SPAR Group, Inc. (NASDAQ: SGRP) (“SPAR,” “SPAR
Group” or the “Company”), a leading provider of merchandising,
marketing, and distribution services today reported financial and
operating results for the three and six months ended June 30, 2024.
Mike Matacunas, the Company’s President and Chief
Executive Officer, commented, “Our second quarter results
reflect a focus on simplification and driving growth in the
Americas, specifically the U.S. and Canada. Our revenues in the
second quarter were up 37% in the ongoing U.S. business and 14% in
Canada. In addition, we continued to divest in underperforming
assets in the second quarter resulting in a one-time $4.9 million
capital gain and increasing our cash to $22 million. Our financials
are stronger than they have ever been in the history of the company
and demand for our services is growing.
“The last three years have seen a transformation of this
business from a complex, joint-venture based, legally mired,
trapped cash, hard to understand company to a focused, simplified,
financially solid, cash-rich, growing enterprise. At the same time,
we have delivered value to our shareholders, expanded our client
base and energized the organization. In effect, we changed two
wheels of the car at the same time and I couldn’t be prouder of
this team,” said Mike Matacunas, Chief Executive Officer.
“Lastly, we do not have an update on our ‘go private’
announcement from June 5th other than to confirm this process
remains underway and we will communicate when appropriate,”
concluded Matacunas.
Second Quarter 2024
Highlights
- Net revenues of $57.3 million, primarily comprised of $54.0
million from the Americas segment
- Closed divestitures of China and Brazil
- Gross profit was $11.0 million, or 19.2% of revenues.
- Gain on selling businesses of $4.9 million
- Net income attributable to SPAR Group, Inc. of $3.6 million, or
$0.15 per diluted share, up 467%.
- Repurchased 1 million shares under our Board-approved share
buyback program.
Six Months 2024 Highlights
- Net revenues of $126.0 million, primarily comprised of $108.7
million from the Americas segment (86%).
- Gross profit was $23.5 million, or 18.7% of revenues.
- Net gains on selling businesses of $12.1 million.
- $11 million increase in cash since year-end 2023
- Net income attributable to SPAR Group, Inc. of $10.3 million,
or $0.43 per diluted share.
Financial Position as of June 30,
2024
The Company’s total worldwide liquidity at the
end of the quarter was $33.4 million, with $21.7 million in cash
and cash equivalents and $11.8 million of unused availability as of
June 30, 2024. For the six months ended June 30, 2024, net cash
provided by operating activities was $170 thousand. The Company
ended the quarter with net working capital of $24.8 million on
June 30, 2024.
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 period ended June 30, 2024. To access the call live
by phone, dial 1-833-630-1542 (Domestic) and 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, 2024, by calling 1-877-344-7529 using passcode
ID 3263044# 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 merchandising and marketing services
company, providing a broad range of services to retailers,
manufacturers, and distributors. With more than 50 years of
experience, the company distinguishes itself from the competition
by offering flexible, scalable and innovative solutions to some of
the world’s leading brands and retailers. 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 an Annual Report on Form 10-K by SGRP with
the Securities and Exchange Commission (the “SEC”) for
its fiscal year ended December 31, 2023, 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 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.
