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DATE
Tuesday, May 12, 2026 at 9 a.m. ET
CALL PARTICIPANTS
- Chief Executive Officer — William Linnane
- Chief Financial Officer — Steven Hennen
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TAKEAWAYS
- Settlement Agreement -- Earlier this month, the company reached a settlement agreement with cofounder and former CEO Bob Brown, ending legacy disputes and enabling management to focus on current execution and strategy.
- Net Revenue -- $30.5 million, a 10.3% decrease year over year, reflecting an intentional shift away from lower-margin project work.
- Gross Margin -- 22.3%, up from 21.4% in the prior year, driven by the business model transition toward recurring merchandising revenue and technology-enabled delivery.
- U.S. Merchandising Revenue -- Increased by 5%, while Canadian revenue increased by 3% during the quarter, both signaling growth in core geographies.
- Remodel Revenue -- U.S. remodel work declined as management pivoted away from lower-margin activity.
- SG&A Expense -- $6.2 million compared to $5.9 million last year; On a normalized basis, this figure was $1.9 million below the 2025 quarterly average, showcasing restructuring benefits.
- Operating Income -- Small operating loss of $42 thousand versus operating income of $1 million in the prior year period.
- GAAP Net Loss -- $553 thousand, or $0.02 per diluted share, compared to $462 thousand net income, or $0.02 per diluted share, in the prior year.
- Adjusted Net Loss -- $274 thousand, or $0.01 per share, contrasted with adjusted net income of $528 thousand, or $0.02 per share, in the prior year.
- Adjusted EBITDA -- $737 thousand compared to $1.5 million in the prior year, noting the effect of strategic revenue mix changes and one-time accruals in the prior period.
- Guidance Reaffirmed -- Management reiterated revenue guidance for the year at $143 million to $151 million, gross margin expectations of 20.5%-22.5%, and SG&A (excluding unusual items) of $25.5 million to $26.5 million.
- Working Capital -- Positive $18 million at March 31, 2026, excluding credit lines and current portion of long-term debt.
- Technology Partnership -- In March, the company announced a partnership with ReposiTrak, integrating proprietary technology with SPAR’s workforce to enhance inventory accuracy and on-shelf execution.
- Free Cash Flow Objective -- CEO Linnane stated an explicit goal of generating sustainable free cash flow as part of the financial roadmap.
- Quarterly Seasonality -- Management confirmed that Q2 and Q3 are historically the strongest quarters in the company's largest operating regions.
- NASDAQ Compliance Plan -- The company is developing and will soon present a plan to NASDAQ to address current listing compliance concerns, with an update expected within weeks.
- Strategic Sale Status -- CEO Linnane clarified, "we are not actively working through a strategic process and trying to get people to bid on the company."
SUMMARY
The settlement with a cofounder closes a significant legacy matter and enables management to fully align execution and strategy. Management’s deliberate revenue mix shift toward higher-margin recurring merchandising drove gross margin expansion and offset top-line contraction. Operational restructuring has materially reduced normalized SG&A expense, while disciplined cost control remains a core focus.
- Consolidated adjusted EBITDA remains positive despite intentionally lower revenue, consistent with the company’s pivot away from remodel activity.
- Management highlighted that most remaining 2026 revenue is already contracted or highly forecastable, with a smaller uncommitted portion potentially benefiting from the new ReposiTrak partnership.
- Cash used in operating activities was $3.9 million, mainly due to working capital timing related to merchandising growth.
- The company expects sequentially stronger results in future quarters as recurring merchandising business accelerates and the technology-partnership pipeline develops.
INDUSTRY GLOSSARY
- ReposiTrak: A proprietary retail technology platform aimed at improving inventory visibility, reducing out-of-stocks, and enhancing on-shelf product execution.
- Remodel work: Project-based retail services involving resets or overhauls of in-store layouts, generally lower margin compared to recurring merchandising contracts.
Full Conference Call Transcript
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.sparring.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 facts, including statements, expectations, future events, or future financial performance or forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 2095. 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.
William Linnane: Now I would like to turn the call over to the company's CEO, William Linnane. Thank you, Sandra, 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, 1 of the original cofounders 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 our shareholders. Bar 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 hour 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 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 grew 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 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 core merchandising business. This aligns our business and financial strategic objectives. Based on current trends, we expect the 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 work 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, doors 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?
