Sparta Commercial Services Inc. (SRCO) reported Q4 2024 revenue of $40.6 million, down sharply versus Q4 2023, reflecting a -40.16% year‑over‑year decline. Despite the revenue drop, gross profit remained robust at $34.9 million, yielding a gross margin near 86%. However, the quarter’s operating performance remained structurally negative, with operating income of -$117.97 million and an EBITDAR of the same magnitude, underscoring a heavy cost base relative to revenue. The quarter’s bottom line is distorted by notable non-operating items, including a large positive “total other income” component that contributed to a net income of $30.8 million and an EPS of $0.001, far from indicative of core operating profitability.
From a liquidity and balance sheet perspective, Sparta faces material near‑term funding needs. The company carried total current liabilities of $9.12 million against only $0.11 million in current assets, producing an extremely low current ratio of 0.0121 and a cash burn through operating activities of -$0.72 million for the period. Cash at period end was $0.101 million, with net debt of roughly $7.71 million and negative shareholders’ equity of about -$10.64 million. Financing activity provided +$0.81 million, aided by stock issuances, while debt repayments reduced obligations, indicating reliance on external funding to support operations. The company clearly remains in a high‑risk liquidity position, requiring either operating improvements or external financing to sustain activities beyond near‑term horizons.
Management commentary is not included in the data provided for QQ4 2024; as a result, the forward‑looking guidance and qualitative outlook from the earnings call are not captured here. The quantitative backdrop, however, points to a fragile near‑term cash profile even as the business continues to exhibit solid gross margins on a per‑unit basis. Investors should treat the current earnings as a transitional period with substantial non‑core drivers affecting net income, and focus on whether Sparta can convert its gross profit potential into sustainable cash flow and earnings growth.”,