SPAR Group, Inc. Aktie

Thank you. Good day and welcome to the SPAR Group second quarter, 2026 financial results conference call. [Operator Instructions]. Please note this event is being recorded.

I would now like to turn the conference over to Phillip Kupper from Three Part Advisors. Please go ahead.

Thank you operator and good morning everyone we appreciate you joining us for SPAR group inc's conference call to review second quarter 2026 results.

Joining me on the call today are as far as Chief Executive Officer William Linnane; and the company's Chief Financial Officer, Steve Hennen. This call is also being webcast and can be accessed through the audio link on the events and presentation page of the investor relations section at investors.sparinc.com.

The information recorded on this call speaks only as of today, 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 on today's discussion that are not historical facts, including statements, expectations, 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.

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. Please refer to today's earnings press release for our disclosures on forward looking statements. 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 reconciliations to the nearest GAAP measures can be found at the end of our earnings release.

SPAR Group assumes no obligation to publicly update or revise any forward-looking statements. Additionally, the earnings press release we issued earlier today is posted on the investor relations section of our website at sparinc.com. A copy of the release was also included in an 8K submitted to the SEC.

Now I'd like to turn the call over to the company's CEO, William Linnane.

Thank you, Philip, and good morning. Thank you for your interest in SPAR Group and for joining us today. After our prepared remarks, we will open the line for questions. The second quarter represented an important milestone in SPAR's transformation.

We returned to profitability for the first time since the first quarter of 2025. We've also delivered more than 60% year-on-year growth in adjusted EBITDA and maintained gross margins above 22%. These results reflect the progress we've made over the last 12 months to simplify the business, strengthen operating discipline, improve the quality of our revenue, and focus on profitable growth.

While there was a revenue mix shift to higher margin business, which impacted overall growth in the quarter, we have focused our efforts on markets and accounts where we have the scale and expertise necessary to offer competitive rates to the customer and still earn a reasonable return on the investment.

We maintained operational discipline, supporting a stronger profitability program. We have continued to prioritize reoccurring merchandising programs over lower margin project work and the results are increasingly evident in both our earnings and cash generating potential. Importantly, the underlying health of the business continues to improve. Both our core U.S. merchandising business and our Canada operations generated sales growth in the quarter.

Canada remains a strong performer, underscoring the strength and resilience of our diversified North America platform. At the same time, our operational initiatives are gaining traction. Gross margins have stabilized in the low 20% range and remain towards the upper end of our guidance. We continue to believe there's a clear path towards achieving gross margins of approximately 25% over time as our revenue mix improves. Productivity initiatives mature and scale benefits increase.

We are also making significant progress in building a leaner, more efficient organization. Our actions over the last year have reduced complexity, improved execution, and positioned the business to drive greater operating leverage as we grow. We continue to expect our underlying SG&A run rate to trend towards approximately 20 million annually.

Looking ahead, I believe the business has been a fundamentally stronger position than it was a year ago. Our balance sheet has improved during the first half of the year. Our operations are delivering greater consistency and we have established a clear roadmap to enhance how SPAR executes, goes to market, leverages technology, and delivers financial performance.

Overall, we believe we're building a business with improving momentum, expanding operating leverage, and increasing visibility into long-term value creation. Finally, we began trading on the OTCQB in late July under the same ticker symbol. SGRP following the NASDAQ delisting notice. Notably, this does not change our strategy. Our focus remains on execution, operational improvement, and maintaining transparency.

I will discuss our strategic initiatives in a few moments after Steve covers our detailed financial results for Q2. Steve.

Thank you, William, and good morning, everyone. Second quarter 2026 net revenues totaled $36.9 million, down 4.5% year over year, primarily due to the lower volume in our remodel business. As William commented, we continue to shift the business to more recurring margin-enhancing merchandising services.

Gross profit for the second quarter was $8.4 million, or 22.8% of revenue, compared with $9.1 million or 23.5% of revenue in the prior year quarter. Higher stabilized gross margins were driven by the intentional shift towards merchandising work that combines people-centric expertise with technology-based tools.

Selling, General and Administrative expenses for the quarter were $6.8 million, which included $543,000 in non-recurring or one-time costs. This compared to $7.9 million in the prior year. As William mentioned, after we anniversary certain restructuring actions next year, our underlying SG&A-based costs will be approximately $20 million as we transform into a leaner, more efficient, and effective business model.

