Thomas Walsh Gary S. Raymond - Chief Executive Officer, President and Executive Director James R. Segreto - Chief Financial Officer, Principal Accounting Officer, Secretary and Treasurer

Matthew Paul - Sidoti & Company, LLC

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the SPAR Group Inc. First Quarter 2013 Update Conference Call. [Operator Instructions] This conference is also being recorded today, May 16, 2013. I would now like to turn the conference over to our host, Thomas Walsh, with Alliance Advisors. Please go ahead.

Thank you. Good afternoon. I'd like to thank everyone for joining us today for the SPAR Group First Quarter 2013 Shareholder Update Conference Call. Mr. Gary Raymond, Chief Executive Officer, and Mr. Jim Segreto, Chief Financial Officer of SPAR Group, will be your presenters on the call. Before we begin, I'm going to review the company's Safe Harbor statement. Statements in this conference call that are not descriptions of historical facts are forward-looking statements relating to future events, and, as such, all forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially. When used in this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to SPAR Group, are such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which may cause actual results to differ from those anticipated by SPAR Group at this time. In addition, other risks are more fully described in SPAR Group's public filings with the U.S. Securities and Exchange Commission, which can be reviewed at www.sec.gov. With that, I'd now like to turn the call over to Mr. Gary Raymond, CEO of SPAR Group. Gary, please go ahead. Gary S. Raymond: Thank you, Thomas, and thank you, everyone, for joining us today for our first quarter 2013 shareholder update conference call. Management is pleased with the company's 24% top line financial growth and market expansion that took place during the first quarter of 2013. The company's ability to increase year-over-year revenue during a period which is typically our slowest quarter provides positive sentiment that the company continues to grow into a leader in the merchandising and marketing services industry. We achieved numerous growth initiatives throughout the first quarter. First and foremost, we have significantly bolstered our U.S. business via the acquisition of general merchandising and certain in-store audit services for our Market Force Information, a leading customer intelligence solution provider. Market Force will allow SPAR to expand our existing client base while augmenting a new service offering to our catalog, in-store audit services. This newly acquired business is expected to generate incremental annualized revenue of approximately $8 million. The subsidiary will expand our clientele in the mass merchandiser, hardware, grocery, drug, toy and other classes of trade that we consider vital for continued profitable growth. We are in the final stages of integrating our systems with Market Force and are now poised to begin to leverage their relationships and service offerings. Additionally, we announced that SPAR is trying to project a $2.8 million annual contract with a Fortune 500 company that possesses a national retail footprint. Under the terms of the agreement, we will provide ongoing coverage in the store's furniture category, including service and assembly in stores as well as in the customer's homes or offices. This contract will provide profitable revenue to our domestic business while providing a new relationship with this consumer goods company. As we continue to grow domestically, we will seek other acquisitions that can bolster our business and profitably increase our revenue base. International revenue grew by more than 40%. Organically, the International business grew 12% based on strong performances in both Australia and China. Our International acquisition growth rate was 28% from increased operations in South Africa and India. During the first quarter, SPAR acquired a business worth $2.5 million in India with a Fortune 500 company, one of the leading consumer good companies in the world. The agreement will operate under SPAR's newest Indian subsidiary, Preceptor Marketing Services, and will focus our merchandising efforts in northern and Western India. The new project will expand our store visits by over 40,000 stores every month and significantly increase our operations there. SPAR also signed a $2.5 million annual contract with a multinational consumer goods company in Japan. We will provide in-store merchandising, including stock replenishment and building displays, demonstrations and auditing to this client in approximately 1,500 store locations throughout this growing Asian country. Additionally, the company has seen encouraging growth trends in several International markets such as South Africa, China, Mexico and Australia. While net income did soften during the first quarter compared to last year, the company has dramatically increased its cash position 89% to $3.4 million while decreasing our line of credit by $1.3 million. The results were impacted as a result of incremental spending in support of new project startup costs and spending against recent acquisitions. Our management believes that these onetime costs were necessary to ensure significant future gains and be awarded large-scale projects that should be profitable in the second half of the year. Management continues to believe that we have reached the targeted balance between our Domestic and International business that is required to maintain our current market position. Our ability to simultaneously and significantly expand operations in both our International and Domestic businesses has always been the key to SPAR's success. We, of course, will remain committed to those efforts in 2013. Going forward, we will remain diligent to following our proven business model of acquiring and efficiently integrating profitable international subsidiaries while organically growing domestic earnings via large-scale contracts with Fortune 500 companies. Management also believes that improved seasonality, organic growth and SPAR's continued strategic acquisition model will continue to improve our financial results throughout 2013. I would now like to turn the call over to Jim Segreto, Chief Financial Officer, who will provide greater detail of our financial results. James R. Segreto: Thank you, Gary. As previously mentioned, we are extremely pleased with the numerous growth opportunities in which we have capitalized during the first quarter ended March 31, 2013. Most notably, we are pleased with the company's new contract awards in both the Domestic and International businesses. During the first quarter of 2013, SPAR Group increased quarterly revenue 24% to $26.2 million. International revenue increased 40% to $16.5 million. The increase was primarily due to the incremental revenue from the newly integrated acquisitions in South Africa and Romania and increased revenue in China and Australia. Domestic revenue increased 4% to $9.7 million. The increase in domestics was directly attributable to the incremental revenue from recent acquisitions of general merchandising in certain in-store audit services from SPAR Market Force Information, and the acquisition of National Marketing Services in the third quarter of 2012. These gains were partially offset by decreases in syndicated services and other project work as compared to the same period in 2012. Gross profit increased 5% to $6 million for the quarter ended -- the first quarter ended, excuse me, December -- March 31, 2013 when compared to $5.8 million the same period in 2012. Gross profit margins declined to 23% compared to 27% for the same period last year. Domestic gross profit margins, however, remained flat to last year at 32%. Net income for the first quarter 2013 was $44,000 compared to $307,000 for the same period in 2012. The decline in both gross profit margin and net income was due primarily to incremental spending in support of new project startups and recent acquisitions when compared to the same period in 2012. As of March 31, 2013, cash and cash equivalents increased to $3.4 million. Working capital totaled 5 -- $8.5 million and the company's current ratio was 1.6:1. Total current assets and total assets were $23 million and $30 million, respectively, and total current liabilities and total liabilities were $14.8 million and $15.1 million, respectively. Total equity was $14.9 million at March 31, 2013. I would like to now turn the call back to Gary for closing remarks. Gary S. Raymond: Thank you, Jim. SPAR's market expansion and revenue growth throughout the first quarter of 2013 continue to provide optimism to SPAR's management. We have continued to expand our market footprint while constantly bolstering relationships with some of the world's largest retailers and consumer packaged goods manufacturers. We have previously provided guidance of $115 million for 2013 and we continue to believe that, that number is well within reach. Our current project pipeline remains strong and we are currently in the midst of targeting and hopefully securing new profitable acquisition candidates for the second half of the year. Management's excited about the direction of the company and look forward to executing on the numerous opportunities in our pipeline. In closing, we are pleased to have strongly positioned us to capitalize on the numerous opportunities that lay ahead. We look forward to increasing our profitability throughout the year through the absorption of Market Force as well as our new contract wins. On behalf of the entire team at SPAR Group and I would like to thank you all for joining us on today's call and we are now available to answer any questions from any of the participants on the call.

