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 three- and
six-month periods ended June 30, 2019.
Highlights for the three- and six-month periods
ended June 30, 2019, as compared to the same periods during the
prior year include the following:
- Revenue for the second quarter of
2019 increased $9.0 million, or 15.2 percent, to $68.2 million.
Domestic operations contributed $6.5 million of the year-over-year
revenue growth. International operations contributed $2.5 million
of the increase.
- Revenue for the six-month period
ending June 30, 2019 increased $11.6 million, or 10.2 percent, to
$125.4 million. Domestic operations contributed $6.7 million of the
year-over-year revenue growth. International operations contributed
$4.8 million of the increase. The International increase is
primarily due to the year-to-date growth in Brazil of $5.7 million,
which was partially offset by weakness in other countries.
- Operating income for the second
quarter increased $5.5 million to $4.2 million, compared to an
operating loss of $(1.2 million) for the same period last year.
During the second quarter of 2018, the Company recorded one-time
charges totaling approximately $2.0 million. Adjusting for one-time
charges, operating income during the second quarter increased $3.0
million year over year.
- Operating income for the six-month
period ending June 30, 2019 increased $6.5 million to $6.0 million,
compared to an operating loss of $(506,000) for the same period
last year. During the first half of 2018, the Company recorded
one-time charges totaling approximately $2.0 million. Adjusting for
one-time charges, operating income during the first half of 2019
increased $4.0 million year over year.
- Net income attributable to SPAR
Group for the second quarter of 2019 was $1.5 million, or $0.07 per
diluted share, compared to a net loss of $(1.8 million), or $(0.09)
per diluted share, during the second quarter of 2018.
- Net income attributable to SPAR
Group for the six-month period ending June 30, 2019 was $2.1
million, or $0.10 per diluted share, compared to a net loss of
$(1.6 million), or $(0.08) per diluted share, during the same
period last year.
- As highlighted in the GAAP
reconciliation tables, EBITDA for the second quarter of 2019
increased to $3.5 million, compared to Adjusted-EBITDA of $603,000
during the same period last year.
- As highlighted in the GAAP
reconciliation table below, EBITDA for the six months ended June
30, 2019 increased to $5.3 million, compared to Adjusted-EBITDA of
$1.6 million during the same period last year.
Financial Results by Geography (in
000's, except per share data)
|
Three Months Ended June 30, |
% |
Six Months Ended June 30, |
% |
Revenue: |
|
2019 |
|
|
2018 |
Change |
|
2019 |
|
|
2018 |
Change |
International |
$ |
40,217 |
|
$ |
37,668 |
6.8% |
$ |
78,721 |
|
$ |
73,878 |
6.6% |
Domestic |
|
28,006 |
|
|
21,556 |
29.9% |
|
46,662 |
|
|
39,925 |
16.9% |
Total |
$ |
68,223 |
|
$ |
59,224 |
15.2% |
$ |
125,383 |
|
$ |
113,803 |
10.2% |
|
Three Months Ended June 30, |
|
% |
Six Months Ended June 30, |
|
% |
Operating Income/(Loss): |
|
2019 |
|
|
2018 |
|
Change |
|
2019 |
|
|
2018 |
|
Change |
International |
$ |
1,622 |
|
$ |
663 |
|
144.6% |
$ |
2,601 |
|
$ |
1,713 |
|
51.8% |
Domestic |
|
2,608 |
|
|
(1,900 |
) |
nmf |
|
3,360 |
|
|
(2,219 |
) |
nmf |
Total |
$ |
4,230 |
|
$ |
(1,237 |
) |
nmf |
$ |
5,961 |
|
$ |
(506 |
) |
nmf |
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
Net income (loss): |
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
|
International |
$ |
279 |
|
$ |
(33 |
) |
nmf |
$ |
501 |
|
$ |
354 |
|
41.1% |
Domestic |
|
1,244 |
|
|
(1,730 |
) |
nmf |
|
1,638 |
|
|
(1,992 |
) |
nmf |
Total |
$ |
1,523 |
|
$ |
(1,763 |
) |
nmf |
$ |
2,139 |
|
$ |
(1,638 |
) |
nmf |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Basic and Diluted Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.07 |
|
$ |
(0.09 |
) |
|
$ |
0.10 |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
“Improvements in domestic operations continue to
be the primary driver of year-over-year financial improvements.
