SPAR Group, Inc. Reports First Quarter 2024 Results
SPAR Group (NASDAQ: SGRP) reported first-quarter 2024 revenues of $68.7 million, a 6.7% increase from the previous year. The company saw a 204% rise in operating income to $9.6 million, with a diluted EPS of $0.28, up 600% from last year's $0.04. This includes a $7.2 million pre-tax gain on a sale.
Net revenues were substantially driven by a 22% increase in U.S. and Canada, while the EMEA region saw a 14.7% decline. APAC revenues fell by 5.5%. Despite a gross profit decrease to $12.5 million, down from $14.1 million last year, SG&A expenses improved to $9.6 million.
SPAR's total liquidity stood at $21.0 million, with $16.6 million in cash. The company ended the quarter with net working capital of $38.2 million. Additionally, SPAR completed several strategic divestitures and a share repurchase plan.
- Consolidated revenue increased by 6.7% to $68.7 million.
- U.S. and Canada revenues increased by 22%.
- Operating income rose by 204% to $9.6 million.
- Diluted EPS increased by 600% to $0.28.
- SG&A expenses decreased to $9.6 million, an improvement from $10.5 million.
- Net income attributable to SPAR Group reached $6.6 million.
- Successful completion of strategic divestitures.
- Share repurchase plan executed.
- Gross profit decreased to $12.5 million from $14.1 million.
- Gross margin dropped to 18.3% from 22.0%.
- EMEA revenues declined by 14.7%.
- APAC revenues decreased by 5.5%.
- Adjusted EBITDA decreased to $2.5 million from $2.9 million.
- Gross margin impacted negatively by higher labor and travel costs in the remodeling business.
Insights
SPAR Group, Inc. has delivered notable financial results for the first quarter of 2024. The company reported
Moreover, the earnings per share (EPS) are quite impressive. The diluted EPS reached
Investors should also note the decrease in gross margin to
SPAR Group's geographical revenue performance reveals an interesting dynamic. The Americas segment, particularly the U.S. and Canada, has seen a robust growth of
The strategic divestitures in regions like Australia, China, South Africa and Brazil are steps toward concentrating on more profitable and manageable segments. These decisions are likely to streamline operations and improve overall efficiency. However, the long-term impact on revenue diversification and global market presence remains to be seen.
Investors should appreciate the company's effort in restructuring its geographical footprint and aligning its focus on the most profitable areas. In the short term, this may lead to more stable revenues from the Americas but may pose risks of over-reliance on these markets.
From an operational standpoint, SPAR Group's first-quarter performance reflects significant operational improvements. The company's focus on simplifying its operating structure has translated into better financial efficiency. The reduction in SG&A expenses from
Additionally, the sale of businesses in underperforming regions like South Africa and the acquisition of the remaining U.S. joint venture indicate a strategic realignment. This strategy is likely aimed at focusing resources on core areas with higher profitability and growth potential. However, the company's gross margin decline reflects the higher operational costs associated with the remodeling business. Investors should be cautious of these higher variable expenses that could impact future profitability if not managed properly.
Overall, these operational changes appear to be positive steps toward a leaner, more focused business model. However, careful monitoring of the remodeling segment's cost structure will be essential to ensure sustainable profit margins.
- Consolidated Revenues of
$68.7 million , up7% from Last Year - U.S. and Canada Revenues up
22% from Last Year - Consolidated Operating Income of
$9.6 million compared to$3.2 million Last Year - Diluted EPS of
$0.28 compared to$0.04 Last Year
AUBURN HILLS, Mich., May 15, 2024 (GLOBE NEWSWIRE) -- SPAR Group, Inc. (NASDAQ: SGRP) (“SPAR,” “SPAR Group” or the “Company”), today announced first-quarter 2024 consolidated revenues of
“I want to thank all of our team for their hard work and efforts,” said Mike Matacunas, SPAR chief executive officer. “Our financial performance in the first quarter exceeded our expectations as the U.S. remodel business recovered more quickly than planned, our Canada business continued to deliver outstanding results and demand for our services grew.”
