• SPAR Group, Inc. Reports Second Quarter Fiscal 2023 Results

    ソース: Nasdaq GlobeNewswire / 14 8 2023 08:00:01   America/New_York

    AUBURN HILLS, Mich., Aug. 14, 2023 (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 three and six months ended June 30, 2023.

    Mike Matacunas, the Company’s President and Chief Executive Officer, commented, “Although consolidated net revenues in the quarter were softer due to U.S. client store remodels that moved out in the calendar, our U.S. merchandising services business had another strong quarter with 16% growth, our Brazil business was up 18%, Canada up 48% and Mexico up 9%. Year to date revenue is up 3%, margin up 140 basis points and EBITDA is up 13%. Consolidated Adjusted EBITDA for the second quarter was $2.6 million or 3.9% of sales, and we generated cash from operating activities of $6.7 million for the first six months of the year. We ended the quarter with $19.8 million of total liquidity, including $10.9 million of cash and cash equivalents, and we continue to maintain a strong balance sheet.   

    “The Company has been exploring strategic alternatives since late last year.   We are maintaining strength and resilience in our financial and liquidity positions, and although sales softened somewhat this quarter, our gross margins expanded through our internal initiatives, pricing and diversified services. We continue to maintain positive, long-term relationships with blue chip consumer goods and retail companies. We do not have an update today on the review of our strategic alternatives; however, we are committed to growing the business, serving our clients and supporting our employees and joint venture partners,” concluded Matacunas.

    Second Quarter 2023 Financial Results

    Net revenues were $65.9 million, comprised of $52.1 million from Americas (79.0%) and $8.2 million from EMEA (12.4%), and $5.7 million from APAC (8.6%). Total net revenue decreased by 2.7%, up 0.8% on a constant currency basis, and Americas revenues declined over the prior year by 2.2%, EMEA declined by 10.3%, and APAC increased by 5.0% from the prior year quarter.      

    Gross profit was $13.1 million, or 19.9% of revenues, compared to $12.9 million, or 19.1% of revenues, in the prior year quarter. This 80-basis point improvement in gross profit margins was due to a number of planned initiatives, which included improved contract terms and pricing, system enhancements and other cost containments, as well as services mix shifts in the quarter.

    Selling, general and administrative (SG&A) expenses were $10.6 million, or 16.1% of revenues (15.9% of revenues excluding non-recurring costs associated with reviewing strategic alternatives), compared to $10.1 million, or 14.9% of revenues, in the prior year quarter.   Non-recurring costs associated with reviewing strategic alternatives were $111 thousand during the second quarter.

    Operating income was $2.0 million, down 15.3%, versus operating income of $2.4 million from the prior year quarter.

    Net income attributable to SPAR Group, Inc. was $639 thousand, or $0.03 per share, compared to net income attributable to SPAR Group Inc. of $1.1 million, or $0.05 per share, in the year-ago quarter. Non-GAAP net income attributable to SPAR Group, Inc. (1) in the quarter was $696 thousand, or $0.03 per share, compared to $1.3 million, or $0.06 per share, in the year-ago quarter.

    Consolidated Adjusted EBITDA (1) in the 2023 quarter was $2.6 million, compared to Adjusted EBITDA of $3.0 million in the prior year. Adjusted EBITDA attributable to SPAR Group, Inc. (1) in the 2023 quarter was $1.6 million, compared to Adjusted EBITDA of $2.1 million in the prior year.

    (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.

    First Six Months 2023 Financial Results

    Net revenues were $130.3 million, comprised of $100.7 million from Americas (77.3%) and $17.9 million from EMEA (13.7%), and $11.8 million from APAC (9.0%). Total net revenue increased by 2.8%, up 6.2% on a constant currency basis, and Americas revenues increased over the prior year by 4.6%, EMEA decreased by 2.4%, and APAC decreased by 3.7% from the prior year period.

