SPAR Group, Inc. (Nasdaq: SGRP), a leading supplier of retail
merchandising, business technology and other marketing services in
10 countries throughout North America, Latin America, Asia Pacific
and Africa, today announced financial results for the third quarter
ended September 30, 2018.
Highlights for the three and nine-month periods
ended September 30, 2018, as compared to the same periods in the
prior year include:
- Revenue for the three-month period
ending September 30, 2018 increased $9.6 million, or 20 percent, to
$58.4 million. International operations contributed to $2.3
million of the increase. Domestic operations contributed $7.3
million to year-over-year revenue growth with Resource Plus
contributing $8.0 million of the change in Domestic revenue for the
period.
- Revenue for the nine-month period
ending September 30, 2018 increased $40.8 million, or 31 percent,
to $172.2 million. International operations contributed to
$18.6 of the increase. Domestic operations contributed $22.2
million to year-over-year revenue growth. Resource Plus
contributed $19.9 million to the change in Domestic revenue
year-over-year.
- Operating income for the third
quarter increased $1.5 million to $2.3 million compared to $828,000
during the same period last year. The increase in operating
income in the third quarter was attributable to both international
and domestic operations.
- Operating income for the nine
months ended September 30, 2018 decreased $467,000, or 19 percent,
to $1.8 million compared to $2.3 million during the same period of
2017. The decline in operating income was driven primarily by
the one-time charges of $2.0 million, partially offset by the
growth in the international operations.
- Net Income attributable to SPAR
Group for the third quarter of 2018 was $621,000, or $0.03 per
share, compared to net income of $246,000, or $0.01 per diluted
share, during the third quarter of 2017.
- Net loss attributable to SPAR Group
for the nine months ended September 30, 2018 was ($1.0) million, or
($0.05) per share, compared to a net income of $346,000, or $0.02
per diluted share, for the same period during 2017.
Financial Results by Geography (in
000's, except per share data)
|
Three Months Ended September 30, |
% |
|
Nine Months Ended September 30, |
% |
Revenue: |
2018 |
|
2017 |
Change |
|
2018 |
|
2017 |
Change |
International |
$ |
35,975 |
|
$ |
33,690 |
6.8% |
|
$ |
109,853 |
|
$ |
91,292 |
20.3% |
Domestic |
|
22,413 |
|
|
15,062 |
48.8% |
|
|
62,338 |
|
|
40,069 |
55.6% |
Total |
$ |
58,388 |
|
$ |
48,752 |
19.8% |
|
$ |
172,191 |
|
$ |
131,361 |
31.1% |
|
Three Months Ended September 30, |
% |
|
Nine Months Ended September 30, |
% |
Operating Income: |
2018 |
|
2017 |
Change |
|
2018 |
|
2017 |
Change |
International |
$ |
1,239 |
|
$ |
485 |
155.5% |
|
$ |
2,952 |
|
|
$ |
1,583 |
86.5% |
Domestic |
|
1,085 |
|
|
343 |
216.3% |
|
|
(1,135 |
) |
|
|
701 |
nmf |
Total |
$ |
2,324 |
|
$ |
828 |
180.7% |
|
$ |
1,817 |
|
|
$ |
2,284 |
(20.4%) |
|
Three Months Ended September
30, |
|
|
Nine Months Ended September
30, |
|
Net income (loss): |
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
International |
$ |
355 |
|
$ |
3 |
nmf |
|
$ |
710 |
|
|
$ |
(186 |
) |
nmf |
Domestic |
|
266 |
|
|
243 |
9.5% |
|
|
(1,728 |
) |
|
|
532 |
|
nmf |
Total |
$ |
621 |
|
$ |
246 |
176.8% |
|
$ |
(1,018 |
) |
|
$ |
346 |
|
nmf |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(nmf = nomeaningful value) |
|
Earnings Per Basic and Diluted
share: |
|
|
|
|
|
|
|
|
|
$ |
0.03 |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
|
$ |
0.02 |
|
|
“We posted solid improvement in financial
results during the third quarter. Domestic revenue benefited
from the acquisition of Resource Plus that we made earlier in the
year and our international business continued to show strong
organic growth. Near full employment rates in the U.S.
continues to put cost pressure on profitability, which we were able
to offset during the third quarter with a revenue mix shift and
ongoing efficiency efforts,” said Chief Executive Officer,
Christiaan Olivier. “While we continue to face headwinds
domestically due to the store closures of certain retail customers,
we are having success adding new customers in diverse retail
channels, putting us in a better position to win new business in
the coming year. Our efforts to improve efficiencies should
have a greater impact in the coming quarters and allow us to
partially offset ongoing labor cost pressure.”
