Good morning, and welcome to the SPAR Group First Quarter 2024 results. 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 first quarter 2024 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 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. Now I would like to turn the call over to the company's CEO, Mike Matacunas.

Thank you, Sandy, and good morning. I am pleased to share our first quarter results and continued progress on SPAR's strategic transformation. At the end of our prepared remarks today, we will open the line for questions from analysts and institutional investors. For the first quarter 2024, our consolidated revenue increased 6.7%. SG&A was down nearly $850,000 or 220 basis points of favorability as a percentage of revenue. We captured the financial benefit of the South Africa sale of $7.2 million; the resulting EBITDA is $10.1 million, and net income attributable to SPAR for the quarter is $6.6 million or $0.28 earnings per share. This is compared to $0.04 of earnings per share last year for the same period. In addition, in subsequent events to the quarter, we announced a buyback of 1 million shares from one of our largest shareholders and a founder and acquired the balance of our Resource Plus U.S. joint venture, giving us full value for our shareholders of the U.S. business. You'll also hear from Antonio in a few minutes that our cash position at the end of the first quarter was strong and our balance sheet is in excellent shape. Within the consolidated results, our U.S. business, which is the combination of our own business in the first quarter plus our Resource Plus joint venture, grew by 17% compared to the same period last year, and Canada grew by 79%. As I noted in the last few calls, we expected the remodel business to recover, and it did not disappoint. The recovery of our U.S. remodel business accelerated in the first quarter and grew by 98% against the same quarter last year. Perhaps as exciting for us, related to the U.S. growth is that three of our top ten clients in the U.S. for the quarter are new clients to our business, one of them moving us deeper into the Grocery segment. While we were busy delivering the quarter, we also won business for future success. Our U.S. and Canada teams won more than $35 million in new business in the first quarter, including a multi-year deal valued at more than $12 million per year with one of the U.S.'s largest home improvement retailers. The one metric that is lower compared to the prior year is gross margin. I see this as a single quarter event and expect the margin to recover to recent levels over the balance of the year. One of the most significant weights on the gross margin in the quarter was the performance of South Africa. South Africa business delivered a 910 basis point drop in gross margin. South African revenue was also down year-over-year. In our view, we exited the business at the right time to preserve long-term value for our shareholders. While we still operate businesses in Japan, Mexico and India, the demand for our services in the U.S. and Canada is strong. We have more work to capitalize on all of the opportunities in front of us, but I remain confident that we are set up for success. After Antonio covers more detailed financial results, I will share additional thoughts and insights about the business. Antonio?

Thank you, Mike, and good morning, everyone. First quarter 2024 net revenues totaled $68.7 million, an increase of 6.7% on Q1 2023 reported numbers. Net revenues included $54.7 million of revenue from the Americas, $8.3 million from EMEA, and $5.8 million from Asia Pacific. Reported revenues by segment for Q1 versus the prior year grew by 12.5% for the Americas, while EMEA declined by 14.7%, and APAC declined by 5.5%. As Mike mentioned earlier, our Americas segment reflects strong remodeling and merchandising revenues, and we have continued to see a sequential recovery in the U.S. client store remodels that started in 2023 and has continued into 2024. Merchandising services were strong but declined against the prior year in our U.S. owned business in Canada. The first quarter's gross profit was $12.5 million or 18.3% of revenues compared to $14.1 million or 22% of revenues in the prior year quarter. The margin compression was due to a mix shift to the remodeling business, which has higher labor and travel costs and lower gross margin in South Africa due to additional variable expenses in the cost of sales, government-imposed wage increases ahead of inflation at a time when the economy is under pressure, which forced margin reduction in contract renegotiations. The first quarter selling, general and administrative expenses totaled $9.6 million or 14% of revenues compared to $10.5 million or 16.2% of revenues in the prior year. SG&A costs included nonrecurring strategic alternative costs of $330,000 during the 2024 period. Operating income totaled $9.6 million, which included gains on the sale of JVs of $7.2 million in the quarter compared to operating income of $3.2 million in the prior year period. Net income attributable to SPAR Group, Inc. for Q1 was $6.6 million or $0.28 per diluted share compared to a net income of $866,000 or $0.04 per diluted share in the year ago quarter. Adjusted net income attributable to SPAR Group, Inc. in the quarter was $1.3 million or $0.06 per diluted share compared to $1.3 million or $0.05 per diluted share in the year ago quarter. Consolidated EBITDA in the 2024 Q1 was $10.1 million, compared to $3.7 million in the prior year quarter. Q1 2024 consolidated EBITDA included gains on the sale of JVs in the amount of $7.2 million. And consolidated adjusted EBITDA in Q1 2024 was $3.4 million compared to $4.2 million in the prior year. Q1 adjusted EBITDA attributable to SPAR Group, Inc. was $2.5 million compared to $2.9 million in the prior year quarter. Now turning to the company's financial position as of March 31, 2024. The company's balance sheet remains strong, and total worldwide liquidity at quarter end was $21 million, with $16.6 million in cash and cash equivalents and $4.4 million of unused availability at the quarter end. The company's cash from operating activities was $615,000 in the quarter, and the net increase in cash was $5.9 million. The company's net working capital as of March 31 was $38.2 million, and the accounts receivable balance was $68.7 million. With that, I would like to turn it back to Mike.

