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 and fiscal year ended December 31, 2017.
Highlights for the three and twelve-month
periods ended December 31, 2017, as compared to the same periods in
the prior year include:
- Revenue for the fourth quarter of
2017 increased $5.5 million, or 12 percent, to $50 million.
International operations (primarily the 2016 acquisition of Brazil)
contributed to year-over-year revenue growth in the fourth
quarter.
- Revenue for the twelve-month period
ending December 31, 2017 increased $47.1 million, or 35 percent, to
$181.4 million. The growth in revenue was directly
attributable to the international operations (primarily the
acquisition of Brazil), which added approximately $40 million, plus
approximately $7 million increase from domestic operations.
- Operating income for the fourth
quarter increased $1.0 million, or 119 percent, to $1.8 compared to
$824,000 during the same period last year. The growth in
operating income in the fourth quarter was directly attributable to
international operations.
- Operating income for the
twelve-month period ended December 31, 2017 increased $1.9 million,
or 86 percent, to $4.1 million compared to $2.2 million during the
same period of 2016. International operations contributed
$1.3 million of the improvement year over year, with domestic
operations contributing approximately $600,000.
- GAAP net loss attributable to SPAR
Group for the fourth quarter of 2017 was $1.3 million, or $(0.06)
per share; compared to net income of $87,000 or $0.00 per diluted
share, during the fourth quarter of 2016. As detailed below,
this year’s non-GAAP measurement of fourth quarter net income,
prior to recording a non-cash tax provision charge of $1.8 million
related to the adoption of the 2017 Tax Cuts and Jobs Act (“Act”),
was approximately $600,000 or $0.03 per diluted share.
- GAAP net loss attributable to SPAR
Group for the twelve months ended December 31, 2017 was $923,000,
or $(0.04) per share; compared to a net income of $173,000, or
$0.01 per diluted share, for the same period in 2016.
Non-GAAP measurement of total year net income, prior to recording a
non-cash tax provision charge of $1.8 million related to the Act,
was approximately $900,000 or $0.04 per diluted share.
|
Financial Results by Geography (in 000's,
except per share data) |
|
|
Three Months Ended December 31, |
% |
|
Twelve Months Ended December 31, |
% |
Revenue: |
|
2017 |
|
|
2016 |
Change |
|
|
2017 |
|
|
2016 |
Change |
International |
$ |
37,816 |
|
$ |
31,832 |
18.8 |
% |
|
$ |
129,108 |
|
$ |
89,345 |
44.5 |
% |
Domestic |
|
12,204 |
|
|
12,711 |
(4.0 |
)% |
|
|
52,273 |
|
|
44,979 |
16.2 |
% |
Total |
$ |
50,020 |
|
$ |
44,543 |
12.3 |
% |
|
$ |
181,381 |
|
$ |
134,324 |
35.0 |
% |
|
|
|
|
|
|
|
Three Months Ended December 31, |
% |
|
Twelve Months Ended December 31, |
% |
Operating Income: |
|
2017 |
|
|
|
2016 |
Change |
|
|
2017 |
|
|
2016 |
|
Change |
International |
$ |
1,990 |
|
|
$ |
759 |
162.0 |
% |
|
$ |
3,572 |
|
$ |
2,255 |
|
58.4 |
% |
Domestic |
|
(184 |
) |
|
|
65 |
(n/a) |
|
|
518 |
|
|
(53 |
) |
n/a |
Total |
$ |
1,806 |
|
|
$ |
824 |
119.2 |
% |
|
$ |
4,090 |
|
$ |
2,202 |
|
85.7 |
% |
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
|
Twelve Months Ended December 31, |
|
Net (loss) income: |
|
2017 |
|
|
|
2016 |
|
|
|
|
2017 |
|
|
|
2016 |
|
International |
$ |
1,030 |
|
|
$ |
67 |
|
|
|
$ |
843 |
|
|
$ |
110 |
|
Domestic |
|
(2,299 |
) |
|
|
20 |
|
|
|
|
(1,766 |
) |
|
|
63 |
|
Total |
$ |
(1,269 |
) |
|
$ |
87 |
|
|
|
$ |
(923 |
) |
|
$ |
173 |
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Basic and Diluted share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.06 |
) |
|
$ |
(0.00 |
) |
|
|
$ |
(0.04 |
) |
|
$ |
0.01 |
|
|
“Fourth quarter operating results reflected a
strong finish to a year that saw significant revenue growth and
