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 fourth
quarter ended December 31, 2018.
Highlights for the three and twelve-month
periods ended December 31, 2018, as compared to the same periods in
the prior year include:
- Revenue for the three-month period
ending December 31, 2018 increased $7.0 million, or 14 percent, to
$57 million. International operations contributed to $1.5
million of the increase. Domestic operations contributed $5.5
million to year-over-year revenue growth with Resource Plus
contributing $4.4 million of the increase in Domestic revenue for
the period.
- Revenue for the twelve-month period
ending December 31, 2018 increased $47.8 million, or 26 percent, to
$229.2 million. International operations contributed to $20
million of the increase. Domestic operations contributed $27.8
million to year-over-year revenue growth. Resource Plus
contributed $24.3 million to the increase in Domestic revenue year
over year.
- Operating income for the fourth
quarter increased $106,000 to $1.9 million compared to $1.8 million
during the same period last year. The increase in operating
income in the fourth quarter was attributable to increased
contribution from international operations, which was partially
offset by a decrease in domestic profitability. During the
fourth quarter, there were $1.4 million of one-time legal and
related party charges negatively impacting domestic
operations.
- Operating income for the twelve
months ended December 31, 2018 decreased $300,000, or 8.8 percent,
to $3.7 million compared to $4.1 million during the same period of
2017. Adjusting for one-time settlement, legal, related party
and other expenses, operations would have delivered $7.5 million in
operating income.
- Net loss attributable to SPAR Group
for the fourth quarter of 2018 was $(534,000), or $(0.03) per
share; compared to a net loss of $(1.3) million, or $(0.06) per
diluted share, during the fourth quarter of 2017.
- Net loss attributable to SPAR Group
for the twelve months ended December 31, 2018 was ($1.6) million,
or $(0.07) per share; compared to a net loss of ($923,000), or
$(0.04) per diluted share, for the same period during
2017.
- As highlighted in the GAAP
reconciliation table below, the Company incurred significant
non-cash and one-time charges during 2018 and 2017;
-
- Excluding these non-cash and
one-time charges, non-GAAP net income attributable to SPAR Group
during the fourth quarter of 2018 was approximately $535,000, or
$0.03 per diluted share, compared with $572,000, or $0.03 per
diluted share during the same period of the prior year.
- Excluding non-cash and one-time
charges, non-GAAP net income attributable to SPAR Group during the
2018 was approximately $1.3 million or $0.06 per diluted share,
compared with $918,000, or $0.04 per diluted share during
2017.
Financial Results by Geography (in
000's, except per share data)
|
|
Three Months
Ended December 31, |
|
% |
|
Twelve Months
Ended December 31, |
|
% |
Revenue: |
|
2018 |
|
|
2017 |
|
Change |
|
|
2018 |
|
|
2017 |
|
Change |
International |
$ |
39,289 |
|
$ |
37,816 |
|
3.9% |
|
$ |
149,142 |
|
$ |
129,108 |
|
15.5% |
Domestic |
|
17,712 |
|
|
12,204 |
|
45.1% |
|
|
80,049 |
|
|
52,273 |
|
53.1% |
Total |
$ |
57,000 |
|
$ |
50,020 |
|
14.0% |
|
$ |
229,191 |
|
$ |
181,381 |
|
26.4% |
|
Three Months
Ended December 31, |
|
% |
|
Twelve Months
Ended December 31, |
|
% |
Operating Income: |
2018 |
|
2017 |
|
Change |
|
2018 |
|
2017 |
|
Change |
International |
