CORRECTION: SPAR Group, Inc. Reports Fourth Quarter and Fiscal 2022 Results, Achieves Record Full Year Sales of $261 million, Up 2.2%, Up 3.5% Constant Currency
“As we discussed last fall, the Company and Board are exploring strategic alternatives for SPAR with the goal of maximizing shareholder value. With a strong balance sheet, 90%+ revenue growth over the last 5 years, expanding gross profit margins, diversified services, and long-term relationships with some of the most important consumer goods and retail companies in the world, we continue to believe that the Company is valued below our nearest competitors. Although we have nothing to report publicly on this process, we remain committed to the execution of our work of growing the business, serving our clients and supporting our employees and joint venture partners,” concluded Matacunas.
Fourth Quarter 2022 Financial Results
Net revenues were
Gross profit was
An impairment of goodwill was recorded in the 2022 fourth quarter, which resulted in a non-cash charge of
Selling, general and administrative (SG&A) expenses were
Operating loss was
Net loss attributable to
Consolidated Adjusted EBITDA (1) in the 2022 quarter was
| (1) | Adjusted Net income attributable to |
Twelve-Month Period 2022 Financial Results
Net revenues were
Gross profit was
Selling, general and administrative (SG&A) expenses were
An impairment of goodwill was recorded in the 2022 fourth quarter, which resulted in a non-cash charge of
Operating income was
Net loss attributable to
Consolidated Adjusted EBITDA (1) in the 2022 full year was
| (1) | Adjusted Net income attributable to |
Financial Position as of
The Company’s total worldwide liquidity at the end of the fourth quarter was
Conference Call
The Company will conduct a conference call today at
About
SPAR Group is a leading global merchandising and marketing services company, providing a broad range of services to retailers, manufacturers, and distributors around the world. With more than 50 years of experience, 25,000+ merchandising specialists around the world, an average of 200,000+ store visits a week and long-term relationships with some of the world’s leading manufacturers and retail businesses, we provide specialized capabilities across more than nine countries. Our unique combination of scale, merchandising and marketing expertise, combined with our unwavering commitment to excellence, separate us from the competition. For more information, please visit the SPAR Group’s website at http://www.sparinc.com.
Cautionary Note Regarding Forward-Looking Statements
This Press Release contains, and the above referenced recorded comments, will contain “forward-looking statements” within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, made by, or respecting, SPAR Group, Inc. (“SGRP”) and its subsidiaries (together with SGRP, “SPAR”, “SPAR Group” or the “Company”), filed in a Current Report on Form 10-Q by SGRP with the Securities and Exchange Commission (the “SEC”) on November 15, 2021. There also are forward-looking statements contained in SGRP’s Annual Report on Form 10-K for its fiscal year ended December 31, 2021, as filed with the SEC on April 15, 2022, and SGRP’s First Amendment to Annual Report on Form 10-K/A for the year ended December 31, 2020, as filed with the SEC on May 2, 2022 (as so amended, the “Annual Report”), in SGRP’s amended definitive Proxy Statement respecting its Annual Meeting of Stockholders held on August 12, 2021, which SGRP filed with the SEC on July 20, 2021 (the “Proxy Statement”), and the 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 Quarterly Report, the Annual Report and the Proxy Statement, the Information Statement, the Second Special Meeting Proxy/Information 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, the “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. 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 expressed 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 also 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.
