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01/10 17:24
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed signals: strong growth in US and Canada, significant revenue increase, and a share buyback program are positive. However, challenges in EMEA, APAC, and South Africa, along with complexity in global operations and lack of clear guidance, offset these positives. The Q&A highlights concerns about margins and future guidance, leading to a neutral outlook.
Consolidated Revenue $68.7 million, an increase of 6.7% compared to Q1 2023.
SG&A Expenses $9.6 million, down from $10.5 million (16.2% of revenues) in the prior year, a decrease of nearly $850,000 or 220 basis points as a percentage of revenue.
EBITDA $10.1 million, compared to $3.7 million in the prior year quarter.
Net Income $6.6 million or $0.28 per diluted share, compared to $866,000 or $0.04 per diluted share in the year-ago quarter.
Gross Profit $12.5 million or 18.3% of revenues, down from $14.1 million or 22% of revenues in the prior year quarter.
Operating Income $9.6 million, compared to $3.2 million in the prior year period.
Adjusted Net Income $1.3 million or $0.06 per diluted share, compared to $1.3 million or $0.05 per diluted share in the year-ago quarter.
Consolidated Adjusted EBITDA $3.4 million, compared to $4.2 million in the prior year.
Cash from Operating Activities $615,000 in the quarter.
Net Working Capital $38.2 million.
Total Worldwide Liquidity $21 million, with $16.6 million in cash and cash equivalents.
Accounts Receivable Balance $68.7 million.
New Business Wins: SPAR's US and Canada teams won more than $35 million in new business in Q1 2024, including a multi-year deal valued at over $12 million per year for a major home improvement retailer.
US Business Growth: The US business grew by 17% compared to the same period last year, with a significant recovery in the remodel business, which grew by 98%.
Canada Business Growth: Canada's revenue grew by 79% compared to the previous year.
SG&A Reduction: Selling, general and administrative expenses decreased by nearly $850,000, or 220 basis points as a percentage of revenue.
Gross Margin: Gross margin was impacted by a 910 basis point drop in South Africa, but is expected to recover over the year.
Business Simplification: SPAR has exited several international markets (Australia, China, South Africa, Brazil) to focus on the US and Canada, reducing complexity and enhancing operational focus.
Board Reconstitution: The board has been reconstituted with experienced executives to drive action and shareholder value.
Gross Margin Performance: The gross margin for the first quarter was lower compared to the prior year, primarily due to a significant drop in gross margin from the South Africa business, which experienced a 910 basis point decline. This was attributed to additional variable expenses and government-imposed wage increases amid economic pressures.
International Business Complexity: The company has exited several international markets (Australia, China, South Africa, Brazil) to reduce operational complexity and focus on the US and Canada. This complexity had previously distracted from core business performance.
Regulatory Challenges in South Africa: The South African operations faced government-imposed wage increases that contributed to margin compression, indicating regulatory challenges impacting profitability.
Economic Factors: The company noted that macroeconomic trends, such as low unemployment and inflation, have increased labor costs for clients, which could impact client budgets and spending.
Client Retention During Transition: Despite exiting international markets, SPAR has not lost any clients or opportunities, suggesting that the transition may have mitigated potential risks associated with client retention.
Supply Chain Challenges: The company highlighted challenges related to shrink (loss of inventory) that retailers have faced, which necessitates more frequent store visits and management, potentially straining resources.
Strategic Transformation: SPAR Group is undergoing a strategic transformation, focusing on simplifying operations and enhancing shareholder value.
New Business Wins: In Q1 2024, SPAR won over $35 million in new business, including a multi-year deal valued at over $12 million per year.
Exit from International Markets: SPAR has exited several international markets (Australia, China, South Africa, Brazil) to reduce complexity and focus on the US and Canada.
Board Reconstitution: The board has been reconstituted with experienced C-suite executives to drive action and results.
Client Retention: Despite exiting international markets, SPAR has not lost any clients, and major clients have shown appreciation for the changes.
Revenue Growth: Consolidated revenue increased by 6.7% in Q1 2024, with expectations for continued growth in the US and Canada.
Gross Margin Recovery: Management expects gross margins to recover to recent levels over the balance of the year.
Future Outlook: SPAR is optimistic about future performance, driven by macroeconomic trends such as low unemployment and retail staffing challenges.
Cash Position: As of Q1 2024, SPAR's total worldwide liquidity was $21 million, with $16.6 million in cash and cash equivalents.
Earnings Per Share: Net income attributable to SPAR for Q1 2024 was $6.6 million, or $0.28 per share, compared to $0.04 per share in the prior year.
Share Buyback Program: Announced the buyback of 1 million shares from one of the largest shareholders.
The earnings call presents mixed signals: strong growth in US and Canada, significant revenue increase, and a share buyback program are positive. However, challenges in EMEA, APAC, and South Africa, along with complexity in global operations and lack of clear guidance, offset these positives. The Q&A highlights concerns about margins and future guidance, leading to a neutral outlook.
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