SPAR Group, Inc. — Third Quarter Fiscal 2026 Earnings Summary

Financial Performance:

• Net revenues for the three months ended September 30, 2026, were $33.5 million, a 19.0% decrease year-over-year.
• Net revenues for the nine months ended September 30, 2026, were $101 million, an 11.5% decrease year-over-year.
• Gross margin for the third quarter was 18.9%, up from 18.6% in the prior year period.
• Gross margin for the nine months ended September 30, 2026, was 21.3%, up from 21.1% in the prior year period.
• Selling, general and administrative (SG&A) expenses for the third quarter declined 39.0% year-over-year to $5.6 million.
• SG&A expenses for the nine months ended September 30, 2026, declined 19.2% year-over-year to $18.6 million.
• Net income for the third quarter was $50 thousand ($0.00 per diluted share), compared to a net loss of $8.8 million ($0.37 per diluted share) in the prior year.
• Net loss for the nine months ended September 30, 2026, was $94 thousand ($0.00 per diluted share), compared to a net loss of $8.3 million ($0.35 per diluted share) in the prior year.
• Adjusted EBITDA for the third quarter was $1.4 million, compared to $90 thousand in the prior year.
• Adjusted EBITDA for the nine months ended September 30, 2026, was $4.3 million, a 47.3% increase year-over-year.
• Cash and cash equivalents as of September 30, 2026, were $4.7 million.
• Net cash used in operating activities for the nine months ended September 30, 2026, was $7.2 million.
• Total debt increased to $30.8 million ($27.5 million in lines of credit and $3.3 million in long-term debt) as of September 30, 2026, from $21.7 million at December 31, 2025.

Guidance and Future Outlook:

• Full-year 2026 net revenue guidance is adjusted to a range of $125 million to $130 million, compared to $136 million in 2025.
• Full-year 2026 gross margin guidance is set at 20.0% to 22.0%, compared to 15.9% in 2025.
• Full-year 2026 SG&A costs (excluding unusual items) are guided at $23.5 million to $25.0 million, compared to $32.2 million in 2025.
• The guidance adjustment reflects lower remodel activity, projects moving to 2027, and a slowdown in retail sector capital spends during 2026.
• Management expects to leverage improved operating performance to generate consistent cash flow and improve financial stability in Q4 2026 and full-year 2027.

Business Segments and Product Lines:

• U.S. net revenues for the third quarter were $29.5 million (88.0% of total), down from $38.2 million in the prior year.
• Canada net revenues for the third quarter were $4.0 million (12.0% of total), up from $3.2 million in the prior year.
• U.S. net revenues for the nine months ended September 30, 2026, were $89.3 million (88.4% of total), down from $104.3 million in the prior year.
• Canada net revenues for the nine months ended September 30, 2026, were $11.7 million (11.6% of total), up from $9.8 million in the prior year.
• A three-year services agreement was signed with a national retailer for merchandising, store remodeling, and temporary labor services, effective in 2027.
• A strategic partnership with ReposiTrak combines retail technology and data intelligence with SPAR's execution platform to offer a "Touchless Retail" solution.

Market and Competitive Landscape:

• Management attributes revenue declines to lower remodel activity year-over-year in the U.S. and a slowdown in certain retail sector capital spends.
• The company is shifting its service mix toward higher-margin merchandising services.
• The company differentiates itself through a combination of scale, flexibility, and client results compared to competitors.

Risks and Challenges:

• Risks include potential continued revenue growth, gross margin expansion, and service mix shifts not materializing as expected.
• Risks include the success of merchandising partnerships and relationships, including borrowing, repaying, or guaranteeing unsecured loans.
• Risks include potential non-compliance with OTCQB rules regarding minimum bid prices, periodic financial report filings, and director independence.
• Risks include the departure of executives in 2025 and the impact of selling certain subsidiaries.
• Forward-looking statements are subject to risks and uncertainties that could cause results to differ materially from expectations.

Management Commentary and Tone:

• CEO William Linnane expressed pleasure with the second consecutive quarter of profitability and improving gross margins.
• Management highlighted a focus on higher-quality revenue, stronger customer relationships, and improved operating leverage.
• CFO Steven Hennen noted that disciplined cost management drove SG&A expenses down 39% year-over-year despite lower U.S. revenue.
• Management stated the third quarter represents a significant step forward in the company's transformation, with a continued focus on increasing profitability, creating free cash flow, and reducing debt.

Other Key Points:

• The company reported a net loss before income tax expense of $242 thousand for the third quarter, compared to a loss of $7.0 million in the prior year.
• Operating lease right-of-use assets decreased to $4.0 million as of September 30, 2026, from $4.9 million at December 31, 2025.
• The company recorded a gain on extinguishment of debt of $224 thousand for the nine months ended September 30, 2026.
• Proceeds from long-term debt were $4.0 million for the nine months ended September 30, 2026.
• Repayments under lines of credit totaled $98.8 million for the nine months ended September 30, 2026.