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, 2020.
Highlights for the three- and nine-month periods
ended September 30, 2020, as compared to the same periods during
the prior year are as follows:
- Revenue for the third quarter of
2020 decreased $7.6 million, or 11.4 percent, to $58.9 million
versus the prior year’s third quarter. Revenues increased 2.1
percent for the domestic operations; however, international
operations decreased 20.4 percent.
- Revenue for the nine-month period
ending September 30, 2020 decreased $20.7 million, or 10.8 percent,
to $171.2 million. Revenues decreased 0.9 percent and 16.8 percent
for domestic and international operations, respectively.
- Operating income for the third
quarter of 2020 increased $0.3 million, or 9.6 percent, to $3.3
million, compared to $3.0 million for the same period last
year.
- Operating income for the nine-month
period ending September 30, 2020 decreased $2.2 million to $6.8
million, compared to $9.0 million for the same period last year.
Domestic operations decreased $2.7 million, while international
increased $0.5 million.
- Net income attributable to SPAR
Group for the third quarter of 2020 was $1.1 million, or $0.05 per
diluted share, compared to $0.9 million, or $0.04 per diluted
share, during the third quarter of 2019.
- Net income attributable to SPAR
Group for the nine-month period ending September 30, 2020 was $1.3
million, or $0.06 per diluted share, compared to $3.0 million, or
$0.15 per diluted share, during the same period last year.
Domestic revenue during the third quarter
recovered 22% sequentially from the second quarter, showing gradual
improvements throughout each month of the quarter. Domestic revenue
benefited from projects that were delayed earlier in the year, as
well as increased demand for store reset and remodeling services in
certain end markets. The improved domestic revenue performance was
partially offset by the lower levels of customer activity in
certain end markets related to COVID 19. The pandemic had a greater
impact on international markets, with lower levels of customer
activity accounting for approximately one third of the 20% decrease
in international revenue. The remaining two thirds of the decrease
in international revenue was related to foreign currency
translation. As a result of our earlier cuts to operational
expenses, discretionary spending and a delay in non-essential
investments, we were able to offset a decrease in revenue and
increasing labor costs to post flat comparisons with the prior
year.
“We are encouraged to see a partial recovery in
financial performance during the third quarter and are also
encouraged that we have been able to maintain strong customer
relationships. There is still a great deal of uncertainty about the
pandemic’s potential impact on customer activity levels in the near
term. Combined with increasing costs of labor, we are continuing a
cautious approach to spending and maintaining our efforts to
preserve the strength of our balance sheet and liquidity,” said
Kori Belzer, chief operating officer of SPAR Group.
Financial Results by Geography (in
000's, except per share
data)
|
Three Months Ended September
30, |
% |
|
Nine Months Ended
September
30, |
% |
Revenue: |
2020 |
|
2019 |
Change |
|
2020 |
|
2019 |
Change |
International |
$ |
31,824 |
|
|
$ |
39,960 |
|
(20.4%) |
|
$ |
98,704 |
|
|
$ |
118,681 |
|
(16.8%) |
Domestic |
|
27,041 |
|
|
|
26,480 |
|
2.1% |
|
|
72,453 |
|
|
|
73,142 |
|
(0.9%) |
Total |
$ |
58,865 |
|
|
$ |
66,440 |
|
(11.4%) |
|
$ |
171,157 |
|
|
$ |
191,823 |
|
(10.8%) |
|
Three Months Ended September
30, |
% |
|
Nine Months Ended
September
30, |
% |
Operating Income/(Loss): |
2020 |
|
2019 |
Change |
|
2020 |
|
2019 |
Change |
International |
$ |
2,042 |
|
|
$ |
1,774 |
|
15.1% |
|
$ |
4,859 |
|
|
$ |
4,381 |
|
10.9% |
Domestic |
|
1,299 |
|
|
|
1,273 |
|
2.0% |
|
|
1,924 |
|
|
|
4,626 |
|
(58.4%) |
Total |
$ |
3,341 |
|
|
$ |
3,047 |
|
9.6% |
|
$ |
6,783 |
|
|
$ |
9,007 |
|
(24.7%) |
|
Three Months Ended September
30, |
|
|
Nine Months Ended
September
30, |
|
Net income
(loss): |
2020 |
|
2019 |
|
|
2020 |
|
2019 |
|
International |
$ |
738 |
|
|
$ |
360 |
|
105% |
|
$ |
1,365 |
|
|
$ |
861 |
|
58.5% |
Domestic |
|
406 |
|
|
|
547 |
|
(25.8%) |
|
|
(28 |
) |
|
|
2,184 |
|
(101.3%) |
Total |
$ |
1,144 |
|
|
$ |
907 |
|
26.1% |
|
$ |
1,337 |
|
|
$ |
3,045 |
|
(56.1%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Basic and Diluted
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.05 |
|
|
$ |
0.04 |
|
|
|
$ |
0.06 |
|
|
$ |
0.15 |
|
|
Margin Profile by Geography
|
Three Months Ended September
30, |
Basis Point |
|
Nine Months Ended
September
30, |
Basis Point |
Gross Margin: |
2020 |
|
2019 |
Change |
|
2020 |
|
2019 |
Change |
International |
18.6% |
|
16.1% |
250 |
|
17.7% |
|
16.1% |
160 |
Domestic |
22.5% |
|
22.7% |
(20) |
|
22.4% |
|
24.7% |
(230) |
Total |
20.4% |
|
18.7% |
170 |
|
19.7% |
|
19.4% |
30 |
Opr.
