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, 2020.
Highlights for the three- and six-month periods
ended June 30, 2020, as compared to the same periods during the
prior year are as follows:
- Revenue for the second quarter of 2020 decreased $17.3 million,
or 25.3 percent, to $50.9 million versus the prior year’s second
quarter. Revenues decreased 21.0 percent and 28.3 percent for
domestic and international operations, respectively.
- Revenue for the six-month period ending June 30, 2020 decreased
$13.1 million, or 10.4 percent, to $112.3 million. Revenues
decreased 2.7 percent and 15.0 percent for domestic and
international operations, respectively.
- Operating income for the second quarter of 2020 decreased $2.3
million, or 53.6 percent, to $1.9 million, compared to $4.2 million
for the same period last year.
- Operating income for the six-month period ending June 30, 2020
decreased $2.5 million to $3.4 million, compared to $6.0 million
for the same period last year. Domestic operations decreased $2.7
million, while international increased $0.2 million.
- Net loss attributable to SPAR Group for the second quarter of
2020 was $103,000, or $0.00 per diluted share, compared to $1.5
million, or $0.07 per diluted share, during the second quarter of
2019.
- Net income attributable to SPAR Group for the six-month period
ending June 30, 2020 was $193,000, or $0.01 per diluted share,
compared to $2.1 million, or $0.10 per diluted share, during the
same period last year.
The Company said that the decrease in financial
performance during the second quarter was primarily related to the
economic effects of Covid-19. While sales trends improved
late in May and June from low levels reached in April, revenue
remained below plan for the duration of the quarter. The
financial performance of the domestic business was negatively
impacted by many domestic customers temporarily closing, curtailing
operations, and limiting the number of non-customers in their
stores in response to the virus. In addition, domestic
profitability was negatively impacted by a revenue mix shift and a
higher cost of field labor. Excluding the negative affect of
foreign currency translation, international operations showed a
low-single digit decrease in revenue and posted flat comparisons in
operating income during the quarter. The solid relative
performance of the international division was related to strong
demand for essential products from consumer-packaged goods
customers, which make up a large portion of the international sales
mix. During the second quarter the Company took action to
decrease operating expenses, cut discretionary spending and delay
non-essential investments to preserve the balance sheet and
liquidity.
“In the face of the largest economic downturn in
our lifetimes, we were able to temper losses due to our highly
variable cost structure and the strong relative performance of our
international division. I want to extend our gratitude to
employees and partners for their hard work and ongoing effort to
navigate the challenging conditions presented by the global
pandemic,” said Kori Belzer, chief operating officer of SPAR
Group.
Financial Results by Geography (in
000's, except per share data)
|
Three Months Ended June 30, |
|
% |
|
Six Months Ended June 30, |
|
% |
Revenue: |
2020 |
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
International |
$ |
28,821 |
|
$ |
40,217 |
|
(28.3%) |
|
$ |
66,880 |
|
$ |
78,721 |
|
(15.0%) |
Domestic |
|
22,123 |
|
|
28,006 |
|
(21.0%) |
|
|
45,412 |
|
|
46,662 |
|
(2.7%) |
Total |
$ |
50,944 |
|
$ |
68,223 |
|
(25.3%) |
|
$ |
112,292 |
|
$ |
125,383 |
|
(10.4%) |
|
Three Months Ended June 30, |
|
% |
|
Six Months Ended June 30, |
|
% |
Operating Income/(Loss): |
2020 |
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
International |
$ |
1,648 |
|
$ |
1,622 |
|
1.6% |
|
$ |
2,817 |
|
$ |
2,607 |
|
8.1% |
Domestic |
|
315 |
|
|
2,608 |
|
(87.9%) |
|
|
623 |
|
|