Operating income for the quarter was $1.2 million compared to operating income of $715,000 in the prior year. Second quarter GAAP net income attributable to SPAR Group was $409,000 or two cents per diluted share compared to break-even results in the prior quarter. Adjusted net income attributable to SPAR Group was $838,000 or $0.04 per diluted share compared to adjusted net income of $151,000 or $0.01 per diluted share in the prior year period.

Consolidated adjusted EBITDA was $2.1 million in the quarter, up 63% from 1.3 million in the prior year. We believe our net margins are durable and sustainable, especially as the merchandising business becomes a larger percent of our business wins.

Turning to our financial position as of June 30, 2026. Our balance sheet remains solid with positive working capital of $25.8 million, excluding the balance owed on the line of credit and the current portion of the long-term debt. This includes $2.9 million in cash and cash equivalents. Net cash used by operating activities was $8.7 million for the quarter, primarily reflecting working capital timing associated with growth in the merchandising business.

We are revising our full year 2026 financial outlook to reflect our continued focus on growing the merchandising side of the business and current expectations for lower remodel activity this year. While this impacts revenue expectations, it supports our objective in improving earnings quality, profitability, and long-term shareholder value. Net revenues in the range of $130 million to $138 million compared to 2025 net revenues of $136 million for the U.S. and Canada.

Gross margins of 21.5% to 23.5% versus 2025 gross margin of 15.9% for the U.S. and Canada. And Selling, general and Administrative costs, excluding unusual items of $21 million to $24 million versus 2025 of $32.2 million.

With that, I will turn it back to William.

Thanks, Steve. Our outcome-based model is gaining traction, and a key differentiator of that strategy is our ability to combine technology, data, and execution at scale. By pairing real-time insights with a flexible, accountable workforce, we help retailers improve inventory visibility, accelerate replenishment, and respond more effectively during peak periods and labor shortages, and ultimately improve in-store performance and sales.

This integrated approach strengthens client outcomes while creating durable, reoccurring revenue opportunities for SPAR. Based on that foundation, we have made meaningful progress with ReposiTrak in developing a compelling scan-based trading, or SBT, proposition that we believe can create significant value for retailers and consumer brands.

In parallel, we have begun replatforming our technology capabilities by leveraging ReposiTrak's deep retail technology expertise. Together, these initiatives are enhancing our go-to-market offering, improving scalability, strengthening our technology foundation, and further differentiating SPAR in the marketplace.

Looking ahead, we have greater visibility of the operating model and strategic priorities than at any point in the past. We are building a leaner, simpler organization with good financial footing. Our operations have stabilized and we have improved our profitability trajectory, expanding our service offering, modernized our technology and are driving sustainable long-term growth.

Finally, we believe that our associates are at the heart of everything we do. And we will continue to build a winning culture by investing in their training, their development, and their growth. While our return to profitability in the second quarter is encouraging, we view it as the beginning of a much larger opportunity. Over nearly six decades, BAR has helped retailers and brands to improve in-store execution and drive sales performance.

We believe we are well positioned to build on that legacy. We are building a stronger, more efficient and more capable SPAR, one that is better positioned to serve our clients, create opportunities for associates, and deliver long-term value for shareholders.

Steve and I would like to thank our employees for their dedication, passion, and relentless hope in serving our customers every day. Their commitment has been instrumental in stabilizing the business, advancing our transformation and delivering the improved financial performance we reported this quarter.

With that, operator, I would like to open the line for questions.

[Operator Instructions] The first question comes from Guy Regal with Schneider. Please go ahead.

So I have a couple of questions here. What was the rationale for not trying to stay on the NASDAQ?

Given the size of the company and the compliance I think the OTCQB is a market that we can operate on, but ultimately the shareholders and we had limited grounds to appeal at that point. So we moved the company to the OTCQB as the next best market to be on.

Okay. And I didn't get a chance to read it in the 10Q. Pretty big section regarding Robert Brown. Where do you stand with him?

Yes I don't want to comment on ongoing legal matters but we don't believe that it's material to the operation. And obviously we're focused on the business itself and it will resolve itself. But I don't want to really get into any other detail on that question.

Okay. And then, you know, in terms of your lower revenue guidance, is it a function of your determining that -- was it just associated with the remodel business, or did you lose some merchandising business. Can you speak to that?

