Hello and welcome to the SPAR Group Fourth Quarter and Full Year 2023 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. As a reminder, this conference is being recorded. I would now like to hand the call to Sandy Martin with Three Part Advisors. Sandy, 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 the 2023 fourth quarter and full year results. Joining me on the call today are SPAR's Chief Executive Officer, Mike Matacunas and the company's Chief Financial Officer, Antonio Calisto Pato. 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 today 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 today 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. 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 fourth quarter and full year results. At the end of our prepared remarks today, we will open the line for questions from analysts and institutional investors. On a consolidated basis, our fourth quarter revenue was $65.1 million, up 0.7% over the prior year. Our gross profit rose by 11%, reflecting a 210 basis point improvement in profit percentage, and our EBITDA for the quarter was $3.1 million compared to a $250,000 loss for the same period last year. Our consolidated net income for the quarter was $795,000 compared to a loss of $1.84 million last year in the same quarter. In short, revenue was up, margins were up, EBITDA was up and net income, the bottom line, was up materially. But the core of our revenue performance for the quarter was our US owned merchandising business that increased revenue 9%. Our Canada business was up 66% and our small business in Japan that increased top line by 8%. This growth was offset by a decline in Brazil, South Africa and our US joint ventures. I will comment more on joint ventures later in this call. Within the United States, our remodel business began to recover nicely and our distribution services business had an excellent quarter as we provided services to one of the country's largest, most successful big box retailers and a large sortation center. Combined with our growth in merchandising in the US, I'm pleased with how quickly we pivoted and responded to client project delays in the fourth quarter and delivered strong top and bottom-line results. While I'm pleased with the revenue, the compelling story of the fourth quarter is our profitability, net results and cash improvement. We increased gross profit dollars by 11% with a 210 basis point improvement in gross profit percentage on a consolidated basis, achieving gross margins of 22.8%. This is a 430 basis points higher for the fourth quarter than two years ago, the fourth quarter of 2021. This, while many of our competitors have experienced declining margins. Our consolidated EBITDA was 4.8% of revenue or $3.1 million for the quarter. This included a one-time net loss on the sale of our joint ventures of $408,000. Year-over-year, our EBITDA improved by 61% adjusting last year's numbers for the one-time goodwill impairment and this year for the one-time loss on sale. I am pleased with these results. Net income attributable to SPAR for the fourth quarter was $2.13 million or 3.3% of revenue. Again, I'm pleased with the results, and I want to thank my team and our team members across all parts of our business for a great quarter and strong results. For the full year, our revenue was $262.7 million, up 0.6%. While this is modest top line consolidated growth, the results in our core business are compelling. Our US merchandising division revenue was $52.5 million, up 20% over 2022. I shared the continued double-digit growth of our merchandising business over the prior quarterly calls, and I'm really pleased with the full year performance. We developed more work with brands in grocery, specialty and discount to drive these numbers. In addition, our distribution assembly and installation business was up more than 50% and our Canadian business top line was up 52% in US dollars. Especially in Canada, the launch of our remodel business in 2022 has delivered outstanding results. Our Canada remodel business is up 423% for the year and we believe there is much more to come in this market. Our headwinds in revenue growth came from Australia, Japan, Mexico, India, South Africa and China. Each of these international businesses declined in revenue. Our gross profit dollars for the full year were up 8.8%, and our gross profit margin was up 160 basis points over 2022. As I've stated before, this is purposeful work, and I continue to be pleased with those results. Our consolidated EBITDA for 2023 was $11.4 million compared to $7.4 million last year or a 54% improvement. And finally, our net income attributable to SPAR for 2023 was $3.9 million compared to a $732,000 loss last year. After Antonio covers more 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.