Thank you, Antonio. If you have been a shareholder in SPAR or followed the business for a number of years, you have undoubtedly noticed the change. This is a different business from just a few years ago. I hope you can sense the momentum and boldness of this team. In fact, our mantra for 2024 is go for bold as we aspire to inspire while we perspire. Unlike other businesses, some of the macroeconomic trends put a wind to our back. A low unemployment rate, growing retail staffing challenges, shrink, expansion of online, and stabilizing interest rates provide us with opportunities as we support some of the world's greatest brands and retailers. Low unemployment means labor is more expensive for our clients, and our ability to provide flexible, syndicated merchandisers on a national scale differentiates us. The challenges with shrink that almost all large retailers have experienced in the last 12 months require more touches in the store to manage the product and reduce shrink. It also requires better analysis of product performance and inventory integrity. Again, more opportunity for syndicated merchandisers to drive results for our clients while targeting the areas of challenge and for analytics, more value created from our SPARview software. The expansion of online requires retailers to constantly rethink the store footprint, layout, function, and experience. Our remodel business is one of the largest in the country supporting transformation for our clients. These are multiyear initiatives for retailers who need to touch a store every few years to maintain its currency and relevance to the ever-demanding consumer. Capitalizing on these macro trends required us to simplify and focus. In the last six months, we've announced the exit of Australia, China, National Merchandising Services, South Africa, and Brazil. While we expect these newly independent businesses to continue to operate, this has greatly reduced the complexity of our business. One of the most important changes for me that enabled this change was the reconstitution of SPAR's Board last fall. The Board is now comprised of Jim Gillis as Chairman, Linda Houston, John Bode, Bill Bartels, and myself. Each new director is a proven C-suite executive, adviser, experienced board member, and passionate about results and shareholder value creation. This is a board about action and results looking forward. Now let me comment on the review of strategic alternatives that we announced in the fall of 2022. For the first few months, we examined every part of our business and source of value. We considered buying, selling, rolling up, divesting, merging, small/large services, technology, and many other alternatives. We exhaustively evaluated alternatives to unlock value for our shareholders. The feedback and our own determination were that the business was overly complex for its size, and the financial value was difficult to repatriate. As the international businesses grew, so did the repatriation challenges. While the U.S. business carried the expense of operating globally, based on the math, the joint venture minority partners were keeping a disproportionate amount of the cash and value. This had to be considered. At the same time, the global leadership team that is based in the U.S. had to work two halves. They had to drive the international joint ventures and deliver the U.S. and Canada performance. While it's hard to quantify the impact of this distraction, it is real, and the last several quarters of U.S. and Canada performance underscore how great this business can be with the right focus. Factoring in complexity and distraction, we evaluated the potential impact on clients if we exited these international markets and focused on the U.S. and Canada. To be clear, we've never changed our core business of merchandising, remodeling, and distribution. The core of our business has always been in the U.S. and Canada. The question in front of us was ironically how complicated it would be to simplify. The answer was easy to find. Since beginning the exits, we have lost zero clients or opportunities. In fact, our largest clients have embraced this news with appreciation and support, which seems like a potential risk has turned out to be an asset. As we sit here today, more than 18 months after the announcement to explore strategic alternatives, we have a clear path to simplifying the business' operating financial structure. The new SPAR will maintain its core business but have to focus and energy to deliver on it. For those who have been investors or following SPAR for the last few years, thank you for your support and faith in me and this team. This is exactly the right time to be here, and I'm bullish about our future. Finally, I want to express my appreciation and admiration for the team at SPAR that gets up every morning and is so committed to client results. This client-centric mindset with a passion for results can't be beat. I'm proud of our first quarter results, and there is more to come. This is a great time to be SPAR. With that, I would like to open the line for questions. Operator?

The first question comes from Theodore O'Neill from Litchfield Hills Research.

