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
nine-month periods ended September 30, 2019.
Highlights for the three- and nine-month periods
ended September 30, 2019, as compared to the same periods during
the prior year include the following:
- Revenue for the third quarter of 2019 increased $8.0 million,
or 13.8 percent, to $66.4 million. Both Domestic and
International operations contributed $4.0 million each to the
year-over-year revenue growth.
- Revenue for the nine-month period ending September 30, 2019
increased $19.6 million, or 11.4 percent, to $191.8 million.
Domestic operations contributed $10.8 million of the year-over-year
increase due primarily to growth in project revenue year over year.
International operations contributed $8.8 million of the increase,
driven primarily by growth in Brazil of $9.8 million and partially
offset by revenue softness in other countries.
- Operating income for the third quarter increased $723,000 to
$3.0 million, compared to $2.3 million for the same period last
year.
- Operating income for the nine-month period ending September 30,
2019 increased $7.2 million to $9.0 million, compared to $1.8
million for the same period last year. Domestic operations
contributed $5.8 million of the year-over-year improvement and
international operations contributed $1.4 million.
- Net income attributable to SPAR Group for the third quarter of
2019 was $907,000, or $0.04 per diluted share, compared to
$621,000, or $0.03 per diluted share, during the third quarter of
2018.
- Net income attributable to SPAR Group for the nine-month period
ending September 30, 2019 was $3.0 million, or $0.15 per diluted
share, compared to a net loss of $(1.0 million), or $(0.05) per
diluted share, during the same period last year.
- Adjusted-EBITDA for the nine months ended September 30, 2019
increased 129% to $7.7 million, compared to Adjusted-EBITDA of $3.4
million during the same period last year.
Financial Results by Geography (in
000's, except per share data)
|
|
Three Months Ended September 30, |
% |
|
|
Nine Months Ended September 30, |
% |
Revenue: |
|
2019 |
|
|
2018 |
Change |
|
|
2019 |
|
|
2018 |
Change |
International |
$ |
39,960 |
|
$ |
35,976 |
11.1 |
% |
|
$ |
118,681 |
|
$ |
109,853 |
8.0 |
% |
Domestic |
|
26,480 |
|
|
22,412 |
18.2 |
% |
|
|
73,142 |
|
|
62,338 |
17.3 |
% |
Total |
$ |
66,440 |
|
$ |
58,388 |
13.8 |
% |
|
$ |
191,823 |
|
$ |
172,191 |
11.4 |
% |
|
|
Three Months Ended September 30, |
% |
|
|
Nine Months Ended September 30, |
|
% |
Operating Income/(Loss): |
|
2019 |
|
|
2018 |
Change |
|
|
2019 |
|
|
2018 |
|
Change |
International |
$ |
1,774 |
|
$ |
1,239 |
43.2 |
% |
|
$ |
4,374 |
|
$ |
2,952 |
|
48.2 |
% |
Domestic |
|
1,273 |
|
|
1,085 |
17.3 |
% |
|
|
4,633 |
|
|
(1,135 |
) |
nmf |
Total |
$ |
3,047 |
|
$ |
2,324 |
31.1 |
% |
|
$ |
9,007 |
|
$ |
1,817 |
|
395.7 |
% |
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
Net income (loss): |
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
|
International |
$ |
360 |
|
$ |
355 |
nmf |
|
$ |
860 |
|
$ |
710 |
|
21.1 |
% |
Domestic |
|
547 |
|
|
266 |
105.6 |
% |
|
|
2,185 |
|
|
(1,728 |
) |
nmf |
Total |
$ |
907 |
|
$ |
621 |
46.1 |
% |
|
$ |
3,045 |
|
$ |
(1,018 |
) |
nmf |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Diluted Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
0.04 |
|
$ |
0.03 |
|
|
$ |
0.15 |
|
$ |
(0.05 |
) |
|
“We posted solid improvements during the third
quarter and year to date. Domestically, our team continues to
deliver growth among existing customers and is having success with
new customer acquisition. International revenue continues to
be negatively affected by foreign currency translation and soft
market conditions in a few countries, particularly in China.
We have overcome these headwinds in other geographies, posting
strong performance internationally, particularly in Brazil,” said
Chief Executive Officer, Christiaan Olivier. “We expect to
continue to benefit domestically as retailers remodel stores to
make them more relevant vis-à-vis the growth in online
sales. Overall, we have a solid pipeline of new
business that should continue to drive top-line growth in 2020 and
are working on strategies to help offset expected labor cost
increases, as we expect a tight labor market to continue to put
pressure on costs.”