“We continue to make significant progress in simplifying our operating and financial structure while driving our core business of merchandising, brand marketing, store transformation and fulfillment services. To date, the company has announced the sale of Australia, China, National Merchandising Services, South Africa and Brazil. In addition, we announced the acquisition of the minority interest in our remaining U.S. joint venture to own
First Quarter 2024 Financial Results
Net revenues were
Gross profit was
Selling, general, and administrative (SG&A) expenses were
Operating income was
Net income attributable to SPAR Group, Inc. was
Consolidated Adjusted EBITDA (1) in the 2024 quarter was
(1) Adjusted Net income attributable to SPAR Group, Inc., Adjusted Diluted earnings per share attributable to SPAR Group, Inc., and Adjusted EBITDA are non-GAAP financial measures as defined and reconciled below.
Financial Position as of March 31, 2024
The Company’s total worldwide liquidity at the end of the quarter was
Conference Call
The Company will conduct a conference call today at 10:00 a.m. Eastern Time to discuss financial and operating results for the period ended March 31, 2024. To access the call live by phone, dial 1-833-630-1542 (Domestic) and 1-412-317-1821 (International) and ask for the SPAR Group call at least 10 minutes prior to the start time. A telephonic replay will be available through May 20, 2024, by calling 1-877-344-7529 using passcode ID 5949651#. A webcast of the call will also be available live and for later replay on the Company’s Investor Relations website at https://investors.sparinc.com/events-and-presentations.
About SPAR Group, Inc.
SPAR Group is a leading global merchandising and marketing services company, providing a broad range of services to retailers, manufacturers, and distributors around the world. With more than 50 years of experience, approximately 25,000 merchandising specialists around the world, an average of 200,000+ store visits a week and long-term relationships with some of the world’s leading manufacturers and retail businesses, we provide specialized capabilities across more than eight countries. Our unique combination of scale, merchandising and marketing expertise, combined with our unwavering commitment to excellence, separate us from the competition. For more information, please visit the SPAR Group’s website at http://www.sparinc.com.
Cautionary Note Regarding Forward-Looking Statements
This Press Release contains, and the above referenced recorded comments, will contain “forward-looking statements” within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, made by, or respecting, SPAR Group, Inc. (“SGRP”) and its subsidiaries (together with SGRP, “SPAR”, “SPAR Group” or the “Company”), filed in an Annual Report on Form 10-K by SGRP with the Securities and Exchange Commission (the “SEC”) for its fiscal year ended December 31, 2023, and SGRP’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and statements as and when filed with the SEC (including the Quarterly Report, the Annual Report and the Proxy Statement, the Information Statement, the Second Special Meeting Proxy/Information Statement, each a “SEC Report”). “Forward-looking statements” are defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other applicable federal and state securities laws, rules and regulations, as amended (together with the Securities Act and Exchange Act, the “Securities Laws”).
The forward-looking statements made by the Company in this Press Release may include (without limitation) any expectations, guidance or other information respecting the pursuit or achievement of the Company’s corporate strategic objectives. The Company’s forward-looking statements also include, in particular and without limitation, those made in “Business”, “Risk Factors”, “Legal Proceedings”, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report. You can identify forward-looking statements in such information by the Company’s use of terms such as “may”, “will”, “expect”, “intend”, “believe”, “estimate”, “anticipate”, “continue”, “plan”, “project” or similar words or variations or negatives of those words.
You should carefully consider (and not place undue reliance on) the Company’s forward-looking statements, risk factors and the other risks, cautions and information made, contained or noted in or incorporated by reference into this Press Release, the Annual Report, the Proxy Statement and the other applicable SEC Reports that could cause the Company’s actual performance or condition (including its assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition) to differ materially from the performance or condition planned, intended, anticipated, estimated or otherwise expected by the Company (collectively, “expectations”) and described in the information in the Company’s forward-looking and other statements, whether expressed or implied. Although the Company believes them to be reasonable, those expectations involve known and unknown risks, uncertainties, and other unpredictable factors (many of which are beyond the Company’s control) that could cause those expectations to fail to occur or be realized or such actual performance or condition to be materially and adversely different from the Company’s expectations. In addition, new risks and uncertainties arise from time to time, and it is impossible for the Company to predict these matters or how they may arise or affect the Company. Accordingly, the Company cannot assure you that its expectations will be achieved in whole or in part, that the Company has identified all potential risks, or that the Company can successfully avoid or mitigate such risks in whole or in part, any of which could be significant and materially adverse to the Company and the value of your investment in SGRP’s Common Stock.