Media Contact:Ronald MargulisRAM
Communications908-272-3930ron@rampr.com |
|
Investor Relations Contact:Sandy Martin Three
Part Advisors214-616-2207smartin@threepa.com |
|
|
|
- Financial Statements Follow – SPAR Group, Inc. and
SubsidiariesCondensed Consolidated Statements of
Income(unaudited)(In thousands, except
per share data) |
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30 |
|
June 30 |
|
2024 |
2023 |
|
2024 |
2023 |
|
|
|
|
|
|
|
|
|
|
Net revenues |
$ |
57,290 |
|
$ |
65,936 |
|
|
$ |
125,984 |
|
$ |
130,316 |
|
Related party - cost of revenues |
|
- |
|
|
1,682 |
|
|
|
- |
|
|
3,179 |
|
Cost
of revenues |
|
46,297 |
|
|
51,158 |
|
|
|
102,448 |
|
|
99,903 |
|
Gross
profit |
|
10,993 |
|
|
13,096 |
|
|
|
23,536 |
|
|
27,234 |
|
Selling, general and administrative expense |
|
9,541 |
|
|
10,605 |
|
|
|
19,158 |
|
|
21,061 |
|
Gain
on sale of business |
|
(4,919 |
) |
|
- |
|
|
|
(12,076 |
) |
|
- |
|
Depreciation and amortization |
|
478 |
|
|
494 |
|
|
|
989 |
|
|
1,026 |
|
Operating income |
|
5,893 |
|
|
1,997 |
|
|
|
15,465 |
|
|
5,147 |
|
Interest expense |
|
567 |
|
|
478 |
|
|
|
1,097 |
|
|
868 |
|
Other
expense (income), net |
|
(296 |
) |
|
(125 |
) |
|
|
(288 |
) |
|
(183 |
) |
Income before income tax expense |
|
5,622 |
|
|
1,644 |
|
|
|
14,656 |
|
|
4,462 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
1,547 |
|
|
538 |
|
|
|
3,401 |
|
|
1,579 |
|
Net
income |
|
4,075 |
|
|
1,106 |
|
|
|
11,255 |
|
|
2,883 |
|
Net
(income) loss attributable to non-controlling interest |
|
(448 |
) |
|
(467 |
) |
|
|
(1,002 |
) |
|
(1,378 |
) |
Net
income (loss) attributable to SPAR Group, Inc. |
$ |
3,627 |
|
$ |
639 |
|
|
$ |
10,253 |
|
$ |
1,505 |
|
Basic income per common share
attributable to SPAR Group, Inc. |
|
0.15 |
|
|
0.03 |
|
|
|
0.43 |
|
|
0.06 |
|
Diluted income per common
share attributable to SPAR Group, Inc. |
$ |
0.15 |
|
$ |
0.03 |
|
|
$ |
0.43 |
|
$ |
0.06 |
|
Weighted-average common shares outstanding– basic |
|
23,786 |
|
|
23,250 |
|
|
|
23,670 |
|
|
23,182 |
|
Weighted-average common shares outstanding – diluted |
|
24,010 |
|
|
23,392 |
|
|
|
23,873 |
|
|
23,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPAR Group, Inc. and SubsidiariesCondensed
Consolidated Balance Sheets(unaudited)(In
thousands, except share and per share data) |
|
|
June 30 |
|
December 31, |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
21,695 |
|
|
$ |
10,719 |
|
Accounts receivable, net |
|
37,963 |
|
|
|
59,776 |
|
Prepaid expenses and other current assets |
|
2,117 |
|
|
|
5,614 |
|
Total
current assets |
|
61,775 |
|
|
|
76,109 |
|
Property and equipment, net |
|
2,467 |
|
|
|
2,871 |
|
Operating lease right-of-use assets |
|
1,154 |
|
|
|
2,323 |
|
Goodwill |
|
1,238 |
|
|
|
1,382 |
|
Intangible assets, net |
|
718 |
|
|
|
1,180 |
|
Deferred income taxes |
|
1,029 |
|
|
|
4,687 |
|
Other assets |
|
1,644 |
|
|
|
1,729 |
|
Total
assets |
$ |
70,025 |
|
|
$ |
90,281 |
|
Liabilities and equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
7,211 |
|
|
$ |
9,488 |
|
Accrued expenses and other current liabilities |
|
5,643 |
|
|
|
15,274 |
|
Due to affiliates |
|
623 |
|
|
|
3,205 |
|
Customer incentives and deposits |
|
4,541 |
|
|
|
1,905 |
|
Lines of credit and short-term loans |
|
18,442 |
|
|
|
17,530 |
|
Current portion of operating lease liabilities |
|
482 |
|
|
|
1,163 |
|
Total
current liabilities |
|
36,942 |
|
|
|
48,565 |
|
Operating lease liabilities, net of current portion |
|
672 |
|
|
|
1,160 |
|
Long-term debt |
|
1,711 |
|
|
|
310 |
|
Total
liabilities |
|
39,325 |
|
|
|
50,035 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
Total
stockholders' equity attributable to SPAR Group, Inc. |
|
29,380 |
|
|
|
28,226 |
|
Non-controlling interest |
|
1,320 |
