SPAR Group, Inc. Reports Fourth Quarter and Full Year Fiscal 2023 Results
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Insights
The reported financial results by SPAR Group, Inc. reveal a modest revenue growth with a significant improvement in profitability, as evidenced by the 160-basis-point increase in gross profit margins and a 74.5% surge in operating income. Such performance is indicative of successful cost management and operational efficiency. The divestitures in international markets and subsequent cash inflows highlight a strategic refocusing, potentially enhancing the company's financial flexibility for future acquisitions.
From an investor's perspective, the improved cash flow and strengthened balance sheet are positive signals. However, the modest top-line growth suggests that market penetration and expansion efforts are yielding incremental results, which may require further strategic initiatives to sustain long-term growth. The focus on emerging businesses such as fulfillment and distribution could signify a pivot towards areas with higher growth potential.
SPAR Group's performance in different geographical segments shows divergent trends, with the Americas and Canada experiencing growth, while EMEA and APAC regions face declines. This suggests a varying competitive landscape and possibly different stages of market maturity. The company's ability to grow market share within an expanding addressable market, as it transitions more into merchandising and remodels, could be a key driver for future revenue growth.
The strategic divestitures and sale agreements in South Africa and Brazil, generating $22 million USD, reflect a deliberate effort to streamline operations and allocate resources more effectively. This capital infusion could provide the means for strategic acquisitions that align with SPAR's core competencies, potentially creating synergies and driving shareholder value.
The disclosure of financial results and strategic divestitures by SPAR Group, Inc. is consistent with regulatory requirements for transparency and provides stakeholders with a comprehensive view of the company's financial health. The sale agreements for operations in South Africa and Brazil are significant, as they not only affect the balance sheet but also the company's global footprint. It's important to consider the legal complexities of such international transactions, including compliance with local regulations and the impact on existing contracts and partnerships.
Moreover, the mention of non-GAAP financial measures, such as Adjusted EBITDA, requires careful scrutiny. These measures are useful for management and investors to evaluate the company's performance without the effects of certain non-cash and non-recurring items, but they should be viewed alongside GAAP measures to ensure a balanced understanding of the company's financial position.
Strategic Initiatives Deliver Improved Results and Significant Cash Flow
AUBURN HILLS, Mich., April 01, 2024 (GLOBE NEWSWIRE) -- SPAR Group, Inc. (NASDAQ: SGRP) (“SPAR”, “SPAR Group” or the “Company”), a leading global provider of merchandising, marketing, and distribution services today reported financial and operating results for the periods ended December 31, 2023.
Mike Matacunas, the Company’s President and Chief Executive Officer, commented, “Fiscal 2023 was a pivotal year for the Company. We successfully executed our sales and profitability goals, which resulted in significant cash flow generation in 2023. Consolidated revenues grew to
“I am pleased with our operational and financial performance of SPAR in 2023. We accomplished shorter term objectives and made significant headway on longer term goals. We grew revenue, improved profitability, strengthened the balance sheet and simplified the core business with strategic divestitures, including our recent announcements regarding Australia, China and National Merchandising Services. In addition, we are announcing sale agreements for both South Africa and Brazil today that generate cash proceeds of approximately
“Finally, I want to thank our employees for their hard work and dedication that fueled our growth in fiscal 2023. We also want to thank our Board and shareholders for their support throughout the year. We look forward to an exciting year ahead for 2024,” concluded Matacunas.
Fourth Quarter 2023 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 2023 quarter was
(1) Adjusted non-GAAP 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.
