WHITE PLAINS, N.Y., Aug. 14, 2020 (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 three- and six-month periods ended June 30, 2020.
Highlights for the three- and six-month periods ended June 30, 2020, as compared to the same periods during the prior year are as follows:
- Revenue for the second quarter of 2020 decreased $17.3 million, or 25.3 percent, to $50.9 million versus the prior year’s second quarter. Revenues decreased 21.0 percent and 28.3 percent for domestic and international operations, respectively.
- Revenue for the six-month period ending June 30, 2020 decreased $13.1 million, or 10.4 percent, to $112.3 million. Revenues decreased 2.7 percent and 15.0 percent for domestic and international operations, respectively.
- Operating income for the second quarter of 2020 decreased $2.3 million, or 53.6 percent, to $1.9 million, compared to $4.2 million for the same period last year.
- Operating income for the six-month period ending June 30, 2020 decreased $2.5 million to $3.4 million, compared to $6.0 million for the same period last year. Domestic operations decreased $2.7 million, while international increased $0.2 million.
- Net loss attributable to SPAR Group for the second quarter of 2020 was $103,000, or $0.00 per diluted share, compared to $1.5 million, or $0.07 per diluted share, during the second quarter of 2019.
- Net income attributable to SPAR Group for the six-month period ending June 30, 2020 was $193,000, or $0.01 per diluted share, compared to $2.1 million, or $0.10 per diluted share, during the same period last year.
The Company said that the decrease in financial performance during the second quarter was primarily related to the economic effects of Covid-19. While sales trends improved late in May and June from low levels reached in April, revenue remained below plan for the duration of the quarter. The financial performance of the domestic business was negatively impacted by many domestic customers temporarily closing, curtailing operations, and limiting the number of non-customers in their stores in response to the virus. In addition, domestic profitability was negatively impacted by a revenue mix shift and a higher cost of field labor. Excluding the negative affect of foreign currency translation, international operations showed a low-single digit decrease in revenue and posted flat comparisons in operating income during the quarter. The solid relative performance of the international division was related to strong demand for essential products from consumer-packaged goods customers, which make up a large portion of the international sales mix. During the second quarter the Company took action to decrease operating expenses, cut discretionary spending and delay non-essential investments to preserve the balance sheet and liquidity.
“In the face of the largest economic downturn in our lifetimes, we were able to temper losses due to our highly variable cost structure and the strong relative performance of our international division. I want to extend our gratitude to employees and partners for their hard work and ongoing effort to navigate the challenging conditions presented by the global pandemic,” said Kori Belzer, chief operating officer of SPAR Group.
Financial Results by Geography (in 000's, except per share data)
| Three Months Ended June 30, | % | Six Months Ended June 30, | % | ||||||||||||
| Revenue: | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||
| International | $ | 28,821 | $ | 40,217 | (28.3%) | $ | 66,880 | $ | 78,721 | (15.0%) | |||||
| Domestic | 22,123 | 28,006 | (21.0%) | 45,412 | 46,662 | (2.7%) | |||||||||
| Total | $ | 50,944 | $ | 68,223 | (25.3%) | $ | 112,292 | $ | 125,383 | (10.4%) | |||||
| Three Months Ended June 30, | % | Six Months Ended June 30, | % | ||||||||||||
| Operating Income/(Loss): | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||
| International | $ | 1,648 | $ | 1,622 | 1.6% | $ | 2,817 | $ | 2,607 | 8.1% | |||||
| Domestic | 315 | 2,608 | (87.9%) | 623 | 3,354 | (81.5%) | |||||||||
| Total | $ | 1,963 | $ | 4,230 | (53.6%) | $ | 3,440 | $ | 5,961 | (42.3%) | |||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| Net income (loss): | 2020 | 2019 | 2020 | 2019 | |||||||||||||
| International | $ | 368 | $ | 279 | 235.5% | $ | 627 | $ | 501 | 38.5% | |||||||
| Domestic | (471 | ) | 1,244 | (163.6%) | (434 | ) | 1,638 | (113.3%) | |||||||||
| Total | $ | (103 | ) | $ | 1,523 | (90.5%) | $ | 193 | $ | 2,139 | (77.7%) | ||||||
| Earnings Per Basic and Diluted Share: | |||||||||||||||||
| $ | (0.00 | ) | $ | 0.07 | $ | 0.01 | $ | 0.10 | |||||||||
Margin Profile by Geography
| Three Months Ended June 30, | Basis Point | Six Months Ended June 30, | Basis Point | ||||||||
| Gross Margin: | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||
| International | 18.2% | 16.9% | 130 | 17.2% | 16.2% | 100 | |||||
| Domestic | 20.9% | 26.0% | (505) | 22.4% | 25.8% | (340) | |||||
| Total | 19.4% | 20.6% | (124) | 19.3% | 19.8% | (50) | |||||
| Operating Income | Three Months Ended June 30, | Basis Point | Six Months Ended June 30, | Basis Point | |||||||
| as a % of Sales | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||