Yes, sure. Yes, the merchandising business was in growth in Q2 and in the first half and the Canada business, which is largely merchandising was in growth. So yes, it's purely a decline in the remodel business related to choices we've made around markets where we can really earn margins that make sense for us relative to the working capital we're tying up in some of the work we're doing. So we're quite focused on keeping that gross margin high as we get to a leaner organization to create the right operating leverage. So yes, the answer is it's purely remodel decline.

Okay. And then can you explain the IT agreement that you have with ReposiTrak? I see you're paying them $151,500 a month. Why that agreement?

As you know, they're a retail tech company. So we're working with them on replatforming our technology. We think there's significant benefits to replatforming that technology.

Okay. And my last question. Did you say that going forward, your annual SG&A costs will be a total of about $20 million?

Yes, we're trending towards that number. I think in the guidance, we said $21 million to $24 million for the fiscal year 2026, but we're trending towards the lower end of that as we approach the back end of the year into 2027.

This concludes our question and answer session. I would like to turn the conference back over to William Linnane for any closing remarks.

Thank you, and thank you for continuing to follow our company. I look forward to providing our Q3 results and updates on strategic initiatives in a few months. Have a great day. Thank you.

The conference has concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the SPAR Group First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Sandy Martin, with Three Part Advisors. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate you joining us for SPAR Group, Inc.'s conference call to review its first quarter 2026 results. Joining me on the call today are SPAR's Chief Executive Officer, William Linnane; and the company's Chief Financial Officer, Steven Hennen. 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.sparinc.com.

The information recorded on this call speaks only as of today, 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, expectations, 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. 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. Please refer to today's earnings press release for our disclosures on forward-looking statements. 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 reconciliations to the nearest GAAP measures can be found at the end of our earnings release. SPAR Group assumes no obligation to update or revise any forward-looking statements publicly. Finally, the earnings press release we issued earlier is posted on the Investor Relations section of our website at sparinc.com. A release copy was also included in an 8-K submitted to the SEC.

Now I would like to turn the call over to the company's CEO, William Linnane.

Thank you, Sandy, and good morning, and thank you for your interest in SPAR Group and for joining us today. After our prepared remarks, we will open the line for questions.

Before turning to our strategy and results, I want to address an important development. Earlier this month, we reached a settlement agreement with Bob Brown, one of the original co-founders and former CEO of SPAR. This resolution formally closes a chapter in the company's history and allows us to move forward with full alignment, constructive engagement and a singular focus on creating shareholder value. We appreciate Bob's decision to support SPAR's current direction and to move beyond legacy matters that do not reflect the progress of today's company. With this behind us, the entire organization is solely focused on execution, client success and long-term value creation for shareholders.

SPAR today is a fundamentally different company than it was just a few years ago. We are a North American-focused best-in-class retail service platform with deep expertise in core merchandising and on-demand execution. We serve leading retailers and consumer packaged goods companies across the United States and Canada. And our differentiated model combines highly skilled people with technology-driven tools to deliver real-time measurable outcomes.

Importantly, we are not constrained by legacy labor-based models. We are outcome-focused, data-informed and built to move at the speed of today's retail. The work our team completed in 2025 laid the foundation for a renewed SPAR, a leaner, more disciplined margin-focused organization designed to scale with operating leverage.

Turning to our first quarter results. We delivered several important milestones. We returned to positive EBITDA. We achieved gross margins of 22.3%, reflecting the strength of our evolving business model. This margin performance demonstrates the benefits of our shift towards higher-margin recurring merchandise revenue supported by our technology-enabled workforce. Notwithstanding a 10% revenue decline in the quarter, this represents an inflection point driven by our deliberate reduction of lower-margin project-based remodel work.

We continue to see progress in our core merchandising business with U.S. merchandising revenue up 5% and Canada returning to growth with a 3% increase.

SG&A was delivered at $1.9 million below the normalized average quarter of 2025, demonstrating the significant restructuring benefit of the work done in the second half of 2025.

We remain focused on achieving our medium-term target of approximately 25% gross margins over the next 18 to 24 months. Our financial strategy is clear: drive up gross margins, control SG&A and grow the top line via recurring revenue streams, all by relentlessly focusing on our core merchandising business. This aligns our business and financial strategic objectives.

Based on current trends, we expect the second quarter to be substantially stronger on a sequential basis as momentum continues to build. Our growth strategy is deliberate and focused. We are prioritizing higher-margin core merchandising programs while simultaneously expanding new service offerings that leverage the infrastructure we already have in place. Each incremental client, scope of work or agreement improves the economics of our fixed cost base, supporting margin expansion over time. This is a model designed for profitable growth, not growth for growth's sake.

