Good day ladies and gentlemen, and welcome to the Stran & Company Fiscal 2021 Year End Earnings Call. At this time, all participants have them placed on a listen-only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, David Waldman, Investor Relations. Sir, the floor is yours.

Good morning and thank you for joining Stran & Company's 2021 year-end financial results conference call. On the call with us today are Andy Shape, Chief Executive Officer and Chris Rollins, Chief Financial Officer. The company issued a press release today, Monday, March 28, containing 2021 year-end financial results which is also posted on the company's website. If you have any questions after the call, or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020. The company's management will now provide prepared remarks reviewing the financial and operational results for the year ended December 31, 2021. Before we get started, we would like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of Stran's ability to implement its business plan, expected revenues and future success. These statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond Stran's control. With that, I will now turn the call over to Andy Shape, Chief Executive Officer. Please go ahead, Andy.

Great, thank you, David and thanks to everyone for joining us on our first ever conference call. We've got some very exciting developments. We want to take this opportunity to provide an update on our progress and answer questions from investors. I'm pleased to report that we achieve year-over-year increases in revenue growth and gross profit and once again achieved profitability for the full year. And while we achieved 5% revenue growth, our recurring organic sales defined as sales excluding the U.S. Census Program, revenue from the Wildman Imprints asset acquisition, and personal protective equipment increased roughly 50% to $31.2 million for the year ended December 31, 2021. We achieved this strong organic growth despite the impact of the pandemic and while preparing for our IPO. In addition, we are off to a very strong start to 2022 as employees return to the workplace, and there are more and more in-person events. As a result, we expect to achieve double digit year-over-year organic growth in 2022. As an example of the traction we're gaining in the market in January, we announced that we were selected by a large nationally recognized healthcare company to provide an incentive products and literature designed to help drive consumer and health behaviors. Due to contractual obligations, we are not able to disclose the specific name of that customer, but this new multiyear contract is projected to generate over $6 million in annual revenue with potential expansion of that opportunity as well. Signing the contract with this new customer illustrates our shift from largely transactional sales to program offerings with long-term recurring revenue streams. We believe the healthcare market represents a significant, yet largely untapped opportunity to utilize promotional products to help drive positive and healthy consumer behaviors. In addition, over the past few weeks, I'm…

Thank you, Andy. Revenue for the year ended December 31, 2021 increased 5.2% to $39.7 from $37.8 million for the year ended December 31, 2020. The increase was partially due to higher spending from existing clients as well as business from new customers. Additionally, we benefited from the acquisition of the Wildman Imprints assets in September 2020. However, these increases in sales were partially offset by the completion of the U.S. Census program in 2020, market saturation of personal protective equipment in 2021, a lack of in-person events, and business still not being fully reopened through 2021 as a result of the COVID-19 pandemic. Gross profit increased 3.1% to $11.8 million, or 29.8% of sales for the full year 2021, compared to $11.5 million, or 30.4% of revenue, for the same period last year. The increase in gross profit was due to increased sales and reduced cost of purchases from improvements in sourcing capabilities and buying power partially offset by an increase in freight costs. Operating loss for the full year 2021 was $438,000 compared to an operating profit of approximately $1.5 million for the same period last year. The shift from operating profit in 2020 to operating loss in 2021 was due to an increase in operating expenses, which in turn was due to additional expenses related to the acquisition of the Wildman Imprints assets, the implementation of a new ERP system, the recently completed Initial Public Offering and ongoing public company expenses and organic growth in our business. Net income for the year ended December 31, 2021 decreased to approximately $235,000 compared to a net income of approximately $1 million for the same period last year. This decrease was primarily due to the non-recurrence of sales of $10.5 million from our work on the U.S. Census program in 2020 and the non-recurrence of sales of $4 million from our work on personal protective equipment in 2020. Increased expenses in 2021 than in 2020 related to our Initial Public Offering and higher freight expenses in 2021 compared to 2020. These factors were only partially offset by increased sales in 2020 to 2021 of $6 million from our September 20 Wildman Imprints asset purchase and the increase of $10.3 million from recurring organic sales from 2020 to 2021. Now I would like to turn your attention to liquidity and capital resources. As of December 31 2021, the company had cash and cash equivalents of approximately $32 million, approximately $40 million of working capital and no long-term debt. Given the strength of our balance sheet, we recently announced a share repurchase program of up to $10 million and as Andy mentioned, expects to be in a position to utilize this in the near future. At this point, I'll turn the call back over to Andy.

