Q2 2022 SPAR Group Inc Earnings Call
Speaker 1: Good morning and welcome to the SPAR Group second quarter 2022 financial results conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Good morning, and welcome to the Spar group second quarter 2022 financial results conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Speaker 1: After today's presentation, there will be an opportunity to ask questions.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Speaker 1: To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this is a...
Please note this event is being recorded.
Speaker 1: I would now like to turn the conference over to Philip Cooper with three-part advisors. Please go ahead.
Now I'd like to turn the conference over to Philip Cooper with three part advisors. Please go ahead.
Thank you operator, and good morning, everyone. We appreciate you joining us for the spar groups conference call to review second quarter results for 2022.
Speaker 2: Thank you operator and good morning everyone. We appreciate you joining us for the SPAHR groups conference call to review second quarter results for 2022. Joining me on the call today are SPAHR's chief executive officer Mike Matakounis and the company's chief financial officer, David.
Joining me on the call today are sparse Chief Executive Officer, Mike Maddox, Phineas and the company's Chief Financial Officer, Peter Breese.
Speaker 2: This call is also being webcast and can be accessed through the audio link on the events and presentations page of the investor relations section at investors.spaarinc.com.
This call is also being webcast and can be accessed through the audio link on the events and presentations page of the Investor Relations section at Investor start sparring Dot com.
Speaker 2: Information recorded on this call speaks only as of today, August 16, 2020.
Information recorded on this call speaks only as of today August 16th 2022.
Speaker 2: So please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements or expectations or future events or future financial performance are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Be advised that.
Any time sensitive information may no longer be accurate as of the date of any replay or transcript reading I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements or expectations or future events or future financial performance are forward looking statements.
Made pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Speaker 2: Forward-looking statements by their nature are uncertain and outside of the company's control. Actual results may differ materially from those expressed or implied.
Forward looking statements by their nature are uncertain and outside of the company's control actual results may differ materially from those expressed or implied.
Speaker 2: Please refer to the earnings press release that was issued today for our disclosures on forward looking statements.
Please refer to the earnings press release that was issued today for our disclosures on forward looking statements. These factors and other risks and uncertainties are described in detail in the company's filings.
Speaker 2: These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management may also refer to non-GAAP financial measures and the reconciliations to the nearest GAAP measures can be found at the end of our earnings release.
With the Securities and Exchange Commission management May also refer to non-GAAP financial measures and a reconciliation to the nearest GAAP measures can be found at the end of our earnings release.
Speaker 2: SPAR groups assumes no obligations to publicly update or revise any forward-looking state.
Our group's assumes no obligations to publicly update or revise any forward looking statements. Finally, the earnings press release, we issued earlier today as supposed to as on the Investor Relations section of our website Spar, Inc. Dot com.
Speaker 2: Finally, the earnings press release we issued earlier today is posted on the investor relations section of our website, sparinc.com. A copy of the release has also been included in an 8K submitted video.
A copy of the release has also been included in an 8-K submitted to the SEC and now I would like to turn the call over to the company's CEO , Mike It's Mike.
Speaker 2: And now I would like to turn the call over to the company's CEO , Mike Matakounis.
Speaker 3: Thank you, Philip, and good morning, everyone. I am pleased to share our second quarter results and comment on a number of exciting achievements and work that is underway at SPAR.
Thank you Philip and good morning, everyone I am pleased to share our second quarter results.
Comment on a number of exciting achievements and work that is underway that's far.
At the end of our prepared remarks today, we will open the line for questions from analysts and institutional investors.
Speaker 3: At the end of our prepared remarks today, we will open the line for questions from analysts and institutional investors.
We filed our second quarter 10-Q yesterday and this morning distributed our earnings press release.
Speaker 3: We filed our second quarter 10-Q yesterday and this morning distributed our earnings press release.
Total revenue for the second quarter was $68 million.
Speaker 3: Total revenue for the second quarter was $68 million.
This reflects a 1% increase year over year.
Speaker 3: This reflects a 1% increase year over year. As a reminder, we'll report in three segments, Americas, EMEA, and Asia Pacific or APAC. I will comment on each one individually.
Reminder, we report in three segments Americas.
In Asia Pacific or APAC, I will comment on each one individually.
Speaker 3: Our Americas segment reported a record revenue of $53.3 million, an increase of $3.9.
Our Americas segment reported a record revenue of $53.3 million, an increase of three 9%.
Speaker 3: Within this segment, the United States Division grew by 16% and delivered a record $31.6 million in revenue.
Within this segment the United States Division grew by 16%.
And delivered a record $31 6 million in revenue.
Our core merchandising services business grew by 27% in the second quarter with the addition of new clients.
Speaker 3: Our core merchandising services business grew by 27% in the second quarter with the addition of new clients. Our resets and remodels business in the United States has increased our client portfolio by 30% year over year and is now operating in multiple countries.