|
|
|
12,020 |
|
Total
stockholders’ equity |
|
30,700 |
|
|
|
40,246 |
|
Total
liabilities and stockholders’ equity |
$ |
70,025 |
|
|
$ |
90,281 |
|
|
|
|
|
|
|
|
|
SPAR Group, Inc. and SubsidiariesCondensed
Consolidated Statements of Cash
Flows(unaudited)(In thousands) |
|
|
Six Months Ended |
|
June 30 |
|
2024 |
|
2023 |
Cash flows from operating activities: |
|
|
|
|
|
Net income |
$ |
11,255 |
|
|
$ |
2,883 |
|
Adjustments to reconcile net income to net cash provided by
operating activities |
|
|
|
|
|
Depreciation and amortization |
|
989 |
|
|
|
1,026 |
|
Amortization of operating lease right-of-use assets |
|
310 |
|
|
|
256 |
|
Provision for expected credit losses |
|
89 |
|
|
|
38 |
|
Deferred income tax expense |
|
3,656 |
|
|
|
111 |
|
Gain
on sale of business |
|
(12,076 |
) |
|
|
- |
|
Share-based compensation expense |
|
256 |
|
|
|
134 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable, net |
|
(9,766 |
) |
|
|
1,205 |
|
Prepaid expenses and other current assets |
|
(2,620 |
) |
|
|
3,118 |
|
Accounts payable |
|
1,992 |
|
|
|
(803 |
) |
Operating lease liabilities |
|
(310 |
) |
|
|
(256 |
) |
Accrued expenses, other current liabilities, due to affiliates and
customer incentives and deposits |
|
6,395 |
|
|
|
(968 |
) |
Net
cash provided by operating activities |
|
170 |
|
|
|
6,744 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Purchases of property and equipment |
|
(781 |
) |
|
|
(717 |
) |
Cash
transferred in the sale of a business |
|
(5,637 |
) |
|
|
- |
|
Proceeds from the sale of joint ventures |
|
17,380 |
|
|
|
- |
|
|
|
10,962 |
|
|
|
(717 |
) |
Net
cash provided by (used in) investing activities |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Borrowings under line of credit |
|
69,117 |
|
|
|
47,340 |
|
Repayments under line of credit |
|
(64,044 |
) |
|
|
(50,003 |
) |
Proceeds from term debt |
|
26 |
|
|
|
- |
|
Repurchases of common
stock |
|
(1,800 |
) |
|
|
- |
|
Payments of notes to
seller |
|
(1,843 |
) |
|
|
- |
|
Payments to acquire
noncontrolling interests |
|
(250 |
) |
|
|
(473 |
) |
Dividend on noncontrolling
interest |
|
(1,315 |
) |
|
|
(1,196 |
) |
Net
cash used in financing activities |
|
(109 |
) |
|
|
(4,332 |
) |
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash |
|
(48 |
) |
|
|
(124 |
) |
Net
change in cash, cash equivalents and restricted cash |
|
10,976 |
|
|
|
1,571 |
|
Cash,
cash equivalents at beginning of period |
|
10,719 |
|
|
|
9,345 |
|
Cash, cash equivalents at end of period |
$ |
21,695 |
|
|
$ |
10,916 |
|
|
|
|
|
|
|
|
|
SPAR Group, Inc. and SubsidiariesSegment
Information(unaudited)(In thousands) |
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30 |
|
June 30 |
|
2024 |
2023 |
|
2024 |
2023 |
Net Revenues: |
|
|
|
|
|
|
|
|
|
Americas |
$ |
54,041 |
|
$ |
52,083 |
|
|
$ |
108,696 |
|
$ |
100,661 |
|
APAC |
|
3,249 |
|
|
5,658 |
|
|
|
9,011 |
|
|
11,758 |
|
EMEA |
|
0 |
|
|
8,195 |
|
|
|
8,277 |
|
|
17,897 |
|
Total
net revenues |
$ |
57,290 |
|
$ |
65,936 |
|
|
$ |
125,984 |
|
$ |
130,316 |
|
|
|
|
|
|
|
|
|
|
|
Operating income: |
|
|
|
|
|
|
|
|
|
Americas |
$ |
6,071 |
|
$ |
2,038 |
|
|
$ |
15,573 |
|
$ |
4,553 |
|
APAC |
|
(178 |
) |
|
(97 |
) |
|
|
(407 |
) |
|
(289 |
) |
EMEA |
|
- |
|
|
56 |
|
|
|
299 |
|
|
883 |
|
Total
operating income |
$ |
5,893 |
|
$ |
1,997 |
|
|
$ |
15,465 |
|
$ |
5,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) depreciation and amortization of
long-lived assets, (ii) interest expense (iii) income tax expense,
(iv) Board of Directors incremental compensation expense, (v)
restructuring, (vi) impairment, (vii) nonrecurring legal settlement
costs and associated legal expenses unrelated to the Company's core
operations, (viii) and special items as determined by management.
