SPAR (SGRP) 16 Aug 222022 Q2 Earnings call transcript

Good morning and welcome to the SPAR Group Second Quarter 2022 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instruction]. Please note today's event is being recorded. I'd now like to turn the conference over to Phillip Kupper with Three Part Advisors. ahead. go Please

and us Operator, review everyone. appreciate We quarter Thank the good SPAR joining for for to Group's you results you, XXXX. morning, conference second call

the Information page Chief Financial the audio investors.SPARinc.com. Fay Executive section on on Joining webcast SPAR's, also call link of events Officer, call speaks Relations today accessed and at and company's Matacunas, on can DeVriese. Chief be me the this the Investor Officer, call as XX, recorded is Mike presentations being today, of This and XXXX. are the through only August

So are of statements, the please pursuant date longer of any made Litigation statements, Private statements forward-looking to I information or the be historical or or replay may performance, like transcript future reading. provisions that in made today's Reform or be no of not including advised Harbor expectations, that the any financial would of Safe that accurate facts, events, you future XXXX. as or also Act time-sensitive Securities to the discussion remind

to the or with found uncertain was and by our assumes on expressed outside Management any of Commission. be publicly refer risks obligation other Exchange company's earnings end nature may forward-looking to and measures the described statements. the Please are to reconciliations revise These SPAR the or measures our Securities the in non-GAAP the are release from Actual update Group forward-looking refer in and financial differ for statements filings nearest no detail at Forward-looking control. implied. release. of can the also those press GAAP earnings factors and to issued results may today their that company's materially statements. disclosures and uncertainties

been section to would release press Mike also call at our turn website the in over Relations to to the now A of Mike? we is CEO, I an like the earnings And Investor SEC. release submitted the copy issued has of included company's X-K on SPARinc.com. today the posted earlier Finally, the Matacunas.

good open second am morning, and and At of will remarks and Thank underway our exciting everyone. our you, comment to share is of pleased we institutional for questions end that quarter prepared was morning results SPAR. I at XX-Q our work from quarter Phillip today, the on analysts Total a achievements number quarter This for the We the release. distributed year-over-year. filed second revenue line reflects and investors. earnings and yesterday press $XX second X% our increase a million. this

and we'll will Asia reminder, one comment I individually. a each As report Pacific three Americas, EMEA or segments on APAC. in

a grew Within Our in revenue. record XX% million, an America United segment reported increase revenue by States the segment, division record a XX.X X.X%. delivered of and $XX.X million this of

core of the clients. XX% second services Our quarter with new in merchandising addition grew the business by

our in business countries. portfolio year-over-year, remodels and by has States, resets Our in XX% multiple is and increased client United the now operating

Our revenue grew we the won by business second quarter, expanded venture Brazil and agreements. client new in joint XX% as

our of excellent continue In services demonstrating the and in satisfaction measure addition, and of of clients our them we to Brazil value have scores relationships. all the

net Our joint renewed clients an won of multi-year Africa, in segment of and EMEA increase large revenue South agreements over We've new prior representing venture increased delivered our year. by the X.X X.X% EMEA XXX%. million income

of the to XX% a X.X in million of our this segment due decline was XX-day Our pandemic in lockdown APAC X.X segment. approximately million This revenue Asia X was Pacific million. China. was or

lockdown our noted change With law turn more margin. attention would mandate. for a strong top-line the performance, expenses during that than Mexico was labor way in is in government the at revenue relatively quarter we revenue second we for the lockdown XX%. by at While let's the minor, of us XXXX, the to the another have Perhaps to look carried cycling our revenue gross China, impact and grown without

reflects margin compared XX.X% to gross a quarter This basis. last year. point XX.X% grew second improvement solid basis on XXX Our to a consolidated

Our in result quarter, second America XXX gross This of XX% by points. internal is margin leverage. focus the the pricing, segment the productivity basis of improved total our represents on business which continued and merchandiser

prior continue that to is profitability EMEA reported in results the increase is the and margins net gross financial in results share XXX half total, wholly-owned second our reported to strategic our focused and and growing, over segment of review with this. our speak pipeline detailed for is basis about net covers to of our the of income, The to Fay I'm an pipeline more our attributable view XXX% that, and pursuit net turn back of income With up last have Our margins income net come while will to few business. on margins consolidated to-date. key to a communicated Fay business believe is strong. gross over I increase improvement our results. our Fay? the will result our there's X.XX I grow. improvement After profit. improve This point continuing the the income DeVriese, XXXX, gross pleased Officer wins call both Financial Relative is and improved we progress. of I've improved In opportunity will year. over my opportunity are on quarters then and Chief our we I million. we our

