SPAR Group, Inc.

Good morning, and welcome to the SPAR Group second quarter 2023 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. 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 the SPAR Group, Inc.' 's conference call to review 2023 second quarter results. Joining me on the call today are SPAR's Chief Executive Officer, Mike Matacunas, and the company's Chief Financial Officer, Antonio Calistopato. 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. 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 fact including statements or expectations or 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 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 the earnings press release that was issued today, prior 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. Finally, the earnings press release will we issued earlier today is posted on the Investors Relations section of our website at sparinc.com. A copy of the release has also been included in an AK submitted to the SEC. And now I would like to turn the call over to the company's CEO, Mike Matacunas. Mike?

Thank you, Sandy, and good morning, everyone. I'm pleased to share our second quarter results. At the end of our prepared remarks today, we will open the line for questions from analysts and institutional investors. The first half of 2023 has been the strongest six months in the history of the business. Revenue, gross profit, EBIT have all reached new levels. As I've said in the past, revenue can move between quarters, but our client agreements and services are longstanding and have consistently been expanding. But the heart of our business are merchandising and marketing services. This is the legacy of the company and work we do for some of the world's largest businesses. These services have continued to grow as businesses look to outsource this work to third parties. Our merchandising services grew by 16% in the United States for the second quarter, 18% in Brazil, 9% in Mexico, and so on. Year-to-date, these services in the United States are up 28%, There's strong improvement in related gross margin. In short, the core of our business is strong and growing. Our U.S. remodel business, in which we assist retailers in staging, renovating, repurposing the sales floor, and overall improvement, the physical store, has started the year slower than it finished in 2022. Our clients have been delaying projects into future quarters. This is likely a reaction to the rising U.S. interest rates. As a reminder, remodeling stores is a staple of operating a retail business. Every store needs to be cared for and renovated at some level every few years. What has accelerated the need for this work is the growth of online and shift in consumer buying habits. The consumer is looking for a wide assortment of product in their neighborhood retail stores. So, for example, we are working with a large company small box store with thousands of locations to introduce perishables into their assortment. This requires resetting the floor layout, changing fixtures, et cetera. Related to the growth of online, the large box retailers in particular are converting space in their stores to pack and ship online orders. We've been doing this work for the last few years with our clients. I expect more to come as we head into the holiday season at the back end of this year. While I'm disappointed at the performance of our remodel business year to date, I'm confident this work remains in front of us. As the demand hasn't dropped, the schedule has extended. The last item I will mention before going through the highlights of the second quarter is the fluctuation of currencies and the impact on our business. Let's use South Africa in the second quarter as a prime example. Our business in South Africa performed well in the second quarter. We grew the top line in local currency by 7%. Our leadership and team in South Africa did a really nice job staying ahead of the impact of a slowing economy. A lot of our clients are consumable clients that are less impacted by inflation, such as P&G, think diapers, or baby formula. The rising interest rate in the U.S. has increased demand for the U.S. dollar compared to the South African RAN. The impact of the currency exchange rate for us was to turn a 7% growth for South Africa into a 10% decline in U.S. dollars. As we continue to successfully grow our international businesses, I would ask that you note the operational health of these businesses. regardless of the conversion of currency fluctuations. Turning to our second quarter results, our consolidated revenue was $66 million, a decline of 2.7% from the prior year same period. Our gross profit was 13.1 million, up 1%. Operating income was 2 million, and our consolidated net income was 1.1 million compared to 1.6 million for the same period in 2022. On a constant currency basis, our consolidated revenue would have been 68.4 or up half a million dollars, or approximately 1%. The exchange rate impact was a negative $2.4 million. Breaking our revenue results by segment, the Americas, which includes the United States, Canada, Mexico, and Brazil, represents approximately 79% of our revenue in the quarter. EMEA, which reflects South Africa, represents about 12%, and Asia Pacific, which includes Japan, China, India and Australia is now 9%. Our second quarter revenue in the United States was a tale of two cities. Merchandising services were up 16% over last year and remodeling services down. For merchandising, we continue to see growth in the quarter. We've added new clients, increased our productivity, and improved margins. On our remodeling business, retailers delayed planned projects and store remodels. which is shifting expected revenues out of the first half into the second half of 2023 and, in some cases, into the first part of 2024. We have no indication yet that these projects have been canceled, so we believe this is a seasonal shift from prior patterns and a temporary reaction to rising interest rates. A small but important bright spot, we saw an increase in unplanned work in the second quarter related to our U.S. clients, which speaks again to the scope of our relationships and the preference of our clients who reach out to spar when they have important work. Canada had an outstanding second quarter. Our Canadian revenue increased 48% compared to the same period last year. This is a reflection of the intentional focus we began to apply when expanding this business as of mid-2022. I expect this trend to continue in Canada under the leadership of Mianna Reid and oversight of Ron Lutz, our Global Chief Commercial Officer. Brazil also had a strong second quarter with revenues increasing 18% over the prior year same period. The team in Brazil has really generated excitement with brands and large clients over the last few years. We base our operations in Sao Paulo, but the impact and services are provided across the country. Mexico had a solid quarter of 9% over the same period last year. I wanted to make a particular note of this as our efforts to rebuild this business post All of the legislative change in Mexico has taken root. Turning our attention to EMEA or South Africa, revenue in the second quarter was down 10% from the prior year. This is entirely explained by currency conversion. In constant currency, revenue is up by 7%. While I'm displeased by the exchange rate impact in our business, I appreciate the work and efforts of our team in Johannesburg, Cape Town, Durban, and other parts of South Africa. that continue to provide great services for our clients such as P&G, Nestle, Woolworths, Rhodes Food Group, Akel, JDE, and more. Asia Pacific, that includes Japan, China, India, and Australia, increased revenue by 5% and gross profit by 500 basis points. While this is a small part of our business, I want to call out Australia that grew top line by 28% over the same quarter in 2022. Based on the results, We've established a solid footing after a challenging two years in Australia under the leadership of Craig Zealy and Dean Nixon. After Antonio covers the detailed financial results, I will come back and share additional thoughts and insights about the business. With that, I will turn the call over to Antonio to review our results.