You should also carefully review the risk factors described in the Annual Report (See Item 1A – Risk Factors) and any other risks, cautions or information made, contained or noted in or incorporated by reference into the Annual Report, the Proxy Statement or other applicable SEC Report. All forward-looking and other statements or information attributable to the Company or persons acting on its behalf are expressly subject to and qualified by all such risk factors and other risks, cautions and information.
The Company does not intend or promise, and the Company expressly disclaims any obligation, to publicly update or revise any forward-looking statements, risk factors or other risks, cautions or information (in whole or in part), whether as a result of new information, risks or uncertainties, future events or recognition or otherwise, except as and to the extent required by applicable law.
| Media Contact: Ronald Margulis RAM Communications 908-272-3930 ron@rampr.com | Investor Relations Contact: Sandy Martin Three Part Advisors 214-616-2207 smartin@threepa.com |
- Financial Statements Follow –
| SPAR Group, Inc. and Subsidiaries | ||||||
| Condensed Consolidated Statements of Income | ||||||
| (unaudited) | ||||||
| (In thousands, except per share amounts) | ||||||
| Three Months Ended, March 31 | ||||||
| 2024 | 2023 | |||||
| Net revenues | $ | 68,693 | $ | 64,380 | ||
| Related party - cost of revenues | - | 1,497 | ||||
| Cost of revenues | 56,151 | 48,745 | ||||
| Gross profit | 12,542 | 14,138 | ||||
| Selling, general and administrative expense | 9,616 | 10,456 | ||||
| Gain on sale of business | (7,157 | ) | - | |||
| Depreciation and amortization | 511 | 532 | ||||
| Operating income | 9,572 | 3,150 | ||||
| Interest expense | 530 | 390 | ||||
| Other expense (income), net | 7 | (58 | ) | |||
| Income before income tax expense | 9,035 | 2,818 | ||||
| Income tax expense | 1,854 | 1,041 | ||||
| Net income | 7,181 | 1,777 | ||||
| Net (income) loss attributable to non-controlling interest | (554 | ) | (911 | ) | ||
| Net income (loss) attributable to SPAR Group, Inc. | $ | 6,627 | $ | 866 | ||
| Basic income per common share attributable to SPAR Group, Inc. | 0.28 | 0.04 | ||||
| Diluted income per common share attributable to SPAR Group, Inc. | $ | 0.28 | $ | 0.04 | ||
| Weighted-average common shares outstanding– basic | 23,817 | 23,114 | ||||
| Weighted-average common shares outstanding – diluted | 24,013 | 23,279 | ||||
| SPAR Group, Inc. and Subsidiaries | ||||||
| Condensed Consolidated Balance Sheets | ||||||
| (unaudited) | ||||||
| (In thousands, except share and per share data) | ||||||
| March 31, | December 31, | |||||
| 2024 | 2023 | |||||
| Assets: | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 16,629 | $ | 10,719 | ||
| Accounts receivable, net | 68,728 | 59,776 | ||||
| Prepaid expenses and other current assets | 7,837 | 5,614 | ||||
| Total current assets | 93,194 | 76,109 | ||||
| Property and equipment, net | 2,643 | 2,871 | ||||
| Operating lease right-of-use assets | 1,682 | 2,323 | ||||
| Goodwill | 942 | 1,382 | ||||
| Intangible assets, net | 865 | 1,180 | ||||
| Deferred income taxes | 3,074 | 4,687 | ||||
| Other assets | 2,131 | 1,729 | ||||
| Total assets | $ | 104,531 | $ | 90,281 | ||
| Liabilities and equity | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 11,001 | $ | 9,488 | ||
| Accrued expenses and other current liabilities | 20,060 | 15,274 | ||||
| Due to affiliates | 3,168 | 3,205 | ||||
| Customer incentives and deposits | 5,113 | 1,905 | ||||
| Lines of credit and short-term loans | 15,159 | 17,530 | ||||
| Current portion of operating lease liabilities | 522 | 1,163 | ||||
| Total current liabilities | 55,023 | 48,565 | ||||
| Operating lease liabilities, net of current portion | 1,160 | 1,160 | ||||
