Executive Summary

Q3 2025 delivered solid topline momentum but materially weaker profitability: net revenues rose to $41.416M (+9.6% YoY), while consolidated gross margin fell to 18.6% (vs 22.3% LY) on a heavier retailer remodeling mix; GAAP diluted EPS was ($0.37) vs ($0.01) LY, and adjusted diluted EPS was ($0.10) vs $0.05 LY .
U.S. and Canada posted strong growth (+28.2% YoY on a comparable basis), aided by one-off project timing; management cautioned mix and elevated remodeling weighed on margins .
Significant non-GAAP adjustments: $4.0M restructuring & severance and $1.6M unusual one-time costs; a $1.9M valuation allowance drove a non-cash tax expense with a ($0.08) per-share impact in the quarter .
Balance sheet/liquidity tightened sequentially: liquidity ended Q3 at $10.4M (cash $8.2M; $2.2M of unused availability), with YTD operating cash usage of $16.0M, partly from receivables growth and a program management arrangement with a large retailer; ABL revolvers were amended/expanded to $36M and extended to Oct-2027 .
Leadership/tone: new CEO William Linnane emphasized building a structurally leaner, higher-margin, cash-generative business; CTO hire underscores a pivot to technology and AI as a differentiator into 2026; no formal revenue/EPS guidance ranges were provided .

What Went Well and What Went Wrong

What Went Well
- Strong North America growth: “combined U.S. and Canada net revenues up 28.2% over third quarter last year,” benefiting partly from one-off project timing; management expects 2H U.S./Canada growth to exceed 1H .
- Strategic reset under new leadership: CEO William Linnane is targeting a “structurally higher-margin business…strong cash flow” with SG&A reductions, fewer leadership layers, and AI-enabled go-to-market; CTO Josh Jewett hired to drive digital innovation and AI .
- Extended/liquidity backstop: revolving credit facilities amended and expanded to $36M with maturity extended to Oct 2027, increasing flexibility .
What Went Wrong
- Margin compression: consolidated gross margin declined to 18.6% (22.3% LY) due to heavier remodeling mix; adjusted EBITDA minimal at $0.09M (0.2% margin) vs $0.221M LY (0.6%) .
- Elevated non-recurring costs: $4.0M restructuring & severance and $1.6M other unusual costs (legal, strategic alternatives, HQ move) weighed on profitability; prior-year comparable one-time costs were lower .
- Cash flow pressure: operating cash usage increased YTD ($16.0M) driven by AR growth and a program management agreement; liquidity fell to $10.4M (cash $8.2M; $2.2M availability) from $15.1M in Q2 and $23.4M in Q1 .

Financial Results

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$37.788	$34.041	$38.629	$41.416
Gross Margin %	22.3%	21.4%	23.5%	18.6%
GAAP Diluted EPS – Continuing Ops ($)	($0.01)	$0.02	($0.11)	($0.37)
Adjusted Diluted EPS ($)	$0.05	$0.02	$0.01	($0.10)
Adjusted EBITDA Margin %	0.6%	4.4%	3.4%	0.2%
Operating Income (Loss) ($USD Millions)	($1.530)	$1.036	$0.715	($5.919)

Notes:

Management cited remodeling mix shift and one-off project timing as key drivers of margin pressure vs. revenue growth .

Segment/Geography (disclosure limited)

Comparable U.S. & Canada net revenue growth: Q1 +6%, Q2 +5%, Q3 +28.2% YoY (on comparable basis, ex JV divestitures) .

KPIs and Balance Sheet

KPI	Q1 2025	Q2 2025	Q3 2025
Total Liquidity ($M)	$23.4	$15.1	$10.4
Cash & Equivalents ($M)	$17.9	$13.9	$8.2
Unused Availability ($M)	$5.5	$1.2	$2.2
Net Cash from Operating Activities (YTD) ($M)	($4.0)	($11.9)	($16.0)
Accounts Receivable, Net ($M)	$38.219	$44.370	$41.349

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
SG&A run-rate (ex-legal/one-time)	Ongoing	n/a	Target ≈ $6.5M per quarter or lower	New cost target
U.S./Canada revenue cadence	2H 2025 vs 1H 2025	n/a	Expect 2H growth higher than 1H	Introduced
Financing capacity (ABL)	Through Oct 2027	n/a	Revolvers amended/expanded to $36M; extended to Oct 2027	Improved flexibility
2026 outlook	FY 2026	n/a	Management anticipates outperforming key financial metrics in 2026	New directional outlook

No explicit numerical revenue/EPS ranges were provided in the press materials reviewed .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1–Q2 2025)	Current Period (Q3 2025)	Trend
Technology & AI initiatives	Focus on digital innovation/pipeline building under prior CEO	CTO Josh Jewett appointed; using technology and AI to transform go-to-market and differentiation	Increasing focus
Cost structure/SG&A	Reduced SG&A in Q1; margin improvements sequentially into Q2	SG&A target ≈$6.5M/quarter; restructuring and severance to create leaner org	Accelerated cost actions
Mix/margins	Gross margin 21.4% (Q1) then 23.5% (Q2)	Gross margin fell to 18.6% on remodeling mix; adjusted EBITDA ≈ breakeven	Margins under pressure
Working capital/cash	Q1 operating cash use ($4.0M); Q2 YTD use ($11.9M)	YTD operating cash use ($16.0M); AR elevated by revenue growth and a program management agreement	Persistent pressure
Growth pipeline	“Largest pipeline” ($200M+ future business) cited in Q1/Q2	North America growth +28.2% (comparable) aided by one-off projects; building toward 2026 goals	Growth intact, mix-sensitive

Note: No Q3 2025 earnings call transcript was available in our document set, so theme evolution relies on press releases/8-Ks and other company releases .

