SPAR Group, Inc. (NASDAQ:SGRP) Q2 2023 Earnings Conference Call August 14, 2023 10:00 AM ET Company Participants Sandy Martin - IR, Three Part Advisors Michael Matacunas - CEO Antonio Calisto Pato - CFO Conference Call Participants Theodore O'Neill - Litchfield Hills Research Operator Good morning, and welcome to the SPAR Group Second Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After the today’s presentation, there will be an opportun ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the first quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from __________ to __________. Commission file number 0-27408 SPAR GROUP, INC. (Exact name of Registrant as specified in i ...

SPAR Group, Inc. (NASDAQ:SGRP) Q4 2022 Results Conference Call April 17, 2023 10:00 AM ET Company Participants Sandy Martin - Three Part Advisors Mike Matacunas - Chief Executive Officer Antonio Calisto Pato - Chief Financial Officer Conference Call Participants Theodore O'Neill - Litchfield Hills Research Operator Good morning and welcome to the SPAR Group's fourth quarter and full year fiscal 2022 earnings conference call. [Operator Instructions] Please note this event is being recorded. I'd now like to t ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to Commission file number 0-27408 SPAR GROUP, INC. (Exact name of registrant as specified in its charter) | Delaware | 33-0684451 | | --- | --- | | (State or other ...

[PART I: FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) This section presents the company's consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls [Item 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) For the nine months ended September 30, 2022, SPAR Group reported net revenues of **$196.6 million**, with net income attributable to the company decreasing to **$1.8 million** and total assets increasing to **$104.2 million**, while operating activities used **$4.2 million** in cash Consolidated Statement of Income Highlights (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Net Revenues** | $69,832 | $67,423 | $196,626 | $195,696 | | **Gross Profit** | $12,840 | $12,610 | $37,619 | $36,875 | | **Operating Income** | $1,720 | $2,675 | $6,143 | $7,282 | | **Net Income** | $900 | $2,139 | $3,969 | $5,052 | | **Net Income (Loss) Attributable to SPAR Group, Inc.** | $(32) | $1,180 | $1,789 | $2,611 | | **Diluted EPS** | $(0.00) | $0.06 | $0.08 | $0.12 | Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $86,308 | $72,026 | | **Total Assets** | $104,204 | $89,016 | | **Total Current Liabilities** | $61,577 | $50,206 | | **Total Liabilities** | $64,344 | $51,668 | | **Total Equity** | $39,860 | $37,348 | Consolidated Statement of Cash Flows Highlights (Nine Months Ended, in thousands) | Metric | Sep 30, 2022 | Sep 30, 2021 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $(4,162) | $1,119 | | **Net cash used in investing activities** | $(1,237) | $(2,432) | | **Net cash provided by financing activities** | $9,247 | $4,374 | | **Net change in cash and cash equivalents** | $(1,352) | $(672) | | **Cash, cash equivalents and restricted cash at end of period** | $12,121 | $15,300 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's segment operations, the financial impact of COVID-19 on China, significant related-party transactions, and an interim goodwill impairment test - The company operates under three segments: **Americas**, **Asia-Pacific (APAC)**, and **Europe, Middle East and Africa (EMEA)**[26](index=26&type=chunk) - The joint venture in China was negatively impacted by COVID-19 lockdowns in Q2 and Q3 2022, resulting in a net loss attributable to SPAR Group of **$348,000** for the nine-month period, compared to a net income of **$23,000** in the prior year[27](index=27&type=chunk) - The company entered into a Change of Control, Voting and Restricted Stock Agreement with its Majority Stockholders, with financial terms totaling **$4,477,585**, including the issuance of **2,000,000** shares of Series B Preferred Stock[50](index=50&type=chunk)[51](index=51&type=chunk)[54](index=54&type=chunk) - An interim quantitative assessment was performed on the goodwill and intangible assets of the Resource Plus reporting unit due to the loss of a significant customer and reduced forecasts. The company concluded that **no impairment was needed** as of September 30, 2022[75](index=75&type=chunk)[76](index=76&type=chunk) Segment Revenue (Nine Months Ended, in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Americas | $149,992 | $146,213 | | Asia - Pacific | $19,351 | $23,584 | | EMEA | $27,283 | $25,899 | | **Total Revenue** | **$196,626** | **$195,696** | Segment Operating Income (Nine Months Ended, in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Americas | $5,862 | $6,203 | | Asia - Pacific | $(1,491) | $(300) | | EMEA | $1,772 | $1,379 | | **Total Operating Income** | **$6,143** | **$7,282** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial performance, highlighting flat revenue, decreased profitability due to higher expenses, negative operating cash flow, and affirming sufficient liquidity [Results of Operations (Three Months Ended September 30, 2022)](index=26&type=section&id=Results%20of%20Operations%20(Three%20Months%20Ended%20September%2030%2C%202022)) Q3 2022 saw a **3.6%** net revenue increase driven by Americas growth, offset by APAC and EMEA declines, with increased SG&A expenses leading to lower operating income and a net loss Q3 2022 vs Q3 2021 Financial Performance (in thousands) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | **Net Revenues** | $69,832 | $67,423 | | **Gross Profit** | $12,840 | $12,610 | | **Operating Income** | $1,720 | $2,675 | | **Net Income (Loss) Attributable to SPAR Group, Inc.