Twelve Months 2023 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. for the year was
Consolidated Adjusted EBITDA (1) in the 2023 period was
(1) Adjusted non-GAAP Net income attributable to SPAR Group, Inc. and 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 December 31, 2023
The Company’s total worldwide liquidity at the end of the year 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 periods ended December 31, 2023. To access the call, live by phone, dial 1-833-630-1542 (Domestic), 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 April 8, 2024, by calling 1-877-344-7529 using passcode ID 5142020#. 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 a Annual Report on Form 10-K by SGRP with the Securities and Exchange Commission (the “SEC”) expected to be filed on or about April 1, 2024. There also are forward-looking statements contained in SGRP’s Annual Report on Form 10-K for its fiscal year ended December 31, 2022, as filed with the SEC on April 17, 2023, and SGRP’s First Amendment to Annual Report on Form 10-K/A for the year ended December 31, 2022, as filed with the SEC on May 1, 2023 (as so amended, the “Annual Report”), 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 Operations | |||||||||||||
| (unaudited) | |||||||||||||
| (In thousands, except per share amounts) | |||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||
| December 31 | December 31 | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Net revenues | $ | 65,099 | $ | 64,643 | $ | 262,747 | $ | 261,268 | |||||
| Related party - cost of revenues | 390 | 1,510 | 5,197 | 8,804 | |||||||||
| Cost of revenues | 49,833 | 49,742 | 202,070 | 201,452 | |||||||||
| Gross profit | 14,876 | 13,391 | 55,480 | 51,012 | |||||||||
| Selling, general and administrative expense | 11,328 | 11,183 | 43,673 | 41,135 | |||||||||
| Loss on sale of business | 408 | - | 408 | - | |||||||||
| Depreciation and amortization | 430 | 510 | 2,001 | 2,033 | |||||||||
| Impairment of Goodwill | - | 2,458 | - | 2,458 | |||||||||
| Operating income | 2,711 | (760 | ) | 9,398 | 5,386 | ||||||||
| Interest expense | 593 | 371 | 1,919 | 965 | |||||||||
| Other income, net | 771 | (119 | ) | 346 | (482 | ) | |||||||
| Income before income tax expense | 1,347 | (1,012 | ) | 7,133 | 4,903 | ||||||||
| Income tax expense | 551 | 835 | 2,357 | 2,777 | |||||||||
| Net income | 795 | (1,847 | ) | 4,776 | 2,126 | ||||||||
| Net (income) loss attributable to non-controlling interest | 1,342 | (678 | ) | (874 | ) | (2,858 | ) | ||||||
| Net income (loss) attributable to SPAR Group, Inc. | $ | 2,137 | $ | (2,525 | ) | $ | 3,902 | $ | (732 | ) | |||
| Basic income per common share attributable to SPAR Group, Inc. | 0.09 | (0.11 | ) | 0.17 | (0.03 | ) | |||||||
| Diluted income per common share attributable to SPAR Group, Inc. | $ | 0.09 | $ | (0.11 | ) | $ | 0.16 | $ | (0.03 | ) | |||
| Weighted-average common shares outstanding– basic | 23,236 | 22,821 | 23,333 | 22,110 | |||||||||
| Weighted-average common shares outstanding – diluted | 23,376 | 22,957 | 24,455 | 22,110 | |||||||||
| SPAR Group, Inc. and Subsidiaries | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| (unaudited) | |||||||
| (In thousands, except share and per share data) | |||||||
| December 31 | December 31, | ||||||
| 2023 | 2022 | ||||||
| Assets: | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 10,719 | $ | 9,345 | |||
| Accounts receivable, net | 59,776 | 63,714 | |||||
| Prepaid expenses and other current assets | 5,614 | 7,861 | |||||
| Total current assets | 76,109 | 80,920 | |||||
| Property and equipment, net | 2,871 | 3,261 | |||||
| Operating lease right-of-use assets | 2,323 | 969 | |||||