Income |
Three Months Ended September
30, |
Basis Point |
|
Nine Months Ended
September
30, |
Basis Point |
as a % of Sales |
2020 |
|
2019 |
Change |
|
2020 |
|
2019 |
Change |
International |
6.4% |
|
4.4% |
200 |
|
4.9% |
|
3.7% |
120 |
Domestic |
4.8% |
|
4.8% |
- |
|
2.7% |
|
6.3% |
(360) |
Total |
5.7% |
|
4.6% |
120 |
|
4.0% |
|
4.7% |
(70) |
|
|
|
|
|
|
|
|
|
|
International gross profit margin for the three-
and nine-month periods ended September 30, 2020 were 18.6% and
17.7%, respectively, compared to 16.1% and 16.1%, respectively, for
the same periods in 2019. For the three-month period ended
September 30, 2020 the international subsidiaries, China and Brazil
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 September 30, 2020, was 22.5% compared to 22.7% for
the same period in 2019. For the nine-month period ended September
30, 2020, domestic gross profit margin was 22.4% compared to 24.7%
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
September 30, 2020
At September 30, 2020, cash and cash equivalents
totaled $15.8 million. Working capital was $19.9 million and
current ratio was 1.4 to 1. Total current assets and total assets
were $67.3 million and $82.5 million, respectively. Total
liabilities were $50.2 million and total equity was $32.3 million
at September 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
Income and Comprehensive
(Loss)
Income(unaudited)(In thousands,
except share and per share data) |
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
$ |
58,865 |
|
|
$ |
66,440 |
|
|
$ |
171,157 |
|
|
$ |
191,823 |
|
Cost of revenues |
|
46,849 |
|
|
|
53,929 |
|
|
|
137,478 |
|
|
|
154,614 |
|
Gross profit |
|
12,016 |
|
|
|
12,511 |
|
|
|
33,679 |
|
|
|
37,209 |
|
Selling, general and
administrative expense |
|
8,145 |
|
|
|
8,940 |
|
|
|
25,287 |
|
|
|
26,639 |
|
Depreciation and
amortization |
|
530 |
|
|
|
524 |
|
|
|
1,609 |
|
|
|
1,563 |
|
Operating income |
|
3,341 |
|
|
|
3,047 |
|
|
|
6,783 |
|
|
|
9,007 |
|
Interest expense |
|
169 |
|
|
|
216 |
|
|
|
482 |
|
|
|
605 |
|
Other income, net |
|
(143 |
) |
|
|
(11 |
) |
|
|
(201 |
) |
|
|
(268 |
) |
Income before income tax
expense |
|
3,315 |
|
|
|
2,842 |
|
|
|
6,502 |
|
|
|
8,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
870 |
|
|
|
760 |
|
|
|
1,830 |
|
|
|
2,745 |
|
Net income |
|
2,445 |
|
|
|
2,082 |
|
|
|
4,672 |
|
|
|
5,925 |
|
Net (income) attributable to
non-controlling interest |
|
(1,301 |
) |
|
|
(1,175 |
) |
|
|
(3,335 |
) |
|
|
(2,880 |
) |
Net income attributable to
SPAR Group, Inc. |
$ |
1,144 |
|
|
$ |
907 |
|
|
$ |
1,337 |
|
|
$ |
3,045 |
|
Basic and diluted income per
common share: |
$ |
0.05 |
|
|
$ |
0.04 |
|
|
$ |
0.06 |
|
|
$ |
0.15 |
|
Weighted average common shares
– basic |
|
21,110 |
|
|
|
20,975 |
|
|
|
21,108 |
|
|
|
20,856 |
|
Weighted average common shares
– diluted |
|
21,147 |
|
|
|
21,061 |
|