and everyone. you, good Thank morning, Mike

and APAC is the is Americas, we Africa. United the noted Mexico and align the Australia and EMEA. changed EMEA three Brazil. comprised States, strategy we South comprised we second January is of finally, growth with better our And India. Canada, company's As reporting to quarter, effective comprised Japan, of China, segments; XXXX, of last Americas under X, business APAC operate

results. Now turning to our financial

included $X.X Second million $X.X and from revenues $XX.X quarter EMEA $XX.X which million APAC. the XXXX, from million, net from totaled million Americas,

to X.X%. segment. prior quarter, mentioned, Mike increased just APAC adversely revenues were consolidated of strength year in Compared As the the lockdowns the revenues by the QX our impacted by

quarter strong by revenues increased APAC a the Difficulty] of XXXX. X.X%, the by X.X% However, other grew [Technical in weakness down completely and the third segments almost growth in offset in EMEA Americas

as Gross in $X.XX EMEA. million, in have net offset was well XXXX share, in EMEA was both impacting points per $X or solid prior profit downward XXX both needed Net income negatively expenditures basis with million, to SPAR quarter Margin XXX or as to the in was $X.XX Organic pandemic increased compared acquisition we versus Consolidated versus and operations million the in lockdowns points last the Japan. but the due which to by year. resulted attributable and adjusted XX.X% the income in points, XXX EPS share from of a million prior U.S. year. Inc., margins entirely strong and initiatives July, $X.X gross to XXX result as compared also in per the of to basis to leverage in period million APAC revenues Adjusted small to profit quarter. or by Inc., up or revenues from basis year second basis basis adjusted pandemic the profit. the $XXX,XXX was the non-controlling pandemic year due lockdown. $XX.X year driven margins prolonged the We largely were EMEA in points $X.X improvements in to prior $XX quarter. quarter increase revenues income After well XXXX XX.X% share, to attributable compared prior year related $X.XX or to SPAR prior in in XX or was Americas, as was by quarter primarily million year revenues administrative $X.X XX.X% Group X.X% $X.X expenses XX.X% in per The in same that $X.X Group general APAC per prior Brazil. Gross contributed were to year a to to due along pressure ago by share million favorable up operating the $XXX,XXX and $X.X SPAR million second the to compared points quarter. prior was or of $XX.X cycle strength for growth of additional the the quarter. in revenues $X.XX mix-shift favorably in from Operating the EBITDA the China growth million following year of Selling, of million the million million or Group $X.X was due quarter compared attributable compared growth. year the Inc., continued ago the adjusting interest, investments $X.X in quarter, normalize the

to reconciliations at GAAP measures of management today's non-GAAP or You find release. financial the press the can end

XX% revenues for and First the million. the down Year-to-date EMEA Total with of $XXX.X total ago revenue was in segment the $XX.X were results. X% up strength period. from half year million XXXX

the Operating year $XX.X compared million prior points XX.X% to half the versus of the negatively first points year strength improvement due Americas period. expenses XXX versus leverage rebound X.X% XX.X of period, SG&A pandemic. last period. or to resulting the markets. flat million mix-shift XXX were half up reported profit ago operating margins the revenues XXXX, million, [ph] in ago prior for of in XX% compared and Gross were quarterly the and million, by basis XX.X% first the favorably APAC XXXX throughout margin or to of points first trends, impacted the for successful by and in income from in revenues Gross due of First or XX.X%, increased actions certain million the to of revenues the period, of business or this to down was apply revenues due or results million, up from lockdowns due XXXX. EMEA basis $XX.X $XX.X million $XX.X half XX.X% half was year for $X.X revenues favorable X.X% of [implementation] of to basis compared points million, in pandemic in revenues profit Americas or primarily to the year APAC year XXX $XX.X Despite $X.X results. first XX basis to half margins

net SPAR to income share year ago For in per was attributable per million Group $X.X the or or million Inc., to $X.X the period. first $X.XX six $X.XX share, compared months,

prior non-controlling adjusted the or in the EBITDA million XXXX the million per prior adjusted year income Inc., in $X.X Inc., year, compared to the $X.XX attributable Excluding was was share million, to net ago excluding to first $X.X half of million share, SPAR attributable interest, Consolidated million Group SPAR interest, million EBITDA or year. adjusted was in $X.X per period. non-controlling Group to the the compared to for compared $X.X $X.X $X.XX $X.X

management can You measures GAAP the to of today's non-GAAP press at the release. financial reconciliations, find end