| Long-term debt | 8,292 | 310 | ||||
| Total liabilities | 64,475 | 50,035 | ||||
| Commitments and contingencies | ||||||
| Stockholders' equity: | ||||||
| Preferred stock, Series - A, $.01 par value: Authorized and available shares– 2,445,598 Issued and outstanding shares– None Preferred stock, Series - B. $.01 par value: Authorized and available shares– 2,000,000 Issued and outstanding shares– none and 650,000 at March 31, 2024 and December 31, 2023, respectively | - | 7 | ||||
| Common stock, | 242 | 232 | ||||
| Treasury stock, at cost, 205,485 shares as of March 31, 2024 and December 31, 2023 | (285 | ) | (285 | ) | ||
| Additional paid-in capital | 21,131 | 21,004 | ||||
| Accumulated other comprehensive loss | (4,659 | ) | (3,341 | ) | ||
| Retained earnings | 16,524 | 10,609 | ||||
| Total stockholders' equity attributable to SPAR Group, Inc. | 32,953 | 28,226 | ||||
| Non-controlling interest | 7,103 | 12,020 | ||||
| Total stockholders’ equity | 40,056 | 40,246 | ||||
| Total liabilities and stockholders’ equity | $ | 104,531 | $ | 90,281 | ||
| SPAR Group, Inc. and Subsidiaries | ||||||
| Condensed Consolidated Statements of Cash Flows | ||||||
| (unaudited) | ||||||
| (In thousands) | ||||||
| Three Months Ended, March 31 | ||||||
| 2024 | 2023 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 7,181 | $ | 1,777 | ||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities | ||||||
| Depreciation and amortization | 511 | 532 | ||||
| Amortization of operating lease assets | 176 | 133 | ||||
| Provision for expected credit losses | 61 | (35 | ) | |||
| Deferred income tax expense | 1,613 | (129 | ) | |||
| Share-based compensation expense | 128 | 173 | ||||
| Gain on sale of business | (7,157 | ) | - | |||
| Changes in operating assets and liabilities, net of business disposals: | ||||||
| Accounts receivable | (8,952 | ) | 607 | |||
| Prepaid expenses and other assets | (2,385 | ) | 1,301 | |||
| Accounts payable | 2,618 | (325 | ) | |||
| Operating lease liabilities | (176 | ) | (133 | ) | ||
| Accrued expenses, other current liabilities and customer incentives and deposits | 6,997 | (965 | ) | |||
| Net cash provided by operating activities | 615 | 2,936 | ||||
| Cash flows from investing activities: | ||||||
| Cash transferred in sale of business | (432 | ) | (343 | ) | ||
| Purchases of property and equipment and capitalized software | (446 | ) | - | |||
| Net cash used in investing activities | (878 | ) | (343 | ) | ||
| Cash flows from financing activities: | ||||||
| Borrowings under line of credit | 25,780 | 26,659 | ||||
| Repayments under lines of credit | (23,657 | ) | (26,577 | ) | ||
| Proceeds from term debt | 8,187 | 445 | ||||
| Payments on term debt | (1,503 | ) | (124 | ) | ||
| Payments on capital lease obligations | - | (5 | ) | |||
| Payments of notes to seller | (1,120 | ) | (722 | ) | ||
| Dividend on noncontrolling interest | (1,343 | ) | (304 | ) | ||
| Net cash provided by (used in) financing activities | 6,344 | (628 | ) | |||
| Effect of foreign exchange rate changes on cash | (171 | ) | (57 | ) | ||
| Net increase (decrease) in cash and cash equivalents | 5,910 | 1,908 | ||||
| Cash and cash equivalents at beginning of year | 10,719 | 9,345 | ||||
| Cash and cash equivalents at end of year | $ | 16,629 | $ | 11,253 | ||
| SPAR Group, Inc. and Subsidiaries | ||||||
| Segment Information | ||||||
| (unaudited) | ||||||
| (In thousands) | ||||||
| Three Months Ended, March 31 | ||||||
| 2024 | 2023 | |||||
| Net Revenues: | ||||||
| Americas | $ | 54,655 | $ | 48,578 | ||
| APAC | 5,761 | 6,100 | ||||
| EMEA | 8,277 | 9,702 | ||||
| Total net revenues | $ | 68,693 | $ | 64,380 | ||
| Operating income: | ||||||
| Americas | $ | 9,427 | $ | 2,521 | ||
