SPAR Group, Inc. Q4 FY2022 earnings call

• Fiscal 2022 was transformational with successful growth in businesses including merchandising, reset and remodeling, and distribution services.
• Record full-year revenue of $261 million, up 3.5% on a constant currency basis. Fourth-quarter revenue was $64.6 million, up 7.7% year over year reported, and 11.8% constant currency.
• Americas segment had record revenue of $48.6 million, up 20.8%; Brazil joint venture had 30% growth in Q4 and 49% EBIT growth. EMEA had $9.4 million revenue, down 2.1% but up 13.6% constant currency. APAC had $6.7 million revenue, down 34.8%.
• Gross margin improved: fourth-quarter gross margin was 20.7% vs 17.7% prior year. Americas contributed to margin expansion, EMEA had 27.2% gross margin, APAC had 21.8% gross margin.
• Management is exploring strategic alternatives to maximize shareholder value, including sale, merger, etc.
• Invested in technology like SPARview and talent framework, hired over 2,400 reps using AI in Q4.

The Americas segment reported record revenue of $48.6 million, an increase of 20.8%. The EMEA segment had revenue of $9.4 million, down 2.1% but up 13.6% on a constant currency basis. The APAC segment had revenue of $6.7 million, a decline of approximately 34.8%. The Americas segment, which includes the US, Brazil, Mexico, and Canada, grew organically on a constant currency basis by 21.2% in the fourth quarter. The US grew by over 20% and delivered close to $25 million in revenue. The Brazil joint venture had record growth of 30% in the fourth quarter and saw EBIT grow by 49%. The EMEA segment's revenue was impacted by the strengthening of the US dollar, but on a constant currency basis, it expanded by 13.6%. APAC was negatively affected by pandemic-related lockdowns in China and Japan.

• Pipeline is robust with multimillion dollar opportunities across US, Brazil, South Africa, and India.
• Business is resilient with no meaningful impact from macro headwinds as it works with essential brands and retailers.
• Continues to take market share from competitors, with ongoing discussions with clients to provide operating leverage.

• Foreign exchange impacts affecting international segments.
• APAC headwinds due to pandemic-related lockdowns.
• Macroeconomic headwinds that could potentially impact plans though not expected to be meaningful.
• Uncertainties related to the ongoing strategic alternatives process.

Q: Could you expand on taking market share from competitors?

A: Yeah, we've had opportunities like a retail pharmacy business where a competitor abandoned the space and we picked it up, and in a multi-box discount retailer where a client switched from a competitor to us due to dissatisfaction. Also, organizations turn to us for recruitment and labor expertise.

Q: Media focuses on retail layoffs, how are you positioned?

A: In retail, we offer variable expense solutions like syndicated models and technology to help with cost structure, and we're seeing retailers shift work to us as they struggle with recruiting.

Q: Will fees related to strategic options continue into 2023?

A: We've allowed for some in 2023, process is ongoing, don't have more to offer currently