** | $(32) | $1,180 | - Americas net revenue increased by **$3.9 million (7.8%)**, primarily due to organic growth in the US and Brazil[113](index=113&type=chunk) - APAC net revenue decreased by **$0.8 million (9.8%)** due to COVID-19 effects in China and foreign exchange impacts in Japan[114](index=114&type=chunk) - SG&A expenses **increased year-over-year** due to planned investments in business development, marketing, technology, and one-time costs related to a strategic alternatives initiative[121](index=121&type=chunk) [Results of Operations (Nine Months Ended September 30, 2022)](index=28&type=section&id=Results%20of%20Operations%20(Nine%20Months%20Ended%20September%2030%2C%202022)) Nine-month net revenues remained flat, with Americas and EMEA growth offset by a significant APAC decline, while increased SG&A expenses led to reduced operating and net income Nine Months 2022 vs 2021 Financial Performance (in thousands) | Metric | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | **Net Revenues** | $196,626 | $195,696 | | **Gross Profit** | $37,619 | $36,875 | | **Operating Income** | $6,143 | $7,282 | | **Net Income Attributable to SPAR Group, Inc.** | $1,789 | $2,611 | - APAC net revenues decreased by **$4.2 million (17.9%)** primarily due to the continuing effects of COVID-19 in China and Japan[135](index=135&type=chunk) - EMEA net revenues increased by **$1.4 million (5.3%)** due to organic growth and the acquisition of Bordax in South Africa, partially offset by foreign exchange impact[136](index=136&type=chunk) [Critical Accounting Estimates](index=29&type=section&id=Critical%20Accounting%20Estimates) The company performed an interim goodwill impairment test on its Resource Plus unit, concluding no impairment was necessary despite a narrow fair value margin, noting future impairment is possible - The company performed an interim quantitative assessment for goodwill and intangible assets related to the Resource Plus reporting unit[156](index=156&type=chunk) - The results indicated the fair value of the reporting unit exceeded the carrying value by **2.3%** as of September 30, 2022, and no impairment was recorded[156](index=156&type=chunk) - Fair value determinations are sensitive to assumptions about future cash flows, discount rates, and growth rates, and **future impairment is possible** if expectations are not met[157](index=157&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company reported **$24.7 million** in net working capital and a **1.4** current ratio, with negative operating cash flow offset by financing activities, affirming sufficient liquidity for the next twelve months - Net cash used in operating activities was **$4.2 million** for the nine months ended Sep 30, 2022, a decrease from **$1.1 million** provided in the same period in 2021[160](index=160&type=chunk) - Net cash provided by financing activities was **$9.3 million**, primarily from net higher draws on lines of credit[164](index=164&type=chunk) - The company had net working capital of **$24.7 million** and a current ratio of **1.4** as of September 30, 2022[166](index=166&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, SPAR Group, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, SPAR Group, Inc. is not required to provide quantitative and qualitative disclosures about market risk[167](index=167&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls during Q3 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures **were effective** as of the end of the reporting period[168](index=168&type=chunk) - **No material changes were made** to the company's internal controls over financial reporting during the third quarter of fiscal year 2022[169](index=169&type=chunk) [PART II: OTHER INFORMATION](index=32&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, and exhibits filed with the report [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions arising in the normal course of business, which management believes will not have a material adverse effect on financial condition or results of operations - The company is a party to various legal actions arising in the normal course of business[172](index=172&type=chunk) - Management does not anticipate that the resolution of these matters will have a **no material adverse effect** on the company[172](index=172&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - There have been **no material changes** in the Company's risk factors since the Annual Report for the year ended December 31, 2021[174](index=174&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The report includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[183](index=183&type=chunk) - Inline XBRL Instance Documents and related taxonomy files are included as exhibits[183](index=183&type=chunk)