Momentum in our domestic business continues with new customer
acquisitions and a growing pipeline. Domestic revenue is also
benefiting from store remodeling, as our retail customers
revitalize their stores to bolster foot traffic and compete against
online sales growth. Our international revenue faces a headwind
with foreign currency translation, but overall we are keeping pace
with market growth,” said Chief Executive Officer, Christiaan
Olivier. “We continue to face cost pressures domestically due to a
tight labor market. However, we see opportunities for organic
growth both domestically and internationally, which we expect will
help to offset near-term factors affecting profitability.”
Margin Profile by Geography
Gross Margin:
|
Three Months Ended June 30, |
Basis Point |
|
Six Months Ended June 30, |
Basis Point |
|
2019 |
|
2018 |
Change |
|
2019 |
|
2018 |
Change |
International |
16.9% |
|
14.6% |
230 |
|
16.2% |
|
14.8% |
140 |
Domestic |
25.9% |
|
23.0% |
290 |
|
25.7% |
|
23.1% |
260 |
Total |
20.6% |
|
17.6% |
300 |
|
19.7% |
|
17.8% |
190 |
Operating Income as a % of
Sales
|
Three Months Ended June 30, |
Basis Point |
|
Six Months Ended June 30, |
Basis Point |
|
2019 |
|
2018 |
Change |
|
2019 |
|
2018 |
Change |
International |
4.0% |
|
1.8% |
220 |
|
3.3% |
|
2.3% |
100 |
Domestic |
9.3% |
|
(8.8%) |
1,810 |
|
(7.2%) |
|
(5.6%) |
(1,280) |
Total |
6.2% |
|
(2.1%) |
830 |
|
4.8% |
|
(0.4%) |
520 |
International gross profit margin for the three-
and six-month periods ended June 30, 2019 were 16.9% and 16.2%,
compared to 14.6% and 14.8%, respectively, for the same periods in
2018. For the three-month period ended June 30, 2019 the
international subsidiaries, with the exception of Brazil, have been
experiencing gross margin pressure compared to the same period last
year. And, with the exception of India, Australia, and Mexico, all
other international subsidiaries experienced gross profit margin
improvement in the first six months of 2019 compared to the same
period last year.
Domestic gross profit margin for the three- and
six-month periods ended June 30, 2019, were 25.9% and 25.7%,
compared to 23.0% and 23.1%, respectively, for the same periods in
2018. The year-over-year increase in domestic gross profit margins
was primarily due to an increase in higher margin project work and
the shift to a more profitable labor platform in August 2018.
Balance Sheet as of June 30,
2019
At June 30, 2019, cash and cash equivalents
totaled $7.8 million. Working capital was $15.3 million and current
ratio was 1.3 to 1. Total current assets and total assets were
$67.7 million and $86.9 million, respectively. Total liabilities
were $58.0 million and total equity was $28.9 million at June 30,
2019.
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, 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 projects 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"), will be filed
shortly in a Current Report on Form 10-Q 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/A for the year ended December 31, 2018 (the "Annual
Report"), which was filed by SGRP with the SEC on April 24, 2019,
and SGRP's definitive Proxy Statement respecting its Annual Meeting
of Stockholders to be held on May 15, 2019 (the "Proxy Statement"),
which SGRP filed with the SEC on April 29, 2019, 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").
