly?

It’s about $1.5 million run rate per month.

Okay. And we’re still using the $450 million as the floor, plus the Gifts By Design. Okay.

Plus Gifts By Design plus additional PPE as we book it. I mean, We’re contemplating what we knew about at that point. And so we really can’t gauge how long the pandemic and the demand for that crisis PPE is going to last. So we wanted to give a realistic basis without that and that’s all added to it.

Okay. Got it. All right. Thanks.

Okay. Thank you very much. All right.

And it looks like we have no further questions. So this concludes our question-and-answer session. I would now like to turn the conference back over to Michael Benstock for any closing remarks.

Well, thank you all for joining us today. It’s always great to be with you and report great results. We hope we look forward to reporting strong operating results in Q1. See you then.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.