and $X.X and of liquidity receivable at worldwide The total June of as Group's balance working cash [indiscernible] $XX the of restricted of end in accounts position, capital quarter company's cash, to million. now quarter. and sheet million the $XX and cash XX million balance million The availability at was was flow Turning company's SPAR with cash $XX.X equivalents June end financial second $XX XX, was XXXX. as million second

gross strong. Our remained balance sheet

For program capital, $XXX,XXX. the XX Inc., XXXX, primarily a On the to working XXXX, months activities Board repurchased. June XX,XXX and back by Group for impacted SPAR today was balances, it due to and Mike. May software were accrued payable expenditures, turn to $X.X I million would buyback have XX, in been and With that, including like six authorized XXX,XXX liability shares cash ended using capital accounts capitalized changes net operating lower shares

developed Xx pleased I'm is you, I results. last We've than a momentum. this financial Thank the really with time. at Fay. pipeline that But about greater enthusiastic it am was year our

our new We win nine margins first in announced continues on our were have focus won multimillion We dollar that months business our entering dollar agreements services we large the only multimillion several to And today. including project staffing produce opened distribution results. the ago. won pipeline push in total a rebranding low-cost our structure into analytics in greater Canada business of We've effort up Canada XXX% remodel leveraging has that completed global our that is advanced and a more. India value continued large first than

in talent one more large example, us In in multinational and retailer expertise to for a recognized turning are and work expertise. Mexico. clients recruiting our hiring Our

merchandising client the marketing all from more asked recruit enabled to us and us we us help not internal national position overachieve a plan to continued services and to This This Mexico While is for this on on growth. exception. scale. of them Mexico, provide our across

turn to seeing they has The worldwide. to consumer and more companies people. great resignation are as retailers clients goods impacted us We find struggle

a on daily this to year. they reached We hire, time money rolled ever For a of pay with now at in the to empower people to working than focus completed of is XXXXs use since locations last discount our of are be text are out recently to working and SPAR, beginning we the part large in company the this large merchandise help improve share CPG people the most provider, we To were to about of pie. consumer pharmacy the this challenge Again, were instead large the the Clients has of of executive. and with We We turned retailer's technology, expanded increase cosmetics a quarter number applicants with provider. to year. pay program One exception. casting a in a ask asking could that take last retail now We also they single XXXXs service programs if more we the beginning required XXX% by clear. larger their application their general merchandising reset of second this to presentation with retail it a us quarter. out other unhappy in of and was means in created off. manufacturer to chain, not the locations. and us are product a really in the to This recently locations hired hired we in goods not XX% we year

our more from As valued are is we shelf take million we SPAR. challenging program and and scores. cosmetics to high of a the intensive one $X reset you retailer relationship work a because with asked with specialty this may completed know, satisfaction competitors, it client our to the retail were of time cosmetics to on at on than There

I business talk determine action. taken doing promotion application the we on piloting asked us The use recent If clients. have prospects Japan, served. broker potential to We of they've to to the remote to is can if changing or And forefront constantly provide disrupt be is my talked More profits we opportunities on of and and result, not to more challenges model expanded in disrupt my We about test or XXXX. clients. store a we potential one the use on approach this services all over one into their are every enable client has P&L drive Result for about with of And with our trips poorly, ideas that majority us provide As in clients taking Canada, the want larger images, a and an tremendous simple. believe In industry. our plan continuing of we If strategy. the are are we idea SPAR identify channel, is crowdsource that insights innovative share and services. traditional we I But can our This Brazil, to piloting conditions, that of XX than better also efficiency. developed our their pictures clients market last asking time piloting, the drive to review sales and sales succeed. the can is their example, to story spend virtual I progressive marketplace years. the take presented locations to growth. clients merchandising every pie, This and to the the programs the learn. product can the shelf has of only are and we

make in world, consumer Based are daily chair, markets. Cargill, and the Tree, hearing for inflation. the for Benckiser, goods and regional expensive in consumer are Home rates carrying facing an Motorola, of who SPAR. my challenges programs it Governments as more some to rising, about best a are many enacting relationships our combat economic the larger the news the the recognized McKesson, on all on we our Reckitt basis forward, such Looking Nivea, and Dollar clients Walmart, interest confidence retail with companies opportunity presents From this more. Depot, many, debt. They're

on is provide our their we positioned at resources, ideas, locations future our We technology are them we enable SPAR experienced and bring perfectly have provide pipeline excellent. leverage execute advanced across costs share faster, opportunity, more Relative transform. to them to hire P&L. we and We efficiently,

of business majority million second than $XXX longer. pipeline agreements ability As closed this our a reminder, or we $XX is quarter, of a most net across valued company and the well is more are year of agreements. potentially the new our pipeline U.S. and current In in for our million our renew to client new, over extend to net The addition

in my our sense ahead. from I you on As future bullish work am can hope I the comments,

have We team, is clients future questions. Operator? great I'd that like to a line With and bright. the significant incredible open for the opportunity,