Gross Margin Profile by
Geography
|
Three Months Ended September 30, |
Basis Point |
|
Nine Months Ended September 30, |
Basis Point |
|
2018 |
|
2017 |
Change |
|
2018 |
|
2017 |
Change |
International |
16.1 |
% |
|
15.6 |
% |
43 |
|
15.2 |
% |
|
16.7 |
% |
(146) |
Domestic |
27.1 |
% |
|
23.5 |
% |
362 |
|
24.6 |
% |
|
26.4 |
% |
(181) |
Total |
20.3 |
% |
|
18.0 |
% |
225 |
|
18.6 |
% |
|
19.6 |
% |
(103) |
Operating Income as a % of
Sales
|
Three Months Ended September 30, |
Basis Point |
|
Nine Months Ended September 30, |
Basis Point |
|
2018 |
|
2017 |
Change |
|
2018 |
|
2017 |
Change |
International |
3.4 |
% |
|
1.4 |
% |
203 |
|
2.7 |
% |
|
1.7 |
% |
104 |
Domestic |
4.8 |
% |
|
2.3 |
% |
251 |
|
(1.8 |
%) |
|
1.8 |
% |
(357) |
Total |
4.0 |
% |
|
1.7 |
% |
236 |
|
1.1 |
% |
|
1.7 |
% |
(66) |
International gross profit margin for the third
quarter and nine months ended September 30, 2018 was 16.1% and
15.2%, compared to 15.6% and 16.7%, respectively, for the same
periods in 2017. The improvement in gross profit margin in
the third quarter was directly attributable to the positive mix of
business in the international markets of Brazil, Mexico and
Japan. With the exception of Canada, Mexico and Japan,
year-to-date gross margin declined in all other international
subsidiaries compared to last year.
Domestic gross profit margin for the third
quarter and nine months ended September 30, 2018 was 27.1% and
24.6%, compared to 23.5% and 26.4%, respectively, for the same
periods in 2017. Year-to-date domestic gross profit margin declined
primarily due to an increase in lower margin project work compared
to the same period last year.
Balance Sheet as of September 30,
2018
As of September 30, 2018, cash and cash
equivalents totaled $7.0 million. Working capital was $14.2 million
and current ratio was 1.3 to 1. Total current assets and total
assets were $56.7 million and $71.2 million, respectively.
Total current liabilities and total liabilities were $42.6 million
and $45.8 million, and total equity was $25.4 million as of
September 30, 2018.
About SPAR Group
SPAR Group, Inc. is a diversified international
merchandising and marketing services Company and provides a broad
array of services worldwide to help companies improve their sales,
operating efficiency and profits at retail locations. The Company
provides merchandising and other marketing services to
manufacturers, distributors and retailers worldwide and coordinates
the operations through the use of multi-lingual proprietary
technology which drives the logistics, communication and reporting
for global operations and customers. SPAR works primarily in
mass merchandiser, office supply, value, grocery, drug,
independent, convenience, toy, home improvement and electronics
stores, as well as providing furniture and other product assembly
services, audit services, in-store events, technology services and
marketing research. The Company has supplied these project and
product services in the United States since certain of its
predecessors were formed in 1979 and internationally since the
Company acquired its first international subsidiary in Japan in May
of 2001. Product services include restocking and adding new
products, removing spoiled or outdated products, resetting
categories "on the shelf" in accordance with client or store
schematics, confirming and replacing shelf tags, setting new sale
or promotional product displays and advertising, replenishing
kiosks, providing in-store event staffing and providing assembly
services in stores, homes and offices. Audit services include price
audits, point of sale audits, out of stock audits, intercept
surveys and planogram audits. Other merchandising services include
whole store or departmental product sets or resets (including new
store openings), new product launches, in-store demonstrations,
special seasonal or promotional merchandising, focused product
support and product recalls. The Company currently does business in
ten countries that encompass approximately 50% of the total world
population through its operations in the United States, Canada,
Japan, South Africa, India, China, Australia, Mexico, Brazil and
Turkey. For more information, please visit the SPAR Group's
website at http://www.sparinc.com.