Research and Remodels business here in the United States has increased our client portfolio by 30% year over year and is now operating in multiple countries.
Speaker 3: Our Brazil joint venture revenue grew by 25% in the second quarter as we won new business and expanded client agreements.
Our Brazil joint venture.
You grew by 25% in the second quarter, as we won new business and expanded client agreements.
Speaker 3: In addition, we measure the satisfaction of our clients in Brazil and all of them continue to have excellent scores demonstrating the value of our services and relationships.
In addition, we measure the satisfaction of our clients in Brazil, and all of them continue to have excellent scores demonstrating the value of our services and relationships.
Speaker 3: Our EMEA segment representing our joint venture in South Africa delivered revenue of $9.1 million, an increase of 7.2% over the prior year.
Our EMEA segment, representing our joint venture in South Africa delivered revenue of $9 1 million, an increase of seven 2% over the prior year.
Speaker 3: We want new clients, we need large multi-year agreements and increase the net income by $211.
One new clients, we need large multiyear agreements and increased net income.
211%.
Our Asia Pacific segment revenue was $5 4 million.
Speaker 3: Our Asia-Pacific segment revenue was $5.4 million.
Speaker 3: This was a decline of approximately 2 million, or 27% in our APAC segment.
This was a decline of approximately $2 million or 27% and our APAC segment.
Speaker 3: 1.6 million of this was due to the 60-day pandemic lockdown in China.
One $6 million of this was due to the 60 day pandemic locked out in <unk>.
China.
Speaker 3: While the top line impact was relatively minor, we carried expenses during the lockdown per the government mandate.
While the top line impact was relatively minor we carried expenses during the lockdown for the government.
Mandate.
Speaker 3: Perhaps another way to look at the second quarter revenue for us is without the lockdown in China and our cycling of the labor law change in Mexico that we noted in 2021, revenue would have grown by more than 10%. With a strong revenue performance, the
Perhaps another way to look at the second quarter revenue for us is without the lockdown in China, and our cycling of the Labor law change in Mexico that we noted in 2021.
Revenue would have grown by more than 10%.
With a strong revenue performance, let's turn our attention to gross margin or.
Speaker 3: Our second quarter gross margin grew to a solid 19.1% compared to 17.9% last year. This reflects 120 basis point improvement on a consolidated basis.
Our second quarter gross margin grew to a solid 19, 1% compared to 17, 9% last year.
Flex is 120 basis point improvement on a consolidated basis.
Speaker 3: our America segment, which represents 79% of the total business in the second quarter. Improved gross margin by 260 basis.
Our American segment, which represent 79% of the total business in the second quarter.
Improved gross margin by 260 basis points.
Speaker 3: This is the result of our continued focus on pricing, merchandise, productivity, and internal leverage.
This is the result of our continued focus on pricing merchandise or productivity and internal leverage.
Speaker 3: Our EMEA segment reported 120 basis point improvement in gross margins while continuing to grow.
Our EMEA segment reported 120 basis point improvement in gross margins, while continuing to grow.
Speaker 3: I've communicated over the last few quarters that we are focused on gross profit. I am pleased with the results to date. I believe there is more opportunity to improve margins and we will continue our pursuit of them.
I have communicated over the last few quarters that we are focused on gross profit I am pleased with the results to date I believe there is more opportunity improve margins and we will continue our pursuit of this.
Relative to the net income we reported a net income of 1.15 million.
Speaker 3: Relative to the net income, we reported a net income of 1.15 million.
Speaker 3: This is an increase of 123% over the prior year. The improvement is both the result of our improved profitability and the increase in attributable net income to our wholly owned business.
This is an increase of 123% over the prior year improved.
The improvement is both the result of our improved profitability and the increase in attributable net income to our wholly owned business in.
Speaker 3: In total, our business is growing. Of course, margins have improved, our consolidated net income is up, and our pipeline is strong. After Faye covers the detailed financial...
In total our business is growing.
Our gross margins have improved our consolidated net income is up and our pipeline is strong.
After he covers the detailed financial results for second.
Speaker 3: I will come back and share key strategic wins and then speak about my view on our opportunity pipeline and progress. I will come back and share key strategic wins and progress.
Half of 2022.
We'll come back and share key strategic wins, and then speak about my view on our opportunity pipeline and progress.
Speaker 3: With that, I will turn the call over to Faye DeBries, our Chief Financial Officer, to review our results. Thanks for watching.
With that I will turn the call over to fade to Bruce our Chief Financial Officer to review our results.
Speaker 4: Thank you, Mike, and good morning, everyone. As we noted last quarter, we changed our second reporting to better align the business with the company's growth strategy.
Thank you, Mike and good morning, everyone. As we noted last quarter, we changed our segment reporting to better align the business with the company's growth strategy.