[Operator now Instructions] Research. with begin is Please go session. first Theodore from will the Hills O'Neill ahead. Our Litchfield question-and-answer We question

Thank much. something quarter. change law last question and this My But understand in about this previous related to is talked in it Mexico. year? first is the else? outsourcing you about I the change in the very is Or labor you've the personnel subcontracting

in yourself. to Mexico, and retailer, thank then Theo, is And a basic was were store, a meaning work in-house. in and large law the for in a that law do effectively we if result services bring it's change, XXXX. morning. of the they that your your provided required to multinational enacted labor federal Yes, says, being in question. by business, your we same were Mexico. must function mid-spring for -- you that merchandising And done the XXXXs it a of in were as government locations XXXXs done work you in Good it's being a That store, other as the work this

then it of question. the we I cycling influence behind we us. And appreciate but great not a have will be on. So this be a third that more something it It's quarter, little will

from QX address can to is you the And Africa. X million, QX revenue strength Okay. is but AR Brazil to due My and is up receivable, million. rise understand accounts the is, your up X to in quarterly I this other question South in

little detail you on a please? could us more give that, So

Yes. detail? Fay, little would you mind a more maybe sharing

Sure.

the receivable segment grown the So general. has in in Americas

China However, had foot were obviously, issue we because little there the the DSO on longer did balanced that remain, we is expected. a pandemic bit a than

was So China. DSO by impacted

much. Okay. very Thanks

from Theo, payment we traditionally AR point And build. to China very now required that. were But great payments work, Thank but business China. and of the stop terms back on a doubled to in very continued in you clients frankly, of And Fay question. The to as small a know, work piece long. put has our our time the our you. fine we're that's are as

Thank you very much.

Our question is with from Instructions] [Operator ahead. go Kay Kay [Michael next [ph]. Associates] Please

that And company not. Thank companies on impacted wondering, congratulations labor a you you And excellent costs, and on the nice that. little you really it's And you, institutional by inflation seems both company Unlike was if many if thought were a that are gentlemen. would very elaborate much. to retail to quarter. and SPAR also, negatively I doing I was higher publicize investors. Thank and anything, what it

Thank A Good for the you, of rising morning. wages. Michael. impact of question. Thank on couple you comments your

happening that's almost in of know, all we As world. around the countries the

that For low us, first the is don't wage. pay a we

paying competitive business very we're already operating. we're in a So the wage

the that's little I you're not directly the was watching impacts a it a middle of second So wage that increase while over quarter, think a in X%, X% us.

question, parts do business and pricing, those coverage. firm our that. like we doing actually to I'm in Thank about profit of pricing, engaged with you resets pausing improvements research of firm profit. begin cases, get more to remodels the more thinking for the agreements, a in lot some exposure. are long-term contract doing -- to more improvement gross gain and to are in in your to on all frankly, Our contributing analyst focus outside We're competitive has have second what profitable gross work our

conference Chicago recently the presenting with So analysts XXth broadly, institutional presented on conference, particular. in this for virtual month. of that can at be be in be I'd shared more investors at and presenting I'll a a have

great and agree time behind [indiscernible] it my exposure. put company to comments, company the that energy point, I I with more you small the continuing your as exposure needs getting hope because So a is for

seems too space. it And in that other companies there correct? many this aren't Is

Yes.

positioned competitors uniquely are in We we're There as are are nine that global countries. a regional. meaning company,

us But companies our with, in offering So Brazil U.S. able in we especially to niche There compete of are different. been there companies a with out the that's have compete Brazil business. unique we U.S. with services we're are carve for in we that a makes that and our business. portfolio that

guidance Yes, earnings that's impressive. the of any future? terms do give And and for very revenues the you in

guidance Michael. giving this point, not at We're

continued you. appreciate and really I Thank success. it

concludes turn our to Mike session. question-and-answer would over This you. remarks? any to the conference Thank closing for like I Matacunas back

today's you thank everyone has company. for call interest on again, who and participated in your listened Well, the for

will As Chicago Midwest for meetings to be one-on-one presenting Central. I've August at just Q&A, we're mentioned, in Investors IDEAS in X:XX available XX at [indiscernible] the the with on And day. Conference we a.m. that also investors

I like to you'd if after providing look that, potentially participate, reach report an out us. Thank like results. to for participating to Part to our you you'd when beyond on with Advisors, forward If attend update progress quarter third today. we meet Three please And and

presentation. concluded. for conference is The Thank today's attending now you

You may disconnect. now