SPAR Group Announces Financial Results for the Second Quarter and Six Months Ended June 30, 2019
Highlights for the three- and six-month periods ended
- Revenue for the second quarter of 2019 increased
$9.0 million , or 15.2 percent, to$68.2 million . Domestic operations contributed$6.5 million of the year-over-year revenue growth. International operations contributed$2.5 million of the increase. - Revenue for the six-month period ending
June 30, 2019 increased$11.6 million , or 10.2 percent, to$125.4 million . Domestic operations contributed$6.7 million of the year-over-year revenue growth. International operations contributed$4.8 million of the increase. The International increase is primarily due to the year-to-date growth inBrazil of$5.7 million , which was partially offset by weakness in other countries. - Operating income for the second quarter increased
$5.5 million to $4.2 million , compared to an operating loss of$(1.2 million) for the same period last year. During the second quarter of 2018, the Company recorded one-time charges totaling approximately$2.0 million . Adjusting for one-time charges, operating income during the second quarter increased$3.0 million year over year. - Operating income for the six-month period ending
June 30, 2019 increased$6.5 million to $6.0 million , compared to an operating loss of$(506,000) for the same period last year. During the first half of 2018, the Company recorded one-time charges totaling approximately$2.0 million . Adjusting for one-time charges, operating income during the first half of 2019 increased$4.0 million year over year. - Net income attributable to
SPAR Group for the second quarter of 2019 was$1.5 million , or$0.07 per diluted share, compared to a net loss of$(1.8 million) , or$(0.09) per diluted share, during the second quarter of 2018. - Net income attributable to
SPAR Group for the six-month period endingJune 30, 2019 was$2.1 million , or$0.10 per diluted share, compared to a net loss of$(1.6 million) , or$(0.08) per diluted share, during the same period last year. - As highlighted in the GAAP reconciliation tables, EBITDA for the second quarter of 2019 increased to
$3.5 million , compared to Adjusted-EBITDA of$603,000 during the same period last year. - As highlighted in the GAAP reconciliation table below, EBITDA for the six months ended
June 30, 2019 increased to$5.3 million , compared to Adjusted-EBITDA of$1.6 million during the same period last year.
Financial Results by Geography (in 000's, except per share data)
Three Months Ended June 30, |
% | Six Months Ended June 30, |
% | ||||||||||||
Revenue: | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||
International | $ | 40,217 | $ | 37,668 | 6.8% | $ | 78,721 | $ | 73,878 | 6.6% | |||||
Domestic | 28,006 | 21,556 | 29.9% | 46,662 | 39,925 | 16.9% | |||||||||
Total | $ | 68,223 | $ | 59,224 | 15.2% | $ | 125,383 | $ | 113,803 | 10.2% |
Three Months Ended June 30, |
% | Six Months Ended June 30, |
% | ||||||||||||||
Operating Income/(Loss): | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||
International | $ | 1,622 | $ | 663 | 144.6% | $ | 2,601 | $ | 1,713 | 51.8% | |||||||
Domestic | 2,608 | (1,900 | ) | nmf | 3,360 | (2,219 | ) | nmf | |||||||||
Total | $ | 4,230 | $ | (1,237 | ) | nmf | $ | 5,961 | $ | (506 | ) | nmf |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
Net income (loss): | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
International | $ | 279 | $ | (33 | ) | nmf | $ | 501 | $ | 354 | 41.1% | ||||||||
Domestic | 1,244 | (1,730 | ) | nmf | 1,638 | (1,992 | ) | nmf | |||||||||||