Speaker 4: effective January 1, 2022, we operate under three segments, America's, APAC, and EMEA. America's is comprised of the United States, Canada, Mexico, and Brazil. APAC is comprised of China, Japan, Australia, and India. And finally, EMEA is comprised of South Africa.
Jimmy first 2022 we operate under three segments America, APAC and EMEA and Merit class comprised 90 States, Canada, Mexico, and Brazil, APAC is comprise of China, Japan, Australia, and India, and finally EMEA it's come.
The South Africa now.
Now turning to our financial results second quarter 2022 net revenues totaled $67 $8 million, which included $53 $3 million from the America Knight point of $1 million from them Yeah.
Speaker 4: Now, turning to our financial results. Second quarter 2022, net revenue totaled $67.8 million, which included $53.3 million from the Americas, $9.1 million from EMEA, and $5.4 million from APES.
$5.4 million from APAC.
Speaker 4: As Mike mentioned, the strength of our future revenues were adversely impacted by the lockdowns in the apex sector.
As Mike mentioned, the strength of our Q2 revenues were adversely impacted by the Lockdowns in the apex segment.
Speaker 4: Compared to the prior year quarter, consolidated revenues increased by just 0.9%. However, the Americas increased by 3.9%, EMEA grew by a strong 7.2%, and weakness in APEC revenues almost completely offset growth in the other segments, down 27.2%.
Compared to the prior year quarter consolidated revenues increased by just plain night person. However, the Americas increased by three nine Christian.
Yeah Goodbye, a strong seven 2% and weakness in APAC revenues almost completely offset growth in the other segment down 27.2%.
Speaker 4: Commenting briefly on the American segment, the increase in revenues were driven by momentum in our U.S. merchandising business and expansion in Canada from reset and remodeling projects, offset somewhat by labor regulation change in Mexico during the third quarter of 2021.
I'm going to briefly Onvia married homes segment. The increase in revenues was driven by momentum in our U S merchandising business and expansion in Canada from a lease that there'll be modeling project offset somewhat by labor regulation change in Mexico, you in third quarter up 2021.
We also had solid revenue growth in EMEA.
Speaker 4: We also had solid revenues growth in EMEA. Organic growth contributed 7.2% along with a small acquisition last year that we cycled in July . The downward pressure from APAC was due entirely to pandemic related lockdowns in both China and Japan.
Again, he grill contributed seven 2% along with a small acquisition last year that we cycle in July .
The downward pressure from APAC was due entirely to pandemic related lockdowns in both China and Japan.
Well its profit was $12 $9 million or 19.1% of revenue compared favorably to $12 million or 17, 9% of revenues in the prior year quarter gross profit margin increased by 120 basis points due to strength in BMS.
Speaker 4: Gross profit was $12.9 million or 19.1% of revenues. Compare favorably to $12 million or 17.9% of revenues in the prior year quarter.
Speaker 4: Growth profit margins increased by 120 basis points due to strength in the Americas up to 160 basis points and the mean up to 120 basis points are largely offset by the APEC's negatively impacted margins by 750 basis points due to the prolonged pandemic.
Cuz up 260 basis points and the media.
120 basis points are largely offset by the APAC negatively impacted margins by 750 basis points due to the prolonged pinned down exactly.
Speaker 4: Margin improvements were due to initiatives both in the U.S. and the media, as well as favorable mischief in Brazil.
Margin improvement was due to initiatives both in the U S and EMEA as well as favorable mix shifts in Brazil.
Speaker 4: selling, general, and administrative expenses were $10.1 million or 14.9% of revenues compared to $9.6 million or 14.3% of revenues in the prior year quarter.
Selling general and administrative expenses with pinpoint $1 million or 14.9% of revenues compared to $9 $6 million or 14, 3% of revenues in the prior year quarter.
Speaker 4: The increase from the prior year quarter was the result of additional expenditures needed to normalize operations following the pandemic versus the same period prior year, as well as continued investments in the growth.
Increased from the prior year quarter was the result of additional expenditures needed normalized operation following the pandemic versus the same period prior year as well as continued investments in the Codell.
Speaker 4: Operating income was $2.4 million versus $1.9 million from the prior year quarter, which resulted in operating leverage of 70 basis points primarily driven by strong growth profits.
Operating income was $2 $4 million versus one $9 million from the prior year quarter, which resulted in operating leverage of 70 basis points, primarily driven by strong gross profit.
Net income attributable to Spar Group, Inc was $121 million for five cents per share compared to $514000 or two cents per share in the year.
Speaker 4: Net income attributable to Spark Group Inc. was $1.1 million for 5 cents per share compared to $514,000 or 2 cents per share in the year-ago quarter. Adjusted net income attributable to Spark Group Inc. in the quarter was $1.3 million or 6 cents per share compared to $714,000 or 3 cents per share in the year-ago quarter.
Quarter.
Adjusted net income attributable to Spar Group, Inc. In the quarter was $1 $3 million was six cents per share compared to $714000 or three cents per share in the year ago quarter.
