Stran & Company 2026 Q3 Earnings Call

Good morning, and thank you for joining Stran & Company's 2026 Third Quarter Financial Results and Business Update Conference Call. With us today are Andy Shape, Chief Executive Officer, and David Browner, Chief Financial Officer. Yesterday, we issued a press release detailing our results, which is available on our website at ir.stran.com. Before we begin, please note that today's remarks may include forward-looking statements that involve risks and uncertainties as described in our SEC filings. We will also discuss EBITDA, a non-GAAP financial measure. A reconciliation of EBITDA to net income, the most directly comparable GAAP measure, is included in yesterday's press release. With that, I'll turn the call over to Andy Shape. Please go ahead. Thank you, Allie.

Good morning, everyone, and thank you for joining us today. The third quarter represents another important step in Stran's evolution as we continue transitioning from a period of investment and expansion towards one focused on profitable growth, stronger cash generation, and increasing shareholder value. Our results demonstrate that this strategy is gaining traction. Revenue increased 8% to $28.1 million, while gross profit grew more than 32% to $9.4 million. Gross margin expanded by more than 600 basis points, and we remained profitable for the third consecutive quarter this year. Importantly, these improvements are not simply the result of higher revenue. They reflect our continued efforts to improve the underlying economics of our business. Over the past several years, we have invested in acquisitions, technology, operational capabilities, and customer relationships to establish a stronger and more diversified business.

We are now leveraging that foundation to generate greater profitability, improve cash flow, and pursue growth opportunities that create meaningful results. Our first priority is to accelerate profitable organic growth. Stran has established relationships with major corporations across a broad range of industries, providing promotional products, branded merchandise, employee recognition, loyalty programs, and fulfillment solutions. Our objective is to expand these relationships by becoming a more integrated partner to our customers. Rather than competing solely for individual promotional product orders, we are focused on securing larger, more comprehensive programs that allow us to support multiple departments, locations, and business objectives. We believe this approach creates opportunities to increase revenue per customer, strengthen long-term relationships, and improve operating efficiency. Recent customer agreements and program expansions reinforce our ability to compete for larger opportunities, and we intend to continue building on this momentum.

We are also investing in technology and operational capabilities that allow us to manage increasingly complex programs without requiring a proportional increase in our cost structure. A central part of that investment is artificial intelligence. We are deploying AI across the business to build agents that support our teams, automate manual processes, and help us operate more efficiently. Internally, we are applying AI to workflows such as order entry, quoting, artwork and proof preparation, inventory management, and customer service. These tools reduce manual touchpoints, shorten turnaround times, and allow our people to focus on higher-value work for our customers. For our customers, we are building AI-enabled capabilities into our technology platform to help us respond faster, tailor programs more precisely, and provide better insight into program performance.

We believe AI will be an important source of operating leverage, allowing us to support larger and more complex programs while maintaining a disciplined cost structure. This is an important part of our strategy. Our objective is not growth at any cost. It is growth that contributes to stronger margins, greater profitability, and long-term value creation. Our second priority is expand the contribution from Stran Loyalty Solutions. SLS continues to demonstrate the value of our expansion into the casino and gaming market. During the third quarter, SLS increased gross profit by more than 90% year over year and generated approximately $687,000 in operating income, compared with an operating loss to the prior period. This represents meaningful progress. We entered this market because we recognized an opportunity to provide casino operators with an integrated merchandise and loyalty solutions that support customer engagement and retention.

Today, we believe we have established a stronger operating foundation from which to pursue additional opportunities. Our focus is on expanding relationships with existing customers, developing new partnerships, and increasing the profitability of the segment. The improvement in SLS also demonstrates the broader opportunity within Stran. As we integrate businesses, strengthen operations, apply technology and AI, and improve execution, we believe we can unlock greater value from our existing platform. Our third priority is disciplined expansion through strategic acquisitions. The promotional products industry remains highly fragmented, and we continue to see opportunities to expand our capabilities, customer base, and market presence through acquisitions. Our view of strategic opportunities also extends beyond promotional products only. We see potential in complementary businesses with synergistic capabilities that would allow us to offer a broader range of marketing services and solutions to our customers through a single integrated platform.