Financial Data and Key Metrics Changes - Total revenue for Q3 2022 was $70 million, reflecting a 4% increase year-over-year on a reported basis and a 7% increase on a constant currency basis [9][24] - Gross margin for Q3 was 18.4%, slightly down from 18.7% in the previous year [17][26] - Consolidated operating income was $1.7 million, down 35% from the same period last year [20][27] - Net loss attributable to SPAR Group Inc. for Q3 was $32,000 compared to a net income of $1.2 million in the year-ago quarter [28] Business Line Data and Key Metrics Changes - Americas segment reported record revenue of $53.7 million, an increase of 7.8%, with U.S. revenue growing by 13% to $32.5 million [11][30] - EMEA segment reported revenue of $8.9 million, down 7.3%, but up 8.3% on a constant currency basis [14][24] - APAC segment reported revenue of $7.1 million, a decline of 9.8%, with a slight improvement of 0.4% on a constant currency basis [15][24] Market Data and Key Metrics Changes - The Americas segment accounted for 77% of total business, while EMEA and APAC represented 14% and 10% respectively [17][30] - The APAC market, while making up approximately 10% of overall revenue, is considered immaterial to the bottom line [16] Company Strategy and Development Direction - The company is exploring strategic alternatives to maximize shareholder value, including potential mergers or divestitures [40] - SPAR Group is optimistic about business prospects, particularly in the retail sector, despite low consumer confidence and rising interest rates [41][42] - The company is focusing on expanding its merchandising services and leveraging technology to enhance operational efficiency [19][60] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are challenges from COVID lockdowns in China and Japan, these markets are not significant contributors to the bottom line [67][68] - The company remains focused on growing its top line and improving gross profits, with expectations of continued growth in the Americas [20][41] Other Important Information - The company repurchased 74,000 shares of common stock under its authorized share repurchase program [37] - SPAR Group has invested in resources to support distribution centers, with over 200 people working to fulfill online orders for the holiday season [53] Q&A Session Summary Question: Revenue acceleration in the Americas - Management indicated that the revenue growth is due to both market share gains and comparisons to lower COVID-impacted periods [66] Question: Impact of inflation and COVID lockdowns - Management confirmed ongoing impacts from COVID lockdowns in China and Japan, but emphasized that these are not large contributors to overall performance [67] Question: SG&A increases - Management expects some SG&A increases to continue into Q4, primarily due to strategic alternative process-related fees [69] Question: Current assets and liabilities - Management expressed confidence in the company's financial position, clarifying that the balance sheet reflects healthy operations [76][77] Question: Competition and visibility in the market - Management is actively working to increase visibility with Wall Street through investor relations efforts [78] Question: Revenue recognition from multibillion-dollar deals - Management explained that revenue from new contracts is recognized over time, typically quarterly, as services are rendered [84][88]

Financial Data and Key Metrics Changes - Total revenue for Q2 2022 was $68 million, reflecting a 1% increase year-over-year [8] - Net income was reported at $1.15 million, an increase of 123% compared to the prior year [15][22] - Gross margin improved to 19.1% from 17.9% in the previous year, representing a 120 basis point increase [13][20] Business Line Data and Key Metrics Changes - Americas segment revenue reached a record $53.3 million, up 3.9%, with the U.S. division growing by 16% [9][19] - EMEA segment revenue was $9.1 million, an increase of 7.2% year-over-year, with net income up by 211% [11][19] - APAC segment revenue declined by 27% to $5.4 million, primarily due to a 60-day pandemic lockdown in China [12][20] Market Data and Key Metrics Changes - The Americas segment accounted for 79% of total business, with significant growth in merchandising services [13] - EMEA showed strong organic growth of 7.2%, while APAC faced challenges due to pandemic-related lockdowns [20] - The overall consolidated revenues increased by just 0.9% due to the weakness in the APAC segment [19] Company Strategy and Development Direction - The company is focusing on margin improvement and has developed a pipeline that is twice as large as last year [33] - SPAR is expanding its services and leveraging advanced analytics to enhance client offerings [34][40] - The company aims to disrupt traditional models in the industry by providing innovative solutions and insights [39][42] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the economic challenges such as rising inflation and interest rates but sees these as opportunities for SPAR [41][42] - The company is well-positioned to hire faster and execute efficiently, leveraging strong relationships with major clients [42][43] - The pipeline is valued