Forward-Looking Statements
This Press Release contains and the above
referenced recorded comments will contain "forward-looking
statements" made by SPAR Group, Inc. ("SGRP", and together with its
subsidiaries, the "SPAR Group" or the "Company"), which will be
filed shortly in a Current Report on Form 8-K by SGRP with the
Securities and Exchange Commission (the "SEC"). There also are
"forward-looking statements" contained in SGRP's Annual Report on
Form 10-K for the year ended December 31, 2017 (the "Annual
Report"), which was filed by SGRP with the SEC on April 2, 2018,
and SGRP's definitive Proxy Statement respecting its Annual Meeting
of Stockholders to be held on or about May 2, 2017 (the "Proxy
Statement"), which SGRP filed with the SEC on April 18, 2018, 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 Annual Report and the Proxy 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, collectively, "Securities
Laws").
You should 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.
Company Contact:James R.
SegretoChief Financial OfficerSPAR Group, Inc.(248) 364-8464
Investor Contact: Dave
MossbergThree Part Advisors(817) 310-0051
SPAR Group, Inc. and
SubsidiariesConsolidated Statements of Income
(Loss) and Comprehensive (Loss) Income
(In thousands, except share and per share
data)
|
Three Months EndedSeptember
30, |
|
Nine Months Ended September
30, |
|
2018 |
2017 |
|
2018 |
|
2017 |
Net revenues |
$ |
58,388 |
|
$ |
48,752 |
|
|
$ |
172,191 |
|
$ |
131,361 |
|
Cost
of revenues |
|
46,546 |
|
|
39,960 |
|
|
|
140,154 |
|
|
105,563 |
|
Gross
profit |
|
11,842 |
|
|
8,792 |
|
|
|
32,037 |
|
|
25,798 |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
8,996 |
|
|
7,477 |
|
|
|
26,650 |
|
|
21,988 |
|
Settlement and other charges |
|
- |
|
|
- |
|
|
|
1,975 |
|
|
- |
|
Depreciation and amortization |
|
522 |
|
|
487 |
|
|
|
1,595 |
|
|
1,526 |
|
Operating income |
|
2,324 |
|
|
828 |
|
|
|
1,817 |
|
|
2,284 |
|
|
|
|
|
|
|
Interest expense |
|
333 |
|
|
110 |
|
|
|
886 |
|
|
117 |
|
Other
(income), net |
|
(109 |
) |
|
(78 |
) |
|
|
(413 |
) |
|
(275 |
) |
Income before income tax expense |
|
2,100 |
|
|
796 |
|
|
|
1,344 |
|
|
2,442 |
|
|
|
|
|
|
|
Income tax expense |
|
419 |
|
|
210 |
|
|
|
335 |
|
|
907 |
|
Net
income |
|
1,681 |
|
|
586 |
|
|
|
1,009 |
|
|
1,535 |
|
Net
loss attributable to non-controlling interest |
|
(1,060 |
) |
|
(340 |
) |
|
|
(2,027 |
) |
|
(1,189 |
) |
Net
income (loss) attributable to SPAR Group, Inc. |
$ |
621 |
|
$ |
246 |
|
|
$ |
(1,018 |
) |
$ |
346 |
|
Basic
net income (loss) per common share: |
$ |
0.03 |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
$ |
0.02 |
|
Diluted net income (loss) per common share: |
$ |
0.03 |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
$ |
0.02 |
|
|
|
|
|
|
|
Weighted average common shares – basic |
|
20,654 |
|
|
20,602 |
|
|
|
20,650 |
|