Steven Hennen: 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 thousand compared to operating income of $1.0 million in the prior year. First quarter GAAP net loss attributable to SPAR Group was $553 thousand or $0.02 per diluted share compared to net income of $462 thousand or positive $0.02 per diluted share. In the prior year quarter. Adjusted net loss attributable to SPAR Group was $274 thousand or $0.01 per diluted share compared to adjusted net income of $528 thousand or $0.02 per diluted share in the prior year period.
Consolidated adjusted EBITDA was $737 thousand 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.
William Linnane: 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 positions SPAR favorably relative to legacy providers. are constrained by outdated cost structures and business models. Technology is a critical enabler for this model. By layering intelligence onto 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 US and Canada.
The need for cost effective execution 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 that objective, and our plans call for expansion across each of our core areas. We are deepening relationships, expanding service scope and growing wallet share 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. 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. 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: If you are using a speakerphone, please stand by momentarily to assemble our roster. The first question comes from Igor Novgorodtsev with Lara's Capital. Please go ahead.
Analyst (Igor Nouve Gaurad Sev): Hello, and thank you for taking my I am actually former board member of the company years ago, and an investor today. So just wanted to make a brief introduction. 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 confident about, and how much of it is projection, and how much of it is to come coming from your partnership from ReposiTrak.
William Linnane: Hi, Igor. it is William here. Thank you for your remaining interest in the company and yeah, thank you for your service in the past. In terms of the revenue at this point, a substantial amount is contracted given we are already 5 months into the year. We have some project work we have our best forecast against, but we are 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 is some of revenue we believe we can drive via the ReposiTrak partnership. But obviously, that is going to build over time as we get momentum on that.
So we are having some good discussions and more to come in relation to that. Does that answer your question?
Analyst (Igor Nouve Gaurad Sev): Somewhat. If you can just delve a little bit more So it seems to be that if you look at your guidance at $37 million to $40 million for the remaining quarters according to your guidance, So Q4 is going to be traditionally weak, would assume, knowing your business. So the strongest are gonna be next quarter and Q2 and Q3. Am I reading it correctly?
William Linnane: Yeah. that is correct. The Q2 and Q3 are historically the strongest quarters in the U.S. and Canada business, which is now the group.
Analyst (Igor Nouve Gaurad Sev): 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 low or something that was deferred?
William Linnane: So it was broadly in line with revenue. We have 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 we are probably pleased with revenue. Obviously, the higher revenue, the better, but we believe we started pretty strongly. We are looking forward to Q2, which, as you said, will be stronger on revenue. The balance of the year will play out, as I described.
Analyst (Igor Nouve Gaurad Sev): The other, question I wanted to ask you are currently not in compliance with Nasdaq. Holistic requirements about the financial metrics of the company or we have the book value. So maybe you can talk about this, how you are planning to come into compliance.
William Linnane: Yeah. We have a plan there, we are working that through and we will present that to the board. And we will be communicating to NASDAQ later in the week. But we are pretty confident we have a robust plan. I do not want to talk publicly to that until we communicate to Nasdaq on it and get their response but that is the current status.
Analyst (Igor Nouve Gaurad Sev): But we should expect update within the next, few weeks what Do you think we should hear 1 way or the other, right?
William Linnane: Yeah. that is correct. You will hear 1 way or another, or you can appeal if you do not like the answer. But the process will work its way through. But we believe we have a robust plan. So we will see how that goes. But, yeah, you are correct.
Analyst (Igor Nouve Gaurad Sev): Okay. And, I guess my last question, and sort of theoretical question, obviously, we were up for sale a couple of years ago. I know it did not work out. It was a considerably higher price than it is today. Right now, you just did a big restructuring and will take a little bit of time. But is there consideration of a strategic sale still on the table, or you are not anticipating anything anytime soon?
William Linnane: I think as a public company, obviously, anyone can buy shares or make an offer trying to get control. But we are focused on the business in hand and delivering numbers and the guidance, and we believe the share price will respond to that. So we are not actively working through a strategic process and trying to get people to bid on the company. But okay.
Analyst (Igor Nouve Gaurad Sev): I do not have anything else, and thank you very much, William. And it is a pleasure speaking with you.
William Linnane: Thanks, Igor. Appreciate the questions.
Operator: This concludes our question and answer session. I would like to turn the conference back over to William Linnane for any closing remarks.
William Linnane: Thank you. Thank you for joining the call. Thank you for continuing to follow our company. I look forward to providing our second quarter results and updating you on strategic initiatives in a couple of months. Hope you have a great day. Take care. Thanks.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
