SPAR Group, Inc. :SGRP-US: Earnings Analysis: Q4, 2016 By the Numbers : April 21, 2017

SPAR Group, Inc. reports financial results for the quarter ended December 31, 2016.

Highlights

  • Summary numbers: Revenues of USD 44.54 million, Net Earnings of USD 0.09 million.
  • Gross margins narrowed from 24.71% to 18.92% compared to the same period last year, operating (EBITDA) margins now 3.29% from 8.25%.
  • Change in operating cash flow of -270.44% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 44.54 33.44 29.73 26.61 32.28
Revenue Growth (%YOY) 38.01 18.29 0.9 -9.07 0.7
Earnings (mil) 0.09 -0.06 0.28 -0.14 1.03
Earnings Growth (%YOY) -91.54 36.96 875.86 -87.84 -61.61
Net Margin (%) 0.2 -0.17 0.95 -0.52 3.19
EPS 0 -0 0.01 -0.01 0.05
Return on Equity (%) 1.39 -0.94 4.69 -2.3 17.64
Return on Assets (%) 0.62 -0.46 2.58 -1.29 9.68

Access our Ratings and Scores for SPAR Group, Inc.

Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, SGRP-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if SGRP-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 33.21% and earnings by 250% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 24.71% to 18.92%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 8.25% to 3.29% in this time frame. For comparison, gross margins were 20.31% and EBITDA margins were 3.17% in the previous period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

SGRP-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 20.43 days from 43.92 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

SGRP-US‘s year-on-year change in operating cash flow of -270.44% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 6.73% to 1.85% and (2) one-time items that contributed to a decrease in pretax margins from 7.19% to 1.68%

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for SPAR Group, Inc.

Company Profile

SPAR Group, Inc. engages in the business of retail merchandising and field marketing. Its services help customers to improve their sales, operation and profits in the field of retail. The company offers merchandising and other marketing services to manufacturers, distributors and retailers worldwide, primarily in mass merchandisers, office supply, grocery, drug store, dollar, independent, convenience, toy, home improvement and electronics stores. It also provides furniture and other product assembly services, audit services, in-store events, technology services and marketing research. Product services relates to restocking and adding new products, removing spoiled or outdated products, resetting categories in accordance with client or store schematics, confirming and replacing shelf tags, setting new sale or promotional product displays and advertising, replenishing kiosks, providing in-store event staffing and providing assembly services in stores, homes and offices. Audit services include price audits, point of sale audits, out of stock audits, intercept surveys and planogram audits. Other merchandising services covers whole store or departmental product sets or resets (including new store openings), new product launches, in-store demonstrations, special seasonal or promotional merchandising, focused product support and product recalls. It operates through the Domestic Division and International Division segments. SPAR was founded by Robert G. Brown and William H. Bartels in 1967 and is headquartered in White Plains, NY.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of SGRP-US.