| Goodwill | 1,382 | 1,708 | |||||
| Intangible assets, net | 1,180 | 2,040 | |||||
| Deferred income taxes, net | 4,687 | 3,766 | |||||
| Other assets | 1,729 | 1,934 | |||||
| Total assets | $ | 90,281 | $ | 94,598 | |||
| Liabilities and equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 9,488 | $ | 10,588 | |||
| Accrued expenses and other current liabilities | 15,274 | 20,261 | |||||
| Due to affiliates | 3,205 | 2,964 | |||||
| Customer incentives and deposits | 1,905 | 2,399 | |||||
| Lines of credit and short-term loans | 17,530 | 17,980 | |||||
| Current portion of operating lease liabilities | 1,163 | 363 | |||||
| Total current liabilities | 48,565 | 54,555 | |||||
| Operating lease liabilities, net of current portion | 1,160 | 606 | |||||
| Long-term debt | 310 | 1,376 | |||||
| Total liabilities | 50,035 | 56,537 | |||||
| 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– 650,000 at December 31, 2023 and 854,753 at December 31, 2022 | 7 | 9 | |||||
| Common stock, | 232 | 229 | |||||
| Treasury stock, at cost 205,485 shares at December 31, 2023 and 205,485 Shares at December 31, 2022 | (285 | ) | (285 | ) | |||
| Additional paid-in capital | 21,004 | 20,708 | |||||
| Accumulated other comprehensive loss | (3,341 | ) | (4,941 | ) | |||
| Retained earnings | 10,609 | 6,707 | |||||
| Total stockholders' equity attributable to SPAR Group, Inc. | 28,226 | 22,427 | |||||
| Non-controlling interest | 12,020 | 15,634 | |||||
| Total stockholders’ equity | 40,246 | 38,061 | |||||
| Total liabilities and stockholders’ equity | $ | 90,281 | $ | 94,598 | |||
| SPAR Group, Inc. and Subsidiaries | |||||||
| Condensed Consolidated Statements of Cash Flows | |||||||
| (unaudited) | |||||||
| (In thousands) | |||||||
| Twelve months ended | |||||||
| December 31, | |||||||
| 2023 | 2022 | ||||||
| Cash flows from operating activities: | |||||||
| Net income | $ | 4,776 | $ | 2,126 | |||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities | |||||||
| Depreciation and amortization | 2,001 | 2,033 | |||||
| Impairment of Goodwill | - | 2,458 | |||||
| Amortization of operating lease assets | 875 | 646 | |||||
| Provision for expected credit losses | 88 | 1,092 | |||||
| Deferred income tax expense | 921 | 994 | |||||
| Share-based compensation expense | 297 | 346 | |||||
| Loss on Disposal of business | 408 | - | |||||
| Changes in operating assets and liabilities, net of business disposals: | |||||||
| Accounts receivable | 3,232 | (11,237 | ) | ||||
| Prepaid expenses and other assets | 2,082 | (3,285 | ) | ||||
| Accounts payable | (2,960 | ) | 1,718 | ||||
| Operating lease liabilities | (875 | ) | (744 | ) | |||
| Accrued expenses, other current liabilities and customer incentives and deposits | (4,024 | ) | (1,191 | ) | |||
| Net cash provided by (used in) operating activities | 6,821 | (5,044 | ) | ||||
| Cash flows from investing activities: | |||||||
| Cash transferred in sale of business | (1,111 | ) | - | ||||
| Purchases of property and equipment and capitalized software | (1,242 | ) | (1,797 | ) | |||
| Other investing | 84 | - | |||||
| Net cash used in investing activities | (2,269 | ) | (1,797 | ) | |||
| Cash flows from financing activities: | |||||||
| Borrowings under line of credit | 103,742 | 30,467 | |||||
| Repayments under lines of credit | (104,845 | ) | (25,648 | ) | |||
| Proceeds from stock options exercised | - | 118 | |||||
| Repurchase of common stock | - | (181 | ) | ||||
| Distribution to non-controlling investors | (1,673 | ) | (1,785 | ) | |||
| Payments to acquire noncontrolling interests | (473 | ) | (2,558 | ) | |||