Investor Relations Contact:
Three
Tel: 214-616-2207 or 817-778-8339
– Financial Statements Follow –
| Condensed Consolidated Statements of Income | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| (In thousands, except share and per share data) | ||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| 2022 |
2021 | 2022 | 2021 | |||||||||||||
| Net revenues | $ | 64,643 | $ | 60,023 | $ | 261,268 | $ | 255,719 | ||||||||
| Related party – cost of revenues | 1,510 | 1,449 | 8,804 | 7,401 | ||||||||||||
| Cost of revenues | 49,742 | 47,928 | 201,452 | 200,796 | ||||||||||||
| Gross profit | 13,391 | 10,646 | 51,012 | 47,522 | ||||||||||||
| Selling, general and administrative expense | 11,183 | 8,756 | 41,135 | 36,778 | ||||||||||||
| Majority Stockholders Change of control agreement | - | 4,478 | - | 4,478 | ||||||||||||
| Depreciation and amortization | 510 | 510 | 2,033 | 2,083 | ||||||||||||
| Impairment of goodwill | 2,458 | - | 2,458 | - | ||||||||||||
| Operating (loss) income | (760 | ) | (3,097 | ) | 5,386 | 4,183 | ||||||||||
| Interest expense | 371 | 184 | 965 | 585 | ||||||||||||
| Other (income), net | (119 | ) | (301 | ) | (482 | ) | (510 | ) | ||||||||
| Income (loss) before income tax expense | (1,012 | ) | (2,980 | ) | 4,903 | 4,108 | ||||||||||
| Income tax expense | 835 | 72 | 2,777 | 2,108 | ||||||||||||
| Net income (loss) | (1,847 | ) | (3,052 | ) | 2,126 | 2,000 | ||||||||||
| Net income attributable to non-controlling interest | (678 | ) | (1,338 | ) | (2,858 | ) | (3,779 | ) | ||||||||
| Net income (loss) attributable to |
$ | (2,525 | ) | $ | (4,390 | ) | $ | (732 | ) | $ | (1,779 | ) | ||||
| Basic and diluted income (loss) per common share: | $ | (0.11 | ) | $ | (0.21 | ) | $ | (0.03 | ) | $ | (0.08 | ) | ||||
| Weighted average common shares – basic | 22,821 | 21,320 | 22,110 | 21,266 | ||||||||||||
| Weighted average common shares – diluted | 22,957 | 21,589 | 22,110 | 21,266 | ||||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||
| (unaudited) | ||||||||||
| (In thousands, except share and per share data) | ||||||||||
| 2022 | 2021 | |||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash, cash equivalents and restricted cash | $ | 9,345 | $ | 13,473 | ||||||
| Accounts receivable, net | 63,714 | 54,171 | ||||||||
| Prepaid expenses and other current assets | 7,861 | 4,382 | ||||||||
| Total current assets | 80,920 | 72,026 | ||||||||
| Property and equipment, net | 3,261 | 2,929 | ||||||||
| Operating lease right-of-use assets | 969 | 1,781 | ||||||||
| 1,708 | 4,166 | |||||||||
| Intangible assets, net | 2,040 | 2,295 | ||||||||
| Deferred income taxes | 3,766 | 4,468 | ||||||||
| Other assets | 1,934 | 1,351 | ||||||||
| Total assets | $ | 94,598 | $ | 89,016 | ||||||
| Liabilities and equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 10,588 | $ | 8,943 | ||||||
| Accrued expenses and other current liabilities | 20,261 | 22,031 | ||||||||
| Due to affiliates | 2,964 | 3,270 | ||||||||
| Customer incentives and deposits | 2,399 | 3,901 | ||||||||
| Lines of credit and short-term loans | 17,980 | 11,042 | ||||||||
| Current portion of operating lease liabilities | 363 | 1,019 | ||||||||
| Total current liabilities | 54,555 | 50,206 | ||||||||
| Operating lease liabilities, less current portion | 606 | 762 | ||||||||
| Long-term debt and other liabilities | 1,376 | 700 | ||||||||
| Total liabilities | 56,537 | 51,668 | ||||||||
| Commitments and contingencies – See Note 8 | ||||||||||
| Equity: | ||||||||||
| Series A convertible preferred stock, |
- | - | ||||||||
| Series B convertible preferred stock, |