Speaker 4: Consolidated adjusted ETA in the 2022 second quarter was $3 million compared to $2.7 million in the prior year.
Consolidated adjusted EBITDA in the 2022 second quarter was $3 million compared to $2 $7 million in the prior year after adjusting for the non controlling interest adjusted EBITDA attributable to the Spar Group Inc. In the 2022 second quarter was two points.
Speaker 4: After adjusting for the noncontrolling interest, adjusted EBITDA attributable to Spark! Inc. in the 2022 second quarter was $2.1 million compared to $1.8 million in the prior year.
$1 billion compared to $1.8 million in the prior year you can find the GAAP to non-GAAP reconciliation of management's financial measures at the end of today's press release.
Speaker 4: you can find the gap to non-GAAP reconciliation of management financial measures at the end of today's press release.
First half with the 2022 results total revenues were $126 $8 million down 1% year ago period.
Speaker 4: First half of the 2022 results, total revenue was $126.8 million, down 1% from the year-ago period.
Year to date strength, but this segments plus in EMEA with revenue up 13% and totaled $18.3 million first half revenues for the Americas was $196.3 million flat versus last year, and APAC reported revenues of $12 $2 million.
Speaker 4: The first half revenues for the Americas were $96.3 million, slats versus last year, and APAC reported revenues of $12.2 million, down 22% compared to the year-ago period.
Down 22% compared to the year ago period.
Explanations and quarterly results also apply to first half results.
Speaker 4: Gross profit for the first half of 2022 was $24.8 million, or 19.1% of revenues, compared favorably to $24.3 million, or 18.9% of revenues in the prior year period.
Gross profit for the first half of 2022 was $24.8 million or 19.1% of revenue.
Pier favorably to $24 3 million or 18.9% of revenues in the prior year period.
Speaker 4: Gross profit margins increased by 20 basis points due to strength in the Americas up 120 basis points and EMEA up 210 basis points due to successful margin improvement action and favorable miss shift in certain markets.
Gross profit margins increased by 20 basis points due to the strength India married.
Mm 120 basis points and EMEA up 210 basis points do you just a sense of what margin improvement actions and favorable mix shifts in certain markets. Despite this trend APAC negatively impacted margins by 380 basis points due to the pandemic lockdown.
Speaker 4: Despite the strength, APAC negatively impacted margins by 380 basis points due to the pandemic lockdown throughout the period.
Throughout the period.
SG&A expenses were $19.3 million or 15, 3% of revenues compared to $18.6 million or 14, 5% of revenues in the prior year first half of 2020 two.
Speaker 4: SG&A expenses were $19.3 million, or 15.3 percent of revenues, compared to $18.6 million, or 14.5 percent of revenues in the prior year first half of 2022, primarily due to rebound of business from dependence.
Merrily deal to reap out of business from the pandemic.
Speaker 4: Operating income was $4.4 million, or 3.5%, versus $4.6 million, or 3.6% in the year-ago period, resulting in operating leverage for the first half of 2022.
Operating income was $4.4 million or three 5% versus $4 $6 million or three 6% in the year ago period, resulting in operating leverage for the first half of 2022 plus.
Speaker 4: For the first six months, net income attributable to SPAR for pink was $1.8 million, so 8 cents per share compared to $1.4 million or 7 cents per share in the year-ago period.
The first six months net income attributable to Spar group, Inc was $1.8 million or eight cents per share compared to $1 $4 million or seven cents per share in the year ago period is.
Speaker 4: excluding the non-controlling interest, adjusted net income attributable to Spark Group Inc. was $1.7 million dollars or 8 cents per share compared to $1.8 million dollars or 8 cents per share in the year-ago period.
Excluding the Noncontrolling interest.
Net income attributable to Spar group, Inc was $1.7 million or eight cents per share.
$1.8 million or <unk> per share in the year ago period.
Speaker 4: consolidated adjusted EBITDA for the first half of 2022 with $5.4 million compared to $6.2 million in the prior year.
Adjusted EBITDA for the first half of 'twenty, 'twenty, two with $5.4 million compared to six $2 million in the prior year.
Speaker 4: excluding the non-controlling interest, adjusted EBITDA attributable to Spark Group Inc. was $3.6 million compared to $4.2 million in the prior year. You can find the gap to non-gabler reconciliation of management's financial measures at the end of today's press release.
Excluding the non controlling interest adjusted EBITDA attributable to Spar Group, Inc was $3 $6 million compared to $4.2 million in the prior year.
You can find the GAAP to non-GAAP reconciliation of management's financial measures at the end of today's press release.
Speaker 4: Turning now to Sparkroom's financial position, cash flow and balance sheet at the end of second quarter.
Turning now to start doing financial position cash flow and balance sheet at the end of second quarter.