improvement in profitability. Top line growth was led by the
acquisition of our Brazil operations, which is providing the
beachhead for further growth in Brazil, as well as the rest of
South America. In addition, our international business saw
strong organic growth in Mexico, Japan and South Africa. As
expected, fourth quarter comparisons for our domestic business were
made difficult by the accelerated timing of project work in the
fourth quarter last year. Nevertheless, we saw strong organic
growth in our domestic business during the year and have built a
strong pipeline for growth in 2018,” said Chief Executive Officer,
Christiaan Olivier. “We will face headwinds domestically during
2018 due to store closures of certain retail customers, as well as
cost pressures from a tight labor market. However, we see
significant opportunities for organic growth, which we expect will
more than offset headwinds and result in strong year-over-year
financial comparisons. Domestically, I am also encouraged about our
recent acquisition of Resource Plus, which is creating some
cross-selling opportunities, as well as a new platform for growth.
The pipeline of opportunities is equally attractive in our
international operations, which we expect to show continued top and
bottom line improvements.”
Mr. Olivier also provided an update on strategic
and operational initiatives. "While we have seen improvement in
recent financial performance, given SPAR’s strong foundation, the
Company is still operating significantly below its potential.
As such, we are in the process of finalizing a comprehensive
strategic and operational plan designed to enhance growth and
improve financial results. The plan entails introducing new
complementary services, new marketing initiatives, operational
changes, targeted international expansion, and productivity
enhancing technology investments. I look forward to working
with our team to implement these initiatives in the coming quarters
and am committed to building sustainable improvements in financial
performance and shareholder value.”
Gross Margin Profile by
Geography
|
Three Months Ended December 31, |
Basis Point |
|
Twelve Months Ended December 31, |
Basis Point |
|
2017 |
|
2016 |
Change |
|
2017 |
|
2016 |
Change |
International |
19.6 |
% |
|
18.4 |
% |
121 |
|
17.5 |
% |
|
19.1 |
% |
(164) |
Domestic |
29.2 |
% |
|
25.3 |
% |
394 |
|
27.1 |
% |
|
27.6 |
% |
(54) |
Total |
22.0 |
% |
|
20.4 |
% |
159 |
|
20.3 |
% |
|
22.0 |
% |
(172) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International gross profit margin for the fourth
quarter and twelve months ended December 31, 2017 was 19.6% and
17.5%, compared to 18.4 and 19.1%, respectively, for the same
periods in 2016. The full year gross margin change relative
to the prior period was primarily due to a mix of higher cost
dedicated business in Brazil while other international subsidiaries
remained constant with prior period gross profit margins.
Domestic gross profit margin for the fourth
quarter and twelve months ended December 31, 2017, was 29.2% and
27.1%, compared to 25.3% and 27.6%, respectively, for the same
periods in 2016. The decrease in total year domestic gross profit
margin was primarily due to an increase in lower margin project
work compared to the same period last year.
Balance Sheet as of December 31,
2017
As of December 31, 2017, cash and cash
equivalents totaled $8.8 million. Working capital was $14.5 million
and current ratio was 1.4 to 1. Total current assets and total
assets were $46.8 million and $58.0 million, respectively.
Both current liabilities and total liabilities were $32.4 million
and total equity was $25.6 million as of December 31, 2017.
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").
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.
Company Contact:James R.