We believe that adding the right combination of capabilities could meaningfully expand Stran's platform, deepen our customer relationships, increasing our relevance across our customers' marketing needs, and increasing the value we delivered. However, our approach remains selective. We are focused on businesses that offer strategic value and can benefit from Stran's infrastructure, customer relationships, and operating capabilities. We believe our existing platform provides an opportunity to integrate complementary businesses while improving their operational efficiency and profitability. Importantly, our acquisition strategy is not simply about increasing the size of the company. It is about building more profitable and scalable organization with the potential to generate stronger returns over time. We believe our financial position provides flexibility to evaluate these opportunities while continuing to support organic growth. I also want to address two important developments related to our capital structure and shareholder value.

First, on November 9th, our publicly traded warrants, which were issued in connection with our 2021 initial public offering, expired in accordance with their terms. Approximately 4.3 million warrants expired unexercised. In addition, our remaining warrants, which total approximately 5.7 million, are scheduled to expire by December 10th. Once they do, all the approximately 10.1 million warrants we had outstanding at the end of the third quarter, equal to more than half of our shares outstanding, will have expired. This is an important development because it eliminates a substantial source of potential future dilution. The expiration did not result in additional shares being issued and had no impact on our operating results. We believe the elimination of these outstanding warrants is a positive step towards simplifying our capital structure and providing greater clarity for shareholders. Second, we continued executing on our share repurchase program.

During the third quarter, we repurchased and retired approximately 109,000 shares of our common stock for approximately $208,000, and approximately $5.6 million remained available under the authorized repurchase program at quarter end. Since program inception, we have repurchased a total of approximately 2.4 million shares for approximately $4.4 million at a weighted average price of $1.81 per share. We believe repurchases can represent an attractive use of capital when balanced against our operational requirements and strategic growth opportunities. Our approach to capital allocation remains disciplined, with a focus on investments that we believe can generate the greatest long-term value for shareholders. Looking ahead, we believe Stran & Company is well-positioned to build on this momentum and accelerate our next phase of profitable growth. We expanded our business, diversified our capabilities, and established a platform capable of supporting larger customer programs.

We are now focused on translating those investments into sustained profitability and stronger cash generation. Our priorities are clear: accelerate profitable organic growth, expand SLS, pursue strategic acquisitions, leverage AI and technology advancements to drive efficiency, and continue to strengthen our financial performance. We believe these initiatives, combined with our balance sheet and disciplined approach to capital allocation, positions us to continue to build value for our shareholders. I'll now turn the call over to our CFO, David Browner, for a more detailed review of our financial results.

David, please go ahead. Thank you, Andy, and good morning, everyone.

I'm pleased to provide a detailed overview of our financial performance for the three and nine months ended September 30th, 2026. For our three months results, total sales increased 8.2% to $28.1 million for the three months ended September 30th, 2026, from $26 million for the prior year period. Sales by our Stran & Company segment increased to $18.5 million for the three months ended September 30th, 2026, from $17.6 million for the prior year period. Sales by our SLS segment increased to $9.6 million for the three months ended September 30th, 2026, from $8.3 million for the prior year period. Total gross profit increased 32.4% to $9.4 million, or 33.3% of sales, for the three months ended September 30th, 2026, from $7.1 million, or 27.2% of sales, for the prior year period.

The increase in the dollar amount of the total gross profit was primarily attributable to the customer mix, effective cost management, and the tariff refunds received during the quarter ended September 30, 2026. Gross profit of our Stran segment increased to $6.4 million for the three months ended September 30, 2026, from $5.5 million for the prior year period. For the Stran segment, the increase in the dollar amount of gross profit was due to the customer mix. Gross profit of our SLS segment increased to $3 million for the three months ended September 30, 2026, from $1.6 million for the prior year period. For the SLS segment, the increase in the dollar amount of gross profit was primarily attributable to the improved customer mix, effective cost management, and lower tariffs, in addition to the tariff refund received in the quarter ended September 30, 2026.