Speaker 4: The company's total worldwide liquidity at the end of second quarter was $16 million, with $12.4 million in cash, cash equivalents, and restricted cash, and $3.3 million of unused availability as of June 30, 2022.
The company's total worldwide liquidity.
And the second quarter was $16 million with $12 $4 million in cash cash equivalents and rich.
Stripped of cash and $3 $3 million and use of availability as of June 30th 2022.
Speaker 4: The company's working capital as of June 30th was $23 million, and the accounts receivable balance was $64 million.
The company's working capital as of June 30, it was $23 million and accounts receivable balance was $64 million spot balance sheet remains strong.
Speaker 4: the stock market balance year remains strong. With the six months ended June 30th, 2022, Netcash, using operating activities, with $3.5 million impacted by changes in working capital, primarily due to lower accounts payable and the crude liability balances, and capital expenditures, including capitalized software with $794,000.
For the six months ended June 30th 2022, net cash using operating activities was $3 five mailing badly impacted by changes in working capital.
Due to lower accounts payable and accrued liabilities balances and capital expenditures, including capitalized software was $794000.
Speaker 4: On May 24, 2022, the board authorized a 500,000 shares buyback program for Spark Group Inc. And today, 74,000 shares have been repurchased. With that, I would like to turn it back to my...
On May 24th 2022, the board authorized a 500000 shares buyback program with Spar Group, Inc. And today 74000 shares have been repurchased.
With that I would like to turn it back to Mike.
Thank you thanks.
Speaker 3: I am pleased with the financial results, but I'm really enthusiastic about our moment.
I am pleased with the financial results, but I'm really enthusiastic about our momentum.
Speaker 3: We've developed a pipeline that is two times greater than it was last year.
We've developed a pipeline that is two times greater than it was last year at this time we have.
Speaker 3: We have won several new multi-million dollar agreements, including our first large multi-million dollar win in the distribution staffing services business that I announced we were entering only nine months ago. And our focus on margins can be seen as a
Several new multimillion dollar agreements, including our first large multimillion dollar win in the distribution staffing services business.
<unk>, we were entering only nine months ago.
Our focus on margins continues to produce results.
Speaker 3: We want our first large remodel project in Canada that has opened up a pipeline that is 100% greater than the total value of our Canada business.
When our first large remodel projects in Canada that has opened up a pipeline.
100% greater than the total value of our Canada business today.
Speaker 3: We've continued our push into advanced analytics, leveraging our low cost structure in India, completed a global rebranding effort and more.
We've continued our push into advanced analytics, leveraging our low cost structure in India completed a global rebranding effort and more.
Speaker 3: Our clients are turning to us for more work and expertise in one example.
Our clients are turning to us for more work and expertise in one example.
Speaker 3: a large multinational retailer, recognize our expertise in recruiting and hiring talent in Mexico.
A large multinational retailer recognize our expertise in recruiting and hiring talent in Mexico.
Speaker 3: while we continue to provide merchandising and marketing services across all of Mexico.
While we continue to provide merchandising and marketing services across all of Mexico.
Speaker 3: This client asked us to help them recruit on a national scale.
This client asked us to help them recruit on a national scale.
Speaker 3: This enabled us to overachieve on our internal plan for Mexico and position us for more growth. This is not the exception. We are seeing more clients turn to us as they...
It's enabled us to overachieve on our internal plan for Mexico and position us for more growth.
This is not the exception.
We are seeing more clients turn to us as they struggled to find people.
Speaker 3: The great resignation has impacted retailers and consumer goods companies worldwide. For SPAR, we rolled out bot technology, text-to-hire, daily pay programs to empower people with their money, and most recently expanded with a casting application to increase the number of applicants by 600%.
The great resignation as impacted retailers and consumer goods companies worldwide course bar, we rolled out bot technology text, a higher daily pay programs to empower people with their money and most recently <unk>.
Spending with a casting application to increase the number of applicants by 600% since this time last year.
Speaker 3: We turned our focus on this challenge last year and it is really beginning to pay off. We hired more people in the second quarter than the company has ever hired in a single quarter.
We turned our focus on this challenge last year and it is really beginning to pay off.
Hired more people in the second quarter than the company has ever hired in a single quarter.
Speaker 3: Clients are also asking us to take a larger share of the pie. One large consumer goods manufacturer was unhappy about the merchandising service provider. They were required to use in a large discount retail chain. They reached out to us to ask if we could.
Clients are also asking us to take a larger share of the pie one large consumer goods manufacturer was unhappy about the merchandising service provider. They were required to use in a large discount retail chain they reached out to us.
Ask if we could help.
Speaker 3: working with the CPG executive, we created a program to improve the presentation of their product and we are now in 50% of this large retailer's locations instead of the other provider. To be clear, this means we are now working in thousands of locations that we were not in at the beginning of this year.