at over $100 million, with significant new business closed in Q2 [43][44] Other Important Information - The company authorized a share buyback program of 500,000 shares, with 74,000 shares repurchased to date [30] - Total worldwide liquidity at the end of Q2 was $16 million, with a strong balance sheet [29] Q&A Session Summary Question: About the labor law change in Mexico - The law requires that if work done in a store is the same as other work, it must be done in-house, impacting SPAR's operations [46] Question: Rise in accounts receivable - Accounts receivable increased due to longer payment terms in China, exacerbated by pandemic-related work stoppages [47][49] Question: Impact of inflation and labor costs - SPAR has not been negatively impacted by rising wages due to competitive pay and focus on profitable segments [52][53] Question: Company exposure to investors - SPAR is engaging research firms for more coverage and has been presenting at various conferences to increase visibility [54] Question: Guidance on future revenues and earnings - The company is not providing guidance at this time [56]

PART I: FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for SPAR Group, Inc [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents SPAR Group's unaudited condensed consolidated financial statements, including income, balance sheets, cash flows, and notes, for Q2 and H1 2022 [Condensed Consolidated Statements of Income and Comprehensive Income (Loss)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income%20(Loss)) This statement details SPAR Group's revenues, gross profit, operating income, and net income for the three and six months ended June 30, 2022 and 2021 Condensed Consolidated Statements of Income and Comprehensive Income (Loss) (In thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2022** | **2021** | **2022** | **2021** | | Net revenues | $67,799 | $67,176 | $126,794 | $128,273 | | Gross profit | $12,948 | $12,006 | $24,780 | $24,265 | | Operating income | $2,357 | $1,887 | $4,425 | $4,606 | | Net income | $1,613 | $1,132 | $3,068 | $2,913 | | Net income attributable to SPAR Group, Inc. | $1,149 | $514 | $1,821 | $1,431 | | Basic and diluted EPS | $0.05 | $0.02 | $0.08 | $0.07 | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of SPAR Group's assets, liabilities, and equity as of June 30, 2022, and December 31, 2021 Condensed Consolidated Balance Sheets (In thousands) | | June 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash, cash equivalents and restricted cash | $12,402 | $13,473 | | Total current assets | $81,807 | $72,026 | | Total assets | $100,217 | $89,016 | | **Liabilities and Equity** | | | | Total current liabilities | $58,932 | $50,206 | | Total liabilities | $60,275 | $51,668 | | Total equity | $39,942 | $37,348 | | Total liabilities and equity | $100,217 | $89,016 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement outlines SPAR Group's cash flows from operating, investing, and financing activities for the six months ended June 30, 2022 and 2021 Condensed Consolidated Statements of Cash Flows (In thousands) | | Six Months Ended June 30, | | :--- | :--- | | | **2022** | **2021** | | Net cash (used in) provided by operating activities | $(3,528) | $1,009 | | Net cash (used in) investing activities | $(794) | $(886) | | Net cash provided by financing activities | $7,439 | $2,025 | | Effect of foreign exchange rate changes on cash | $(4,188) | $(1,419) | | Net change in cash and cash equivalents | $(1,071) | $729 | | Cash, cash equivalents and restricted cash at end of period | $12,402 | $16,701 | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures supporting the consolidated financial statements, covering operations, credit facilities, related-party transactions, and segment information - The company operates as a global merchandising and brand marketing services firm across nine countries, organized into three segments: Americas, Asia-Pacific (APAC), and Europe, Middle East and Africa (EMEA)[25](index=25&type=chunk)[26](index=26&type=chunk) - The COVID-19 lockdown in Shanghai during Q2 2022 significantly impacted the company's joint venture in China, causing a net loss attributable to SPAR of **$329,000** for the quarter due to a **50% revenue decrease** while expenses continued[27](index=27&type=chunk) - In January 2022, the company entered into a Change of Control, Voting and Restricted Stock Agreement with its Majority Stockholders, involving the issuance of **2,000,000 shares** of Series B Preferred Stock, a **$250,000 cash payment**, and assumption of certain liabilities, with a total value of approximately **$4.5 million**[51](index=51&type=chunk)[52](index=52&type=chunk)[54](index=54&type=chunk) Segment Performance (In thousands) | Segment | Q2 2022 Revenue | Q2 2021 Revenue | Q2 2022 Operating Income | Q2 2021 Operating Income | | :--- | :--- | :--- | :--- | :--- | | Americas | $53,274 | $51,251 | $2,636 | $1,667 | | Asia - Pacific | $5,386 | $7,401 | $(713) | $(147) | | EMEA | $9,139 | $8,524 | $434 | $367 | | **Total** | **$67,799** | **$67,176** | **$2,357** | **$1,887** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, liquidity, capital resources, and cash flow activities for the three and six