$ |
3,321 |
|
$ |
1,899 |
|
74.9% |
|
$ |
6,272 |
|
$ |
3,481 |
|
99.1% |
Domestic |
|
(1,408) |
|
|
(93) |
|
nmf |
|
|
(2,542) |
|
|
609 |
|
nmf |
Total |
$ |
1,912 |
|
$ |
1,806 |
|
5.9% |
|
$ |
3,729 |
|
$ |
4,090 |
|
8.8% |
|
Three
Months Ended December 31, |
|
|
|
Twelve Months
Ended December 31, |
|
|
Net income (loss): |
2018 |
|
2017 |
|
|
|
2018 |
|
2017 |
|
|
International |
$ |
821 |
|
$ |
939 |
|
(12.6%) |
|
$ |
1,529 |
|
$ |
752 |
|
103.3% |
Domestic |
|
(1,355) |
|
|
(2,208) |
|
nmf |
|
|
(3,080) |
|
|
(1,675) |
|
nmf |
Total |
$ |
(534) |
|
$ |
(1,269) |
|
nmf |
|
$ |
(1,551) |
|
$ |
(923) |
|
nmf |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Basic and Diluted
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.03) |
|
$ |
(0.06) |
|
|
|
$ |
(0.07) |
|
$ |
(0.04) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(nmf = no meaningful
value) |
|
|
“During 2018 we made significant progress in
addressing structural issues within our domestic operations,
realigning our sales and marketing efforts and improving our
technologies. These changes are making a difference and have
resulted in improving financial operating results net of one-time
charges. On the top line, our team delivered double-digit
top-line growth during 2018, with organic growth both domestically
and internationally plus the recent acquisition of Resource
Plus. While improvements in profitability during 2018 were
clouded by one-time charges, we made foundational improvements in
our ability to deliver profitable growth,” said Chief Executive
Officer, Christiaan Olivier. “Our pipeline of business
opportunities is strong, and we expect continued revenue growth
during 2019. We expect to have even stronger growth in
profitability during 2019, as we gain further benefit from
structural changes.”
Gross Margin Profile by
Geography
|
Three Months
Ended December 31, |
|
Basis Point |
|
Twelve Months
Ended December 31, |
|
Basis Point |
|
2018 |
|
2017 |
|
Change |
|
2018 |
|
2017 |
|
Change |
International |
22.4% |
|
19.6% |
|
275 |
|
17.1% |
|
17.5% |
|
(44) |
Domestic |
19.6% |
|
29.2% |
|
(966) |
|
23.5% |
|
27.1% |
|
(356) |
Total |
21.5% |
|
22.0% |
|
(46) |
|
19.3% |
|
20.3% |
|
(95) |
Operating Income as a % of
Sales
|
Three Months
Ended December 31, |
|
Basis Point |
|
Twelve Months
Ended December 31, |
|
Basis Point |
|
2018 |
|
2017 |
|
Change |
|
2018 |
|
2017 |
|
Change |
International |
8.5% |
|
5.0% |
|
343 |
|
4.2% |
|
2.7% |
|
151 |
Domestic |
(8.0%) |
|
(0.76%) |
|
(719) |
|
(3.2%) |
|
1.2% |
|
(434) |
Total |
3.4% |
|
3.6% |
|
(26) |
|
1.6% |
|
2.3% |
|
(63) |
International gross profit margin for the fourth
quarter and twelve months ended December 31, 2018 was 22.4% and
17.1%, compared to 19.6% and 17.5%, respectively, for the same
periods in 2017. The decline in gross profit margin year over
year was directly attributable to higher cost margin business in
Brazil and a write-down in Australia for one-time cost reserve
adjustments, partially offset by margin improvement in Mexico,
China, and Japan.
Domestic gross profit margin for the fourth
quarter and twelve months ended December 31, 2018, was 19.6% and
23.5%, compared to 29.2% and 27.1%, 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 December 31,
2018
As of December 31, 2018, cash and cash
equivalents totaled $7.1 million. Working capital was $12.6 million
and current ratio was 1.3 to 1. Total current assets and total
assets were $55.1 million and $69.1 million, respectively.