3,354 |
|
(81.5%) |
Total |
$ |
1,963 |
|
$ |
4,230 |
|
(53.6%) |
|
$ |
3,440 |
|
$ |
5,961 |
|
(42.3%) |
|
Three Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
Net income (loss): |
2020 |
|
2019 |
|
|
|
2020 |
|
2019 |
|
|
International |
$ |
368 |
|
|
$ |
279 |
|
235.5% |
|
$ |
627 |
|
|
$ |
501 |
|
38.5% |
Domestic |
|
(471 |
) |
|
|
1,244 |
|
(163.6%) |
|
|
(434 |
) |
|
|
1,638 |
|
(113.3%) |
Total |
$ |
(103 |
) |
|
$ |
1,523 |
|
(90.5%) |
|
$ |
193 |
|
|
$ |
2,139 |
|
(77.7%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Basic and Diluted Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.00 |
) |
|
$ |
0.07 |
|
|
|
$ |
0.01 |
|
|
$ |
0.10 |
|
|
Margin Profile by Geography
|
Three Months Ended June 30, |
|
Basis Point |
|
Six Months Ended June 30, |
|
Basis Point |
Gross Margin: |
2020 |
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
International |
18.2% |
|
16.9% |
|
130 |
|
17.2% |
|
16.2% |
|
100 |
Domestic |
20.9% |
|
26.0% |
|
(505) |
|
22.4% |
|
25.8% |
|
(340) |
Total |
19.4% |
|
20.6% |
|
(124) |
|
19.3% |
|
19.8% |
|
(50) |
Operating Income |
Three Months Ended June 30, |
|
Basis Point |
|
Six Months Ended June 30, |
|
Basis Point |
as a % of Sales |
2020 |
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
International |
5.7% |
|
4.0% |
|
168 |
|
4.2% |
|
3.3% |
|
90 |
Domestic |
1.1% |
|
9.3% |
|
(824) |
|
1.8% |
|
7.2% |
|
(540) |
Total |
3.7% |
|
6.2% |
|
(250) |
|
3.2% |
|
4.8% |
|
(160) |
International gross profit margin for the three-
and six-month periods ended June 30, 2020 were 18.2% and 17.2%,
respectively, compared to 16.9% and 16.2%, respectively, for the
same periods in 2019. For the three-month period ended June
30, 2020 the international subsidiaries, Australia, Mexico, and
South Africa experienced favorable gross margin improvement year
over year. All other international subsidiaries experienced
gross margin pressure compared to the same period last year.
Domestic gross profit margin for the three-month
period ended June 30, 2020, was 20.9% compared to 26.0% for the
same period in 2019. For the six-month period ended June 30,
2020, domestic gross profit margin was 22.4% compared to 25.8% for
the same period in 2019. The year-over-year decrease in
domestic gross profit margin was primarily attributable to lower
sales, wage pressure, and an unfavorable mix in lower gross margin
project work.
Balance Sheet as of June 30,
2020
At June 30, 2020, cash and cash equivalents
totaled $13.7 million. Working capital was $17.2 million and
current ratio was 1.4 to 1. Total current assets and total assets
were $58.5 million and $73.9 million, respectively. Total
liabilities were $44.2 million and total equity was $29.7 million
at June 30, 2020.
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, 2019 (the "Annual
Report"), which was filed by SGRP with the SEC on April 14, 2020,
and SGRP's definitive Proxy Statement respecting its Annual Meeting
of Stockholders held on May 13, 2020 (the "Proxy Statement"),
which SGRP filed with the SEC on May 1, 2020, 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
SubsidiariesCondensed Consolidated Statements of
Loss and Comprehensive (Loss)
Income(unaudited)(In thousands, except
share and per share data)
|
Three Months Ended |
|
|
Six Months Ended |
|
|
June 30, |
|
|
June 30, |
|
|
2020 |
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net revenues |
$ |
50,944 |
|
|
$ |
68,223 |
|
|
$ |
112,292 |
|
|
$ |
125,383 |
|
Cost of revenues |
|
41,072 |
|
|
|
54,159 |
|
|
|
90,632 |
|
|
|
100,685 |
|
Gross profit |
|
9,872 |
|
|
|
14,064 |
|
|
|
21,660 |
|
|
|
24,698 |
|
Selling, general and administrative expense |
|
7,370 |
|
|
|
9,306 |
|
|
|
17,141 |
|
|
|
17,699 |
|
Depreciation and amortization |
|
539 |
|
|
|
528 |
|
|
|
1,079 |
|
|
|
1,038 |
|
Operating income |
|
1,963 |
|
|
|
4,230 |
|
|
|
3,440 |
|
|
|
5,961 |
|
Interest expense |
|
84 |
|
|
|
187 |
|
|
|
312 |
|
|
|
388 |
|
Other income, net |