months ended June 30, 2022 [Results of Operations - Three Months Ended June 30, 2022](index=26&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030%2C%202022) This section analyzes SPAR Group's financial performance for Q2 2022, highlighting revenue, gross profit, and net income trends by segment Key Financial Metrics - Q2 Performance | Metric | Q2 2022 | Q2 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $67.8M | $67.2M | +0.9% | | Gross Profit | $12.9M | $12.0M | +7.9% | | Gross Margin | 19.1% | 17.9% | +1.2 pts | | Operating Income | $2.4M | $1.9M | +24.9% | | Net Income (to SGRP) | $1.1M | $0.5M | +123.5% | - **Americas Revenue:** Increased by **3.9%** due to organic growth in the US and Brazil, partially offset by a decrease in Mexico from labor regulation changes[106](index=106&type=chunk) - **APAC Revenue:** Decreased by **27.0%** primarily due to the continuing effects of COVID-19 in China and Japan[107](index=107&type=chunk) - **EMEA Revenue:** Increased by **7.1%** from organic growth and the acquisition of Bordax in South Africa[107](index=107&type=chunk) [Results of Operations - Six Months Ended June 30, 2022](index=28&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20June%2030%2C%202022) This section analyzes SPAR Group's financial performance for H1 2022, detailing revenue, gross profit, and net income trends by segment Key Financial Metrics - H1 Performance | Metric | H1 2022 | H1 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $126.8M | $128.3M | -1.2% | | Gross Profit | $24.8M | $24.3M | +2.1% | | Gross Margin | 19.5% | 18.9% | +0.6 pts | | Operating Income | $4.4M | $4.6M | -4.0% | | Net Income (to SGRP) | $1.8M | $1.4M | +27.3% | - **Americas Revenue:** Remained flat, with growth in the US and Brazil offset by a significant reduction in Mexico due to new labor laws[125](index=125&type=chunk) - **APAC Revenue:** Decreased by **22.3%** due to COVID-19 impacts in China and Japan[126](index=126&type=chunk) - **EMEA Revenue:** Increased by **13.0%** due to organic growth and the Bordax acquisition[126](index=126&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses SPAR Group's working capital, cash flow activities, and capital resources as of June 30, 2022 - Net cash used in operating activities was **$3.5 million** for H1 2022, compared to **$1.0 million** provided in H1 2021, primarily due to increased accounts receivable, higher prepaid expenses, and payments under the Majority Stockholders CIC Agreement[141](index=141&type=chunk) - Net cash provided by financing activities increased to **$7.4 million** in H1 2022 from **$2.0 million** in H1 2021, mainly due to higher net draws on lines of credit[144](index=144&type=chunk) Liquidity Metrics | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Net Working Capital | $22.9M | $21.8M | | Current Ratio | 1.4 | 1.4 | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, SPAR Group is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, SPAR Group, Inc. is not required to provide quantitative and qualitative disclosures about market risk[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that SPAR Group's disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[148](index=148&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting[151](index=151&type=chunk) PART II: OTHER INFORMATION This section covers legal proceedings, risk factors, and other miscellaneous information for SPAR Group [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions arising from normal business operations, not expected to have a material adverse impact - The company is involved in various legal proceedings arising from normal business operations, which are not expected to have a material adverse impact[152](index=152&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred in the company's risk factors since the filing of its Annual Report on Form 10-K - No material changes have occurred in the company's risk factors since the filing of its Annual Report[155](index=155&type=chunk) [Other Items (2, 3, 4, 5)](index=33&type=section&id=Other%20Items) Items 2, 3, 4, and 5 of Part II are reported as "Not applicable" for this reporting period - Items 2, 3, 4, and 5 of Part II are reported as 'Not applicable'[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including credit facility modifications and executive certifications - Exhibits filed include the Fourth Modification Agreement with North Mill Capital, amended change in control severance agreements for executives, and Sarbanes-Oxley certifications[162](index=162&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the first quarterly period ended March 31, 2022. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from __________ to __________. Commission file number 0-27408 SPAR GROUP, INC. (Exact name of Registrant as specified in ...

SPAR Group, Inc. (NASDAQ:SGRP) Q1 2022 Earnings Conference Call May 16, 2022 11:00 AM ET Company Participants Mike Matacunas – President and Chief Executive Officer Fay DeVriese – Chief Financial Officer Sandy Martin – Investor Relations Conference Call Participants Operator Good day and welcome to the SPAR Group. First Quarter 2022 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by [Operator Instruction]. P ...