Thank you, Chris. In conclusion, although we faced challenges during the pandemic, we recorded solid financial results for the year 2021. We are especially encouraged by the macro trend as employees return to the workplace and there are more and more in-person events. We believe we are well positioned in 2022 to take advantage of our unique position to accelerate growth as a leading provider of outsourced marketing solutions given our compelling value proposition and comprehensive offering to address all the needs of our customers under one roof. With a strong balance sheet we are well capitalized to execute on all of our organic growth strategies while continuing to actively pursue through synergistic mergers and acquisitions, and have no plans to raise additional capital. We remain committed to driving shareholder value and look forward to providing further updates as developments unfold. I'd like to thank you for joining the call today. At this point, we would like to open the call for questions. Operator?

Thank you. [Operator Instructions] Our first question today is coming from Eddie Reilly at EF Hutton. Your line is live. You may begin.

Hey, guys, congrats on the strong year. Just wondering if you could provide us with some color on the strength of the current acquisition pipeline and the multiples you're seeing in the market currently?

Sure, thank you, Eddie. Yes, we're excited about the year and as mentioned, merger and acquisition strategy is something that we really look to accelerate our growth. And as I'd mentioned, there's 40,000 players within the industry and we're number 32, as voted by Advertising Specialties Institute. So we're well positioned to already be a leader yet, there are a lot of smaller players out there. So our pipeline for acquisitions is very strong. We are meeting with dozens per week or speaking with dozens per week about opportunities out there and it's very strong. In addition, we're part of a group called Facilis Group, which has over between 100 and 150 distributors within our organization that some of them are looking to formulate exits, some of them are looking to be bought out, some of them have struggled during COVID. So they may have COVID fatigue and have had a difficult time. We also believe that interest rates going up may cause some companies not be able to finance their operations like they have been. So we find that that's a very unique position that we're in with such a strong balance sheet and such a strong cash position. In addition Ed you'd asked about the multiple. So a lot of the acquisitions that we're looking at, are essentially self-funding, where we may have to put up a little bit of cash up front. A lot of times, we have to only do a two to four-year earnout, where it's almost self-funding. You know, the multiples within this industry may be anywhere from say, 3 to 6 times EBITDA that we're looking at right now of purchasing them, it can be higher at times, but that's really what we may be looking at for multiples. So we're really excited about the acquisition opportunities that we have right now. We are taking our time to find the right opportunities. We're not just looking to go add on buy revenue, we want to buy accretive revenue that also fits in with our long-term strategy. So we're being very selective about who we choose so that they're really part of our greater growth strategy and growth plan.

Got you, got you. Thanks for that. And on integration with the two most recent acquisitions of GAP and Wildman, I was wondering, what -- how long that takes and if there were any surprises along the way, and maybe what the new ERP system might do to alleviate some integration?

Absolutely, great question. So, when we acquired Wildman back in 2020, we recognized very quickly that in order to continue to do that more efficiently and more effectively, we had to increase our ERP, including our accounting software. So we went out and vetted quite a few providers and ended up on Oracle's NetSuite to implement as an ERP. That should make it much easier for us to integrate, as well as have more visibility. So that is one initiative that we started back in March of 2021. We're expecting at the end of Q2 to go live with that, with NetSuite as our ERP. So we spent the last year and a little bit over a year, implementing that, and that will help a lot. So what that will allow us to do is take different outputs from existing platforms that some of our acquisition targets may have, and be able to bring them in through an open API and really have more visibility. And that's when we bring it in we can streamline it, train them, and really get everyone on the same page so we can have more visibility into what that profitability looks like, what people are doing, as well as repurpose those employees that maybe were working inefficiently at their old company. We find a lot of that as we go into new organizations or older organizations that we go in and acquire we find that some of their jobs may be redundant, but they're very valued and experienced people that that know a lot about our industry, a lot about their customers, and we repurpose them to really concentrate more on revenue generating activities and profitability activities rather than minutiae. So that's one of the things that's been a nice surprise for us as we're acquiring companies, we're able to repurpose people to really be more efficient.

Got it. And on the new customer acquisition topic, could you give us some color into the strategies you're pursuing to acquire new customers?