| APAC | (216 | ) | (192 | ) | ||
| EMEA | 361 | 821 | ||||
| Total operating income | $ | 9,572 | $ | 3,150 | ||
Reconciliation of GAAP to Non-GAAP Financial Measures
Non-GAAP net income attributable to SPAR Group and related per share amounts represents net income attributable to SPAR Group adjusted for the removal of a one-time positive adjustment. Adjusted EBITDA represents net income before, as applicable from time to time, (i) depreciation and amortization of long-lived assets, (ii) interest expense (iii) income tax expense, (iv) Board of Directors incremental compensation expense, (v) restructuring, (vi) impairment, (vii) nonrecurring legal settlement costs and associated legal expenses unrelated to the Company's core operations, (viii) and special items as determined by management. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures have limitations as analytical tools and should not be considered in isolation or as an alternative to performance measure derived in accordance with GAAP as an indicator of our operating performance. We present Adjusted net income attributable to SPAR Group and per share amounts, and Adjusted EBITDA because management uses these measures as key performance indicators, and we believe that securities analysts, investors and others use these measures to evaluate companies in our industry. Our calculation of these measures may not be comparable to similarly named measures reported by other companies. The following tables present a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to these measures for the periods presented:
| SPAR Group, Inc. | ||||||
| Net income attributable to SPAR Group, Inc. to | ||||||
| Adjusted Net income attributable to SPAR Group, Inc. Reconciliation | ||||||
| Diluted income per common share attributable to SPAR Group, Inc. to | ||||||
| Adjusted Diluted income per common share attributable to SPAR Group, Inc. Reconciliation | ||||||
| (In thousands) | ||||||
| Three Months Ended, March 31 | ||||||
| 2024 | 2023 | |||||
| Net Income attributable to SPAR Group Inc. | $ | 6,627 | $ | 866 | ||
| Adjustments to Consolidated EBITDA (net of taxes)* | (5,292 | ) | 387 | |||
| Adjusted Net income attributable to SPAR Group, Inc. | $ | 1,335 | $ | 1,253 | ||
| Diluted income per common share attributable to SPAR Group, Inc. | $ | 0.28 | $ | 0.04 | ||
| Adjustments to Consolidated EBITDA per share (net of taxes) * | (0.22 | ) | 0.01 | |||
| Adjusted Diluted income per common share attributable to SPAR Group, Inc. | $ | 0.06 | $ | 0.05 | ||
| * 2024 Adjustments to Consolidated EBITDA include | ||||||
| SPAR Group, Inc. | ||||||
| Net Income to Consolidated Adjusted EBITDA to Adjusted EBITDA attributable to SPAR Group, Inc. Reconciliation | ||||||
| (In thousands) | ||||||
| Three Months Ended, March 31 | ||||||
| 2024 | 2023 | |||||
| Consolidated Net Income | $ | 7,181 | $ | 1,777 | ||
| Depreciation and amortization | 511 | 532 | ||||
| Interest expense | 530 | 390 | ||||
| Income Tax expense | 1,854 | 1,041 | ||||
| Other expense (income), net | 7 | (58 | ) | |||
| Consolidated EBITDA | 10,083 | 3,682 | ||||
| Review of Strategic Alternatives | 330 | 317 | ||||
| Gain on Sale of Business | (7,157 | ) | - | |||
| Share Based Compensation | 128 | 173 | ||||
| Consolidated Adjusted EBITDA | 3,384 | 4,172 | ||||
| Adjusted EBITDA attributable to non controlling interest | (918 | ) | (1,276 | ) | ||
| Adjusted EBITDA attributable to SPAR Group, Inc. | $ | 2,466 | $ | 2,896 | ||
Note: We report non‑GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non‑GAAP Financial Measures" for an explanation of non‑GAAP measures, and the table entitled "GAAP to Non‑GAAP Reconciliation" for a reconciliation of GAAP to non‑GAAP measures.
FAQ
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