SPAR Group Reports 25.1% Revenue Decline and $2.7 Million Net Loss for Fiscal Year 2024

SPAR Group, Inc. (SGRP) reported a significant decline in financial performance for the fiscal year ending December 31, 2024, with consolidated net revenues of $196.8 million, down 25.1% from $262.7 million in 2023. This decrease was primarily attributed to the divestiture of all international joint ventures, which included operations in Brazil and South Africa. The Americas division, which includes the U.S. and Canada, saw revenues drop to $177.2 million from $203.7 million, a 13% decline, although this was partially offset by an 11% revenue increase in the U.S. and a 15% increase in Canada. The Asia-Pacific and EMEA divisions experienced even steeper declines, with revenues falling by 53.9% and 76.1%, respectively, due to the exit from those markets.

In terms of profitability, SPAR Group reported a net loss of $2.7 million for 2024, compared to a net income of $4.8 million in the previous year. The company's EBITDA also decreased significantly, from $11.4 million in 2023 to $2.5 million in 2024. The cost of revenues as a percentage of net revenue increased to 80.5%, up from 78.9% in 2023, reflecting higher costs associated with the remodel business, which has lower margins than traditional merchandising services. Selling, general, and administrative expenses were approximately $37.3 million, or 18.9% of net revenue, down from $43.7 million, or 16.6% of net revenue, in 2023.

Strategically, SPAR Group has undergone significant organizational changes, including the exit from international markets and the acquisition of the remaining 49% interest in a joint venture. The company is also in the process of a proposed acquisition by Highwire Capital, which could impact its operational focus and financial condition. The merger agreement, announced in August 2024, involves a cash transaction valued at approximately $58 million, with a closing date anticipated by May 30, 2025. The company has incurred costs related to this acquisition, which have contributed to its financial challenges.

Operationally, SPAR Group's workforce totaled approximately 3,425 employees as of December 31, 2024, including both full-time and part-time staff. The company has emphasized its commitment to enhancing its technology capabilities, particularly through the implementation of a new enterprise resource planning (ERP) system aimed at improving financial reporting and operational efficiency. Despite the challenges faced in 2024, SPAR Group remains focused on its core business in the U.S. and Canada, with plans to invest in technology and explore new service offerings to drive future growth.

Looking ahead, SPAR Group's management has expressed cautious optimism regarding its strategic direction, particularly in light of the proposed acquisition and ongoing efforts to streamline operations. However, the company acknowledges the risks associated with market conditions, client project variability, and potential regulatory changes that could impact its business model. The management is actively working to address identified weaknesses in internal controls and improve financial reporting processes, which they believe will enhance overall operational performance in the future.