|
20,633 |
|
|
|
|
|
|
|
Weighted average common shares – diluted |
|
21,320 |
|
|
21,320 |
|
|
|
20,650 |
|
|
21,331 |
|
|
|
|
|
|
|
Net
income |
$ |
1,681 |
|
$ |
586 |
|
|
$ |
1,009 |
|
$ |
1,535 |
|
Other
comprehensive (loss) income: |
|
|
|
|
|
Foreign
currency translation adjustments |
|
(2,782 |
) |
|
(61 |
) |
|
|
(3,462 |
) |
|
681 |
|
Comprehensive (loss) income |
|
(1,101 |
) |
|
525 |
|
|
|
(2,453 |
) |
|
2,216 |
|
Comprehensive loss (income) attributable to non-controlling
interest |
|
269 |
|
|
(318 |
) |
|
|
(393 |
) |
|
(1,523 |
) |
Comprehensive (loss) income attributable to SPAR Group, Inc. |
$ |
(832 |
) |
$ |
207 |
|
|
$ |
(2,846 |
) |
$ |
693 |
|
|
|
|
|
|
|
SPAR Group, Inc. and
SubsidiariesConsolidated Balance
Sheets(In thousands, except share and per share data)
|
September 30,
2018 |
|
December 31, 2017 |
Assets |
|
|
|
|
|
|
Current assets: |
|
|
Cash and cash
equivalents |
$ |
6,988 |
|
$ |
8,827 |
|
Accounts receivable, net |
|
46,783 |
|
|
35,964 |
|
Prepaid expenses and other current assets |
|
2,964 |
|
|
2,031 |
|
Total
current assets |
|
56,735 |
|
|
46,822 |
|
Property and equipment, net |
|
2,902 |
|
|
2,712 |
|
Goodwill |
|
3,783 |
|
|
1,836 |
|
Intangible assets, net |
|
3,449 |
|
|
1,634 |
|
Deferred income taxes |
|
2,562 |
|
|
3,055 |
|
Other
assets |
|
1,736 |
|
|
1,929 |
|
Total
assets |
$ |
71,167 |
|
$ |
57,988 |
|
Liabilities and
equity |
|
|
|
|
|
|
Current liabilities: |
|
|
Accounts payable |
$ |
9,542 |
|
$ |
7,341 |
|
Accrued expenses and other current liabilities |
|
17,778 |
|
|
13,581 |
|
Due to affiliates |
|
5,114 |
|
|
3,026 |
|
Customer incentives and deposits |
|
499 |
|
|
1,539 |
|
Lines of credit and short-term loans |
|
9,635 |
|
|
6,839 |
|
Total
current liabilities |
|
42,568 |
|
|
32,326 |
|
Long-term debt and other liabilities |
|
3,220 |
|
|
107 |
|
Total
liabilities |
|
45,788 |
|
|
32,433 |
|
|
|
|
Equity: |
|
|
SPAR
Group, Inc. equity |
|
|
Preferred stock, $.01 par value: |
|
|
Authorized and available shares– 2,445,598 |
|
|
Issued and outstanding shares– |
|
|
None – September 30, 2018 and December 31, 2017 |
|
– |
|
|
– |
|
Common stock, $.01 par value: |
|
|
Authorized shares – 47,000,000 |
|
|
Issued shares – 20,680,717 – September 30, 2018 and December
31, 2017 |
|
208 |
|
|
207 |
|
Treasury stock, at cost |
|
|
|
|
|
|
22,798
shares – September 30, 2018 and |
|
|
|
|
|
|
104,398
shares – December 31, 2017 |
|
(26 |
) |
|
(115 |
) |
Additional paid-in capital |
|
16,275 |
|
|
16,271 |
|
Accumulated other comprehensive loss |
|
(3,518 |
) |
|
(1,690 |
) |
Retained earnings |
|
3,945 |
|
|
4,977 |
|
Total
SPAR Group, Inc. equity |
|
16,884 |
|
|
19,650 |
|
Non-controlling interest |
|
8,495 |
|
|
5,905 |
|
Total
equity |
|
25,379 |
|
|
25,555 |
|
Total
liabilities and equity |
$ |
71,167 |
|
$ |
57,988 |
|
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