EX-99.1 2 ex_130310.htm EXHIBIT 99.1 ex_130310.htm

Exhibit 99.1

  

SPAR Group Announces Financial Results for the Third Quarter Ended September 30, 2018

 

 

WHITE PLAINS, N.Y., November 19, 2018 (GLOBE NEWSWIRE) -- 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 third quarter ended September 30, 2018.

 

Highlights for the three and nine-month periods ended September 30, 2018, as compared to the same periods in the prior year include:

 

 

Revenue for the three-month period ending September 30, 2018 increased $9.6 million, or 20 percent, to $58.4 million. International operations contributed to $2.3 million of the increase. Domestic operations contributed $7.3 million to year-over-year revenue growth with Resource Plus contributing $8.0 million of the change in Domestic revenue for the period.

 

 

Revenue for the nine-month period ending September 30, 2018 increased $40.8 million, or 31 percent, to $172.2 million. International operations contributed to $18.6 of the increase. Domestic operations contributed $22.2 million to year-over-year revenue growth. Resource Plus contributed $19.9 million to the change in Domestic revenue year over year

 

 

Operating income for the third quarter increased $1.5 million to $2.3 million compared to $828,000 during the same period last year. The increase in operating income in the third quarter was attributable to both international and domestic operations.

 

 

Operating income for the nine months ended September 30, 2018 decreased $467,000, or 19 percent, to $1.8 million compared to $2.3 million during the same period of 2017. The decline in operating income was driven primarily by the one-time charges of $2.0 million; partially offset by the growth in the international operations.

 

 

Net Income attributable to SPAR Group for the third quarter of 2018 was $621,000 or $0.03 per share; compared to net income of $246,000 or $0.01 per diluted share, during the third quarter of 2017.

 

 

Net loss attributable to SPAR Group for the nine months ended September 30, 2018 was ($1.0) million, or ($0.05) per share; compared to a net income of $346,000, or $0.02 per diluted share, for the same period during 2017.

 

 

Financial Results by Geography (in 000's, except per share data)

 

   

Three Months Ended September 30,

   

%

   

Nine Months Ended September 30,

   

%

 

Revenue:

 

2018

   

2017

   

Change

   

2018

   

2017

   

Change

 

International

  $ 35,975     $ 33,690       6.8 %     $ 109,853     $ 91,292       20.3 %  

Domestic

    22,413       15,062       48.8 %       62,338       40,069       55.6 %  

Total

  $ 58,388     $ 48,752       19.8 %     $ 172,191     $ 131,361       31.1 %  

 

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Three Months Ended September 30,

   

%

   

Nine Months Ended September 30,

   

%

 

Operating Income:

 

2018

   

2017

   

Change

   

2018

   

2017

   

Change

 

International

  $ 1,239     $ 485       155.5 %     $ 2,952     $ 1,583       86.5 %  

Domestic

    1,085       343       216.3 %       (1,135 )     701    

nmf

   

Total

  $ 2,324     $ 828       180.7 %     $ 1,817     $ 2,284       (20.4 %)  

 

   

Three Months Ended September 30,

             

Nine Months Ended September 30,

       

Net income (loss):

 

2018

   

2017

             

2018

   

2017

       

International

  $ 355     $ 3    

nmf

      $ 710     $ (186 )

nmf

   

Domestic

    266       243       9.5 %       (1,728 )     532  

nmf

   

Total

  $ 621     $ 246       176.8 %     $ (1,018 )   $ 346  

nmf

   
                             

(nmf = no meaningful value)

       
Earnings Per Basic and Diluted share:                                                
    $ 0.03     $ 0.01               $ (0.05 )   $ 0.02        

 

“We posted solid improvement in financial results during the third quarter. Domestic revenue benefited from the acquisition of Resource Plus that we made earlier in the year and our international business continued to show strong organic growth. Near full employment rates in the U.S. continues to put cost pressure on profitably, which we were able to offset during the third quarter with a revenue mix shift and ongoing efficiency efforts,” said Chief Executive Officer, Christiaan Olivier. “While we continue to face headwinds domestically due to the store closures of certain retail customers, we are having success adding new customers in diverse retail channels putting us in a better position to win new business in the coming year. Our efforts to improve efficiencies should have a greater impact in the coming quarters and allow us to partially offset ongoing labor cost pressure.”

 

Gross Margin Profile by Geography

 

   

Three Months Ended September 30,

   

Basis

Point

   

Nine Months Ended September 30,

   

Basis

Point

 
   

2018

   

2017

   

Change

   

2018

   

2017

   

Change

 

International

    16.1 %     15.6 %     43         15.2 %     16.7 %     (146 )  

Domestic

    27.1 %     23.5 %     362         24.6 %     26.4 %     (181 )  

Total

    20.3 %     18.0 %     225         18.6 %     19.6 %     (103 )  

 

 

Operating Income as a % of Sales

 

   

Three Months Ended September 30,

   

Basis

Point

   

Nine Months Ended September 30,

   

Basis

Point

 
   

2018

   

2017

   

Change

   

2018

   

2017

   

Change

 

International

    3.4 %     1.4 %     203         2.7 %     1.7 %     104    

Domestic

    4.8 %     2.3 %     251         (1.8 %)     1.8 %     (357 )  

Total

    4.0 %     1.7 %     236         1.1 %     1.7 %     (66 )  

 

International gross profit margin for the third quarter and nine months ended September 30, 2018 was 16.1% and 15.2%, compared to 15.6% and 16.7%, respectively, for the same periods in 2017. The improvement in gross profit margin in the third quarter was directly attributable to the positive mix of business in the international markets of Brazil, Mexico and Japan. With the exception of Canada, Mexico and Japan, year-to-date gross margin declined in all other international subsidiaries compared to last year.

