SPAR Continues To Deliver Strong Earnings

| About: SPAR Group, (SGRP)

SPAR Group, Inc. (NASDAQ:SGRP), a leading supplier of retail merchandising and other marketing services throughout the United States and internationally, recently announced its financial results for the year and fourth quarter ending December 31, 2012. Revenue totaled $102.8 million and $31.0 million for the 2012 year and fourth quarter, an increase of 40% and 31%, respectively. Additionally, earnings per share for the 2012 fiscal year and fourth quarter were $0.14 and $0.06 per diluted share, respectively, compared to $0.10 and $0.06 per diluted share for the same periods in 2011.

The Company has continued to deliver escalating earnings, increased revenue and operational expansion over the previous several quarters. In surpassing the $100 million annual revenue threshold, issuing and then beating guidance, and staying true to its strategic growth plan, management has completed the necessary steps to guide SPAR's transition to an emerging retail merchandising company to a viable market leader. Additionally, senior management conducted a conference call with shareholders to recap notable 2012 achievements, provide details on the financials, and offer a glimpse into 2013 operations. You may view a transcript of that call here.

I have relayed the company's financial breakdown from its earnings release below. However, the actual SEC 10-K filing can be found here.

Financial Highlights for the Year Ended December 31, 2012

The increase in international revenue was due primarily to newly integrated acquisitions in Mexico, Turkey, Romania and South Africa, as well as, continued organic growth in South Africa and Japan. Domestic revenue for 2012 totaled $43.1 million compared to $37.8 million during the same period in 2011. The increase of $5.3 million or 14% was attributable to continued growth from the Company's syndicated and assembly service businesses and the acquisition of a competitive company in the second half of 2012.

Domestic margin for the fiscal year 2012 was 32.4% compared to 33.3% during the same period 2011. The slight decrease in domestic gross profit margin was related to an unfavorable mix within both syndicated and project work compared to the same period last year. International gross profit margin for 2012 was 22.3% compared to 27.7% in 2011. The decrease in gross profit margin was primarily due to lower margin business in Mexico and Canada related to their dedicated service model and the mix of business in the Japan and China markets.

Financial Highlights for the Fourth Quarter Ended December 31, 2012

Domestic revenue for the fourth quarter of 2012 increased 17% to $11.9 million compared to the same three month period ended December 31, 2011. The improvement in domestic revenue was a direct result of improved operations within the Company's syndicated services business as well as continued growth in its assembly business. International revenue for the fourth quarter of 2012 was $19 million compared to $13.4 million for the same period in 2011. The increase in international revenue was attributable to newly integrated acquisitions in South Africa, Romania and Turkey, as well as, continued organic growth in Mexico, Japan and Canada.

SPAR's Domestic gross profit margin was 34% for the fourth quarter 2012 compared to 37% for the same period in 2011. The decrease in gross profit margin was directly attributable to an unfavorable mix within both syndicated and project work compared to last year. The International gross profit margin was 22% for the fourth quarter of 2012 compared to 26% for the same period in 2011. The decrease was due to the mix of business predominately in our Japan and Australian markets.

Balance Sheet as of December 31, 2012

As of December 31, 2012, cash and cash equivalents totaled $1.8 million. Working capital improved to $9.7 million and the Company's current ratio was 1.7 to 1. Total current assets and total assets were $24.0 million and $29.3 million, respectively. Total current liabilities and total liabilities were $14.3 million and $14.5 million, respectively, and total equity was $14.7 million at December 31, 2012.

I remain optimistic that SPAR Group will continue its growth throughout 2013 while expanding its market presence. I do not know of too many companies with similar achievements reflecting similar valuations. I will continue to watch this company as I believe it is an exciting microcap company with strong growth potential.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , Business Services, Earnings
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