Thank you, Mike, and good morning, everyone. Fourth quarter 2023 net revenues totaled $65.1 million, an increase of 0.7% over Q4 2022 reported numbers. Net revenues included $49.2 million of revenue from the Americas, $8.8 million from EMEA and $7.1 million from Asia Pacific. Reported revenues by segment for Q4 versus prior year grew by 1.4% for the Americas, 5.9% for APAC and declined by 6.3% for EMEA. As Mike mentioned earlier, our Americas segment reflects strong merchandising revenues, and we saw a sequential recovery in the US client store remodels as 2023 progressed. Similar to the second and third quarters, we continue to see strong sales momentum for the fourth quarter related to merchandising services in our US owned business and Canada. Fourth quarter gross profit was $14.9 million or 22.8% of revenues compared to $13.4 million or 20.7% of revenues in the prior year quarter. This 210 basis point improvement from the prior year was based on improved contract terms and pricing, system enhancements and other containment and service mix shift in the quarter. Selling, general and administrative expenses for the fourth quarter totaled $11.3 million or 17.4% of revenues compared to $11.2 million or 17.3% of revenues in the prior year quarter. SG&A costs included nonrecurring legal costs of $149,000 during the fourth quarter. The fourth quarter operating income was $2.7 million compared to an operating loss of $760,000 in the prior year quarter. Net income attributable to SPAR Group, Inc. for Q4 was $2.1 million or $0.09 per diluted share compared to a net loss of $2.5 million or $0.11 per share in the year ago quarter. Adjusted net income attributable to SPAR Group, Inc. in the quarter was $2.6 million or $0.11 per diluted share compared to $420,000 or $0.02 per share in the year ago quarter. Consolidated adjusted EBITDA in the 2023 fourth quarter was $3.7 million compared to $3.5 million in the prior year. Q4 adjusted EBITDA attributable to SPAR Group, Inc. was $3.9 million, up from $2.3 million in the prior year quarter. For the full year 2023, sales were $262.7 million with gross profit of $55 million or 21.1% of sales, an increase of 160 basis points over 2022. Operating income was $9.4 million, up 75%. Excluding the 2022 noncash goodwill impairment charge, the 2023 operating income increase was 19.8% versus the prior year. Net income attributable to SPAR for the year was $3.9 million, $0.17 per share or $0.16 per diluted share. On an adjusted basis, non-GAAP net income attributable to SPAR for 2023 was $5.1 million or $0.21 per diluted share, up significantly from $0.09 per share in the year ago period. Finally, 2023 adjusted EBITDA attributable to SPAR in 2023 was $9.9 million, up 62% from 2022. Now turning to the company's financial position as of December 31st, 2023. The company's balance sheet remains strong and total worldwide liquidity at quarter end was $19.3 million, with $10.7 million in cash, cash equivalents and restricted cash and $8.6 million of unused availability at year-end. The company's net working capital as of December 31st was $27.5 million, and the accounts receivable balance was $59.8 million. We continue to make progress with improvements in our days sales outstanding each quarter. With that, I would like to turn it back to Mike.

Thank you, Antonio. As we look at our business, there are a number of macro trends that are shaping our industry and opening up opportunities. This is especially true in the US and for those familiar with global market influences, the US typically leads and other countries follow, albeit at different paces. I want to spend a few minutes on what is changing the landscape. According to the National Retail Federation, retail sales for 2023 were up 5.6%. In the world of retail, anything over 3% to 4% provides a retail sales material opportunity. This number is an indicator that product is turning faster and there's more work for SPAR. As a reminder, we are the last person to touch the product, place it on the shelf before the customer buys. We are also changing promotional materials, adjusting clip strips, resetting end caps and more. Higher sales means more work for us. When sales are up, retailers and brands need more of our services. Second, unemployment was 3.9% in February for the United States. When unemployment is low, this means businesses must compete for labor, and this typically drives up prices. For retailers and brands that have their own field services organization this can quickly become a critical financial challenge. For SPAR, we solve it. We have thousands of individuals trained and positioned to help. We can dedicate people or we can provide syndicated services. Those retailers and brands who are struggling with labor, we can offer shared resources at a lower cost while maintaining service levels. You may have noticed less and less employees in your local retail stores. Our report from Yahoo Finance in February noted that retailers had cut more than 5,300 jobs just in the first five weeks of 2024. The economy is changing, more part-time, more transactional, and our model is well placed to capitalize on this shift to variable resourcing and value-added services. Third, the economy seems to have digested the 525 basis point interest increases from the Federal Reserve since March 2022. From my vantage point, this slowed the deployment of capital in the first half of 2023, while our clients and prospects monitored this. By the second half of 2023, the deployment of capital related to what we do has begun to return to normal rates. You may have seen the announcements from Target that they plan to open 300 more stores in the next decade. Walmart announced in January this year an ambitious five year store plan. ALDI is planning to open more stores in the US this year, etc. Based on the demand for our remodel services in both the US and Canada, the capital appears to be flowing again at normal, if not accelerated rates. In total, the macro trends and shifts in the economy are moving towards SPAR. It's exciting for us. The other topic I want to comment on is the divestitures we've announced in the last few months. We announced selling our 51% interest in Australia, China and national merchandising services in the United States. And today, we are announcing our agreements to sell the company's joint venture positions in Brazil and South Africa, which we closed sometime during the second fiscal quarter of the year. These divestitures simplify our portfolio, financial structure and operating model. This simplification provides more focus on our core business that is growing by double digits and our ability to capitalize on the shifting macro trends. In working through the strategic alternatives analysis in the last 18 months, it became clear the structure of our organization was wide and thin versus narrow and deep. Growing through JV partnerships is complex and the process of repatriating our cash is even more complex. In order to create long-term value for our shareholders, we have to simplify the organization, harvest our cash for further growth, and use our brand equity and marketing dollars on a strategy that best utilizes our people, process and technology. We're confident that simplifying the operations of finances at SPAR will allow us to accelerate our growth and generate significantly more cash flow for our shareholders. Lastly, I want to thank all of the employees and associates of SPAR, our Board of Directors, our clients and our business partners for their contributions, counsel, partnership and passion for the business. I'm grateful to lead this outstanding group of people, and I look forward to building shareholder value, generating revenue, profitability and incremental cash flow. This is a great time to be SPAR. With that, I would like to open the line for questions. Operator?