 

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Domestic gross profit margin for the third quarter and nine months ended September 30, 2018, was 27.1% and 24.6%, compared to 23.5% and 26.4%, 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 September 30, 2018

 

As of September 30, 2018, cash and cash equivalents totaled $7.0 million. Working capital was $14.2 million and current ratio was 1.3 to 1. Total current assets and total assets were $56.7 million and $71.2 million, respectively. Total current liabilities and total liabilities were $42.6 million and $45.8 million, and total equity was $25.4 million as of September 30, 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"), will be filed shortly in a Current Report on Form 8-K 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 for the year ended December 31, 2017 (the "Annual Report"), which was filed by SGRP with the SEC on April 2, 2018, and SGRP's definitive Proxy Statement respecting its Annual Meeting of Stockholders to be held on or about May 2, 2017 (the "Proxy Statement"), which SGRP filed with the SEC on April 18, 2018, 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. 

 

Company Contact:

James R. Segreto

Chief Financial Officer

SPAR Group, Inc.

(248) 364-8464

 

Investor Contact:

Dave Mossberg

Three Part Advisors

(817) 310-0051

 

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SPAR Group, Inc. and Subsidiaries

Consolidated Statements of Income (Loss) and Comprehensive (Loss) Income

 (In thousands, except share and per share data) 

 

   

Three Months Ended

September 30,

   

Nine Months Ended

September 30,

 
   

2018

   

2017

   

2018

   

2017

 
Net revenues   $ 58,388     $ 48,752     $ 172,191     $ 131,361  

Cost of revenues

    46,546       39,960       140,154       105,563  

Gross profit

    11,842       8,792       32,037       25,798  
                                 

Selling, general and administrative expenses

    8,996       7,477       26,650       21,988  

Settlement and other charges

    -       -       1,975       -  

Depreciation and amortization

    522       487       1,595       1,526  

Operating income

    2,324       828       1,817       2,284  
                                 

Interest expense

    333       110       886       117  

Other (income), net

    (109 )     (78 )     (413 )     (275 )

Income before income tax expense

    2,100       796       1,344       2,442  
                                 

Income tax expense

    419       210       335       907  

Net income

    1,681       586       1,009       1,535  

Net loss attributable to non-controlling interest

    (1,060 )     (340 )     (2,027 )     (1,189 )

Net income (loss) attributable to SPAR Group, Inc.

  $ 621     $ 246     $ (1,018 )   $ 346  
                                 

Basic net income (loss) per common share:

  $ 0.03     $ 0.01     $ (0.05 )   $ 0.02  
                                 

Diluted net income (loss) per common share:

  $ 0.03     $ 0.01     $ (0.05 )   $ 0.02  
                                 

Weighted average common shares – basic

    20,654       20,602       20,650       20,633  
                                 

Weighted average common shares – diluted

    21,320       21,320       20,650       21,331  
                                 

Net income

  $ 1,681     $ 586     $ 1,009     $ 1,535  

Other comprehensive (loss) income:

                               

Foreign currency translation adjustments

    (2,782 )     (61 )     (3,462 )     681  

Comprehensive (loss) income

    (1,101 )     525       (2,453 )     2,216  

Comprehensive loss (income) attributable to non-controlling interest

    269       (318 )     (393 )     (1,523 )

Comprehensive (loss) income attributable to SPAR Group, Inc.

  $ (832 )   $ 207     $ (2,846 )   $ 693  

 

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SPAR Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

 

   

September 30,

2018

   

December 31,
201
7

 

Assets

               

Current assets:

               

Cash and cash equivalents

  $ 6,988     $ 8,827  

Accounts receivable, net

    46,783       35,964  

Prepaid expenses and other current assets

    2,964       2,031  

Total current assets

    56,735       46,822  
                 

Property and equipment, net

    2,902       2,712  

Goodwill

    3,783       1,836  

Intangible assets, net

    3,449       1,634  

Deferred income taxes

    2,562       3,055  

Other assets

    1,736       1,929  

Total assets

  $ 71,167     $ 57,988  
                 

Liabilities and equity

               

Current liabilities:

               

Accounts payable

  $ 9,542     $ 7,341  

Accrued expenses and other current liabilities

    17,778       13,581  

Due to affiliates

    5,114       3,026  

Customer incentives and deposits

    499       1,539  

Lines of credit and short-term loans

    9,635       6,839  

Total current liabilities

    42,568       32,326  

Long-term debt and other liabilities

    3,220       107  

Total liabilities

    45,788       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 –

20,680,717 – September 30, 2018 and December 31, 2017

    208       207  

Treasury stock, at cost

22,798 shares – September 30, 2018 and

104,398 shares – December 31, 2017

    (26 )     (115 )

Additional paid-in capital

    16,275       16,271  

Accumulated other comprehensive loss

    (3,518 )     (1,690 )

Retained earnings

    3,945       4,977  

Total SPAR Group, Inc. equity

    16,884       19,650  

Non-controlling interest

    8,495       5,905  

Total equity

    25,379       25,555  

Total liabilities and equity

  $ 71,167     $ 57,988  

 

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