    Gross profit was $27.2 million, or 20.9% of revenues, compared to $24.8 million, or 19.5% of revenues, in the prior year period. This 140-basis point improvement in gross profit margins was due to a number of planned initiatives, which included improved contract terms and pricing, system enhancements and other cost containments.

    Selling, general and administrative (SG&A) expenses were $21.1 million, or 16.2% of revenues (15.8% of revenues excluding non-recurring costs associated with reviewing strategic alternatives), compared to $19.3 million, or 15.3% of revenues, in the prior year period. Non-recurring costs associated with reviewing strategic alternatives were $428 thousand during the first half of 2023.

    Operating income was $5.1 million, up 16.3%, versus operating income of $4.4 million from the prior year period.

    Net income attributable to SPAR Group, Inc. was $1.5 million, or $0.06 per share, compared to net income attributable to SPAR Group Inc. of $1.8 million, or $0.08 per share, in the half-year period a year ago. Non-GAAP net income attributable to SPAR Group, Inc. (2) in the period was $1.9 million, or $0.08 per share, compared to $1.8 million, or $0.07 per share, in the year-ago period.

    Consolidated Adjusted EBITDA (2) in the 2023 period was $6.7 million, compared to Adjusted EBITDA of $5.4 million in the prior year. Adjusted EBITDA attributable to SPAR Group, Inc. (1) in the 2023 period was $4.5 million, compared to $3.6 million in the prior year.

    (2)   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 June 30, 2023

    The Company’s total worldwide liquidity at the end of the first half was $19.8 million, with $10.9 million in cash, cash equivalents and restricted cash and $8.9 million of unused availability as of June 30, 2023.   For the six months ended June 30, 2023, net cash provided by operating activities was $6.7 million and was primarily due to working capital changes. The Company ended the six months with positive net working capital of $27.2 million at June 30, 2023.

    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 second quarter and six months ended June 30, 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 August 21, 2023, by calling 1-877-344-7529 using passcode ID 7834005#. 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, 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 nine 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 Quarterly Report on Form 10-Q by SGRP with the Securities and Exchange Commission (the “SEC”) expected to be filed on or about August 14, 2023. 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 the 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.

    Investor Relations Contact:
    Three Part Advisors, LLC
    Sandy Martin / Phillip Kupper
    Tel: 214-616-2207 or 817-778-8339

     

    - Financial Statements Follow –

     

     SPAR Group, Inc. and Subsidiaries 
    Condensed Consolidated Statements of Income 
    (unaudited) 
    (In thousands, except per share data) 
               
      Three Months EndedSix Months Ended 
      June 30June 30 
      2023 2022 2022 2021  
               
    Net revenues $65,936 $67,799 $130,316 $126,794  
    Related party - cost of revenues  1,682  2,521  3,179  4,666  
    Cost of revenues  51,158  52,330  99,903  97,348  
    Gross profit  13,096  12,948  27,234  24,780  
    Selling, general and administrative expense  10,605  10,084  21,061  19,338  
    Depreciation and amortization  494  507  1,026  1,017  
    Operating income  1,997  2,357  5,147  4,425  
    Interest expense, net  478  178  868  328  
    Other income, net  (125) (149) (183) (237) 
    Income before income tax expense  1,644  2,328  4,462  4,334  
               
    Income tax expense  538  715  1,579  1,266  
    Net income  1,106  1,613  2,883  3,068  
    Net income attributable to non-controlling interest  (467) (464) (1,378) (1,247) 
    Net income attributable to SPAR Group, Inc. $639 $1,149 $1,505 $1,821  
    Basic income per common share attributable to SPAR Group, Inc. 0.03  0.05  0.06  0.08  
    Diluted income per common share attributable to SPAR Group, Inc. $0.03 $0.05 $0.06 $0.08  
    Weighted-average common shares outstanding– basic  23,250  21,808  23,182  21,696  
    Weighted-average common shares outstanding – diluted  23,392  21,935  23,337  21,831  
               

