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SPAR Group, Inc. (SGRP)

Q2 2014 Earnings Call· Wed, Aug 13, 2014

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Transcript

Operator

Operator

Good day, and welcome to the SPAR Group Incorporated 2014 second quarter conference call. Today's conference is being recorded. At this time, I would like to turn the call over to Valter Pinto of Capital Markets Group. Please go ahead.

Valter Pinto

Management

Thank you, operator, and good afternoon. I'd like to thank everyone for joining us today for the SPAR Group 2014 second quarter earnings conference call. On today's call the presenters will be Ms. Jill Blanchard, Chief Executive Officer and President; and Mr. Jim Segreto, Chief Financial Officer. Before we begin, I am going to review the company's Safe Harbor statement. Statements in this conference call that are not descriptions of historical fact are forward-looking statements relating to future events. As such, all forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, actual results may differ materially. When used in this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to SPAR Group, are such a forward-looking statement. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which may cause actual results to differ from those anticipated by SPAR Group at this time. In addition, other risks are more fully described in SPAR Group's public filings with the U.S. Securities and Exchange Commission, which can be reviewed at www.sec.gov. With that, I'd like to congratulate the SPAR Group team on their 2014 second quarter and first six months financial results. And turn the call over to Jill Blanchard, CEO and President of SPAR Group. Jill, the floor is yours.

Jill Blanchard

Management

Thank you, Valter. And thank you everyone for joining us today for our 2014 second quarter earnings conference call. As previously mentioned, as I'm coming on board as the new CEO, one of my major goals was to implement a strategic plan and culture within SPAR Group that focus on five corporate objectives, growth, customer value, employee development, efficiency and productivity and earnings per share. I am happy to say today that we've made much progress on all fronts, which I believe is critical to what has driven our year-over-year double-digit organic revenue growth in both our domestic and international operation during the second quarter of 2014. Our revenue for the 2014 second quarter increased 13% on a year-over-year basis and grew $30.9 million as compared to $27.4 million in the prior year. Domestic revenue increased 11% and international increased at 14% year-over-year. The revenues for the first six months of this year grew 13% to $59 million as compared to $52.4 million in the prior year. Our domestic revenue grew 12%, international grew 13% on a year-over-year basis. Let me now provide some specifics related to our efforts and outcomes that result from our strategic plan. First, we are focused on building more senior level relationships with each of our key customers. Recently we announced the expansion of our partnership with Somerset Group into the U.S. We have been working closely with Somerset for over eight years in Canada. And the expansion into the U.S. will add approximately 6,400 retail doors, while executing 30,000 site visits each year to provide merchandising other marketing services, such as ensuring integrity display and updating the graphics on the interactive displays. We also expanded our relationship with Staples through the launch of eight new categories in their retail space nationwide, while continuing to…

James Segreto

Management

Thank you, Jill. A summary of our financial results for the three and six month periods ended June 30, 2014, are as follows. For the three months ended June 30, 2014, as Jill mentioned earlier, the company reported 13% increase in net revenue for the three months ended June 30 to $30.9 million compared to $27.4 million for the same period in 2013. Domestic net revenue totaled $12.6 million compared to $11.4 million for the same period in '13, an increase of $1.2 million or 11%. The increase was primarily due to incremental revenue from project work compared to the same period last year. International net revenue totaled $18.3 million for the three months ended June 30, 2014, compared to $16 million for the same period in 2013, an increase of $2.3 million or 14%. The increase in net revenue was primarily driven by increases in Mexico, Japan, Canada, with partially offset lower volume in China, Australia and Turkey. The company's gross profit margin for the three months ended June 30 improved by 0.9 percentage points to 24.9% compared to 24% for the same period in 2013. For the second quarter, domestic gross profit margin was 31.4% compared to 30% for the same period in 2013. The increase in gross profit margin of 1.4 percentage points was due primarily to a favorable mix of project work compared to last year. The second quarter gross profit margin does not reflect improvement from our first quarter results by 3 percentage points. Our international gross profit margin for the three months ended June 30, 2014, was 20.4% compared to 19.7% for the same period in 2013. The increase in gross profit margin of 0.7 percentage points was primarily driven by margin improvement in China, Canada, South Africa and Australia, partially offset by lower…

Jill Blanchard

Management

Great. Thanks Jim. Going forward we will continue to focus on our strategic relationships delivering value to our customers, continuing to grow our existing talent and attracting new talent and expanding our existing customers globally. On behalf of the entire team here at SPAR Group, I would like to thank you all for joining us on today's call. This ends our prepared comments and we are now available to answer any questions.

Operator

Operator

(Operator Instructions) With no questions in queue, I would like to turn the call back over to management for any additional or closing remarks.

Jill Blanchard

Management

Great. Thank you. So thank you to everybody for taking the time to join us on today's call.

Operator

Operator

Once again, that does conclude today's conference. We do thank you for your participation.