Sure. So we're looking at a couple different ways, one is geographic. So our main headquarters is just outside of Boston, in Quincy, Massachusetts. That's our main headquarters. When we acquired Wildman Imprints, we opened up an office in Warsaw, Indiana. So now we expanded our footprint into the Midwest. We are looking geographically to look West Coast, as well as other regions within the country as well as potentially even eventually, globally and worldwide. Currently, we're executing our global programs through partnerships, but we may explore that in the future. So geographical is one area that we're looking at. In addition, we're looking at finding somewhat smaller, not too small, but in the in the say, $3 million to $10 million range where there's customers who haven't taken advantage of our technology offerings, our supply chain strengths, our strength of our balance sheet that really haven't been able to capitalize on what we can really offer as comprehensive services and taking those customers that have a great client base, or those competitors of ours who has a great customer base, and great people, and great relationships with their customers, but really haven't capitalized and maximized that. So we are really looking to find those opportunities, we can go and really accelerate that even further by getting additional resources.

Awesome. And then as you guys continue to grow by acquisition and organically, do you think we should maybe see continued reduced costs of purchases going forward or are you more bound by the Facilis Group at this at this point?

No. So Facilis Group is not, it is just an organization that we're part of to be part of their community to take advantage of some of their software tools that they have, as well as some of the increased buying power for some of the supply chain that we might not necessarily spend a lot with. On the other hand, because of our spending already, we negotiate directly with most of our suppliers and our factories that are the large ones to negotiate our own buying power, our own rebate structure, as well as preferred pricing. So we do believe as we continue to grow, and as we continue to get larger, that we'll be able to increase not only our gross profit margin, but our net profit margin. It is -- we do want to make note that, our goal right now is to continue to grow top line revenue as a priority. Obviously, profitability is important to us. But we're looking to accelerate our growth even further at a top line revenue as a priority, and then eventually continue to work on profitability over time to try to get that even relative to one another. So as our growth, as we see our growth increase by multiple double digit figures, we want to see our profitability increase at the same pace.

Got you. And do you guys have any estimate for maybe some non-recurring operating expenses that might have occurred in the year?

At the top of my head, I don't have exact non-recurring expenses that maybe hit the P&L in 2021. I don't want to put a figure there but it was significant. But it was significant and Ed I mean, as we had mentioned, there's not only the direct cost, but the indirect costs of going public, as well as everything that we did in 2021. We implemented it. We acquired Wildman, we integrated that. We implemented a new ERP, began that process. We also went public and that was a lot of work where a lot of the resources that we had normally working on our day-to-day business where it had to be backfilled by others so that we could do the day-to-day, but also work on strengthening our balance sheet through raising capital. We are very happy with how that turned out. Now our balance sheet is extremely strong. And we're just extremely well-positioned to really capitalize on this market where no one else really is. So I feel really good about the position we're in. It's extremely unique. Everyone within our industry is excited to watch what we're doing. We're excited to see what we can do and we're very excited about the future of Stran.

Okay, great. Thanks, Andy and congrats again.

Thanks Eddie.

Thank you. Our next question today is coming from Evan Greenberg at Legend Capital Opportunity Fund. Your line is live, you may begin.

Hello guys. Congratulations on a great quarter.

Thanks Evan.

You're welcome. First question has to do with shipping costs and the increase as a percentage of sales. I'm sure most of that was in line with or was slightly higher than the increase in core revenues. But some of that I'm sure had to do with inflationary situations. How are you able to control that and you're able to pass some of that along to the customers?

Great question. As we have mentioned in multiple times, the cost of shipping has gone way up as everyone reads and knows, especially bringing in a container. I think a container used to cost us $3,000 or $4,000, to bring in from China and now it's closer to say $15,000 to $20,000. So we've seen a very large spike in that. The nice thing about that is, we are able to, the majority of the time we're able to pass it on to our customer, because when we're going in quoting products, and we're selling products to our customers, we typically pass that along to them. So when they ask for a project, and we're continuing to do them, we are not set with our price. Our prices are able to fluctuate based on market trends and we -- all of our contracts are written that way. So we are able to pass that along to our customers. It is a fine line of also working with our customers to be reasonable and work with them to not push too much cost upon them, but we really are able to push it onto them. Since we're not like a retailer that has a set price for a long period of time, it's more of as projects come up, we're able to re-price them. So we're in a unique position to do that. We are controlling it. We're doing the best that we can to try to get preferred prices, use LTL where possible, as well as continue to work with UPS and FedEx to negotiate our prices as best as possible.