SegretoChief Financial OfficerSPAR Group, Inc.(914) 332-4100
Investor Contact: Dave
MossbergThree Part Advisors(817) 310-0051
|
SPAR Group, Inc. and
Subsidiaries |
Consolidated Statements of (Loss) Income and
Comprehensive Loss |
(In thousands, except share and per share data) |
|
|
Three Months Ended December
31, |
|
Twelve Months Ended December
31, |
|
2017 |
2016 |
|
2017 |
2016 |
Net
revenues |
$ |
50,020 |
|
$ |
44,543 |
|
|
$ |
181,381 |
|
$ |
134,324 |
|
Cost
of revenues |
|
39,038 |
|
|
35,473 |
|
|
|
144,601 |
|
|
104,781 |
|
Gross
profit |
|
10,982 |
|
|
9,070 |
|
|
|
36,780 |
|
|
29,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
8,576 |
|
|
7,605 |
|
|
|
30,564 |
|
|
25,241 |
|
Depreciation and amortization |
|
600 |
|
|
641 |
|
|
|
2,126 |
|
|
2,100 |
|
Operating income |
|
1,806 |
|
|
824 |
|
|
|
4,090 |
|
|
2,202 |
|
|
|
|
|
|
|
Interest expense |
|
220 |
|
|
22 |
|
|
|
337 |
|
|
133 |
|
Other
(income), net |
|
(125 |
) |
|
55 |
|
|
|
(401 |
) |
|
(128 |
) |
Income before income tax expense |
|
1,711 |
|
|
747 |
|
|
|
4,154 |
|
|
2,197 |
|
|
|
|
|
|
|
Income tax expense |
|
2,069 |
|
|
241 |
|
|
|
2,977 |
|
|
441 |
|
Net
(loss) income |
|
(358 |
) |
|
506 |
|
|
|
1,177 |
|
|
1,756 |
|
Net
income attributable to non-controlling interest |
|
(911 |
) |
|
(419 |
) |
|
|
(2,100 |
) |
|
(1,583 |
) |
Net
(loss) income attributable to SPAR Group, Inc. |
$ |
(1,269 |
) |
$ |
87 |
|
|
$ |
(923 |
) |
$ |
173 |
|
Basic
net (loss) income per common share: |
$ |
(0.06 |
) |
$ |
0.00 |
|
|
$ |
(0.04 |
) |
$ |
0.01 |
|
Diluted net (loss) income per common share: |
$ |
(0.06 |
) |
$ |
0.00 |
|
|
$ |
(0.04 |
) |
$ |
0.01 |
|
|
|
|
|
|
|
Weighted average common shares – basic |
|
20,571 |
|
|
20,641 |
|
|
|
20,617 |
|
|
20,595 |
|
|
|
|
|
|
|
Weighted average common shares – diluted |
|
20,571 |
|
|
21,348 |
|
|
|
20,617 |
|
|
21,309 |
|
|
|
|
|
|
|
Net
(loss) income |
$ |
(358 |
) |
$ |
506 |
|
|
$ |
1,177 |
|
$ |
1,756 |
|
Other
comprehensive income (loss): |
|
|
|
|
|
Foreign currency translation adjustments |
|
634 |
|
|
(631 |
) |
|
|
1,315 |
|
|
(1,126 |
) |
Comprehensive income (loss) |
|
276 |
|
|
(125 |
) |
|
|
2,492 |
|
|
630 |
|
Comprehensive income attributable to non-controlling interest |
|
(1,176 |
) |
|
(419 |
) |
|
|
(2,698 |
) |
|
(1,011 |
) |
Comprehensive loss attributable to SPAR Group, Inc. |
$ |
(900 |
) |
$ |
(544 |
) |
|
$ |
(206 |
) |
$ |
(381 |
) |
|
|
|
|
|
|
|
SPAR Group, Inc. and Subsidiaries |
Consolidated Balance Sheets |
(In thousands, except share and per share data) |
|
|
December 31,
2017 |
December 31, 2016 |
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ |
8,827 |
|
$ |
7,324 |
|
Accounts receivable, net |
|
35,964 |
|
|
33,669 |
|
Prepaid expenses and other current assets |
|
2,031 |
|
|
1,299 |
|
Total
current assets |
|
46,822 |
|
|
42,292 |
|
Property and equipment, net |
|
2,712 |
|
|
2,536 |
|