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
(growth, customer value, employee development, greater productivity
& efficiency, and earnings per share). Building upon the
Company's strong foundation, leveraging compatible global
opportunities, growing the Company’s client base and contacts,
continuing to strengthen the Company’s balance sheet, growing
revenues and improving profitability through organic growth, new
business developments and strategic acquisitions, and continuing to
control costs. 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 express
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 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) 364-7727
Investor Contact: Dave
MossbergThree Part Advisors(817) 310-0051
SPAR Group, Inc. and
SubsidiariesConsolidated Statements of Income
(loss) and Comprehensive Income
(loss) (In thousands, except share
and per share data) (Unaudited)
|
Three Months EndedJune 30, |
|
Six Months Ended June 30, |
|
2019 |
|
2019 |
|
|
2019 |
|
2018 |
|
Net revenues |
$ |
68,223 |
|
$ |
59,224 |
|
|
$ |
125,383 |
|
$ |
113,803 |
|
Cost of revenues |
|
54,159 |
|
|
48,759 |
|
|
|
100,685 |
|
|
93,608 |
|
Gross profit |
|
14,064 |
|
|
10,465 |
|
|
|
24,698 |
|
|
20,195 |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
9,306 |
|
|
9,196 |
|
|
|
17,699 |
|
|
17,654 |
|
Settlement and other charges |
|
- |
|
|
1,975 |
|
|
|
- |
|
|
1,975 |
|
Depreciation and amortization |
|
528 |
|
|
531 |
|
|
|
1,038 |
|
|
1,072 |
|
Operating income (loss) |
|
4,230 |
|
|
(1,237 |
) |
|
|
5,961 |
|
|
(506 |
) |
|
|
|
|
|
|
Interest (income) expense |
|
187 |
|
|
354 |
|
|
|
388 |
|
|
553 |
|
Other (income), net |
|
(192 |
) |
|
(232 |
) |
|
|
(257 |
) |
|
(304 |
) |
Income (loss) before income tax expense |
|
4,235 |
|
|
(1,359 |
) |
|
|
5,830 |
|
|
(755 |
) |
|
|
|
|
|
|
Income tax expense (benefit) |
|
1,428 |
|
|
(262 |
) |
|
|
1,986 |
|
|
(84 |
) |
Net income (loss) |
|
2,807 |
|
|
(1,097 |
) |
|
|
3,844 |
|
|
(671 |
) |
Net (loss) attributable to non-controlling interest |
|
(1,284 |
) |
|
(666 |
) |
|
|
(1,705 |
) |
|
(967 |
) |
Net income (loss) attributable to SPAR Group, Inc. |
$ |
1,523 |
|
$ |
(1,763 |
) |
|
$ |
2,139 |
|
$ |
(1,638 |
) |
Basic net income (loss) per common share: |
$ |
0.07 |
|
$ |
(0.09 |
) |
|
$ |
0.10 |
|
$ |
(0.08 |
) |
Diluted net income (loss) per common share: |
$ |
0.07 |
|
$ |
(0.09 |
) |
|
$ |
0.10 |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
Weighted average common shares – basic |
|
20,816 |
|
|
20,649 |
|
|
|
20,796 |
|
|
20,649 |
|
|
|
|
|
|
|
Weighted average common shares – diluted |
|
21,104 |
|
|
20,649 |
|
|
|
21,080 |
|
|
20,649 |
|
|
|
|
|
|
|
Net income (loss) |
$ |
2,807 |
|
$ |
(1,097 |
) |
|
$ |
3,844 |
|
$ |
(671 |
) |
Other comprehensive income (loss): |
|
|
|
|
|
Foreign currency translation adjustments |
|
59 |
|
|
(650 |
) |
|
|
167 |
|
|
(680 |
) |
Comprehensive income (loss) |
|
2,866 |
|
|
(1,747 |
) |
|
|
4,011 |
|
|
(1,351 |
) |
Comprehensive (income) attributable to non-controlling
interest |
|
(1,358 |
) |
|
(391 |
) |
|
|
(1,808 |
) |
|
(662 |
) |
Comprehensive income (loss) attributable to SPAR Group, Inc. |
$ |
1,508 |
|
$ |
(2,138 |
) |
|
$ |
2,203 |
|
$ |
(2,013 |
) |
|
|
|
|
|
|
SPAR Group, Inc. and
SubsidiariesConsolidated Balance
