Stran & Company, Inc. (NASDAQ:SWAG), a leading outsourced marketing solutions provider, has reported its financial results for the fiscal year ended December 31, 2023, showcasing impressive growth and a return to profitability.
The company's annual revenue reached a record $75.9 million, a 28.7% increase compared to the prior year. This strong performance was driven by higher spending from existing customers as well as new business wins. Notably, the company's organic revenue, excluding the impact of acquisitions, grew by 16.6% or $8.7 million to $61.2 million.
Stran's gross profit for the year increased by a remarkable 50.2% to $24.9 million, with the gross profit margin expanding to 32.8% from 28.1% in the previous year. This margin expansion was the result of the company's strategic initiatives to improve pricing and optimize purchasing and freight costs.
Most significantly, Stran achieved profitability in 2023, reporting net income of $35,058, a significant turnaround from the $778,000 net loss recorded in the prior year. This profitability milestone was driven by the company's successful integration of recent acquisitions and the realization of operational efficiencies.
The company's fourth quarter results further highlighted its strong momentum, with revenue increasing by 27.5% to a record $23.3 million. Gross profit for the quarter surged 63.5% to $8.7 million, and the gross margin expanded to 37.4% from 29.2% in the same period of 2022. Operating income for the fourth quarter increased by an impressive 156% to $1.1 million, demonstrating the company's ability to leverage its growing scale and operational improvements.
Stran's Chief Executive Officer, Andy Shape, commented, "We are proud to report our return to profitability in 2023, which is a testament to the successful execution of our strategic growth initiatives. The investments we have made, alongside our diligent expense management, have enabled us to realize the scalability and profit potential inherent in our business model."
Business Overview
Stran & Company is an outsourced marketing solutions provider that sells branded products to a diverse customer base. The company purchases products and branding through various third-party manufacturers and decorators, and then resells the finished goods to its customers. In addition to selling branded products, Stran offers a range of complementary services, including custom sourcing, e-commerce solutions, creative and merchandising services, warehousing/fulfillment, and loyalty and incentive programs.The company's sales are primarily derived from program business, which accounted for 80.7% of total revenue in the first nine months of 2023, up from 82.1% in the same period of the prior year. Stran defines program clients as those with a contractual obligation for specific ongoing branding needs, which typically include inventory management, technology platform usage, warehousing, creative services, and additional client support. These program offerings help secure recurring revenue and foster longer-lasting customer relationships.
Stran has a diverse customer base of over 2,000 active accounts, with fewer than 350 considered program clients. The company's top customer accounted for 13.6% of revenue in the first nine months of 2023, down from 10.4% in the same period of 2022.
Acquisitions and Geographic Expansion
Stran has been actively pursuing a growth strategy that includes both organic initiatives and strategic acquisitions. In the past two years, the company has completed four acquisitions, including G.A.P. Promotions, Trend Brand Solutions, Premier NYC, and T R Miller. These acquisitions have expanded Stran's geographic reach, bolstered its warehousing and manufacturing capabilities, and provided access to new customer verticals.The most recent acquisition of T R Miller's assets in June 2023 further strengthened Stran's position in the promotional products industry. The integration of T R Miller's operations has been a key focus, and the company expects the acquisition to be highly accretive to its financial performance going forward.
In addition to its acquisition strategy, Stran has been expanding its presence in new geographic regions and industry verticals. The company has secured several notable new customer contracts, including a six-figure deal with a leading medical group and an expanded partnership with an existing online sports and entertainment client.
Liquidity and Balance Sheet
As of December 31, 2023, Stran had approximately $18.5 million in cash and investments, with no long-term debt. Excluding the company's rewards program liabilities, Stran maintained cash and investments of approximately $17.6 million, providing ample liquidity to support its growth initiatives and explore strategic opportunities.The company's strong balance sheet and cash position give it the flexibility to continue investing in its business, both organically and through selective acquisitions, while also maintaining prudent financial management.
Outlook and Key Initiatives
Looking ahead, Stran remains focused on executing its growth strategy, which includes continued investment in technology, sales and marketing initiatives, and selective M&A. The company's recent hires of a Chief Information Officer, Executive Vice President of Sales, and Senior Vice President of Client Strategy are expected to further strengthen its operational capabilities and drive growth.Stran's CEO, Andy Shape, expressed confidence in the company's ability to sustain long-term profitability, stating, "The improvements in our operations and increased efficiency are even more evidenced by our impressive fourth quarter results. We remain dedicated to our growth strategy and are confident that we will solidify our position as a leader in the $26 billion promotional products industry."
The company's strong performance in 2023, marked by record revenue, improved profitability, and strategic initiatives, positions Stran well to continue its momentum in the years ahead. As the promotional products industry continues to consolidate, Stran is poised to capitalize on its competitive advantages and further strengthen its market position.