     

    SPAR Group, Inc. and Subsidiaries 
    Condensed Consolidated Balance Sheets 
    (unaudited) 
    (In thousands, except share and per share data)  
           
           
      June 30,
    2023
     December 31,
    2022
     
     
          
    Assets      
    Current assets:      
    Cash and cash equivalents $10,916 $9,345  
    Accounts receivable, net  63,018  63,714  
    Prepaid expenses and other current assets  4,779  7,861  
    Total current assets  78,713  80,920  
    Property and equipment, net  3,172  3,261  
    Operating lease right-of-use assets  1,856  969  
    Goodwill  1,715  1,708  
    Intangible assets, net  1,501  2,040  
    Deferred income taxes, net  4,100  3,766  
    Other assets  2,019  1,934  
    Total assets $93,076 $94,598  
    Liabilities and stockholders' equity      
    Current liabilities:      
    Accounts payable $9,334 $10,588  
    Accrued expenses and other current liabilities  19,965  20,261  
    Due to affiliates  3,079  2,964  
    Customer incentives and deposits  2,327  2,399  
    Lines of credit and short-term loans  15,906  17,980  
    Current portion of operating lease liabilities  877  363  
    Total current liabilities  51,488  54,555  
    Operating lease liabilities, net of current portion  978  606  
    Long-term debt  1,033  1,376  
    Total liabilities  53,499  56,537  
    Commitments and contingencies      
    Stockholders' equity:      
    Series B convertible preferred stock, $0.01 par value per share: 2,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 2,000,000 shares issued as of June 30, 2023 and December 31, 2022; 721,420 shares and 854,753 shares outstanding as of June 30, 2023 and December 31, 2022, respectively  7  9  
    Common stock, $0.01 par value per share: 47,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 23,438,222 and 23,059,138 shares issued as of June 30, 2023 and December 31, 2022, respectively; 23,232,739 shares and 22,853,653 shares outstanding as of June 30, 2023 and December 31, 2022, respectively  233  229  
    Treasury stock, at cost, 205,485 shares and 205,485 shares as of June 30, 2023 and December 31, 2022, respectively  (285) (285) 
    Additional paid-in capital  20,845  20,708  
    Accumulated other comprehensive loss  (4,525) (4,941) 
    Retained earnings  8,212  6,707  
    Total stockholders' equity attributable to SPAR Group, Inc.   24,487  22,427  
    Non-controlling interest  15,090  15,634  
    Total stockholders’ equity  39,577  38,061  
    Total liabilities and stockholders’ equity $93,076 $94,598  
           

     

    SPAR Group, Inc. and Subsidiaries  
    Condensed Consolidated Statements of Cash Flows  
    (unaudited)  
    (In thousands)  
            
         
      Six Months Ended June 30,  
      2023 2022 
    Cash flows from operating activities:       
    Net income $2,883 $3,068   
    Adjustments to reconcile net income to net cash provided by (used in) operating activities       
    Depreciation and amortization  1,026  1,017   
    Amortization of operating lease right-of-use assets  256  483   
    Bad debt expense, net of recoveries  38  53   
    Deferred income tax expense (benefit)  111  -   
    Share-based compensation expense  134  280   
    Majority stockholders change in control agreement  -  (420)  
    Changes in operating assets and liabilities:       
    Accounts receivable  1,205  (9,438)  
    Prepaid expenses and other current assets  3,118  (1,971)  
    Accounts payable  (803) 1,413   
    Operating lease liabilities  (256) (483)  
    Accrued expenses, other current liabilities, due to affiliates and customer incentives and deposits  (968) 2,470   
    Net cash provided by (used in) operating activities  6,744  (3,528)  
            
    Cash flows from investing activities       
    Purchases of property and equipment  (717) (794)  
    Net cash used in investing activities  (717) (794)  
            