Working with the CPG executive we created a program to improve the presentation of their product and we are now at 50%. This large retailers locations instead of the other provider to be clear. This means we are now working with thousands of locations that we were not in the beginning of this year.
Again, not the exception, we recently completed a cosmetics reset and a general merchandise and pharmacy retailer with thousands of locations as you may know cosmetics or specialty to spark is a challenging and time intensive program to reset cosmetics on the retail shelf.
Speaker 3: Again, not the exception. We recently completed a cosmetics reset in a general merchandise and pharmacy retailer with thousands of them.
Speaker 3: As you may know, cosmetics are a specialty to SPAR. It is a challenging and time-intensive program to reset. Cosmetics on the retail sh-
Speaker 3: Because of our relationship with the retailer, we were asked to take on this work valued at more than $1 million from one of our competitors. And we completed it with high client satisfaction.
Cause of our relationship with the retailer we were asked to take on this work valued at more than $1 million from one of our competitors and we completed it with high client satisfaction scores.
Speaker 3: As a result, they've asked us to plan a continuing this into 2023.
As a result, they've asked us to plan of continuing that into 2023.
Speaker 3: more than taking a larger share of the pie, our clients and prospects are asking us to provide expanded services.
We're then taking a larger share of the pie or clients or prospects are asking us to provide expanded services.
Speaker 3: and all of my recent trips to Japan, Brazil, Canada, I spend the majority of my time with clients. We talk about market conditions, P&L challenges and strategy, but we also talk about doing more to enable their business to succeed.
All of my recent trips to Japan, Brazil, Canada, I spend the majority of my time with clients, we talk about market conditions P&L challenges in strategy, but we also talk about doing more to enable their business to succeed.
Speaker 3: The result is that we are constantly piloting progressive and innovative ideas with clients that have the potential to disrupt the marketplace and drive tremendous growth. In one example, we are piloting the use of crowd-sourced store images to identify sales and promotion opportunities for our clients.
The result is that we're constantly piling piloting progressive and innovative ideas with clients that have the potential to disrupt the marketplace and drive tremendous growth and one example, we are piloting the use of Crowdsourced store images identified sales and promotion opportunities for our clients.
Speaker 3: We use an application review pictures taken in remote locations to determine if our client can be better served. The idea is simple. If their product is not on the shelf or presented poorly, we can take action.
We use an application review pictures taken in remote locations to determine if our clients can be better served the idea is simple if their product is not on the shelf will presented poorly we can take action.
This approach to virtual merchandising services has the potential to disrupt the traditional broker model that has developed over the last 30 years. If we can provide our clients insights to every store in every channel we can drive their sales profits inefficiencies.
Speaker 3: This approach to virtual merchandising services has the potential to disrupt the traditional broker model that has developed over the last 30 years. If we can provide our clients insights to every store and every channel, we can drive their sales, profits, and efficiency.
Speaker 3: This is only one of the programs we are piloting. I believe in Test and Learn and I want SPAR on the forefront of changing the industry.
This is only one of the programs we are piloting I believe in test and learn and I once bar on the forefront of changing the industry.
Speaker 3: Looking forward, we recognize the larger economic challenges facing the consumer goods and retail.
Looking forward, we recognize the larger economic challenges faced in the consumer goods and retail markets governments are enacting programs to combat regional inflation. We're all hearing about consumer confidence on a daily basis on the news and the interest rates are rising.
Speaker 3: Governments are enacting programs to combat regional inflation. We're all hearing about consumer confidence on a daily basis on the news and the interest rates are rising. Make it more expensive for our clients who are carrying debt. From my chair, this presents an opportunity for SPAR.
Make it more expensive for our clients who are carrying debt.
From my Chair this presents an opportunity for spot.
Speaker 3: Based on our relationships with some of the best companies in the world, such as Reca Penkieser, Motorola, Walmart, Dollar Tree, Nivea, Cargill, McKesson, Home Depot, and many, many more. We are perfectly positioned to hire fast.
Based on our relationships with some of the best companies in the world such as Reckitt Benckiser, Motorola Walmart dollar tree Nivea, Cargill, Mckesson home depot and many many more we are perfectly positioned to hire faster.
Speaker 3: execute more efficiently, share costs across locations, and provide them leverage on their P&L. We bring ideas, we have experienced resources, we provide advanced technology, and we enable them to transform relative to our future opportunities.
Execute more efficiently sheer cost across locations should provide some leverage on their P&L. We bring ideas. We have experienced resources, we provide advanced technology and we enable them transform.
Relative to our future opportunity, it's far our pipeline is excellent as it is.
Speaker 3: As a reminder, most of our client agreements are for a year or potentially longer.
A reminder, most of our client agreements are for a year or potentially longer.
Speaker 3: In the second quarter, we closed more than $10 million of net new business across the company, and our pipeline is valued well over $100 million US.
In the second quarter, we closed more than $10 million of net new business across the company and our pipeline is valued well over $100 million U S.