Sheets(In thousands, except share and per share data)
|
June 30, 2019 |
|
December 31, 2018 |
Assets |
(Unaudited) |
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
7,826 |
|
|
$ |
7,111 |
|
Accounts receivable, net |
|
57,462 |
|
|
|
46,142 |
|
Prepaid expenses and other current assets |
|
2,461 |
|
|
|
1,879 |
|
Total current assets |
|
67,749 |
|
|
|
55,132 |
|
Property and equipment, net |
|
3,085 |
|
|
|
2,950 |
|
Operating lease right-of-use assets |
|
4,770 |
|
|
|
- |
|
Goodwill |
|
3,788 |
|
|
|
3,788 |
|
Intangible assets, net |
|
3,067 |
|
|
|
3,332 |
|
Deferred income taxes |
|
2,687 |
|
|
|
2,568 |
|
Other assets |
|
1,734 |
|
|
|
1,325 |
|
Total assets |
$ |
86,880 |
|
|
$ |
69,095 |
|
|
|
|
Liabilities and
equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ |
10,338 |
|
|
$ |
8,668 |
|
Accrued expenses and other current liabilities |
|
22,583 |
|
|
|
18,168 |
|
Due to affiliates |
|
4,520 |
|
|
|
4,645 |
|
Customer incentives and deposits |
|
968 |
|
|
|
620 |
|
Lines of credit and short-term loans |
|
13,182 |
|
|
|
10,414 |
|
Current portion of operating lease liabilities |
|
843 |
|
|
|
- |
|
Total current liabilities |
|
52,434 |
|
|
|
42,515 |
|
Operating lease liabilities, less current portion |
|
3,927 |
|
|
|
- |
|
Long-term debt and other liabilities |
|
1,634 |
|
|
|
1,806 |
|
Total liabilities |
|
57,995 |
|
|
|
44,321 |
|
|
|
|
Equity: |
|
|
SPAR Group, Inc. equity |
|
|
Preferred stock, $.01 par value: |
|
|
Authorized and available shares– 2,445,598 |
|
|
Issued and outstanding shares – |
|
|
None – June 30, 2019, and December 31, 2018 |
|
– |
|
|
|
– |
|
Common stock, $.01 par value: |
|
|
Authorized shares – 47,000,000 |
|
|
Issued shares – 20,847,461 – June 30, 2019, and 20,776,588 December
31, 2018 |
|
209 |
|
|
|
208 |
|
Treasury stock, at cost 1,697 shares – June 30, 2019, and 7,895
December 31, 2018 |
|
(15 |
) |
|
|
(8 |
) |
Additional paid-in capital |
|
16,410 |
|
|
|
16,304 |
|
Accumulated other comprehensive loss |
|
(3,556 |
) |
|
|
(3,638 |
) |
Retained earnings |
|
5,553 |
|
|
|
3,432 |
|
Total SPAR Group, Inc. equity |
|
18,601 |
|
|
|
16,298 |
|
Non-controlling interest |
|
10,284 |
|
|
|
8,476 |
|
Total equity |
|
28,885 |
|
|
|
24,774 |
|
Total liabilities and equity |
$ |
86,880 |
|
|
$ |
69,095 |
|
Reconciliation of Net Income to Adjusted EBITDA
(unaudited) |
(000’s) |
Three Months Ended |
Three Months Ended |
|
30-Jun-19 |
30-Jun-18 |
Reported net income |
1,523 |
|
(1,763 |
) |
Income tax expense (benefit) |
1,428 |
|
(262 |
) |
Income before income tax expense |
2,951 |
|
(2,025 |
) |
Other adjustments |
- |
|
1,975 |
|
Interest and other expense (benefit) |
(5 |
) |
122 |
|
Depreciation and amortization |
528 |
|
531 |
|
Adjusted EBITDA |
3,474 |
|
603 |
|
Reconciliation of Net Income to Adjusted
EBITDA(unaudited) |
(000’s) |
Six Months Ended |
Six Months Ended |
|
30-Jun-19 |
30-Jun-18 |
Reported net income |
2,139 |
(1,638 |
) |
Income tax expense (benefit) |
1,986 |
(84 |
) |
Income before income tax expense |
4,125 |
(1,722 |
) |
Other adjustments |
- |
1,975 |
|
Interest and other expense (benefit) |
131 |
249 |
|
Depreciation and amortization |
1,038 |
1,072 |
|
Adjusted EBITDA |
5,294 |
1,574 |
|
Spar (NASDAQ:SGRP)
Historical Stock Chart
From Mar 2024 to Apr 2024
Spar (NASDAQ:SGRP)
Historical Stock Chart
From Apr 2023 to Apr 2024