9 | - | ||||||||
| Common stock, |
229 | 213 | ||||||||
| (285 | ) | -104 | ||||||||
| Additional paid-in capital | 20,708 | 17,231 | ||||||||
| Accumulated other comprehensive loss | (4,941 | ) | (5,028 | ) | ||||||
| Retained earnings | 6,707 | 7,439 | ||||||||
| 22,427 | 19,751 | |||||||||
| Non-controlling interest | 15,634 | 17,597 | ||||||||
| Total equity | 38,061 | 37,348 | ||||||||
| Total liabilities and equity | $ | 94,598 | $ | 89,016 | ||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (unaudited) | ||||||||
| (In thousands) | ||||||||
| Twelve Months Ended |
||||||||
| 2022 | 2021 | |||||||
| Operating activities | ||||||||
| Net income | $ | 2,126 | $ | 2,000 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities | ||||||||
| Depreciation and amortization | 2,033 | 2,083 | ||||||
| Impairment of goodwill | 2,458 | |||||||
| Non-cash lease expense | 646 | 1,120 | ||||||
| Bad debt expense, net of recoveries | 1,092 | 128 | ||||||
| Deferred income tax expense (benefit) | 994 | (267 | ) | |||||
| Share-based compensation | 346 | 711 | ||||||
| Majority stockholders change in control agreement | - | 4,478 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (11,237 | ) | (7,305 | ) | ||||
| Prepaid expenses and other assets | (3,285 | ) | (510 | ) | ||||
| Accounts payable | 1,718 | 1,095 | ||||||
| Operating lease liabilities | (744 | ) | (1,120 | ) | ||||
| Accrued expenses, other current liabilities and customer incentives and deposits | (1,191 | ) | 216 | |||||
| Net cash provided (used in) by operating activities | (5,044 | ) | 2,629 | |||||
| Investing activities | ||||||||
| Purchases of property and equipment and capitalized software | (1,797 | ) | (1,722 | ) | ||||
| Net cash used in investing activities | (1,797 | ) | (1,722 | ) | ||||
| Financing activities | ||||||||
| Borrowings under line of credit | 30,467 | 77,200 | ||||||
| Repayments under line of credit | (25,648 | ) | (75,451 | ) | ||||
| Proceeds related to stock options exercised | 118 | - | ||||||
| Payments related to stock options exercised | - | (123 | ) | |||||
| Repurchase of common stock | (181 | ) | - | |||||
| Distribution to non-controlling investors | (1,785 | ) | - | |||||
| Acquisition of minority interest | (2,558 | ) | - | |||||
| Proceeds from term debt | 3,530 | - | ||||||
| Payments on term debt | (454 | ) | (300 | ) | ||||
| Net cash provided by financing activities | 3,489 | 1,326 | ||||||
| Effect of foreign exchange rate changes on cash | (776 | ) | (4,732 | ) | ||||
| Net change in cash and cash equivalents | (4,128 | ) | (2,499 | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of period | 13,473 | 15,972 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 9,345 | $ | 13,473 | ||||
| Segment Information | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue: | ||||||||||||||||
| $ | 48,590 | $ | 40,217 | $ | 198,581 | $ | 186,430 | |||||||||
| Asia – Pacific | 6,658 | 10,207 | 26,009 | 33,791 | ||||||||||||
| EMEA | 9,395 | 9,599 | 36,678 | 35,498 | ||||||||||||
| Total revenue | $ | 64,643 | $ | 60,023 | $ | 261,268 | $ | 255,719 | ||||||||
| Operating income: | ||||||||||||||||
| $ | (1,758 | ) | $ | (3,499 | ) | $ | 4,103 | $ | 2,427 | |||||||
| Asia – Pacific | (131 | ) | (844 | ) | (1,621 | ) | (967 | ) | ||||||||
| EMEA | 1,128 | 1,246 | 2,904 | 2,723 | ||||||||||||
| Total operating income | $ | (760 | ) | $ | (3,097 | ) | $ | 5,386 | $ | 4,183 | ||||||
Reconciliation of GAAP to Non-GAAP Financial Measures