The majority of this pipeline is net new in addition to our ability to renew and extend our current agreements.
Speaker 3: The majority of this pipeline is net new in addition to our ability to renew and extend our current
Speaker 3: As I hope you can censor my comments, I am bullish on our future in the work ahead.
As I hope you can sense from my comments I am bullish on our future and the work ahead we.
Speaker 3: We have a great team, incredible clients and significant opportunity. The future is bright. With that, I'd like to open the line for questions. Operator. We will now begin.
We have a great team incredible clients and significant opportunity for future is bright.
With that I'd like to open the line for questions operator.
We will now begin the question and answer session.
Speaker 1: To ask a question, you may press star then one on your telephone keypad.
To ask a question you May press Star then one on your telephone keypad.
Speaker 1: If you are using a speakerphone, please pick up your handset before pressing the key.
If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Speaker 1: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
At this time, we will pause momentarily to assemble our roster.
Speaker 1: Our first question is from Theodore O'Neill with Litchfield Hills Research. Please go ahead.
Our first question is from Theodore O'neill with Litchfield Hills Research. Please go ahead.
Speaker 3: Thank you very much. My first question is about the labor law change in Mexico. I understand you've talked about this in a previous quarter, but is this related to the change in personal outsourcing and subcontracting last year or is it something else?
You very much.
My first question is about the labor law changed in Mexico, I understand you've talked about this in the previous quarter, but is this related to the change in personal outsourcing and some contracting last year or is it something else.
See you. Thank you for the question good morning, Yeah.
Speaker 3: Theo, thank you for the question. Good morning. Yes, it's a law that was enacted by the federal government in Mexico mid spring in 2021 that effectively says if the work being done in your store is the same as the other work being done in your store, meaning it's a basic function for your business, then you must do it yourself.
Yes, it's a law that was enacted by the federal government in Mexico.
Mid spring in 2021.
Effectively says if the the work being done in your store is the same as the other work being done in your store, meaning it's a basic function for your business then you must do it yourself.
And we were a large merchandising services provided to a multinational retailer and we were in thousands and thousands of locations in Mexico and as a result of that labor law change they were required to bring that work in house.
Speaker 3: And we were a large merchandising services provider to a multinational retailer and we were in thousands and thousands of locations in Mexico. And as a result of that labor law change, they were required to bring that work in.
Speaker 3: So I appreciate the question. It's not something that we have a great influence on, and we will be cycling a little more of it this third quarter, but then it will be behind us.
So I appreciate the question, it's not something that we have a great influence on and we will be cycling a little more of it this third quarter, but then it will be behind us soon okay.
Speaker 2: My other question is, can you address the rise in accounts receivable? Your quarterly revenue from Q4 to Q2 is up 6 million, but the AR is up 9 million. And I understand this is due to strength in Brazil and South Africa, so could you give us a little more detail on that, please? Yes.
My My other question is can you address the rise in accounts receivable.
Quarterly revenue from Q4 to Q2 was up $6 million, but the AUR was up $9 million and I understand this is due to strength in Brazil, and South Africa. So could you give us a little more detail on that please.
Yeah, Hey would you mind, maybe sharing a little more detail.
Sure.
Speaker 4: Sure. You know, so the receivable has grown in the American segment in general. You know, however, there is a DSO issue on the—because of the China pandemic, that did remain on receivable balance for a little bit longer than we have expected. So, it was—DSO was impacted by China.
So the receivable has grown in the Americas segment in general now however, there is oh, yeah. So issue Andi am just slip because of China pindan make bad debt you would mean to a receivable balance for a little bit longer than we had expected play with DSO was impacted by churn.
Speaker 2: Okay, thanks very much. Yeah, Theo, if I could put a fine point on that. The payment terms in China are traditionally very long. As we were required to stop work, the AR continued to build. Now we're back to work and frankly double the time of our payments from our clients in China. But as you know, that's a very small piece of our business. Great question.
Okay. Thanks very much.
Yeah. Thank you if I could put a fine point on that.
Payment terms in China are traditionally very long.
And as we were required to stop work the a or continued to build.
And now we're back to work in.
Frankly double the time of our payments from our clients in China, but as you know that's a very small piece of our business, but great question. Thank you.
Thank you very much.
Again, if you have a question. Please press Star then one please standby as we poll for questions.
Speaker 1: Again, if you have a question, please press star then 1. Please stand by as we poll for questions.
Speaker 1: Our next question is from Michael K. with K Associates. Please go ahead.
Our next question is from Michael Kay with Kay Associates. Please go ahead.
Speaker 5: Thank you gentlemen and congratulations on the excellent quarter. Unlike many companies that were negatively impacted by inflation and higher labor costs, it seems that...
Thank you gentlemen.
Congratulations on the excellent quarter. Unlike many companies that were negatively impacted by inflation.
Your labor cost it seems that.