Total current liabilities and total liabilities were $42.5 million
and $44.3 million, and total equity was $24.8 million as of
December 31, 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"), There also are
"forward looking statements" contained in SGRP's Annual Report on
Form 10-K for the year ended December 31, 2018 (the "Annual
Report"), which was filed by SGRP with the SEC on April 15, 2019,
and SGRP's definitive Proxy Statement respecting its Annual Meeting
of Stockholders to be held on or about May 16, 2019 (the "Proxy
Statement"), which SGRP will be filling with the SEC on or about
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").
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 Subsidiaries |
Consolidated
Statements of Loss and Comprehensive (Loss) Income |
(In thousands, except
share and per share data) |
|
|
|
|
|
Three
Months Ended December 31, |
|
Twelve
Months Ended December 31, |
|
2018 |
2017 |
|
|
2018 |
|
|
2017 |
|
Net revenues |
$ |
57,000 |
|
$ |
50,020 |
|
|
$ |
229,191 |
|
$ |
181,381 |
|
Cost of
revenues |
|
44,750 |
|
|
39,038 |
|
|
|
184,904 |
|
|
144,601 |
|
Gross
profit |
|
12,250 |
|
|
10,982 |
|
|
|
44,287 |
|
|
36,780 |
|
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
8,879 |
|
|
8,576 |
|
|
|
34,188 |
|
|
30,564 |
|
Settlement and other charges |
|
945 |
|
|
- |
|
|
|
4,261 |
|
|
- |
|
Depreciation and amortization |
|
514 |
|
|
600 |
|
|
|
2,109 |
|
|
2,126 |
|
Operating income |
|
1,912 |
|
|
1,806 |
|
|
|
3,729 |
|
|
4,090 |
|
|
|
|
|
|
|
Interest
expense |
|
209 |
|
|
220 |
|
|
|
1,095 |
|
|
337 |
|
Other
loss (income), net |
|
8 |
|
|
(125 |
) |
|
|
(406 |
) |
|
(401 |
) |
Income
before income tax expense |
|
1,695 |
|
|
1,711 |
|
|
|
3,040 |
|
|
4,154 |
|
|
|
|
|
|
|
Income
tax expense |
|
1,067 |
|
|
2,069 |
|
|
|
1,402 |
|
|
2,977 |
|
Net
income (loss) |
|
628 |
|
|
(358 |
) |
|
|
1,638 |
|
|
1,177 |
|
Net loss
attributable to non-controlling interest |
|
(1,162 |
) |
|
(911 |
) |
|
|
(3,189 |
) |
|
(2,100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to SPAR Group, Inc. |
$ |
(534 |
) |
$ |
(1,269 |
) |
|
$ |
(1,551 |
) |
$ |
(923 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net loss per common share: |
$ |
(0.03 |
) |
$ |
(0.06 |
) |
|
$ |
(0.07 |
) |
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net loss per common share: |
$ |
(0.03 |
) |
$ |
(0.06 |
) |
|
$ |
(0.07 |
) |
$ |
(0.04 |
) |
|
|
|
|
|
|
Weighted
average common shares – basic |
|
21,160 |
|
|
20,571 |
|
|
|
20,684 |
|
|
20,617 |
|
|
|
|
|
|
|
Weighted
average common shares – diluted |
|
21,160 |
|
|
21,571 |
|
|
|
20,684 |
|
|
21,617 |
|
|
|
|
|
|
|
Net
income (loss) |
$ |
628 |
|
$ |
(358 |
) |
|
$ |
1,638 |
|
$ |
1,177 |
|
Other
comprehensive income (loss): |
|
|
|
|
|
Foreign currency translation
adjustments |
|
178 |
|
|
366 |
|
|
|
(3,284 |
) |
|
1,315 |
|
Comprehensive income (loss) |
|
806 |
|
|
8 |
|
|
|
(1,646 |
) |
|
2,492 |
|
Comprehensive (loss) income attributable to non-controlling
interest |
|
(1,444 |
) |
|
966 |
|
|
|
(1,837 |
) |
|
(2,698 |
) |
Comprehensive (loss) income attributable to SPAR Group, Inc. |
$ |
(638 |
) |
$ |
974 |
|
|
$ |
(3,283 |
) |
$ |
(206 |
) |
|
|
|
|
|
|
SPAR Group, Inc.