In March, we announced a partnership with ReposiTrak, which underscores our belief that the future of retail execution is not technology alone, nor labor alone. It is the intelligent combination of both. Our partnership combines proprietary technology with our flexible workforce platform to enhance inventory accuracy, reduce out of stocks and improve on-shelf sales. AI and advanced analytics can identify problems, but people still need to execute solutions at the shelf edge in real time across thousands of locations. This is where SPAR excels. Retailers and brands do not need more dashboards. They need issues resolved, standards maintained and sales protected.

Our platform identifies exactly where action is needed and SPAR's national on-demand workforce takes the action. We help keep shelves full, stores organized and products visually merchandised without adding incremental store labor costs. At a time when retailers are under intense pressure to protect revenue and reduce operational complexity, this capability matters more than ever.

After Steve covers our detailed financial results, I will share additional thoughts. Steve?

Thank you, William, and good morning, everyone. First quarter 2026 net revenues totaled $30.5 million, down 10.3% year-over-year. Breaking out net revenue further, U.S. merchandising revenue grew 5% year-over-year and Canada revenue increased 3%. U.S. remodel work declined in the quarter as we continued our deliberate shift toward higher-margin recurring merchandising services.

Gross profit for the first quarter was $6.8 million or 22.3% of revenue compared to $7.3 million or 21.4% of revenue in the prior year quarter. Higher gross margins were driven by the intentional shift towards merchandising work that combines people-centric expertise with technology-based tools. Selling, general and administrative expenses for the quarter were $6.2 million compared to $5.9 million in the prior year.

On a normalized basis, removing out-of-period accrual adjustments, SG&A declined $1.9 million versus the 2025 quarterly average, and we see further reduction opportunities ahead.

Operating results were essentially breakeven with a small operating loss of $42,000 compared to operating income of $1 million in the prior year.

First quarter's GAAP net loss attributable to SPAR Group was $553,000 or $0.02 per diluted share compared to net income of $462,000 or a positive $0.02 per diluted share in the prior year quarter.

Adjusted net loss attributable to SPAR Group was $274,000 or $0.01 per diluted share compared to adjusted net income of $528,000 or $0.02 per diluted share in the prior year period.

Consolidated adjusted EBITDA was $737,000 in the quarter. While this represents a decline from $1.5 million in the prior year, it reflects the intentional revenue mix transition away from lower-margin remodel activity and certain out-of-period accruals that were reflected in our SG&A costs last year. We view the underlying margin trajectory as encouraging and remain on track with our full year outlook.

Turning to our financial position. As of March 31, 2026, our balance sheet remains solid with positive working capital of $18 million, excluding the balance owed on the line of credit and the current portion of the long-term debt. This includes $4.3 million in cash and cash equivalents. Net cash used by operating activities was $3.9 million for the quarter, primarily reflecting working capital timing associated with growth in our merchandising business.

With that, I will turn it back to William.

Thank you, Steve. We are encouraged by the quality of our business development pipeline. Recent wins with blue-chip retailers and CPG partners validate the strategic changes we have made to our go-to-market approach. We intentionally redesigned that strategy, prioritizing recurring higher-margin core merchandising supported by people-centric domain expertise and technology-enabled partnerships that improve economics for both our clients and for SPAR.

Our model is designed to function as a highly efficient and flexible service that can address critical needs when retailers or brands require support without burdening store teams or adding fixed labor costs. That flexibility delivers strong return on investment for clients and position SPAR favorably relative to legacy providers who are constrained by outdated cost structures and business models.

Technology is a critical enabler for this model. By layering intelligence on execution, better inventory visibility, faster and more accurate restocking and support during peak seasons or labor shortages, retailers can act faster and smarter at scale. This approach is an integrated approach, and this is how we will build a durable recurring revenue stream and create competitive separation in the market. We continue to believe the market opportunity is significant.

Our solutions are applicable across all retail formats, grocery, dollar, convenience, club, mass and specialty stores across the U.S. and Canada. The need for cost-effective execution-focused partners has never been more immediate, and we are actively deploying and evaluating additional technology and AI-based tools to further enhance our offering.