Total | $ | 1,523 | $ | (1,763 | ) | nmf | $ | 2,139 | $ | (1,638 | ) | nmf | |||||||
Earnings Per Basic and Diluted Share: | |||||||||||||||||||
$ | 0.07 | $ | (0.09 | ) | $ | 0.10 | $ | (0.08 | ) | ||||||||||
“Improvements in domestic operations continue to be the primary driver of year-over-year financial improvements. Momentum in our domestic business continues with new customer acquisitions and a growing pipeline. Domestic revenue is also benefiting from store remodeling, as our retail customers revitalize their stores to bolster foot traffic and compete against online sales growth. Our international revenue faces a headwind with foreign currency translation, but overall we are keeping pace with market growth,” said Chief Executive Officer,
Margin Profile by Geography
Gross Margin:
Three Months Ended June 30, | Basis Point | Six Months Ended June 30, | Basis Point | ||||||
2019 | 2018 | Change | 2019 | 2018 | Change | ||||
International | 16.9% | 14.6% | 230 | 16.2% | 14.8% | 140 | |||
Domestic | 25.9% | 23.0% | 290 | 25.7% | 23.1% | 260 | |||
Total | 20.6% | 17.6% | 300 | 19.7% | 17.8% | 190 |
Operating Income as a % of Sales
Three Months Ended June 30, | Basis Point | Six Months Ended June 30, | Basis Point | ||||||
2019 | 2018 | Change | 2019 | 2018 | Change | ||||
International | 4.0% | 1.8% | 220 | 3.3% | 2.3% | 100 | |||
Domestic | 9.3% | (8.8%) | 1,810 | (7.2%) | (5.6%) | (1,280) | |||
Total | 6.2% | (2.1%) | 830 | 4.8% | (0.4%) | 520 |
International gross profit margin for the three- and six-month periods ended
Domestic gross profit margin for the three- and six-month periods ended
Balance Sheet as of
At
About
Forward-Looking Statements
This Press Release contains and the above referenced recorded comments will contain "forward-looking statements" made by
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:
Chief Financial Officer
(248) 364-7727
Investor Contact:
Three Part Advisors
(817) 310-0051
Consolidated Statements of Income (loss) and Comprehensive Income (loss)
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
2019 | 2019 | 2019 |
2018 | ||||||||||||
Net revenues |
$ | 68,223 | $ | 59,224 | $ | 125,383 | $ | 113,803 | |||||||
Cost of revenues | 54,159 | 48,759 | 100,685 | 93,608 | |||||||||||
Gross profit | 14,064 | 10,465 | 24,698 | 20,195 | |||||||||||
Selling, general and administrative expenses | 9,306 | 9,196 | 17,699 | 17,654 | |||||||||||
Settlement and other charges | - | 1,975 | - | 1,975 | |||||||||||
Depreciation and amortization | 528 | 531 | 1,038 | 1,072 | |||||||||||
Operating income (loss) | 4,230 | (1,237 | ) | 5,961 | (506 | ) | |||||||||
Interest (income) expense | 187 | 354 | 388 | 553 | |||||||||||
Other (income), net | (192 | ) | (232 | ) | (257 | ) | (304 | ) | |||||||
Income (loss) before income tax expense | 4,235 | (1,359 | ) | 5,830 | (755 | ) | |||||||||
Income tax expense (benefit) | 1,428 | (262 | ) | 1,986 | (84 | ) | |||||||||
Net income (loss) | 2,807 | (1,097 | ) | 3,844 | (671 | ) | |||||||||
Net (loss) attributable to non-controlling interest | (1,284 | ) | (666 | ) | (1,705 | ) | (967 | ) | |||||||
Net income (loss) attributable to SPAR Group, Inc. | $ | 1,523 | $ | (1,763 | ) | $ | 2,139 | $ | (1,638 | ) | |||||
Basic net income (loss) per common share: | $ | 0.07 | $ | (0.09 | ) | $ | 0.10 | $ | (0.08 | ) | |||||
Diluted net income (loss) per common share: | $ | 0.07 | $ | (0.09 | ) | $ | 0.10 | $ | (0.08 | ) | |||||
Weighted average common shares – basic | 20,816 | 20,649 | 20,796 | 20,649 | |||||||||||
Weighted average common shares – diluted | 21,104 | 20,649 | 21,080 | 20,649 | |||||||||||
