Superior Group of Companies, Inc. (NASDAQ:SGC) delivered an impressive start to fiscal year 2024, reporting strong year-over-year growth across its key financial metrics. The company generated annual net income of $8.8 million, annual revenue of $543.3 million, annual operating cash flow of $78.9 million, and annual free cash flow of $74.0 million in the prior fiscal year.

Financials

In the first quarter of 2024, the company continued its momentum, reporting consolidated revenues of $138.8 million, reflecting a 6.2% year-over-year increase. This top-line growth was driven by strong performance across all three of Superior's reportable segments - Branded Products, Healthcare Apparel, and Contact Centers.

Segment Performance

The Branded Products segment, which produces and sells customized merchandising solutions, promotional products, and branded uniform programs, saw its revenues increase by 6.4% year-over-year to $87.1 million. This growth was attributed to higher order volume from larger customers as well as increased pricing. The segment's EBITDA grew by 32% to $9.9 million, driven by continued gross margin improvement.

The Healthcare Apparel segment, which manufactures and sells healthcare apparel such as scrubs, lab coats, and patient apparel, reported a 3.8% year-over-year increase in revenues to $29.2 million. This was primarily due to incremental online sales volume growth, including sales growth through the company's direct-to-consumer website launched in the second quarter of 2023. The segment's EBITDA grew by 68% to $2.6 million, mainly driven by improved gross margins.

The Contact Centers segment, which provides outsourced, nearshore business process outsourcing and call-center support services, saw its revenues increase by 6.8% year-over-year to $23.6 million. The segment's EBITDA grew by 5% to $2.9 million, despite higher labor costs that the company is still working to fully anniversary.

Consolidated gross margin for the first quarter of 2024 was 39.8%, a significant improvement from 36.0% in the prior-year period. This margin expansion was driven by favorable pricing and lower supply chain costs in the Branded Products segment, as well as lower costs and improved manufacturing efficiencies in the Healthcare Apparel segment.

Financial Position

The company's financial position also continued to strengthen during the quarter. Superior generated $9.4 million in operating cash flow and reduced its net debt by an additional $4 million, resulting in a net leverage ratio of 1.6x at the end of the first quarter, a substantial improvement from 3.8x a year ago.

Outlook

Looking ahead, Superior has raised and tightened its full-year 2024 revenue guidance to a range of $563 million to $570 million, up from the prior range of $558 million to $568 million. The company has also raised and tightened its full-year earnings per diluted share outlook to a new range of $0.73 to $0.79, up from the prior range of $0.61 to $0.68.

The improved guidance reflects the company's continued confidence in the demand environment and its ability to drive further margin expansion. Management noted that they expect a more balanced performance throughout the year, as opposed to the heavily back-end weighted results seen in 2023.

Conclusion

Superior's diversified business model, with exposure to the large and growing Branded Products, Healthcare Apparel, and Contact Centers markets, positions the company well to capitalize on favorable industry trends. The company's focus on new customer acquisition, strong customer retention, and strategic investments in people and technology should enable it to continue delivering impressive results.

With a strengthened balance sheet, ample liquidity, and a positive outlook, Superior Group of Companies appears well-positioned to drive sustainable growth and create value for shareholders in the years ahead.