From a financial point of view, our priorities are clear. We are building a leaner, profit-focused business, starting this quarter with positive EBITDA with an explicit goal of generating sustainable free cash flow. Growth underpins those objectives and our plans call for expansion across each of our core areas. We are deepening relationships, expanding service scopes and growing wallet with existing clients. We also see meaningful cost reduction opportunities this year as we implement further efficiencies across the business.

Together, these actions position us to deliver sustainable, profitable growth and increased shareholder value over time. Today, we are reiterating our fiscal year 2026 guidance. We expect revenue in the range of $143 million to $151 million, gross margins of approximately 20.5% to 22.5% and SG&A, excluding unusual items of $25.5 million to $26.5 million. At its core, SPAR has built a differentiated platform: Real-time insights paired with a scalable accountable workforce.

This combination gives our clients speed, consistency, transparency and national reach. And it gives us a business we believe can compound value over time. Retailers and brands are demanding partners who can execute at their own pace, commit to outcomes and scale without friction. That is the company we are building. We believe SPAR is well positioned for the opportunities ahead.

Steve and I would like to thank our employees for their continued commitment, hard work and dedication and the Board for their continued support.

With that, operator, I would like to open the line for questions.

[Operator Instructions] The first question comes from Igor Novgorodtsev with Lares Capital.

I'm actually a former Board member of the company years ago and in investor today. So I just wanted to get a brief introduction. So I know the company well. Could you tell me a little bit about the remaining revenue for this year? How much of it is already committed contracts, which you're confident about and how much of it is projection? And how much of it is coming from your partnership with ReposiTrak?

Igor, it's William here. Thank you for your remaining interest in the company. And thank you for your service in the past. In terms of the revenue at this point, a substantial amount is contracted given we're already 5 months into the year. We have some project work where we have a best forecast against, but we're highly confident on that.

And then we have a small element of uncommitted relative to the total revenue. And within that uncommitted and future revenue, there's some of the revenue we believe we can drive via the ReposiTrak partnership. But obviously, that's going to build over time as we get momentum on that. So we're having some good discussions and more to come in relation to that. Does that answer your question?

Somewhat, if you can just delve a little bit more. So it seems to be that if you look at your guidance, it's $37 million to $40 million for the remaining quarters according to your guidance. So Q4 is going to be traditionally weak, I would assume, knowing your business. So the strongest are going to be next quarter and Q2 and Q3. Am I reading it correctly?

Yes, that's correct. Q2 and Q3 are historically the strongest quarters in the U.S. and Canada business, which is now the group.

Okay. How do you think your quarter did versus revenue-wise versus what you expected in revenue? Is that what you kind of expected? Or was it a little bit lower or something was deferred?

So it was broadly in line with revenue. Obviously, we've taken a pivot to focus on the higher-margin merchandising business. So we were pleased to get that back into growth. Some of the remodel revenue was connected with low-margin accounts. So yes, we're broadly pleased with revenue. Obviously, the higher revenue, the better, but we believe we started pretty strongly. We're looking forward to Q2, which, as you said, will be stronger on revenue and the balance of the year will play out, as I described.

Okay. The other question I wanted to ask is you're currently not in compliance with NASDAQ listing requirements about the -- I believe net worth of the company or of the book value. So maybe you can talk about this, how you're planning to come into compliance?

Yes. We have a plan. We're working that through, and we'll present that to the Board, and we will be communicating to NASDAQ later in the week. But we're pretty confident we have a robust plan. I don't want to talk publicly to that until we communicate to NASDAQ on it and get their response, but that's the current status.

But we should expect an update within the next few weeks, but is that what you think we should hear one way or another, right?

Yes, that's correct. You'll hear one way or another or you can appeal if you don't like the answer, but the process will work its way through. But we believe we have a robust plan. So we'll see how that goes. But yes, you're correct.

Okay. And I guess my last question and a sort of theoretical question. Obviously, you were up for sale a few years -- well, a couple of years ago. I know it didn't work out, but it was a considerably higher price than it is today. Right now, you just did a big restructuring, and I understand it will take a little bit of time. But is considering a strategic sale still on the table? Or are you not anticipating anything anytime soon?

Well, I think as a public company, obviously, anyone can buy shares or make an offer or trying to get control. But we're focused on the business in hand and delivering the numbers and the guidance, and we believe the share price will respond to that. So we're not actively working through a strategic process and trying to get people to bid on the company. But yes.