Management Commentary

“Although we are very pleased to report topline momentum this quarter…we recognize that there is more work ahead to build a structurally leaner and more profitable business…our strategic imperatives center on driving continued revenue growth…reducing senior team leadership costs and management layers, eliminating non-revenue-generating costs, and heightening our focus on cash generation and working capital discipline.” – William Linnane, CEO .
“The second half of 2025…represents a reset period… While…topline performance [was] pleasing, the revenue mix weighed on margins due to a higher proportion of retailer remodeling…We are…advancing efforts to create a leaner cost structure…targeting SG&A at approximately $6.5 million per quarter or lower… accounts receivable balances and operating cash usage increased in 2025…driven by…revenue growth and…the impact of our program management agreement.” – Antonio Calisto Pato, CFO .
“Our new Chief Technology Officer, Josh Jewett, is accelerating the use of technology and AI to transform SPAR’s go-to-market strategy, driving innovation and competitive differentiation.” – William Linnane . “Under his leadership, the Company will focus on key partnerships and solutions…providing enhanced value to clients that drives competitive differentiation.” – Company release .

Q&A Highlights

No Q3 2025 earnings call transcript was available; therefore, there are no Q&A details to report from this period [ListDocuments showed none]. Press commentary clarified key drivers: mix shift to remodeling compressed margins; restructuring and one-time costs elevated SG&A; working capital and AR increased due to growth and a program management arrangement .

Estimates Context

S&P Global consensus for Q3 2025 EPS and revenue was not available for SGRP at the time of retrieval; only actual revenue was reflected in the feed (no published consensus to compare). Consensus: EPS n/a*, Revenue n/a*; Actuals: EPS ($0.37), Revenue $41.416M . Values retrieved from S&P Global.*
Implication: Without published consensus, we cannot designate beats/misses; the market focus should be on sequential growth, margin compression drivers, and cost/working capital actions .

Financial Results Detail vs Prior Periods and Drivers

Revenue trajectory: Q1 $34.041M → Q2 $38.629M → Q3 $41.416M; YoY Q3 +9.6% (vs $37.788M), supported by U.S./Canada growth (+28.2% comparable) and one-off projects .
Profitability: Gross margin fell to 18.6% (from 23.5% in Q2), primarily on remodeling mix; adjusted EBITDA margin compressed to 0.2% (from 3.4% in Q2) .
Non-GAAP adjustments: $4.0M restructuring & severance; $1.6M unusual costs (legal, strategic alternatives, HQ move); exceptional Board payments $0.544M; adjusted diluted EPS ($0.10) vs GAAP ($0.37) .
Tax: $1.9M valuation allowance increased income tax expense; non-cash, no impact on liquidity or covenants; ~($0.08) per-share effect .

Guidance Changes (Expanded Context)

SG&A: Management targeting ≈$6.5M/quarter or lower excluding one-time items; Q3 adjusted SG&A was $7.6M (ex unusual) vs similar LY; initiatives aim to take the run-rate “below $6.5M” .
2H cadence: Expect U.S./Canada revenue growth in 2H to exceed 1H; Q3 benefited from one-off project timing .
Liquidity: ABL revolvers amended/expanded to $36M; maturity extended to Oct 2027 .
2026: Company anticipates outperforming key financial metrics, with technology/AI central to the go-to-market transformation .

Key Takeaways for Investors

Q3 characterized by strong revenue but pronounced margin pressure; the immediate narrative is mix-driven GM compression and restructuring costs vs. sequential sales growth momentum .
Near-term upside hinges on mix normalization and execution of SG&A reductions toward the ≈$6.5M quarterly target; monitor subsequent quarters for run-rate evidence and adjusted EBITDA recovery .
Working capital discipline is a focus into 2026; watch AR trends and operating cash usage given increased program management arrangements and growth .
Technology/AI-led differentiation under a new CEO/CTO team is a notable medium-term thesis pillar; track proof points in win rates, pricing, and margin uplift as offerings scale .
Balance sheet flexibility improved via ABL amendment/extension, but available liquidity declined sequentially; successful cost-down and cash generation are key to confidence .
With no S&P Global consensus available*, stock reaction likely keys off the margin reset, cost actions, and cash trajectory rather than beats/misses optics . Values retrieved from S&P Global.*
One-off project timing aided revenue; absence of formal quantitative guidance increases the importance of quarterly cadence checkpoints and management’s qualitative updates .

Additional Relevant Press Releases (Q3 2025)

Leadership transitions: CEO retirement and new President announced (Aug 28, 2025) .
Investor group purchased 220,000 shares at $2.00 (76% premium to prior close) in a private transaction; company continues to pursue termination fee from Highwire Capital (Aug 26, 2025) .
CTO appointment and technology transformation focus (Oct 8, 2025) .

Footnote: *Values retrieved from S&P Global.

SPAR Group, Inc. (SGRP)·Q3 2025 Earnings Summary