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DATE
Wednesday, May 13, 2026 at 10 a.m. ET
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Full Conference Call Transcript
Andrew Shape: Thank you, Ali. Good morning, everyone, and thank you for joining us today. The first quarter of 2026 demonstrated that Stran has reached a genuine inflection point in profitability. It validates the strength of our platform, the depth of our client relationships, and the scalability of our operating model. Most importantly, it confirms what we have long believed, that investments we have made over the past few years are now translating directly into profitable growth. During the first quarter, total revenue grew 8.9% year-over-year to $31.2 million reflecting continued momentum across both existing client relationships and new business wins. Even more importantly, that growth translated into significantly improved profitability and operating leverage across the organization.
Gross profit increased 13.7% to 9.6 million while gross margin expanded more than 100 basis points to 30.9% when compared to the prior year. These results demonstrate the strength of our execution the value of our client relationships, and the benefits of the operational discipline and strategic investments we have made over the last several years. We have also achieved significant profitability milestone this quarter, having generated net income of $744 thousand compared to a net loss of $393 thousand in the prior year period. In addition, EBITDA improved to $1 million versus a negative $201 thousand a year ago. This was a year-over-year improvement of $1.2 million. These are not incremental improvements.
This is a fundamental shift in the earnings trajectory of our business. What makes these results especially encouraging is that we are delivering profitable growth while simultaneously investing in the future of our company. Expanding our technology capability, deepening our enterprise client relationships, and building towards a significantly larger market opportunity ahead. We have turned the corner on profitability, and we intend to keep widening that gap. As we continue to scale, we are seeing tangible operating leverage throughout the organization. Total operating expenses remained essentially flat year over year, at $9 million despite meaningful revenue growth. As a percentage of sales, operating expenses improved to 28.8% from 31.4% a year ago. A 260 basis point improvement.
I also want to highlight the dramatic turnaround within Stran Loyalty Solutions segment during the quarter. SLS generated $532 thousand of operating income in Q1 2026 compared to an operating loss of $462 thousand in the prior year period. This reflects both the successful integration of Gander Group business and the sustained operational discipline our team has implemented. Importantly, the SLS segment gross margin expanded to 28.7% from 21.8% in Q1 2025, a nearly 700 basis point improvement. Beyond the financial results, the first quarter was also marked by several highly strategic client wins and relationship expansions that reinforce the growing relevance of our solutions in the marketplace.
1 of the highlights of the quarter was the extension of a 3 year multimillion dollar partnership with 1 of the world’s premier nonprofit running organizations. This renewal reflects the trust our clients place in Stran and validates our ability to execute complex, high-impact engagement campaigns. In addition, we secured a new multimillion dollar agreement with a leading gaming company to support a large scale rewards and loyalty initiative. This win demonstrates the growing demand for integrated promotional products and incentive solutions, particularly among consumer-facing brands seeking innovative ways to strengthen customer engagement and loyalty. We are also proud to add 2 top Global 100 law firms as new clients.
These relationships further diversify our customer base and reflect the increasing appeal of Stran’s solutions among sophisticated professional services organizations that require premium service, strategic execution, and scalable technology capabilities. Collectively, these wins highlight several important themes that we believe position Stran for future sustained long term growth. First, we continue to gain traction with enterprise-level clients that value strategic partnerships rather than transactional vendors. Second, we are expanding into new verticals and end markets where branded merchandise, loyalty solutions, and other engagement programs are becoming increasingly important components of customer acquisition and retention strategy. And third, our technology investments are creating a meaningful competitive advantage.
We recently launched Stran’s digital solutions, our proprietary SaaS-based platform designed to enhance client engagement, streamline campaign execution, improving analytics capabilities, and generate recurring revenue over time. This is a platform that makes Stran harder to replace and more valuable than ever to every client we service. With strong digital solutions, we are moving beyond being just a best-in-class promotional products provider and becoming an integrated marketing ecosystem partner. We are adding scalable software capabilities that deepen client relationships and create opportunities for higher margin, recurring revenue streams, the kind of revenue that compounds over time and expands our long term earning potential.
This is an important strategic initiative because it positions Stran at the intersection of branded merchandise technology and data-driven engagement solutions. As more companies seek integrated marketing ecosystems rather than isolated service providers, we believe our combined physical and digital offering creates a compelling competitive advantage. Equally important, we continue to maintain a strong balance sheet that provides significant flexibility to support future growth initiatives. We ended the quarter with $12.8 million in cash, cash equivalents, and investments. This financial position allows us to continue investing in technology expanding our sales and marketing capabilities, evaluating strategic acquisition opportunities, and pursuing initiatives that enhance long term shareholder value. Looking ahead, we are not just optimistic, we are confident.
This quarter demonstrated the power of Stran’s growth model. Revenue growth, margin expansion, and profitable operations, all delivered simultaneously. We believe that promotional products and loyalty industries continue to benefit from strong secular trends, including increased corporate focus on customer engagement employee retention, experiential marketing, and brand activation. At the same time, clients are increasingly looking for partners that can provide integrated, scalable technology enabled solutions with measurable ROI. Strahan is exceptionally well positioned to capitalize on those trends. Strategic acquisitions also remain a core pillar of our long term growth strategy. While we continue to evaluate opportunities actively, we are being increasingly disciplined and selective in today’s environment.