| Proceeds from term debt | 930 | 3,530 | |||||
| Payments on term debt | (701 | ) | (454 | ) | |||
| Net cash provided by (used in) financing activities | (3,020 | ) | 3,489 | ||||
| Effect of foreign exchange rate changes on cash | (158 | ) | (776 | ) | |||
| Net increase (decrease) in cash and cash equivalents | 1,374 | (4,128 | ) | ||||
| Cash and cash equivalents at beginning of year | 9,345 | 13,473 | |||||
| Cash and cash equivalents at end of year | $ | 10,719 | $ | 9,345 | |||
| SPAR Group, Inc. and Subsidiaries | |||||||||||||
| Segment Information | |||||||||||||
| (unaudited) | |||||||||||||
| (In thousands) | |||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Net Revenues: | |||||||||||||
| Americas | $ | 49,248 | $ | 48,590 | $ | 203,705 | $ | 198,581 | |||||
| APAC | 7,048 | 6,658 | 24,480 | 26,009 | |||||||||
| EMEA | 8,803 | 9,395 | 34,562 | 36,678 | |||||||||
| Total net revenues | $ | 65,099 | $ | 64,643 | $ | 262,747 | $ | 261,268 | |||||
| Operating income: | |||||||||||||
| Americas | $ | 1,347 | $ | (1,758 | ) | $ | 7,240 | $ | 4,103 | ||||
| APAC | (89 | ) | (131 | ) | (599 | ) | (1,621 | ) | |||||
| EMEA | 1,453 | 1,128 | 2,757 | 2,904 | |||||||||
| Total operating income | $ | 2,711 | $ | (761 | ) | $ | 9,398 | $ | 5,386 | ||||
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 | Twelve Months Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Net Income attributable to SPAR Group Inc. | $ | 2,137 | $ | (2,525 | ) | $ | 3,902 | $ | (732 | ) | |||
| Add-back Adjusted EBITDA (net of taxes) | 482 | 2,945 | 1,237 | 2,654 | |||||||||
| Adjusted Net income attributable to SPAR Group, Inc. | $ | 2,619 | $ | 420 | $ | 5,139 | $ | 1,922 | |||||
| Diluted income per common share attributable to SPAR Group, Inc. | $ | 0.09 | $ | (0.11 | ) | $ | 0.16 | $ | (0.03 | ) | |||
| Add-back Adjusted EBITDA per common share (net of taxes) | 0.02 | 0.13 | 0.05 | 0.12 | |||||||||
| Adjusted Diluted income per common share attributable to SPAR Group, Inc. | $ | 0.11 | $ | 0.02 | $ | 0.21 | $ | 0.09 | |||||
| SPAR Group, Inc. | |||||||||||||
| Net Income to Consolidated Adjusted EBITDA to | |||||||||||||
| Adjusted EBITDA attributable to SPAR Group, Inc. Reconciliation | |||||||||||||
| (In thousands) | |||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Consolidated Net Income | $ | 795 | $ | (1,847 | ) | $ | 4,776 | $ | 2,126 | ||||
| Depreciation and amortization | 430 | 510 | 2,001 | 2,033 | |||||||||
| Interest expense | 593 | 371 | 1,919 | 965 | |||||||||
| Income Tax expense | 551 | 835 | 2,357 | 2,777 | |||||||||
| Other income | 771 | (119 | ) | 346 | (482 | ) | |||||||
| Consolidated EBITDA | 3,140 | (250 | ) | 11,399 | 7,420 | ||||||||
| Costs and other relating to CIC | - | 336 | - | (32 | ) | ||||||||
| Review of Strategic Alternatives | (27 | ) | 540 | 544 | 540 | ||||||||
| Goodwill Impairment | - | 2,458 | - | 2,458 | |||||||||
| Loss on sale of businesses | 408 | - | 408 | - | |||||||||
| Restructuring costs | - | - | 28 | - | |||||||||
| Legal Costs / Settlements - non recurring | 149 | - | 289 | - | |||||||||
| Share Based Compensation | 80 | - | 297 | - | |||||||||
| Board of Directors incremental compensation | - | 394 | - | 394 | |||||||||
| Consolidated Adjusted EBITDA | 3,750 | 3,478 | 12,965 | 10,780 | |||||||||
| Adjusted EBITDA attributable to non controlling interest | 189 | (1,158 | ) | (3,022 | ) | (4,637 | ) | ||||||
| Adjusted EBITDA attributable to SPAR Group, Inc. | $ | 3,939 | $ | 2,320 | $ | 9,943 | $ | 6,143 | |||||
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
What were SPAR Group, Inc.'s consolidated revenues for 2023?
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