Goodwill |
|
1,836 |
|
|
1,847 |
|
Intangible assets, net |
|
1,634 |
|
|
2,340 |
|
Deferred income taxes |
|
3,055 |
|
|
4,694 |
|
Other
assets |
|
1,929 |
|
|
1,142 |
|
Total
assets |
$ |
57,988 |
|
$ |
54,851 |
|
Liabilities and
equity |
|
|
|
|
|
|
Current liabilities: |
|
|
Accounts payable |
$ |
7,341 |
|
$ |
5,567 |
|
Accrued expenses and other current liabilities |
|
13,581 |
|
|
9,766 |
|
Due to affiliates |
|
3,026 |
|
|
3,349 |
|
Customer incentives and deposits |
|
1,539 |
|
|
1,305 |
|
Lines of credit and short-term loans |
|
6,839 |
|
|
9,778 |
|
Total
current liabilities |
|
32,326 |
|
|
29,765 |
|
Long-term debt and other liabilities |
|
107 |
|
|
4 |
|
Total
liabilities |
|
32,433 |
|
|
29,769 |
|
|
|
|
Equity: |
|
|
SPAR
Group, Inc. equity |
|
|
Preferred stock, $.01 par value: |
|
|
Authorized and available shares– 2,445,598 |
|
|
Issued and outstanding shares– |
|
|
None – September 30, 2017 and December 31, 2016 |
|
– |
|
|
– |
|
Common stock, $.01 par value: |
|
|
Authorized shares – 47,000,000 |
|
|
Issued shares – 20,680,717 – September 30, 2017 and December
31, 2016 |
|
207 |
|
|
207 |
|
Treasury stock, at cost 115,123 shares – September 30, 2017
and37,877 shares – December 31, 2016 |
|
(115 |
) |
|
(51 |
) |
Additional paid-in capital |
|
16,271 |
|
|
16,093 |
|
Accumulated other comprehensive loss |
|
(1,690 |
) |
|
(2,407 |
) |
Retained earnings |
|
4,977 |
|
|
5,835 |
|
Total
SPAR Group, Inc. equity |
|
19,650 |
|
|
19,677 |
|
Non-controlling interest |
|
5,905 |
|
|
5,405 |
|
Total
equity |
|
25,555 |
|
|
25,082 |
|
Total
liabilities and equity |
$ |
57,988 |
|
$ |
54,851 |
|
|
Reconciliation
of GAAP net (loss) income to non-GAAP net income related to the
2017 tax reform Act: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Twelve Months Ended |
Net (loss) income: |
December 31, 2017 |
|
|
December 31, 2017 |
GAAP
net loss |
$ |
(1,269 |
) |
|
|
$ |
(923 |
) |
Tax
Provision impact |
|
1,841 |
|
|
|
|
1,841 |
|
Total non-GAAP net income |
$ |
572 |
|
|
|
$ |
918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Earnings Per Basic and Diluted share: |
$ |
0.03 |
|
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
This schedule reconciles the Company's GAAP net
(loss) to its non-GAAP net income. The Company believes that
presentation of this schedule provides meaningful supplemental
information to both management and investors that is indicative of
the Company's core operating results and facilitates comparison of
operating results across reporting periods. The Company uses these
non-GAAP measures when evaluating its financial results as well as
for internal planning and forecasting purposes. These non-GAAP
measures should not be viewed as a substitute for the Company's
GAAP results.
Spar (NASDAQ:SGRP)
Historical Stock Chart
From Mar 2024 to Apr 2024
Spar (NASDAQ:SGRP)
Historical Stock Chart
From Apr 2023 to Apr 2024