Okay, followup question to that is, you have ample cash reserves as you've noted, and you're buying back stock and you're generating cash for the most part, I mean, you had some additional expenses this quarter. It is a two-part question. The first part is, on a normalized basis what do you think the EBITDA would have been had you not had the ERP implementation and the merger and acquisition expenses? Do you think you would have had an EBITDA of around 10%,what kind of EBITDA margin do you think you would have had?

This year, I don't think 10% this year would have been a stretch with everything that we had just because we've been concentrated on replacing some of that revenue. So what we knew coming into 2021, we were losing almost $15 million in revenue of nonrecurring revenue between the U.S. Census program that only happens every 10 years, and PPE products. So we knew we had to work very hard to replace that revenue. So we put a lot of time and energy into sales, marketing, and really efforts of trying to attract new customers and new business. That's why we saw 50% organic growth, because we knew it was coming and we knew we had to do that. So we put a lot of time and energy into doing that a lot of times, it doesn't always pay off immediately. So it takes us a little bit while to ramp up for those, for the money that we're putting into the sales and marketing initiatives to pay results. But as we can see, by February, March of this year, where we've already had our second and third largest bookings of any time, the only one that exceeded our February and March was when we booked the Census program, which was one month, when we did that was almost $8 million. So these are the second and third, because we're seeing results from what we're putting into the business. We're putting capital into it to increase our sales and marketing efforts to go acquire companies. We're seeing substantial significant bookings go up that will turn into potential revenue, so that will be relative to one another. So I would think on a normalized basis, it may be last year, even because we had to do that would probably be closer to say a 5% to 7% EBITDA.

Okay.

It is our goal -- moving forward it is our goal to get closer to 10% or above.

Okay. And the second question had to do with acquisitions. If you saw an acquisition that was larger than the cash hoard that you have, do you have credit lines or other access to capital right now untapped reserves that you could go to?

Yes, so currently, we have a $7 million revolving line of credit with Salem Five Bank, a local bank here and it's a very good facility that we have, because there's no unused line fee and they’re very flexible. So, we have the opportunity to increase that. In addition, we could go back to them and look at asset-based lending and leverage that even further. So, currently right now we have $7 million that's untapped that we could easily tap into. Yet if we found an acquisition opportunity that would exceed our cash, which would have to be a very large acquisition, which in our opinion would have to be a much larger company than even Stran in and of itself to use that capital to buy a company like that. But we do have the ability to do that, and I think we could leverage it by looking at asset-based lending and potentially double or even more of that facility that we have based on those details.

Okay, great, thanks.

Thank you. Our next question today is coming from Will Hamilton at Manatuck Hill. Your line is live. You may begin.

Hey, good morning, and thanks for the time. Just a few questions, first the healthcare customer that you won, I was just wondering, was that like an entirely new program for them and it was an RFP that they put out, or did you win that away from a competitor?

That was not a new program. They had been running it a little bit differently before, but they did go out to RFP, and we did win that from - we did take that from another current incumbent, but they were running it a little bit differently. So, we did a little bit different spin on that, where before consumers used to have to go pick up some of their rewards versus where we are shipping them out to them. So, we took a little bit of a different, unique approach to them, and they obviously liked it and went with us and that program is going very well, and we're very happy with that program. And like I mentioned, unfortunately, we can't disclose their name due to our contract.

You announce you won it in January, but is it going to be any material amount in the first quarter, this March quarter?

Absolutely, yes. We announced it in January because that's when the revenue started to come in, and that's an annuity. So, it's a three-year contract with two one-year extensions, so of the same, and then we're looking at expanding that into other parts of their business as well as other healthcare providers as well. But that will absolutely hit revenue in first quarter and moving forward.

Okay. And that is a sort of a loyalty rewards type program that they're running that you're marketing for them?

That's exactly. Yes, we're sending healthcare products. So, if people participate in the program, which is a hypertension and a pregnancy care program and follow their guidance, which is their ultimate goal is to create healthier people in order to reduce healthcare costs for themselves. So, they give incentives and rewards for people to do that and they've seen the metrics that works. So, we want to go and take that case study and promote it to others to show that the incentives really work to not only make the customers feel more engaged, but also to reduce costs, especially in the healthcare market.