Thank you very much. We will now begin the question-and-answer session. Today's first question comes from Theodore O'Neill with Litchfield Hills Research. Please go ahead.

Thank you very much and congratulations on a great quarter. So my first question, Mike, is a couple part question. On the South Africa, Brazil, NMS, Australia and China, can you give us an approximate percentage of revenue that represented in 2023? And in your press release, it says this transaction will raise cash levels. We'll raise cash on top of what you already have, looking at maybe being $30 million in the next couple of months. And that would exceed your current market cap. I was wondering if there's any plans for a dividend or stock buyback with that.

Theo, good morning. Thanks for the question and two parts. On the first, as a contribution of revenue, the businesses that we've divested from or in the process of divesting from sort of in the neighborhood of 25% to 30% of total revenue and a smaller percentage of actual EBITDA and bottom line impact directly to the shareholders. Maybe a context, the way to think about these divestitures is as we look out the windshield of the car instead of the rearview mirror. We look at sort of the road in front of us for the US and Canada and some other markets that are really wide open. And so when we looked at what might be holding us back and how we could potentially capitalize on some of the value for our shareholders, these businesses look like good businesses, but we could do more with capital in pocket and investments, potentially accretive acquisitions or other investments, potentially giving value directly back to the shareholders. To your second question, Theo, the Board and I are discussing a number of options. You know there are always three or four categories when you have a material amount of cash in the business. The first is to look for organic growth where you can do things that accelerate the growth of the business that you have today. The second is to look for accretive opportunities that expand what you can offer, do more for clients that also then deliver direct results quarter-by-quarter. And the third alternative is to then give that cash directly back to the shareholders. All of those are being looked at by the Board, nothing to announce this morning. But you're right, we will be in short sitting on a large amount of capital, which I think is exciting because it gives us a number of choices for our future. I appreciate that, Theo.

Okay. And on margins, margins were much stronger than expected. And I'm wondering, is this the new normal? And if there was a contribution in a particular geographic area or industry that made that so positive in this quarter?

No. Some of it was mix. In other words, our merchandising business, which continues to grow really, really quickly in the US is our most profitable business, and that affects the margins each quarter as it gets bigger and bigger. And as we've shared over the last year, our remodel business was slowing in the second quarter but began to come back but not yet enough to offset some of that. So there wasn't anything one-off in the quarter and the margin number, it's continued focus on the terms and also on the bank side of productivity. So how much work we can do for each dollar that we get from clients. It's hard to say the quarter margins were so strong. I am looking at this year, expecting remodels to grow quite quickly given the capital seems to be available to us from the clients and the demand that's coming into Q1 for us. So I think we're in a good place. I'm not sure after two years of 430 basis points, there's another 400 basis points. We'll keep focused on it but we're sort of at a normal at this point, I think.

Okay. My last question is, what's driving the strong demand in Canada?

A couple of things. One, when we took remodels business, well, the two things. One, our merchandising business has grown as well. That was a shift, a couple of brands in Canada and large global brands had field merchandising organizations and determined in 2022 and into early 2023 that they wanted a third-party partner to take over that work for them. And we were very successful and used our relationships in the United States to win that work. So that grew our merchandising business, and we're going to have another strong merchandising business, I believe, this year. But the second point is remodels in Canada. There's a lot of store growth going on in Canada. Certainly, not at the scale of the United States given the market in Canada. But as we sort of raised our hand and said we know how to do this, and we want to be part of this. You may recall, I've discussed in the past, we had a pilot program in late '22, but that became very successful for us, and we had a few clients that then quickly came to us into a lot of work. And we're finding ourselves to be one of the preferred providers for remodel services in Canada now. And that's why I commented, I think there's a lot of room in front of us for this business given there are very few other players that we can see in the market of our scale and I think that gives us a good opportunity.

Okay. Thanks very much.

Thank you. This concludes our question-and-answer session. I would now like to turn the call back over to Mike Matacunas for any closing remarks.

Operator, thank you very much. Just broadly speaking, I just want to thank everyone who was listening and participated in the call today. We look forward to providing an update for the first quarter coming in the next few months and going from here. So thank you, again, everyone.

The conference has now concluded. Thank you for your participation. You may now disconnect your lines.