Adjusted net income attributable to SPAR Group and related per share amounts represents net income attributable to SPAR Group adjusted for the removal of a one-time positive adjustment related to the majority stockholders change of control agreement accrued in 2021 and realized in January of 2022. Adjusted EBITDA represents net income before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation and amortization of long-lived assets, (iv) share based compensation expense, (v) nonrecurring legal settlement costs and associated legal expenses unrelated to the Company's core operations. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures have limitations as analytical tools and should not be considered in isolation or as an alternative to performance measure derived in accordance with GAAP as an indicator of our operating performance. We present Adjusted net income attributable to SPAR Group and per share amounts, and Adjusted EBITDA because management uses these measures as key performance indicators, and we believe that securities analysts, investors and others use these measures to evaluate companies in our industry. Our calculation of these measures may not be comparable to similarly named measures reported by other companies. The following tables present a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to these measures for the periods presented:
Net Income (Loss) attributable to Adjusted Net Income (Loss) attributable to Diluted earnings per share attributable to Adjusted Diluted earnings per share attributable to Fiscal Three and Twelve Months Ended |
||||||||||||||||
| Three Months Ended |
Twelve Months Ended |
|||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Net (Loss) Income attributable to |
(2,525 | ) | (4,390 | ) | (732 | ) | (1,779 | ) | ||||||||
| Add-back one-time impact (net of taxes) | 2,945 | 3,746 | 2,654 | 4,421 | ||||||||||||
| Adjusted Net Income (Loss) attributable to |
420 | (644 | ) | 1,922 | 2,642 | |||||||||||
| Diluted earnings per share attributable to |
$ | (0.11 | ) | $ | (0.21 | ) | $ | (0.03 | ) | $ | (0.08 | ) | ||||
| Add-back one-time impact (net of taxes) | $ | 0.13 | $ | 0.17 | $ | 0.12 | $ | 0.21 | ||||||||
| Adjusted Diluted earnings per share attributable to |
$ | 0.02 | $ | (0.03 | ) | $ | 0.09 | $ | 0.12 | |||||||
Net Income (Loss) to Consolidated Adjusted EBITDA to Adjusted EBITDA attributable to Fiscal Three and Twelve Months Ended |
||||||
| Three Months Ended |
Twelve Months Ended December 31, |
|||||
| 2022 | 2021 | 2022 | 2021 | |||
| Consolidated Net Income | ( |
( |
$2,126 | $2,000 | ||
| Depreciation and amortization | 510 | 510 | 2,033 | 2,083 | ||
| Interest expense | 371 | 184 | 965 | 585 | ||
| Income Tax expense | 835 | 72 | 2,777 | 2,108 | ||
| Other income | (119) | (301) | (482) | (510) | ||
| Consolidated EBITDA | (250) | (2,587) | 7,419 | 6,266 | ||
| Legal costs relating to CIC | 336 | 4,509 | (32) | 4,814 | ||
| Review of Strategic Alternatives | 540 | 25 | 540 | 72 | ||
| 2,458 | - | 2,458 | - | |||
| Board of Directors share based compensation | - | 208 | - | 711 | ||
| Board of Directors compensation | 394 | - | 394 | - | ||
| Consolidated Adjusted EBITDA | $3,478 | $2,155 | $10,779 | $11,863 | ||
| Adjusted EBITDA attributable to non controlling interest | (1,158) | (1,794) | (4,637) | (4,908) | ||
| Adjusted EBITDA attributable to |
$2,320 | $361 | $6,142 | $6,956 | ||
Note: We report non‑GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non‑GAAP Financial Measures" for an explanation of non‑GAAP measures, and the table entitled "GAAP to Non‑GAAP Reconciliation" for a reconciliation of GAAP to non‑GAAP measures.
Source: SPAR Group, Inc.