    Cash flows from financing activities       
    Borrowings under line of credit  47,340  21,885   
    Repayments under line of credit  (50,003) (14,446)  
    Payments to acquire noncontrolling interests  (473) -   
    Distribution to noncontrolling investors  (1,196) -   
    Net cash provided by (used in) financing activities  (4,332) 7,439   
            
    Effect of foreign exchange rate changes on cash  (124) (4,188)  
    Net change in cash, cash equivalents and restricted cash  1,571  (1,071)  
    Cash, cash equivalents at beginning of period  9,345  13,473   
    Cash, cash equivalents at end of period $10,916 $12,402   
            

     

    SPAR Group, Inc. and Subsidiaries 
    Segment Information 
    (unaudited) 
    (In thousands) 
               
               
      Three Months EndedSix Months Ended 
      June 30,June 30, 
      2023 2022 2022 2021  
    Net Revenues:          
    Americas $52,083 $53,274 $100,661 $96,253  
    APAC  5,658  5,386  11,758  12,205  
    EMEA  8,195  9,139  17,897  18,336  
    Total net revenues $65,936 $67,799 $130,316 $126,794  
               
    Operating income:          
    Americas $2,038 $2,636 $4,553 $4,419  
    APAC  (97) (713) (289) (1,155) 
    EMEA  56  434  883  1,161  
    Total operating income $1,997 $2,357 $5,147 $4,425  
               

    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) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation and amortization of long-lived assets, (iv) share based compensation expense, (v) review of strategic alternatives, (vi) nonrecurring legal settlement costs and associated legal expenses unrelated to the Company's core operations. 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 (Loss) attributable to SPAR Group, Inc. to      
        non-GAAP Net Income (Loss) attributable to SPAR Group, Inc. Reconciliation
        Diluted earnings per share attributable to SPAR Group, Inc. to
        non-GAAP Diluted earnings per share attributable to SPAR Group, Inc. Reconciliation
               
                    
           Three Months Ended June 30,  Six Months Ended June 30, 
        (in thousands)  2023  2022   2023  2022  
                    
        Net Income attributable to SPAR Group Inc. $ 639 $1,149   1,505  1,821  
             Add-back Adjusted EBIDTA (net of taxes)  57  103   444  (71) 
        Adjusted Net income attributable to SPAR Group, Inc. $ 696 $1,252   1,949  1,750  
                    
        Diluted income per common share attributable to SPAR Group, Inc. $ 0.03 $0.05  $ 0.06 $0.08  
             Add-back Adjusted EBIDTA (net of taxes) $ 0.00 $0.01  $ 0.02 $(0.00) 
        Adjusted Diluted income per common share attributable to SPAR Group, Inc.  $ 0.03 $0.06  $ 0.08 $0.08  
                    

     

                   
    SPAR Group, Inc.
    Net Income (Loss) to Consolidated Adjusted EBITDA to
    Adjusted EBITDA attributable to SPAR Group, Inc. Reconciliation
                   
                   
           Three Months Ended June 30, Six Months Ended June 30, 
        (in thousands)  2023   2022   2023   2022  
        Consolidated Net Income $1,106  $1,613  $2,883  $3,068  
         Depreciation and amortization  494   507   1,026   1,017  
         Interest expense, net  478   178   868   328  
         Income tax expense  538   715   1,579   1,266  
         Other expense (income), net  (125)  (149)  (183)  (237) 
        Consolidated EBITDA  2,491   2,864   6,173   5,443  
         Review of strategic alternatives  111   -   428   -  
         Share based compensation  (39)  130   134   280  
         Legal Costs / Settlements - non recurring  -   -   -   (368) 
        Consolidated Adjusted EBITDA  2,563   2,994   6,735   5,355  
         Adjusted EBITDA attributable to non controlling interest  (959)  (861)  (2,234)  (1,740) 
        Adjusted EBITDA attributable to SPAR Group, Inc. $1,604  $2,133  $4,501  $3,615  
                   

    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.


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