| International | 5.7% | 4.0% | 168 | 4.2% | 3.3% | 90 | |||||
| Domestic | 1.1% | 9.3% | (824) | 1.8% | 7.2% | (540) | |||||
| Total | 3.7% | 6.2% | (250) | 3.2% | 4.8% | (160) | |||||
International gross profit margin for the three- and six-month periods ended June 30, 2020 were 18.2% and 17.2%, respectively, compared to 16.9% and 16.2%, respectively, for the same periods in 2019. For the three-month period ended June 30, 2020 the international subsidiaries, Australia, Mexico, and South Africa 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 June 30, 2020, was 20.9% compared to 26.0% for the same period in 2019. For the six-month period ended June 30, 2020, domestic gross profit margin was 22.4% compared to 25.8% 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 June 30, 2020
At June 30, 2020, cash and cash equivalents totaled $13.7 million. Working capital was $17.2 million and current ratio was 1.4 to 1. Total current assets and total assets were $58.5 million and $73.9 million, respectively. Total liabilities were $44.2 million and total equity was $29.7 million at June 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 Subsidiaries
Condensed Consolidated Statements of Loss and Comprehensive (Loss) Income
(unaudited)
(In thousands, except share and per share data)
| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Net revenues | $ | 50,944 | $ | 68,223 | $ | 112,292 | $ | 125,383 | |||||||
| Cost of revenues | 41,072 | 54,159 | 90,632 | 100,685 | |||||||||||
| Gross profit | 9,872 | 14,064 | 21,660 | 24,698 | |||||||||||
| Selling, general and administrative expense | 7,370 | 9,306 | 17,141 | 17,699 | |||||||||||
| Depreciation and amortization | 539 | 528 | 1,079 | 1,038 | |||||||||||
| Operating income | 1,963 | 4,230 | 3,440 | 5,961 | |||||||||||
| Interest expense | 84 | 187 | 312 | 388 | |||||||||||
| Other income, net | (50 | ) | (192 | ) | (58 | ) | (257 | ) | |||||||
| Income before income tax expense | 1,929 | 4,235 | 3,186 | 5,830 | |||||||||||
| Income tax expense | 624 | 1,428 | 959 | 1,986 | |||||||||||
| Net income | 1,305 | 2,807 | 2,227 | 3,844 | |||||||||||
| Net (income) attributable to non-controlling interest | (1,408 | ) | (1,284 | ) | (2,034 | ) | (1,705 | ) | |||||||
| Net income attributable to SPAR Group, Inc. | $ | (103 | ) | $ | 1,523 | $ | 193 | $ | 2,139 | ||||||
| Basic and diluted income per common share: | $ | (0.00 | ) | $ | 0.07 | $ | 0.01 | $ | 0.10 | ||||||
| Weighted average common shares – basic | 21,108 | 20,816 | 21,107 | 20,796 | |||||||||||
| Weighted average common shares – diluted | 21,125 | 21,104 | 21,157 | 21,080 | |||||||||||
| Net income | $ | 1,305 | $ | 2,807 | $ | 2,227 | $ | 3,844 | |||||||
| Other comprehensive (loss) income: | |||||||||||||||
| Foreign currency translation adjustments | (79 | ) | 59 | (3,979 | ) | 167 | |||||||||
| Comprehensive income (loss) | 1,226 | 2,866 | (1,752 | ) | 4,011 | ||||||||||
| Comprehensive (income) loss attributable to non-controlling interest | (1,365 | ) | (1,358 | ) | 455 | (1,808 | ) | ||||||||
| Comprehensive (loss) income attributable to SPAR Group, Inc. | $ | (139 | ) | $ | 1,508 | $ | (1,297 | ) | $ | 2,203 | |||||
SPAR Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
| June 30, | December 31, | ||||||
| 2020 | 2019 | ||||||
| (Unaudited) | |||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 13,676 | $ | 10,458 | |||
| Accounts receivable, net | 42,911 | 49,299 | |||||
| Prepaid expenses and other current assets | 1,871 | 2,404 | |||||
| Total current assets | 58,458 | 62,161 | |||||
| Property and equipment, net | 2,793 | 2,848 | |||||
| Operating lease right-of-use assets | 3,488 | 4,948 | |||||
| Goodwill | 3,756 | 3,784 | |||||
| Intangible assets, net | 2,512 | 2,796 | |||||
| Deferred income taxes | 1,644 | 1,883 | |||||
| Other assets | 1,259 | 1,115 | |||||
| Total assets | $ | 73,910 | $ | 79,535 | |||
| Liabilities and equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 6,841 | $ | 9,186 | |||
| Accrued expenses and other current liabilities | 20,278 | 18,548 | |||||
| Due to affiliates | 3,780 | 4,666 | |||||
| Customer incentives and deposits | 416 | 594 | |||||
| Lines of credit and short-term loans | 8,103 | 8,932 | |||||
| Current portion of operating lease liabilities | 1,779 | 2,828 | |||||
| Total current liabilities | 41,197 | 44,754 | |||||
| Operating lease liabilities, less current portion | 1,709 | 2,120 | |||||
| Long-term debt and other liabilities | 1,300 | 1,300 | |||||
| Total liabilities | 44,206 | 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 – 21,108,352 – Balance at June 30, 2020, and 21,102,335 – December 31, 2019 | 211 | 211 | |||||
| Treasury stock, at cost 1,697 shares – Balance at June 30, 2020, and December 31, 2019 | (2 | ) | (2 | ) | |||
| Additional paid-in capital | 16,606 | 16,511 | |||||
| Accumulated other comprehensive loss | (5,106 | ) | (3,616 | ) | |||
| Retained earnings | 6,044 | 5,851 | |||||
| Total SPAR Group, Inc. equity | 17,753 | 18,955 | |||||
| Non-controlling interest | 11,951 | 12,406 | |||||
| Total equity | 29,704 | 31,361 | |||||
| Total liabilities and equity | $ | 73,910 | $ | 79,535 | |||