Margin Profile by Geography
Gross Margin:
|
Three Months Ended September 30, |
Basis Point |
|
Nine Months Ended September 30, |
Basis Point |
|
2019 |
|
|
2018 |
|
Change |
|
2019 |
|
|
2018 |
|
Change |
International |
16.1 |
% |
|
16.0 |
% |
10 |
|
16.1 |
% |
|
15.2 |
% |
90 |
Domestic |
23.0 |
% |
|
27.1 |
% |
(410) |
|
24.7 |
% |
|
24.6 |
% |
10 |
Total |
18.9 |
% |
|
20.3 |
% |
(145) |
|
19.4 |
% |
|
18.6 |
% |
80 |
Operating Income as a % of
Sales
|
Three Months Ended September 30, |
Basis Point |
|
Nine Months Ended September 30, |
Basis Point |
|
2019 |
|
|
2018 |
|
Change |
|
2019 |
|
|
2018 |
|
Change |
International |
4.4 |
% |
|
3.4 |
% |
100 |
|
3.7 |
% |
|
2.7 |
% |
100 |
Domestic |
4.8 |
% |
|
4.8 |
% |
- |
|
6.3 |
% |
|
(1.8 |
%) |
810 |
Total |
4.6 |
% |
|
4.0 |
% |
60 |
|
4.7 |
% |
|
1.1 |
% |
360 |
International gross profit margin for both the
three- and nine-month periods ended September 30, 2019 was 16.1%,
compared to 16.0% and 15.2%, respectively, for the same periods in
2018. For the three-month period ended September 30, 2019 the
international subsidiaries, Brazil, Mexico, and China experienced
favorable gross margin improvement year over year. All other
international subsidiaries experienced some gross margin pressure
compared to the same period last year.
Domestic gross profit margin for the three-month
period ended September 30, 2019, was 23.0% compared to 27.1% for
the same period in 2018. The year-over-year decrease in
domestic gross profit margin was directly attributable to an
unfavorable mix in lower gross margin project work. For the
nine-month period ended September 30, 2019, domestic gross profit
margin remained consistent year over year.
Balance Sheet as of September 30,
2019
At September 30, 2019, cash and cash equivalents
totaled $7.4 million. Working capital was $16.6 million and current
ratio was 1.3 to 1. Total current assets and total assets were
$67.9 million and $87.1 million, respectively. Total
liabilities were $56.9 million and total equity was $30.2 million
at September 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.
SPAR Group, Inc. and SubsidiariesConsolidated
Statements of Income (Loss) and Comprehensive Income
(Loss) (In thousands, except share and per share data)
(Unaudited) |
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
Net revenues |
$ |
66,440 |
|
$ |
56,388 |
|
|
$ |
191,823 |
|
$ |
172,191 |
|
Cost of revenues |
|
53,929 |
|
|
46,456 |
|
|
|
154,614 |
|
|
140,154 |
|
Gross profit |
|
12,511 |
|
|
11,842 |
|
|
|
37,209 |
|
|
32,037 |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
8,940 |
|
|
8,996 |
|
|
|
26,639 |
|
|
26,650 |
|
Settlement and other charges |
|
- |
|
|
- |
|
|
|
- |
|
|
1,975 |
|
Depreciation and amortization |
|
524 |
|
|
522 |
|
|
|
1,563 |
|
|
1,595 |
|
Operating income |
|
3,047 |
|
|
2,324 |
|
|
|
9,007 |
|
|
1,817 |
|
|
|
|
|
|
|
Interest expense |
|
216 |
|
|
333 |
|
|
|
605 |
|
|
886 |
|
Other (income), net |
|
(11 |
) |
|
(109 |
) |
|
|
(268 |
) |
|
(413 |
) |
Income before income tax expense |
|
2,842 |
|
|
2,100 |
|
|
|
8,670 |
|
|
1,344 |
|
|
|
|
|
|
|
Income tax expense |
|
760 |
|
|
419 |
|
|
|
2,745 |
|
|
335 |
|
Net income |
|
2,082 |
|
|
1,681 |
|
|
|
5,925 |
|
|
1,009 |
|
Net income attributable to non-controlling interest |
|
(1,175 |
) |
|
(1,060 |
) |
|
|
(2,880 |
) |
|
(2,027 |
) |
Net income (loss) attributable to SPAR Group, Inc. |
$ |
907 |
|
$ |
621 |
|
|
$ |
3,045 |
|
$ |
(1,018 |
) |
Basic and diluted net income(loss) per common share: |
$ |
0.04 |
|
$ |
0.03 |
|
|
$ |
0.15 |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
Weighted average common shares – basic |
|
20,795 |
|
|