This concludes our question-and-answer session. I would like to turn the conference back over to William Linnane for closing remarks.

Thank you. Thank you for joining the call, and thank you for continuing to follow our company. I look forward to providing our second quarter results and updating on strategic initiatives in a couple of months. Hope you have a great day and take care. Thanks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the SPAR Group Fourth Quarter and Year-End 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sandy Martin, Three Part Advisors. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate you joining us for SPAR Group, Inc.'s conference call to review the fourth quarter and full year 2025 results. Joining me on the call today are SPAR's Chief Executive Officer, William Linnane; and the company's Chief Financial Officer, Steven Hennen. This call is being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section at investors.sparinc.com.

The information recorded on this call speaks only as of today, 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, expectations, 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. 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. Please refer to today's earnings press release for our disclosures on forward-looking statements. 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 reconciliation to the nearest GAAP measures can be found at the end of our earnings release. SPAR Group assumes no obligation to update or revise any forward-looking statements publicly. Finally, the earnings press release we issued today is posted on the Investor Relations section of our website at sparinc.com.

Now I would like to turn the call over to the company's CEO, William Linnane.

Thank you, Sandy, and good morning. I'm pleased to share our fiscal 2025 results. After our prepared remarks, we will open the line for questions. Fiscal 2025 was a transformational year for SPAR. We finalized the work connected to the divestiture of our international joint ventures, a deliberate decision that allowed us to concentrate fully on growing our business in the U.S. and Canada. Last week, we announced a strategic partnership with ReposiTrak, which I'll speak to in a moment. Today, SPAR is a nationwide retail service solutions company with deep expertise in merchandising, both traditional and our new on-demand model. We are North America-centric, people-powered and tech-enabled, and we are aligned around a clear vision of where this business is going.

Before we get to the numbers, I want to walk you through how we fundamentally changed this organization. Last 2 years, we simplified the business, exiting international operations that added complexity without serving our core strategy and sharpened our focus on the U.S. and Canada markets, where we have long-standing relationships with retailers and CPG companies. In 2025, we rebuilt the leadership team from the ground up, eliminating management layers, bringing in proven operators with direct and varied industry experience, strengthening our data foundations and upweighting our advanced analytical capabilities. The result is a leaner organization that can scale profitably, leveraging a rightsized cost base and automating manual tasks to turn complex execution and related data into faster decisions and ultimately, better client outcomes.

We are focused on delivering continued revenue growth, deliberately targeting higher-margin core merchandising business while building on new service offerings. These 2 streams are complementary. Together, they open a large and underpenetrated addressable market with a flexible, innovative approach. And each new contract improves the economics of our fixed cost base we've already built. Our partnership with ReposiTrak is a direct expression of this. It demonstrates how AI, data, people and in-store action can work together seamlessly to solve a problem retailers and the vendors cannot solve with technology alone. This brings me to our strategic thesis. We believe the future of retail execution lies in the intersection of human action and AI-enabled intelligence. Technology is transforming how retailers detect out of stocks, pricing errors, compliance gaps and execution failures. But detection alone doesn't fix shelves. Retailers and brands are flooded with signals.

What they lack is reliable, fast, verified actions in store. That gap is where SPAR operates and where we are building something defensible. Our industry is long run on a dedicated and flexible time-based labor, pay for hours, assigned tasks has hope for outcomes. We are moving past that. SPAR is redefining retail execution around intelligent outcome-based action, a model where data, technology and in-store execution converge in real time on demand. The retailers and brands that will win over the next decade need a partner that can move at their speed, hold themselves accountable to outcomes, scale without breaking. That is what we are building, and we are just getting started.

After Steve covers our detailed financial results, I will share additional thoughts and insights about the business. Steve?

Thank you, William, and good morning, everybody. Fiscal 2025 net revenues totaled $136.1 million. During 2025, the company changed its reportable segments from Americas, Asia Pacific, APAC, and Europe, Middle East and Africa, following our strategic exits from several global joint venture arrangements. Today, we present geographic reportable segments that include the United States and Canada. All prior year segment information has been recast to the year-end presentation, which means that Mexico and all other international operation revenues are included as all other for the year ended December 31, 2024.