[Operator Instructions] Our first question comes from the line of Matthew Paul with Sidoti & Company. Matthew Paul - Sidoti & Company, LLC: In regards to your strategic acquisition model and the cash position, is it to say that you're not as active -- you're not really looking actively domestically or you're just kind of limiting yourselves to international targets there? Gary S. Raymond: Looking at your targets both domestically and internationally. In fact, I'd love to have a balance between getting -- looking at opportunities in both. We've in the past kind of focused primarily on International as we were doing our expansion mode, but we think we've been -- a year ago, we were poised to do another one in the U.S., which obviously, that finally closed this year and we'd like to look at additional opportunities domestically, either in the traditional merchandising space, as well as the assembly area of business that we do as well. Matthew Paul - Sidoti & Company, LLC: Okay, thank you. And my second question, can you just provide a little bit of color on the Market Force acquisition and the way it's going to kind of strengthen your existing services? Gary S. Raymond: Sure. There's a couple pieces to that, the first one being the type of work that Market Force is doing in this position that we acquired. Some of it is what I would call more traditional merchandising business, which we indeed do today. And there are a number of clients that are both common to what we are doing, as well as ones that are very different. But the audit service work that they do, we believe, is something that we would like to go explore. We did that before with the assembly business through another acquisition, where we believe we can find an adjacent business to our core merchandising work and able to use that and expand that within our traditional syndicated offering that we put out there. So we think that this could be the type of business that could help us expand it to some of the many customers that we have on the merchandising rolls today. From our perspective, there are fewer competitors in this space and the margins generally are a little bit better than traditional merchandising. So we see it as an opportunity going forward to try to position ourselves to go attract and get more of the audit type of work.

And our next question comes from the line of Steve Jurseen [ph].

Question I have is -- and a follow-up. The guidance of $115 million, does that include the acquisition of Market Force? Gary S. Raymond: Yes, we put out $115 million from about the $102 million or so that we did last year. And we're hoping that we can hit that number at a minimum and that it would include the revenue that we believe we're going to get from Market Force. The Market Force we put out there at about $7 million to $8 million annualized, obviously, we're not going to have a full year's worth of business from them since we just started it in late March. So it does include it, but again, we're putting a number -- that's why I stated earlier I think it's well within reach that number because we think that that's the minimum number we hope to achieve.

Okay. Also, what is the plan for future acquisitions in the International market and are you guys planning to acquire additional partners in existing locations? Gary S. Raymond: Yes and yes. We are looking internationally both at potentially new markets that we're not -- that we don't reside in today. And we are also looking at potential acquisitions in markets where we currently operate that we think may be a good opportunity. So you've seen the ones that we have done both at the end of last year and the beginning of this year in both South Africa and India. We'd also like to explore acquisitions in Canada. We'd like look at them in Australia, perhaps Mexico and perhaps even looking at South Africa again. So markets where we feel we're particularly strong, certainly have good management and where we believe a need presents itself, we would look to do those type of offerings as well because we believe that they can really build scale in those markets and help us to grow a little bit more profitably.

[Operator Instructions] And I'm showing no further questions at this time. Gary S. Raymond: Okay. Well, thank you very much. In closing, we just like to say that we've got a lot at SPAR Group on our plate right now as we're looking to, as I mentioned earlier, get the absorption of the entire acquisition, not just in terms of closing it, but getting everything up and running operationally. And as you kind of work through these transitions, they generally tend to get a little bit easier as you're going along. So we think this is going to be a very good fit for us, and in combination with the other things that we're working on, both in our core business as well as other expansion opportunities, we're very hopeful 2013 and beyond will be a good year. We believe a lot of things that we've done so far should set us up for that. So again, thank you very much. If anybody has any questions otherwise, you're welcome to give us a contact through our Investor Relations group, Alliance Advisors. Again, thank you very much, and thank you to all the employees who worked so hard on this transition over the past few months.