Software Acquisition Group Inc. III (NASDAQ:SWAG) Q4 2023 Earnings Call Transcript March 28, 2024
Software Acquisition Group Inc. III isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to the Stran & Company Fiscal 2023 Year-end Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Alexandra Schilt, Vice President of Crescendo Communications. Ma’am, the floor is yours.
Alexandra Schilt: Good morning, and thank you for joining Stran & Company’s 2023 year-end financial results and business update conference call. On the call with us today are Andy Shape, Chief Executive Officer; and David Browner, Chief Financial Officer. The company issued a press release today, March 28, 2024, containing its 2023 fourth quarter and 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 3 and 12 months ended December 31, 2023.
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.
Andy Shape: Thank you, Ale, and thanks to everyone for joining us today as we discuss the meaningful progress and milestones made throughout 2023. First, I’m proud to report that we generated a record sales of approximately $75.9 million for 2023 or 28.7% increase over the prior year. Additionally, our gross profit increased 50.2% to approximately $24.9 million, with our gross profit margin increasing to 32.8% compared to 28.1% for 2022. Most notably, we achieved profitability for 2023. As I previously mentioned, Stran has historically been profitable, and while we did not — we did report a loss for last year, as we integrated a number of acquisitions, we knew these acquisitions will be highly accretive and beneficial for our shareholders.
We are now at an important inflection point within the company and are confident that we can sustain long-term profitability as a result of the successful execution of strategic growth initiatives implemented throughout the past few years. The improvement in operations even more visible when you look at our fourth quarter results. While revenue increased by 27.5% to a record approximately $23.3 million for the fourth quarter, even more impressive, our gross profit increased 63.5% to approximately $8.7 million, and our gross margin increased 37 — to 37.4% compared to 29.2% for the same period last year. You can get a really good picture of the operating leverage we’re starting to gain when you look at our fourth quarter operating income which increased 156% to approximately $1.1 million versus $421,000 for the same period last year.
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Q&A Session
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Our strategy is working and we’re firing on all cylinders. We believe our substantial growth and increased profitability stand as proof of the investments we’ve made alongside diligent expense management, validating the scalability and profit potential inherent in our business. And while been active on the M&A front, we are proud to have realized a 16.6% increase in organic revenue for 2023. Despite the challenging macroeconomic conditions during 2023, we have demonstrated our resilience especially compared to many of our peers who experienced nominal growth or even declines in 2023. This achievement highlights our robust competitive position, expanding market presence, growth within existing client relationships and the addition of a number of first class customers that I’ll talk about in a moment.
On the M&A front, we closed the T R Miller acquisition in June of 2023, which was our fourth acquisition with less — within less than 2 years, and followed G.A.P. Promotions, Trend Brand Solutions and Premier NYC. Each acquisition has delivered crucial strategic benefits to Stran and our operations including the expansion of our geographic reach, bolstering our warehousing and manufacturing capabilities, expansion into specific verticals and attracting esteemed clients to our already impressive portfolio. As previously mentioned, M&A has played a crucial role in our growth strategy, particularly given the conducive environment for consolidation within the promotional products industry. While we continue to actively explore potential M&A opportunities as they emerge, our primary focus is on nurturing our organic growth and optimizing the benefits of our existing acquisitions.
Currently, we are actively expanding into new verticals and geographic regions to bolster our growth trajectory. Moreover, our improved sales and marketing initiatives including more targeted SEO and demand generation, combined with an experienced sales leadership team are having a positive effect on our contract pipeline, evidenced by several new contract and — contracts announced during the year as well as expanding contracts within existing clients. Specifically as we secured a six figure contract with a leading medical group that specializes in the treatment of gastrointestinal disorders, this customer has over 200 locations throughout the United States and over 3,000 employees. We have successfully launched a new marketing program for them and also provided holiday gifts for the 2023 season while continue to supply recruitment gifts as well as new hire kits to employees.
We also expanded our partnership with the existing online sports and entertainment client, and introduced a loyalty redemption program tailored to their needs. This offering includes a blended — blend of physical and experiential rewards and that incentivizing desired behaviors. This program exemplifies one of several initiatives built upon our eCommerce loyalty program platform, which encompasses every aspect of client and consumer engagement, from concept to development to production, technology integration, logistics, inventory management, fulfillment and reporting. Our goal is to ensure a seamless experience for both the client and their customers. Within the first week alone, this program generated over 22,000 orders resulting in sales exceeding $2 million.
The program successfully delivered over 51,000 orders, generating over $4 million in total sales. We are excited about the ongoing execution of this program for our client and are eager to explore similar opportunities within other clients. Additionally, we were contracted by a multinational direct selling beauty products company provide incentive merchandise to assist in growing the customers North American loyalty program. We successfully launched their custom branded eCommerce merchandise store during the first quarter of 2023 for the North American market and are actively exploring how it can support their international clientele as well. With our global reach and community exceeding 4 million beauty influencer — influencers worldwide, we are delighted to have been chosen to assist in expanding their loyalty program by offering incentive merchandise to the North American customer base.
We also continue to launch new online stores for customers and are now actively managing over 280 online customer stores. These provide long-term value for our customers as well as easy and simple access to the products. In addition, considering the growth trajectory we are experiencing, we have hired and promoted key personnel. First, we officially promoted David Browner to the position of Chief Financial Officer after serving as our Interim CFO for almost a year, as well as holding other key financial roles since becoming part of Stran team in 2012. We have witnessed his management, operational and financial skills and appreciate his significant contributions to the company’s growth and integration of several acquisitions. Given his long relationship with the company and background, David is a valued member of our leadership team.
Following David, we made strategic hires and filled key positions including Chief Information Officer, Executive Vice President of Sales and Senior Vice President of Client Strategy. Ian Wall, an experienced Information Technology Executive now serves as our Chief Information Officer. Given his extensive experience in implementing technology differentiators, both internal and customer facing while working at Harvard and Tufts in the education sector, and Vertex and Biogen in the pharmaceutical industry, Ian has added significant value to our team. We’re active work — actively working to fully implement NetSuite into our operations along with other eCommerce initiatives using Adobe’s eCommerce platform, Magento Open Source. And Ian brings the firsthand experience and deep skill set utilizing both of these platforms that will allow us to maximize our technology investments and improve the overall efficiency of our business.
Additionally, Ian demonstrated his ability to leverage technology to enhance operations, improve efficiency and strengthen the customer experience by implementing NetSuite and other innovative technologies at his previous positions. We are proud to have Ian on our executive team. Nick Kiefer now serves as our Executive Vice President of Sales and Michele Pytlinski is our Senior Vice President of Client Strategy. Both Nick and Michele, are promotional products industry veterans and collectively bring decades of industry experience — sales experience to our company. Our goal is to build on our strong foundation and we believe these industry professionals will enable us to better capitalize on significant opportunities within the market. Nick and Michele’s successful track records of implementing strategic sales strategies to further penetrate customers and growth and we are proud to welcome them to our sales team.