On a comparable basis, full year revenues of $136.1 million for the United States and Canada increased by 3.3% over 2024. Drilling down, U.S. net revenues increased 3.9% to $122.1 million, while Canadian sales were essentially flat at $14.1 million. Our gross profit for the year was $21.7 million or 15.9% of revenue compared with $33.6 million or 20.5% of revenue in 2024. Gross margin compression in 2025 was primarily due to shift towards the remodeling business, which inherently carries higher labor and travel costs, market-driven wage pressure and shifts in workforce alignment. Full year selling, general and administrative expenses were $32.2 million or 23.7% of revenues compared to $33.9 million or 20.7% of revenues in the prior year. SG&A costs included approximately $7 million of onetime costs and out-of-period write-offs in 2025.

We expect our annual run rate SG&A costs to be approximately $25.5 million to $26.5 million, excluding any unusual and nonrecurring costs. In addition, we recorded restructuring costs and severance of $4.8 million for the 2025 fiscal year-end. As a result, we reported operating loss of $16.9 million for the fiscal year 2025 compared to $700,000 of operating income in the prior fiscal period. Net loss attributable to SPAR Group, Inc. for 2025 was $24.6 million or $1.04 per diluted share compared to a net loss of $3.2 million or $0.13 per share in 2024. Adjusted net loss attributable to SPAR Group, Inc. was $10.7 million or $0.45 per diluted share compared to $707,000 or $0.03 per diluted share in the prior period.

Consolidated EBITDA for the fiscal 2025 year was a negative $16.5 million compared to $3.5 million in the prior year. 2024 includes $2.5 million gain from the sale of the businesses. Consolidated adjusted EBITDA was a negative $8.6 million compared to a positive $6.7 million in the prior year. Fiscal 2025 adjusted EBITDA attributed to the SPAR Group, Inc. was the same as consolidated with a negative $8.6 million compared to a positive $5.6 million in the prior year.

Turning to the company's financial position. As of December 31, 2025, our balance sheet remains solid with positive working capital of $14.7 million, excluding the balance owed on the line of credit and the current portion of the long-term debt. This includes $3.3 million in cash and cash equivalents, for the 12 months ending December 31, 2025, net cash used by operating activities was $18.4 million.

With that, I would like to turn it back to William.

Thank you, Steve. On March 26, we announced our strategic partnership with ReposiTrak. And I want to give you a sense of what that looks like in practice. When a truck arrives with promotional items, seasonal goods or high-velocity SKUs, a retailer and as importantly, the vendor needs those products on shelf immediately. They can't wait for scheduled labor. This is relevant to all vendors, but can be especially challenging for scan-based trading with direct-to-store vendors. SPAR teams are dispatched in real time to any store anywhere in the country. We call this surge or on-demand merchandising. It's a cost-effective, flexible labor buffer that activates exactly when and where it's needed without adding to the store's teams workload, providing a high return on investment.

The ReposiTrak partnership adds the intelligence layer, out-of-stock detection, perpetual inventory accuracy and route optimization so that our dispatch decisions are data-driven, not reactive. The result is a seamless loop. Technology identifies the need and SPAR executes to fix. This model is applicable to grocery, mass, club, dollar convenience and specialty retail across the United States and Canada, depending on the data source. The addressable market is large and the need is immediate. We are bullish about what this partnership and other similar partnerships unlock for SPAR in 2026 and beyond.

Turning to our fiscal year 2026 financial guidance issued today. We expect top line revenue to be in the range of $143 million to $151 million and gross margins to improve to 20.5% to 22.5%, primarily driven by our service mix with a growing percent of merchandising work relative to remodel work. We are encouraged by the growing strength of our business pipeline, driven by wallet expansion from existing clients and market share gains this year. We believe that SPAR will win because we are uniquely positioned to serve as a critical operating layer for leading retailers and brands with national scale, deep execution DNA and a large, highly flexible labor model. We've also invested in modern cloud and ERP infrastructure to enable fast, efficient recruiting and client services.

And as we discussed earlier, we are successfully pursuing a partner-led technology strategy. With our strategic retail partners, we can move faster and more credibly than anyone else. In addition, our proprietary SPARview platform is a mobile-first tool that collects data as we perform projects and allows us to communicate with our people on outcomes. We are increasingly utilizing AI platforms to detect issues, help us prioritize what matters most. A trigger is signaled with ROI-driven tasks and SPAR deploys trained field teams dynamically soon after the execution is verified and outcomes are measured and reported. This creates closed-loop retail execution from signal to fix to ROI. SPAR is the execution engine that turns retail intelligence into revenue recovery.