|
|
21,152 |
|
|
|
21,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
2,445 |
|
|
$ |
2,082 |
|
|
$ |
4,672 |
|
|
$ |
5,925 |
|
Other comprehensive income
(loss): |
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
71 |
|
|
|
(811 |
) |
|
|
(3,908 |
) |
|
|
(644 |
) |
Comprehensive income |
|
2,516 |
|
|
|
1,271 |
|
|
|
764 |
|
|
|
5,281 |
|
Comprehensive (income)
attributable to non-controlling interest |
|
(1,326 |
) |
|
|
(815 |
) |
|
|
(871 |
) |
|
|
(2,623 |
) |
Comprehensive income (loss)
attributable to SPAR Group, Inc. |
$ |
1,190 |
|
|
$ |
456 |
|
|
$ |
(107 |
) |
|
$ |
2,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPAR Group, Inc. and SubsidiariesCondensed
Consolidated Balance Sheets(In thousands, except share and
per share data) |
|
|
|
|
|
September 30, |
|
December 31, |
|
2020 |
|
2019 |
|
(Unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
15,750 |
|
|
$ |
10,458 |
|
Accounts receivable, net |
|
47,366 |
|
|
|
49,299 |
|
Prepaid expenses and other current assets |
|
4,212 |
|
|
|
2,404 |
|
Total current assets |
|
67,328 |
|
|
|
62,161 |
|
Property and equipment,
net |
|
2,846 |
|
|
|
2,848 |
|
Operating lease right-of-use
assets |
|
2,742 |
|
|
|
4,948 |
|
Goodwill |
|
3,753 |
|
|
|
3,784 |
|
Intangible assets, net |
|
2,381 |
|
|
|
2,796 |
|
Deferred income taxes |
|
1,388 |
|
|
|
1,883 |
|
Other assets |
|
2,033 |
|
|
|
1,115 |
|
Total assets |
$ |
82,471 |
|
|
$ |
79,535 |
|
Liabilities and
equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
8,377 |
|
|
$ |
9,186 |
|
Accrued expenses and other current liabilities |
|
21,186 |
|
|
|
18,548 |
|
Due to affiliates |
|
3,475 |
|
|
|
4,666 |
|
Customer incentives and deposits |
|
1,052 |
|
|
|
594 |
|
Lines of credit and short-term loans |
|
12,104 |
|
|
|
8,932 |
|
Current portion of operating lease liabilities |
|
1,145 |
|
|
|
2,828 |
|
Total current liabilities |
|
47,339 |
|
|
|
44,754 |
|
Operating lease liabilities,
less current portion |
|
1,597 |
|
|
|
2,120 |
|
Long-term debt and other
liabilities |
|
1,300 |
|
|
|
1,300 |
|
Total liabilities |
|
50,236 |
|
|
|
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 – 21,111,861 – Balance
at September 30, 2020, and 21,108,352 – December 31, 2019 |
|
211 |
|
|
|
211 |
|
Treasury stock, at cost 1,697
shares – Balance at September 30, 2020, and December 31, 2019 |
|
(2 |
) |
|
|
(2 |
) |
Additional paid-in capital |
|
16,621 |
|
|
|
16,511 |
|
Accumulated other comprehensive loss |
|
(5,060 |
) |
|
|
(3,616 |
) |
Retained earnings |
|
7,188 |
|
|
|
5,851 |
|
Total SPAR Group, Inc.
equity |
|
18,958 |
|
|
|
18,955 |
|
Non-controlling interest |
|
13,277 |
|
|
|
12,406 |
|
Total equity |
|
32,235 |
|
|
|
31,361 |
|
Total liabilities and
equity |
$ |
82,471 |
|
|
$ |
79,535 |
|
|
|
|
|
|
|
|
|
Company Contact:
Clint Morrow
(248) 364-8412
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