Net income (loss) | $ | 2,807 | $ | (1,097 | ) | $ | 3,844 | $ | (671 | ) | |||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustments | 59 | (650 | ) | 167 | (680 | ) | |||||||||
Comprehensive income (loss) | 2,866 | (1,747 | ) | 4,011 | (1,351 | ) | |||||||||
Comprehensive (income) attributable to non-controlling interest | (1,358 | ) | (391 | ) | (1,808 | ) | (662 | ) | |||||||
Comprehensive income (loss) attributable to SPAR Group, Inc. | $ | 1,508 | $ | (2,138 | ) | $ | 2,203 | $ | (2,013 | ) | |||||
Consolidated Balance Sheets
(In thousands, except share and per share data)
June 30, 2019 |
December 31, 2018 |
||||||
Assets | (Unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 7,826 | $ | 7,111 | |||
Accounts receivable, net | 57,462 | 46,142 | |||||
Prepaid expenses and other current assets | 2,461 | 1,879 | |||||
Total current assets | 67,749 | 55,132 | |||||
Property and equipment, net |
3,085 | 2,950 | |||||
Operating lease right-of-use assets | 4,770 | - | |||||
Goodwill | 3,788 | 3,788 | |||||
Intangible assets, net | 3,067 | 3,332 | |||||
Deferred income taxes | 2,687 | 2,568 | |||||
Other assets | 1,734 | 1,325 | |||||
Total assets | $ | 86,880 | $ | 69,095 | |||
Liabilities and equity |
|||||||
Current liabilities: | |||||||
Accounts payable | $ | 10,338 | $ | 8,668 | |||
Accrued expenses and other current liabilities | 22,583 | 18,168 | |||||
Due to affiliates | 4,520 | 4,645 | |||||
Customer incentives and deposits | 968 | 620 | |||||
Lines of credit and short-term loans | 13,182 | 10,414 | |||||
Current portion of operating lease liabilities | 843 | - | |||||
Total current liabilities | 52,434 | 42,515 | |||||
Operating lease liabilities, less current portion | 3,927 | - | |||||
Long-term debt and other liabilities | 1,634 | 1,806 | |||||
Total liabilities | 57,995 | 44,321 | |||||
Equity: | |||||||
SPAR Group, Inc. equity | |||||||
Preferred stock, $.01 par value: | |||||||
Authorized and available shares– 2,445,598 | |||||||
Issued and outstanding shares – | |||||||
None – June 30, 2019, and December 31, 2018 | – | – | |||||
Common stock, $.01 par value: | |||||||
Authorized shares – 47,000,000 | |||||||
Issued shares – 20,847,461 – June 30, 2019, and 20,776,588 December 31, 2018 | 209 | 208 | |||||
Treasury stock, at cost 1,697 shares – June 30, 2019, and 7,895 December 31, 2018 | (15 | ) | (8 | ) | |||
Additional paid-in capital | 16,410 | 16,304 | |||||
Accumulated other comprehensive loss | (3,556 | ) | (3,638 | ) | |||
Retained earnings | 5,553 | 3,432 | |||||
Total SPAR Group, Inc. equity | 18,601 | 16,298 | |||||
Non-controlling interest | 10,284 | 8,476 | |||||
Total equity | 28,885 | 24,774 | |||||
Total liabilities and equity | $ | 86,880 | $ | 69,095 |
Reconciliation of Net Income to Adjusted EBITDA (unaudited) |
||||
(000’s) | Three Months Ended | Three Months Ended | ||
30-Jun-19 | 30-Jun-18 | |||
Reported net income | 1,523 | (1,763 | ) | |
Income tax expense (benefit) | 1,428 | (262 | ) | |
Income before income tax expense | 2,951 | (2,025 | ) | |
Other adjustments | - | 1,975 | ||
Interest and other expense (benefit) | (5 | ) | 122 | |
Depreciation and amortization | 528 | 531 | ||
Adjusted EBITDA | 3,474 | 603 |
Reconciliation of Net Income to Adjusted EBITDA (unaudited) |
|||
(000’s) | Six Months Ended | Six Months Ended | |
30-Jun-19 | 30-Jun-18 | ||
Reported net income | 2,139 | (1,638 | ) |
Income tax expense (benefit) | 1,986 | (84 | ) |
Income before income tax expense | 4,125 | (1,722 | ) |
Other adjustments | - | 1,975 | |
Interest and other expense (benefit) | 131 | 249 | |
Depreciation and amortization | 1,038 | 1,072 | |
Adjusted EBITDA | 5,294 | 1,574 |
Source: SPAR Group