Turning to our strategic transformation. Our road map over the past year has been disciplined and deliberate. And now we are laser-focused on building a profitable business that generates free cash flow. Growth underpins everything we do. Our plans include growth in each of our core areas. We are deepening existing relationships and building new ones with mass retailers, grocery partners in the dollar channel and with leading CPG partners. We are expanding our services for existing clients and increasing wallet share. At the same time, we are investing in data integration, AI and technology partnerships, workforce intelligence, dynamic scheduling, automation and margin expansion.

None of this works without the right people. That's why we've strengthened our leadership bench, simplified the organization, stabilized Workday, our ERP, invested in workforce management and focused on training, deployment and retention. Our ambition is not just to lead in technology but to genuinely lead in how people are managed, developed and valued because the future of this company is tech and people powered. We are developing SPAR's reliable and repeatable human operating layer for the retail and CPG industries, and we believe this will deliver sustainable shareholder value. The work ahead is significant, but the direction is clear. If we execute consistently, decisively and with discipline, SPAR will not just participate but will lead in the future of retail execution.

With that, operator, I would like to open the line for questions.

[Operator Instructions] The first question comes from [ Ross Davidson ] with Benetton Capital.

I know 2025 is a big transformational year. I think you guys have done a good job of laying that out. Just on Q4, though, can you give us any -- just a little bit of color around both the revenue decline and, I guess, the resulting negative gross margin? Just help us understand how we are inflecting from that Q4 into what you've described for 2026?

Yes. Thanks, Ross, for your question. In terms of the shape of 2025, obviously, Q3 was significant growth rate, and we had some timing of projects in terms of how they land in 2025 and how they land in 2024. So that's part of the answer to 2025, Q4. I think you'll see a more stable growth rate as we go into 2026, and that's partly related to the focus back on to really growing merchandising as opposed to remodel business. So does that answer the question?

I think. So almost like a little bit of an air pocket as you kind of wrapped up some projects and then as we get into 2026, sort of work through that and on to the sort of the numbers you described, I guess.

Yes, that's correct. And we've purposely pivoted the business development and sales team to really focus on the merchandising going forward given the margin difference between the 2 businesses. So obviously, we'll take the remodel work if it's profitable, but we want to focus this on where we see the headroom for growth and where we think we can add technology with partners to improve margin over the long term. So yes, that's correct.

Okay. Great. And that makes sense. And I think that you described that well. And then just in terms of expectations for the year, in no way am I trying to get to quarterly guidance, I don't think you should do that. But just as we think about the ramp and the transformation, should we expect a build up towards the gross margin you described? Or any seasonality, I guess, anything we should expect with respect to what we'll see in Q1, Q2 versus Q3, Q4?

Yes. So this is Steve. When we provided the guidance that we released today, that is on an annual basis. Now the only quarter that we see kind of below that, potentially at the bottom end of that range is the fourth quarter, which is typically our slowest quarter of the year.

And Ross, that's partly because within our gross margins, we have our field management costs, which is somewhat semi fixed. But we've intentionally pivoted strongly to focus back office merchandising. So I think we'll post Q1 here in the next 4 to 6 weeks. And as Steve said, they're full year numbers, but you'll see the story laid out as we post that and then refine the guidance.

Okay. So it's a pretty quick sort of -- well, it's a pretty quick turnaround for Q1, as you noted. And then the business, we should expect pretty clean numbers with respect to kind of all the transformation work we've done in 2025, even early in 2026, we'll see kind of the profile of -- or the result of that work, I guess, is kind of what I'm hearing.

That is correct. Yes.

Okay. That's great. And then the ReposiTrak partnership, just to confirm, so is that -- that's "live" and that's something you're out now marketing and offering to potential customers?

That's correct. Meetings are actually in progress in terms of conversations. So yes, it's live. And we're excited about it. It's the first of potentially some other announcements we'll make into the future, but it's -- it aligns to our strategy of where we can really add the most value, but also create a defensible model at a higher margin rate by having partners who can be data about different parts of the market. ReposiTrak specifically have a strong out-of-stock management tool, and they've got access to data across certain parts of the market that they're strong in. So yes, we're excited about the partnership.

As there are no further questions from investors, I would like to turn the conference back over to William Linnane for any closing remarks.

Thank you, and thank you for continuing to follow our company. I look forward to providing our first quarter results and updating our strategic initiatives in a couple of months. Have a great day, everyone, and thank you again.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.