and Subsidiaries |
Consolidated
Balance Sheets |
(In thousands, except
share and per share data) |
|
|
|
|
December
31, 2018 |
|
December
31, 2017 |
|
Assets |
|
|
|
|
|
|
Current
assets: |
|
|
Cash
and cash equivalents |
$ |
7,111 |
|
$ |
8,827 |
|
Accounts receivable, net |
|
46,162 |
|
|
35,964 |
|
Prepaid expenses and other current assets |
|
1,879 |
|
|
2,031 |
|
Total
current assets |
|
55,132 |
|
|
46,822 |
|
Property and equipment, net |
|
2,950 |
|
|
2,712 |
|
Goodwill |
|
3,788 |
|
|
1,836 |
|
Intangible assets, net |
|
3,332 |
|
|
1,634 |
|
Deferred
income taxes |
|
2,568 |
|
|
3,055 |
|
Other
assets |
|
1,325 |
|
|
1,929 |
|
Total
assets |
$ |
69,095 |
|
$ |
57,988 |
|
Liabilities and
equity |
|
|
|
|
|
|
Current
liabilities: |
|
|
Accounts payable |
$ |
8,668 |
|
$ |
7,341 |
|
Accrued expenses and other current liabilities |
|
18,168 |
|
|
13,581 |
|
Due
to affiliates |
|
4,645 |
|
|
3,026 |
|
Customer incentives and deposits |
|
620 |
|
|
1,539 |
|
Lines of credit and short-term loans |
|
10,414 |
|
|
6,839 |
|
Total
current liabilities |
|
42,515 |
|
|
32,326 |
|
Long-term debt and other liabilities |
|
1,806 |
|
|
107 |
|
Total
liabilities |
|
44,321 |
|
|
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 – 20,784,483 – December 31, 2018 and 20,680,717
December 31, 2017 |
|
208 |
|
|
207 |
|
Treasury stock, at cost |
|
|
|
|
|
|
7,895 shares – December 31, 2018 and104,398 shares – December 31,
2017 |
|
(8 |
) |
|
(115 |
) |
Additional paid-in capital |
|
16,304 |
|
|
16,271 |
|
Accumulated other comprehensive loss |
|
(3,638 |
) |
|
(1,690 |
) |
Retained earnings |
|
3,432 |
|
|
4,977 |
|
Total
SPAR Group, Inc. equity |
|
16,298 |
|
|
19,650 |
|
Non-controlling interest |
|
8,476 |
|
|
5,905 |
|
Total
equity |
|
24,774 |
|
|
25,555 |
|
Total
liabilities and equity |
$ |
69,095 |
|
$ |
57,988 |
|
|
|
|
|
|
|
|
GAAP to Non-GAAP Reconciliation |
|
|
|
|
|
|
|
Three Months Ended |
Three Months Ended |
|
Twelve Months Ended |
Twelve Months Ended |
Net (loss) income: |
31-Dec-18 |
31-Dec-17 |
|
31-Dec-18 |
31-Dec-17 |
GAAP net loss |
(534) |
(1,269) |
|
(1,551) |
(923) |
One Time Charges |
1,369 |
- |
|
3,780 |
- |
Tax Provision impact |
(300) |
1,841 |
|
(900) |
1,841 |
Total non-GAAP net income |
535 |
572 |
|
1,329 |
918 |
|
|
|
|
|
|
Non-GAAP Earnings Per Basic and Diluted share: |
$0.03 |
$0.03 |
|
$0.06 |
$0.04 |
Company Contact:
James R. Segreto
Chief Financial Officer
SPAR Group, Inc.
(248) 364-8410
Investor Contact:
Dave Mossberg
Three Part Advisors
(817) 310-0051
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