Congratulations on a strong quarter, Mike. My question focuses on the upcoming quarter. I understand you won't be providing guidance, but I'm curious about what transpired this quarter regarding revenue, especially since you operate different businesses. There seems to be some revenue carried over into the first quarter you just reported. I had anticipated a sequential decline in revenue, yet it instead increased. Could you clarify the revenue dynamics this quarter so I can grasp which components may not carry into the next quarter?

I appreciate the question. You're right. It is one of these years, I think that for the revenue, as we sort of announced and then exit these individual businesses, it will probably be harder to sort of calculate, and you're also right, we don't give forward-looking guidance. Having said that, the best way to think about it at the moment is that the core of our business is really growing. The U.S. and Canada combined are up 22%, to where I broke them apart in my notes and comments earlier that the U.S. business at 17% and Canada at 79% is holding up and then accelerating the overall top line; even with foreign exchange rate impacts, even with the issues in South Africa we had in the first quarter, we put up 6.7% or approximately 7% revenue growth. Going forward, you know that you'll see and can interpret from our comments that South Africa and China won't be in the second quarter. But we've also announced an exit of Brazil, and Brazil will be in the second quarter, right at this point because we haven't announced the formal closing of Brazil at this point. So not that, that helps you given it's a moving target, but the answer where this revenue is coming from is the core of our business, and I'm really excited about how these clients are reacting to it. Appreciate the question.

Okay. And then a follow-up to that then. You've mentioned in your prepared remarks that you're seeing the remodeling business coming back, recovering quicker than you expected. What's going on with your customers in the U.S. and Canada that is causing that to happen?

Some of it was pent up. Last year in the second quarter, we mentioned that many people had paused on their transformation investments in stores to improve them for customers. We began to see signs of recovery in the fourth quarter. A few weeks ago, I pointed out that this momentum was returning, and it has exceeded our expectations. There are several major clients who are investing more than we anticipated, which is why I indicated that the results have been better than expected. I don't see any signs of a slowdown for the rest of the year, and we continue to encounter more opportunities. Additionally, we've been winning more clients in this area. Not only are our existing clients increasing their investments, but new clients we've acquired in the past six months are also expanding their commitments. I anticipate that this will be an excellent year for the remodel business overall.

The next question comes from Sebastian Clarke, a Private Investor.

I have two questions. First, you touched a little bit on the economies of the South African business, which kind of was a drag on gross margin. Regarding the Brazilian joint venture, which still will account for the numbers in Q2. Are the margins in Brazil similar to those in Canada and in the U.S., or maybe ask in a different way; if we lose the Brazilian business, what kind of margin profile are we looking at — kind of similar, lower, or higher?

No, Sebastian. I appreciate the question. The answer is the Brazilian gross margins are lower. And South Africa, as I noted, obviously had a very challenging quarter and had a challenging fourth quarter. You may recall in my comments from last quarter. So we certainly, I believe, exited at the right time for long-term and even short-term value for the shareholders. But Brazil is a lower-margin business, so as that is exited and we complete the close of that, I would expect you'll see the benefit of that.

Perfect. And the second question is around capital allocation. I think if your Brazilian business, if you close that, you will probably have more than $25 million in cash and it was greatly appreciated to see you buying back stock from the old founder. What is your thought process around capital allocation and especially if you're considering acquisitions, would we look at bigger acquisitions, smaller tuck-in acquisitions? Maybe could you give some comments on that?

Yes, certainly. I think the capital allocation is always in three buckets. The first is to support or accelerate organic growth. The second is to find accretive acquisitions if you expand our capability, move us into new categories, add new services that our current clients can find value in, etc. And the third, of course, is to return it directly to our shareholders through a number of ways, like share buybacks or dividends, special dividends, those kinds of things. And so in light of that, you'll see we're effectively doing all of these things at the same time. We are looking at share repurchase. We're absolutely looking at acquisition opportunities, and I think the only comment I can share, Sebastian, is that from my experience having done a couple of dozen acquisitions and transactions of different types, the big ones are no easier than the little ones, meaning the little ones are just as hard. So I would rather go big as opposed to small, but that doesn't mean that's necessarily the best thing out there for us. So we're looking at everything. We've got a whole portfolio of things, and if we think it excites our clients and then expands our business and is accretive, we're taking a serious look at it.

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

I appreciate it, Drew. Thank you just in general, for your interest in SPAR, for everyone listening to and participating on the earnings conference call today. I really look forward to providing an update on our progress with the second quarter results in August. Thank you very much. Have a good morning.

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