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.
ReconciliationDiluted earnings per share
attributable to SPAR Group, Inc. to non-GAAP
Diluted earnings per share attributable to SPAR Group, Inc.
Reconciliation(In thousands) |
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30 |
|
June 30 |
|
2024 |
2023 |
|
2024 |
2023 |
Net Income attributable to SPAR Group Inc. |
$ |
3,627 |
|
$ |
639 |
|
|
$ |
10,253 |
|
$ |
1,505 |
|
Adjustments to Consolidated
EBITDA (net of taxes)* |
|
(3,528 |
) |
|
57 |
|
|
|
(8,820 |
) |
|
444 |
|
Adjusted Net income
attributable to SPAR Group, Inc. |
$ |
99 |
|
$ |
696 |
|
|
$ |
1,433 |
|
$ |
1,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common
share attributable to SPAR Group, Inc. |
$ |
0.15 |
|
$ |
0.03 |
|
|
$ |
0.43 |
|
$ |
0.06 |
|
Adjustments to Consolidated
EBITDA per share (net of taxes) |
|
(0.15 |
) |
|
- |
|
|
|
(0.37 |
) |
|
0.02 |
|
Adjusted Diluted income per
common share attributable to SPAR Group, Inc. |
$ |
0.00 |
|
$ |
0.03 |
|
|
$ |
0.06 |
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
* 2024 Q2 Adjustments to Consolidated EBITDA
include $325K for review of strategic initiatives, $(4,919)K gain
on sale, and $128K of stock based compensation. 2023 Q2 Adjustments
to Consolidated EBITDA include $111K for review of strategic
alternatives and $(39)K for stock based compensation. All of these
are tax effected at 21% to compute the after tax value presented
here.
SPAR Group, Inc. Net Income (Loss) to
Consolidated Adjusted EBITDA to Adjusted EBITDA attributable to
SPAR Group, Inc. Reconciliation (In thousands) |
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30 |
|
June 30 |
|
2024 |
2023 |
|
2024 |
2023 |
Consolidated Net Income |
$ |
4,075 |
|
$ |
1,106 |
|
|
$ |
11,255 |
|
$ |
2,883 |
|
Depreciation and
amortization |
|
478 |
|
|
494 |
|
|
|
989 |
|
|
1,026 |
|
Interest expense |
|
567 |
|
|
478 |
|
|
|
1,097 |
|
|
868 |
|
Income Tax expense |
|
1,547 |
|
|
538 |
|
|
|
3,401 |
|
|
1,579 |
|
Other expense (income),
net |
|
(296 |
) |
|
(125 |
) |
|
|
(288 |
) |
|
(183 |
) |
Consolidated EBITDA |
|
6,371 |
|
|
2,491 |
|
|
|
16,454 |
|
|
6,173 |
|
Review of Strategic
Alternatives |
|
325 |
|
|
111 |
|
|
|
655 |
|
|
428 |
|
Gain on Sale of Business |
|
(4,919 |
) |
|
- |
|
|
|
(12,076 |
) |
|
- |
|
Share Based Compensation |
|
128 |
|
|
(39 |
) |
|
|
256 |
|
|
134 |
|
Consolidated Adjusted
EBITDA |
|
1,905 |
|
|
2,563 |
|
|
|
5,289 |
|
|
6,735 |
|
Adjusted EBITDA attributable
to non controlling interest |
|
(525 |
) |
|
(959 |
) |
|
|
(1,443 |
) |
|
(2,234 |
) |
Adjusted EBITDA attributable
to SPAR Group, Inc. |
$ |
1,380 |
|
$ |
1,604 |
|
|
$ |
3,846 |
|
$ |
4,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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