Okay. The fourth quarter growth looks like it around 35% and just wondering if you could give any colors to how much of that was organic and then within the organic roughly what is the contribution from new customers, new logos versus expansion of existing customer relationships?

So, in terms of the organic growth in Q4, I don't have the figures exactly in front of me, but I would say at least two-thirds of that was from organic growth and then a third of that was from as a result of -- actually now that I think about it, almost all of that was organic because we closed the Wildman Imprints transaction, the asset purchase at the end of Q3 in 2020. So, we had already realized that in Q4 of 2020 versus 2021. So, all of that was organic because we didn't get any of the GAP acquisition until Q1 of this year. So, all of that was organic. In terms of the new customers, again I don't have that, but I would think that new customers probably account for maybe a third of that would be my assumption on that, but I don't have those figures in front of me. Bringing new logos and we're constantly adding new logos. Right now we're concentrating on -- we have over 30 Fortune 500 customers. There's a lot of potential within our accounts. We want to continue to expand into those while also adding. So, our goal is to continually grow those existing accounts and maximize the revenue by creating a flywheel and giving more value to them, but also finding new logos and new customers to bring on. So, it was all organic in Q4 and I would say about a third of it is new customers versus old customers.

All right, that's helpful. Last question is, you just mentioned in terms of driving future growth investments in sales. I'm just -- how many salespeople do you have right now and what did you add last year, what you maybe shouldn’t add this year?

Yes, so last year, our total employee count last year averaged at about 64 employees. As of today we have 89 employees. So we've seen significant growth in that. Currently right now we have 21 outside sales reps that are commission sales reps, and we have 24 inside sales reps that concentrate on continuing to grow that. So that's our current sales model. And really what we're looking to do with them is, is really maximize that by having the inside and the outside work together to really identify opportunities within accounts, add value to them so that they see the value that we can deliver to them and how effectively we can market their brands to continue to expand that spend. So not only are we looking to add additional sales people and additional marketing efforts to that, we're also looking to try to maximize the sales potential for that current team. And in addition, we're looking at marketing efforts. So what we want to do is provide more inbound lead generation for that sales team, so that, more eyeballs are on Stran, more people see who we are. More people are interested in what we do when we hand those leads over to our sales team to capitalize on close. So that's really part of our strategy is, not just looking at acquiring companies, but also have a very tight strategy on how we acquire new customers, how we acquire the maximum amount of business from our customers and apply that not only to ourselves, but to the acquisitions target that we bring on. So it's not something where we're just buying companies and remaining status quo with them. We want to take that revenue, protect that asset and grow that asset that we buy by applying those best practices and resources to capitalize on what we bought for that asset.

Okay. Do you have like metrics for outside sales as to what you hope are mature sales outside salesperson to hit in a year?

We have different levels. So we have junior sales reps, we have senior sales reps and enterprise account sales reps. So they run the gamut between what we're expecting for each of them, but we have recently changed our commission structure to pay more on growth and less on repeat business. So, we look at annuity and say, annuities are great, but annuities are great when they grow. And that's really what we're trying to promote within our sales team is give that compensation model to really promote growth within their existing accounts, not just status quo within that. This industry has had a very big tendency to really accept staleness within accounts. And really what we're trying to do is say, offer more products, more services, more offerings to our customers to be more value for them, so we can grow those accounts, not just be satisfied with status quo.

Right. Thank you for the time.

Yep.

Thank you. We have no further questions in queue at this time. I would now like to turn the floor back over to Andy Shape for any closing remarks.

Thank you very much. We're excited about the future of Stran. We're excited about how we ended 2021. Our balance sheet is extremely strong compared to our trading where we're trading near or even sometimes below cash value. We feel like this is unique opportunity for investors and for ourselves to really build even further value in Stran. So we're very excited about the future of our business. We're in a unique position where we really have an industry that no one has capitalized on. There's scarcity value. There's very few public companies that are within this space, especially on a major exchange like NASDAQ or New York Stock Exchange where we are the only one that is completely promotional products based. There are some divisions of some other companies, but we're very excited about that. So thank you for your time. I appreciate listening and look forward to the future of Stran. Thank you.

Thank you. Ladies and gentlemen, this does conclude today's event. You may disconnect at this time and have a wonderful day. We thank you for your participation.