We are focused on targets that enhance our technology capabilities, expand our client base, strengthen our vertical expertise, and create clear long term shareholder value. With our strong balance sheet and improved profitability profile, we believe we are well positioned to pursue the right opportunities at the right time. We are entering the remainder of the year with strong momentum, an expanding pipeline, growing enterprise relationships, 2 profitable segments, and a platform we believe can continue compounding. The promotional products and loyalty industries are large, fragmented, and shifting towards integrated partners with technology and scale. And that describes Stran.
Our focus remains on driving sustainable, profitable revenue growth expanding margins, deepening client relationships, and continue to build a platform capable of generating compounding value for our shareholders. We have the strategy, the team, the balance sheet, and the momentum. The opportunity is in front of us is significant, and we are executing. And while trading blackout restrictions prevented us from repurchasing during the first quarter, we intend to resume our buyback program as a direct expression of our confidence in the business. We believe the current share price meaningfully undervalued Stran and we view repurchases as an attractive and disciplined use of capital as we continue to build long term shareholder value.
I will now turn the call over to our CFO, David Browner, for a more detailed review of our financial results. David, please go ahead.
David Browner: Thank you, Andy, and good morning, everyone. I am pleased to provide a detailed overview of our financial performance for the quarter ended March 31, 2026. Total sales increased 8.9% to $31.2 million for the 3 months ended March 31, 2026, from $28.7 million for the prior year period. Sales by our Stran segment increased 11.9% to $23.4 million for the 3 months ended March 31, 2026, from $20.9 million in the prior year period. The increase in sales was primarily driven due to higher spending from existing clients as well as new customers. Sales by our SLS segment remain approximately flat at $7.8 million for the 3 months ended March 2026 when compared to the prior year period.
Total gross profit increased 13.7% to $9.6 million or 30.9% of sales for the 3 months ended March 31, 2026 from $8.5 million or 29.6% of sales for the 3 months ended 03/31/2025. The increase in the dollar amount of the total gross profit was primarily attributable to the shift in customer mix and effective cost management. Gross profit of our Stran segment increased to $7.8 million for the 3 months ended March 31, 2026 from $6.8 million for the prior year period. Gross profit for our SLS segment increased to $2.2 million for the 3 months ended March 31, 2026 from $1.7 million the prior year period.
Total operating expenses decreased 0.2% to $9.0 million for the 3 months ended March 31, 2026 As a percentage of sales, operating expenses improved to 28.8% for the 3 months ended March 31, 2026, from 31.4% for the 3 months ended 03/31/2025. An improvement of approximately 260 basis points reflecting the operating leverage now embedded in our model. Operating expenses of our Strand segment increased to $6.2 million for the 3 months ended March 31, 2026 from $5.6 million for the prior year period. As a percentage of sales, operating expenses of our Stran segment decreased 26.6% for the 3 months ended March 31, 2026, from 26.9% for the prior year period.
The increase in the dollar amount of the operating expense was primarily due to the investment in the Stran Digital Solutions higher expenses related to our Magento open source ecommerce platform, and higher sales and marketing related costs. Operating expenses of our SLS segment decreased to $1.7 million for the 3 months ended March 31, 2020 from $2.2 million for the prior year period. As a percentage of sales, operating expenses of the SLS segment improved to 21.9% the 3 months ended March 31, 2026, from 27.7% for the prior year period. The decrease in the dollar amount of the operating expense was primarily attributable to a reduction in headcount, and lower sales related costs.
Operating expenses for the other, which represents unallocated corporate costs, decreased to $1.1 million for the 3 months ended March 31, 2026, from $1.2 million for the prior year period. Primarily driven by lower legal and accounting related expenses due to the reaudit of our historical financial statements. Our net income for the 3 months ended March 31, 2026 was $744 thousand compared to a net loss of $393 thousand for the prior year period. This marks a clear inflection in profitability driven by gross profit growth. I was outpacing revenue growth and essentially flat operating expenses. As of March 31, 2026, we have approximately $12.0 million in cash and cash equivalents and investments.
Now I will turn the call back to Andy.
Andrew Shape: Thank you, David, and thank you everyone for listening. Before we conclude, I am very excited about the results that we posted, but I would love to open it up for questions. So, please open it up for questions, and we will answer anything that anyone would like to know.
Operator: Certainly. At this time, we will be conducting a Q&A session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Moment, please, while we poll for questions. Once again, if you would like to ask a question, please press *1.
Andrew Shape: Alright. So it does not look like we have any questions. So thank you. Looks like we have answered a lot of things, and I am sure we will have other questions as time goes on. So thank you, everyone, for listening. And I will wrap things up. So before we conclude, I do want to acknowledge the incredible team at Stran whose dedication and execution made this quarter possible. I also want to thank our clients for the trust they place in us and our shareholders for their continued support. Q1 2026 is proof that our strategy is working, We are just getting started.
We believe the first quarter demonstrated meaningful, measurable progress revenue growth, margin expansion, operating leverage, and a genuine profitability inflection. We have turned the corner, and we believe we are still in the early stages of unlocking the full potential of this platform. We are highly confident in the strength of our business, our market position, and our ability to execute. The investments we have made in our people, technology, client relationships have built the foundation for a durable, compounding growth. We will continue to expand margins, deepen client relationships, pursue strategic opportunities, and deliver results that reflect the quality of this business. The best is ahead of us.
With that, thank you again for joining us today and for your continued interest in Stran. We appreciate your time and support, and we look forward to updating you on our continued progress in the quarters ahead. Thank you.
Operator: This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.
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Stran (SWAG) Q1 2026 Earnings Call Transcript was originally published by The Motley Fool
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