Speaker 5: SPAR was not, and I thought if you'd elaborate on that. And also, it's really a nice little company, and I was wondering what, if anything, are you doing to publicize a company to both retail and institutional investors?
As far was not.
I thought if you could elaborate on that and also.
It's really a nice little company and I was wondering what what if anything are you doing to publicize that company to both retail and institutional investors.
Thank you very much.
Speaker 3: Thank you, Michael. Good morning. Thank you for your question. A couple comments on the impact of rising wages, as we know that's happening in almost all of the countries around the world. For us, the first is that we don't pay a low wage. So, we're already paying a very competitive wage in the business we're operating.
Thank you Michael Good morning, Thank you for your question.
A couple of comments on the impact of rising wages as we know that's happening and almost all of the countries around the World Trust. The first is that we don't pay a low wage. So we're already paying a very competitive wage and the business. We're operating so while you're watching a 5% I think it was a little over 5%.
Speaker 3: So while you're watching a 5%, I think it was a little over 5% increase in the middle of the second quarter. That's not a wage that directly impacts.
Increase in the middle of the second quarter, that's not a wage that directly impacts us.
Speaker 3: Our improvement in gross profit has a lot more to do with our focus on contract pricing, long-term agreements, competitive pricing, and frankly doing work in more profitable parts of the business like resets and remodels in some cases. All of those are contributing to our improvements in gross profit.
The improvement in gross profit has a lot more to do with our focus on contract pricing long term agreements competitive pricing and frankly doing work in more profitable parts of the business like research and Remodels in some cases all of those are contributing to our improvement in gross profit.
Speaker 3: pausing thinking about your second question. Oh, what are we doing to gain exposure? Thank you for that. We actually have engaged the research...
I'm pausing and thinking about your second question Oh, what do we what are we doing to gain exposure for that we're actually have engaged the research.
Speaker 3: analyst, outside firm to begin to get more coverage so that could be shared more broadly.
List firm outside for them to begin to get more coverage.
That could be shared more broadly with institutional investors.
Speaker 3: investors in particular. I'll be presenting and have presented recently at a virtual conference. I'll be presenting at a conference for analysts in Chicago on the 24th of this month.
Investors in particular.
Be presenting and have presented recently at a virtual conference I'll be presenting at a conference for analysts in Chicago on the 24th of this month.
Speaker 3: So continuing to put the time and energy behind getting exposure for the company.
So continuing to put put the time and energy behind getting exposure for the company because as I Hope you got from sensor my comments I agree with your point it is a.
Speaker 3: Because as I hope you get from censoring my comments, I agree with your point. It is a great small company.
Great small company that needs more exposure.
Speaker 5: And it seems there aren't too many other companies in this space. Is that correct?
And it seems there arent too many other companies in this space is that correct.
Yes, we are.
Speaker 3: Yes, we are uniquely positioned as a global company, meaning we're in nine countries. There are competitors that are regional. So there are companies in Brazil that we compete with in our Brazil business. There are companies in the US that we compete with for our US business. But we have been able to carve out a niche that's unique, and especially with the portfolio of services we're offering that makes us unique.
Our uniquely positioned as a global company anywhere in nine countries. There are competitors that are regional so there are companies in Brazil that we compete with in our Brazil business. There are companies in the U S. Do we compete with for our U S business.
But we have been able to carve out a niche that's unique and especially with the portfolio of services, we're offering that makes us different.
Speaker 5: Yes, that's very impressive. And do you give any guidance in terms of revenues and earnings for the future? We're not giving guidance at this point, Michael.
Yes, that's very impressive and the do you give any guidance in terms of revenues and.
Earnings for the future.
Where we're not giving guidance at this point Michael.
Thank you I really appreciate it and continued success.
Thank you.
Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to Mike Matakounis for any closing remarks.
This concludes our question and answer session I would like to turn the conference back over to Mike Medica in us for any closing remarks.
Well again, thank you for everyone, who listened and participated on today's call for your interest in the company.
Speaker 3: Well, again, thank you for everyone who listened and has participated on today's call for your interest in the company.
Speaker 3: As I just mentioned in the Q&A, we will be presenting to Bison investors at the Midwest Ideas Conference in Chicago on August 24th at 9.30am Central.
As I just mentioned in the Q&A, we will be presenting to by some investors at the Midwest ideas conference in Chicago on August 24th at 930, a M central.
Speaker 3: and we're also available for one-on-one meetings with investors that day. If you'd like to participate, please reach out to three-part advisors who would like to attend and potentially meet with us.
And were also available for one on one on one meetings with investors that day, if you'd like to participate please reach out to three part advisors, if you'd like to attend and potentially meet with us.
Speaker 3: And beyond that, I look forward to providing an update on our progress when we report third quarter results. Thank you.
And after beyond that and look forward to providing an update on our progress when we report third quarter results. Thank you for participating today.
Speaker 1: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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