SPAR Group, Inc. Q1 FY2024 earnings call

• Consolidated revenue increased 6.7% in Q1 2024. SG&A was down nearly $850,000 or 220 basis points of favorability as a percentage of revenue.
• EBITDA was $10.1 million, net income attributable to SPAR was $6.6 million or $0.28 earnings per share.
• U.S. business grew 17% compared to the same period last year, Canada grew by 79%, and U.S. remodel business grew by 98%.
• Won more than $35 million in new business in Q1, including a multiyear deal valued at over $12 million per year with a U.S. home improvement retailer.
• Exited several international markets (Australia, China, National Merchandising Services, South Africa, Brazil) to simplify the business.
• Board reconstituted in fall 2023 with proven C-suite executives focused on results and shareholder value creation.

For the first quarter 2024, consolidated revenue was $68.7 million, an increase of 6.7% compared to Q1 2023. Net revenues included $54.7 million from the Americas (12.5% growth year-over-year), $8.3 million from EMEA (14.7% decline), and $5.8 million from APAC (5.5% decline). The Americas segment reflected strong remodeling and merchandising revenues, with the U.S. remodel business growing 98% against the same quarter last year and Canada growing by 79%. The South Africa business had a 910 basis point drop in gross margin and a year-over-year revenue decline.

• Gross margin is seen as a single quarter event and expected to recover to recent levels over the balance of the year.
• South Africa and China will not be in the second quarter, and Brazil exit will be in the second quarter as the formal closing is not yet complete.
• Core business remains merchandising, remodeling, and distribution, with focus on U.S. and Canada.

• South Africa's performance negatively impacted gross margin with a 910 basis point drop and year-over-year revenue decline.
• Complexity and distraction from international operations, including having to manage international joint ventures while driving U.S. and Canada performance.

Q: Theodore O'Neill asked about revenue and next quarter, noting expected sequential revenue change and which businesses won't be in next quarter.

A: Michael Matacunas responded that core business is growing, South Africa and China won't be in Q2, Brazil exit in Q2, and core business clients are reacting positively.

Q: Sebastian Clarke asked about Brazil margins and capital allocation.

A: Michael Matacunas said Brazilian gross margins are lower, and capital allocation includes supporting organic growth, accretive acquisitions, and returning value to shareholders via share buybacks or dividends.