20,654 |
|
|
|
20,856 |
|
|
20,650 |
|
|
|
|
|
|
|
Weighted average common shares – diluted |
|
21,061 |
|
|
21,320 |
|
|
|
21,096 |
|
|
20,650 |
|
|
|
|
|
|
|
Net income |
$ |
2,082 |
|
$ |
1,681 |
|
|
$ |
5,925 |
|
$ |
1,009 |
|
Other comprehensive loss: |
|
|
|
|
|
Foreign currency translation adjustments |
|
(811 |
) |
|
(2,782 |
) |
|
|
(644 |
) |
|
(3,462 |
) |
Comprehensive income (loss) |
|
1,271 |
|
|
(1,101 |
) |
|
|
5,281 |
|
|
(2,453 |
) |
Comprehensive (income) loss attributable to non-controlling
interest |
|
(815 |
) |
|
269 |
|
|
|
(2,623 |
) |
|
(393 |
) |
Comprehensive income (loss) attributable to SPAR Group, Inc. |
$ |
456 |
|
$ |
(832 |
) |
|
$ |
2,658 |
|
$ |
(2,846 |
) |
|
|
|
|
|
|
SPAR Group, Inc. and
SubsidiariesConsolidated Balance
Sheets(In thousands, except share and per share data) |
|
|
September 30, 2019 |
December 31, 2018 |
Assets |
(Unaudited) |
|
Current assets: |
|
|
Cash and cash equivalents |
$ |
7,372 |
|
$ |
7,111 |
|
Accounts receivable, net |
|
57,186 |
|
|
46,142 |
|
Prepaid expenses and other current assets |
|
3,382 |
|
|
1,879 |
|
Total current assets |
|
67,940 |
|
|
55,132 |
|
Property and equipment, net |
|
3,122 |
|
|
2,950 |
|
Operating lease right-of-use assets |
|
4,288 |
|
|
- |
|
Goodwill |
|
3,779 |
|
|
3,788 |
|
Intangible assets, net |
|
2,925 |
|
|
3,332 |
|
Deferred income taxes |
|
2,675 |
|
|
2,568 |
|
Other assets |
|
2,365 |
|
|
1,325 |
|
Total assets |
$ |
87,094 |
|
$ |
69,095 |
|
Liabilities and
equity |
|
|
|
|
|
|
Current liabilities: |
|
|
Accounts payable |
$ |
11,524 |
|
$ |
8,668 |
|
Accrued expenses and other current liabilities |
|
22,270 |
|
|
18,168 |
|
Due to affiliates |
|
4,924 |
|
|
4,645 |
|
Customer incentives and deposits |
|
908 |
|
|
620 |
|
Lines of credit and short-term loans |
|
11,352 |
|
|
10,414 |
|
Current portion of operating lease liabilities |
|
361 |
|
|
- |
|
Total current liabilities |
|
51,339 |
|
|
42,515 |
|
Operating lease liabilities, less current portion |
|
3,927 |
|
|
- |
|
Long-term debt and other liabilities |
|
1,634 |
|
|
1,806 |
|
Total liabilities |
|
56,900 |
|
|
44,321 |
|
|
|
|
Equity: |
|
|
SPAR Group, Inc. equity |
|
|
Preferred stock, $.01 par value: |
|
|
Authorized and available shares– 2,445,598 |
|
|
Issued and outstanding shares– |
|
|
None – September 30, 2019, and December 31, 2018 |
|
– |
|
|
– |
|
Common stock, $.01 par value: |
|
|
Authorized shares – 47,000,000 |
|
|
Issued shares – 21,093,762 – September 30, 2019, and
20,784,483 December 31, 2018 |
|
210 |
|
|
208 |
|
Treasury stock, at cost 1,697 shares – September 30,
2019, and 7,895 December 31, 2018 |
|
(15 |
) |
|
(8 |
) |
Additional paid-in capital |
|
16,448 |
|
|
16,304 |
|
Accumulated other comprehensive loss |
|
(4,006 |
) |
|
(3,638 |
) |
Retained earnings |
|
6,459 |
|
|
3,432 |
|
Total SPAR Group, Inc. equity |
|
19,096 |
|
|
16,298 |
|
Non-controlling interest |
|
11,098 |
|
|
8,476 |
|
Total equity |
|
30,194 |
|
|
24,774 |
|
Total liabilities and equity |
$ |
87,094 |
|
$ |
69,095 |
|
Reconciliation of Net Income to Adjusted
EBITDA(unaudited) |
(000’s) |
Nine Months Ended |
Nine Months Ended |
|
30-Sep-19 |
30-Sep-18 |
Reported net income |
3,045 |
(1,018) |
|
Income tax expense |
2,745 |
335 |
|
Income before income tax expense |
5,790 |
(683) |
|
Other adjustments |
- |
1,975 |
|
Interest and other expense |
337 |
473 |
|
Depreciation and amortization |
1,563 |
1,595 |
|
Adjusted EBITDA |
7,690 |
3,360 |
|
Company Contact:
James R. Segreto
Chief Financial Officer
SPAR Group, Inc.
(248) 364-7727
Investor Contact:
Dave Mossberg
Three Part Advisors
(817) 310-0051
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