|
(50 |
) |
|
|
(192 |
) |
|
|
(58 |
) |
|
|
(257 |
) |
Income before income tax expense |
|
1,929 |
|
|
|
4,235 |
|
|
|
3,186 |
|
|
|
5,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
624 |
|
|
|
1,428 |
|
|
|
959 |
|
|
|
1,986 |
|
Net income |
|
1,305 |
|
|
|
2,807 |
|
|
|
2,227 |
|
|
|
3,844 |
|
Net (income) attributable to non-controlling interest |
|
(1,408 |
) |
|
|
(1,284 |
) |
|
|
(2,034 |
) |
|
|
(1,705 |
) |
Net income attributable to SPAR Group, Inc. |
$ |
(103 |
) |
|
$ |
1,523 |
|
|
$ |
193 |
|
|
$ |
2,139 |
|
Basic and diluted income per common share: |
$ |
(0.00 |
) |
|
$ |
0.07 |
|
|
$ |
0.01 |
|
|
$ |
0.10 |
|
Weighted average common shares – basic |
|
21,108 |
|
|
|
20,816 |
|
|
|
21,107 |
|
|
|
20,796 |
|
Weighted average common shares – diluted |
|
21,125 |
|
|
|
21,104 |
|
|
|
21,157 |
|
|
|
21,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
1,305 |
|
|
$ |
2,807 |
|
|
$ |
2,227 |
|
|
$ |
3,844 |
|
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
(79 |
) |
|
|
59 |
|
|
|
(3,979 |
) |
|
|
167 |
|
Comprehensive income (loss) |
|
1,226 |
|
|
|
2,866 |
|
|
|
(1,752 |
) |
|
|
4,011 |
|
Comprehensive (income) loss attributable to non-controlling
interest |
|
(1,365 |
) |
|
|
(1,358 |
) |
|
|
455 |
|
|
|
(1,808 |
) |
Comprehensive (loss) income attributable to SPAR Group, Inc. |
$ |
(139 |
) |
|
$ |
1,508 |
|
|
$ |
(1,297 |
) |
|
$ |
2,203 |
|
SPAR Group, Inc. and
SubsidiariesCondensed Consolidated Balance
Sheets(In thousands, except share and per share
data)
|
June 30, |
|
|
December 31, |
|
|
2020 |
|
|
2019 |
|
|
(Unaudited) |
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
13,676 |
|
|
$ |
10,458 |
|
Accounts receivable, net |
|
42,911 |
|
|
|
49,299 |
|
Prepaid expenses and other current assets |
|
1,871 |
|
|
|
2,404 |
|
Total current assets |
|
58,458 |
|
|
|
62,161 |
|
Property and equipment, net |
|
2,793 |
|
|
|
2,848 |
|
Operating lease right-of-use assets |
|
3,488 |
|
|
|
4,948 |
|
Goodwill |
|
3,756 |
|
|
|
3,784 |
|
Intangible assets, net |
|
2,512 |
|
|
|
2,796 |
|
Deferred income taxes |
|
1,644 |
|
|
|
1,883 |
|
Other assets |
|
1,259 |
|
|
|
1,115 |
|
Total assets |
$ |
73,910 |
|
|
$ |
79,535 |
|
Liabilities and equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
6,841 |
|
|
$ |
9,186 |
|
Accrued expenses and other current liabilities |
|
20,278 |
|
|
|
18,548 |
|
Due to affiliates |
|
3,780 |
|
|
|
4,666 |
|
Customer incentives and deposits |
|
416 |
|
|
|
594 |
|
Lines of credit and short-term loans |
|
8,103 |
|
|
|
8,932 |
|
Current portion of operating lease liabilities |
|
1,779 |
|
|
|
2,828 |
|
Total current liabilities |
|
41,197 |
|
|
|
44,754 |
|
Operating lease liabilities, less current portion |
|
1,709 |
|
|
|
2,120 |
|
Long-term debt and other liabilities |
|
1,300 |
|
|
|
1,300 |
|
Total liabilities |
|
44,206 |
|
|
|
48,174 |
|
Commitments and contingencies – See Note 8 |
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
SPAR Group, Inc. equity |
|
|
|
|
|
|
|
Preferred stock, $.01 par value: Authorized and available shares–
2,445,598 Issued and outstanding shares – None – Balance at June
30, 2020 and December 31, 2019 |
|
- |
|
|
|
- |
|
Common stock, $.01 par value: Authorized shares – 47,000,000 Issued
shares – 21,108,352 – Balance at June 30, 2020, and 21,102,335 –
December 31, 2019 |
|
211 |
|
|
|
211 |
|
Treasury stock, at cost 1,697 shares – Balance at June 30, 2020,
and December 31, 2019 |
|
(2 |
) |
|
|
(2 |
) |
Additional paid-in capital |
|
16,606 |
|
|
|
16,511 |
|
Accumulated other comprehensive loss |
|
(5,106 |
) |
|
|
(3,616 |
) |
Retained earnings |
|
6,044 |
|
|
|
5,851 |
|
Total SPAR Group, Inc. equity |
|
17,753 |
|
|
|
18,955 |
|
Non-controlling interest |
|
11,951 |
|
|
|
12,406 |
|
Total equity |
|
29,704 |
|
|
|
31,361 |
|
Total liabilities and equity |
$ |
73,910 |
|
|
$ |
79,535 |
|
Company Contact:
Clint Morrow
(248) 364-8412
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