BGSF, Inc. Reports Third Quarter 2024 Financial Results

PLANO, Texas--(BUSINESS WIRE)--BGSF, Inc. (NYSE: BGSF), a growing provider of consulting, managed services, and professional workforce solutions, today reported financial results for the third fiscal quarter ended September 29, 2024.

Q3 2024 Highlights (results include sequential comparisons to Q2 2024):

• Revenues were $71.2 million for Q3, compared to $68.1 million for Q2.
  • Property Management segment revenues increased 15.9% from Q2, driven by seasonal demand.
  • Professional segment revenues declined 2.5% from Q2, due to a decline in billed hours in the Finance & Accounting division.
• Gross profit was $24.3 million, up from $23.6 million in Q2, primarily due to higher sales in Property Management.
• Net loss was $0.8 million, or $0.07 per diluted share for Q3 and Q2.
• Adjusted EBITDA¹ was $3.2 million (4.5% of revenues) in Q3 from $2.6 million (3.8% of revenues) in Q2.
• Adjusted EPS¹ was $0.10 for Q3 compared with $0.07 for Q2.
• Launched advanced lead generation technology, which generated significantly better lead acquisition and conversion rates in the quarter.

¹ Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures as defined and reconciled below.

SUMMARY OF FINANCIAL RESULTS
(dollars in thousands) (unaudited)
		For the Thirteen Week Periods Ended
		September 29, 2024						October 1, 2023						June 30, 2024
Revenue:
Property Management		$	29,824					$	35,976					$	25,726
Professional			41,362						47,508						42,411
Total		$	71,186					$	83,484					$	68,137
Gross profit / Gross profit percentage:
Property Management		$	10,696		35.9	%		$	14,197		39.5	%		$	9,596		37.3	%
Professional			13,633		33.0	%			15,782		33.2	%			14,034		33.1	%
Total		$	24,329		34.2	%		$	29,979		35.9	%		$	23,630		34.7	%
Operating income		$	470					$	5,267					$	81
Net (loss) Income		$	(804	)				$	2,640					$	(761	)
Net (loss) income per diluted share		$	(0.07	)				$	0.24					$	(0.07	)
Non-GAAP Financial Measures:
Adjusted EBITDA1		$	3,208					$	7,857					$	2,603
Adjusted EBITDA Margin (% of revenue)1			4.5	%					9.4	%					3.8	%
Adjusted EPS1		$	0.10					$	0.36					$	0.07

Beth A. Garvey, Chair, President, and CEO, said, "Although economic uncertainties persist and the demand environment remains choppy for the entire IT consulting and workforce industry, we are pleased to report that our third quarter total revenues improved sequentially by 4.5%. This sales progression was due to a seasonal lift in Property Management, up 15.9%, compared to the second quarter. In addition, the Professional segment stabilized late in the quarter, down 2.5% for the quarter compared to the second quarter. We continue to launch 2024 project wins expeditiously, including the major IT transformation project related to a large international client that we discussed last quarter. Our largest category in Professional, IT consulting, maintained stable topline revenues between second and third quarters, which is positive. Finance & Accounting experienced lower project work in the third quarter due to typical seasonality for calendar reporting clients. Permanent placements stabilized with flat revenues between second and third quarters. Conversely, Managed Solutions continued to grow sequentially, which aligns with our strategic goals of expanding our consulting efforts. We remain cautiously optimistic at the pockets of revenue categories that stabilized this quarter but continue to tightly manage costs and expenses.

"As part of our ongoing technology enhancements, I am pleased to share that we have launched our advanced lead generation engine in the third quarter, made possible by our earlier investment to modernize our tech stack. BGSF's technology platform leverages our marketing automation to streamline better lead acquisition and increase conversion rates across both our Professional and Property Management divisions. We have other tech enhancements launching in the fourth quarter to drive better efficiencies and believe these initiatives demonstrate our commitment to BGSF's digital transformation to improve client engagement and deliver cutting-edge workforce solutions."

"The review of strategic alternatives work continues, and we have no updates that we can share today. We look forward to discussing in more detail in the future," concluded Garvey.

Conference Call

BGSF will discuss its third quarter 2024 financial results during a conference call and webcast at 9:00 a.m. ET on November 7, 2024. Interested participants may dial 1-844-481-3017 (Toll Free) or 1-412-317-1882 (International). A replay of the call will be available until November 14, 2024. To access the replay, please dial 1-877-344-7529 (Toll Free), or 1-412-317-0088 (International) and enter access code 4519768. The live webcast and archived replay are accessible from the investor relations section of the Company's website at https://investor.bgsf.com/events-and-presentations/default.aspx

About BGSF

BGSF provides consulting, managed services and professional workforce solutions to a variety of industries through its various divisions in IT, Finance & Accounting, Managed Solutions, and Property Management. BGSF has integrated several regional and national brands achieving scalable growth. The Company was ranked by Staffing Industry Analysts as the 97^th largest U.S. staffing company and the 49^th largest IT staffing firm in 2024. The Company's disciplined acquisition philosophy, which builds value through both financial growth and the retention of unique and dedicated talent within BGSF's family of companies, has resulted in a seasoned management team with strong tenure and the ability to offer exceptional service to our field talent and client partners while building value for investors. For more information on the Company and its services, please visit its website at www.bgsf.com.

Forward-Looking Statements

The forward-looking statements in this press release are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements regarding our future financial performance and the expectations and objectives of our board or management. The Company's actual results could differ materially from those indicated by the forward-looking statements because of various other risks and uncertainties, including, among other things, risks relating to volatility and uncertainty in the capital markets, availability of suitable third parties with which to conduct any strategic transaction, whether the Company will be able to pursue a strategic transaction, or whether any such transaction, if pursued, will be completed successfully and on attractive terms, or at all, the risks associated with undertaking a review of strategic alternatives, including in respect of relationships with stockholders, employees, customers, and suppliers, as well as risks and uncertainties listed in Item 1A of the Company's Annual Report on Form 10-K and in the Company's other filings and reports with the Securities and Exchange Commission. All of the risks and uncertainties are beyond the ability of the Company to control, and in many cases, the Company cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this press release, the words "allows," "anticipates," "believes," "plans," "expects," "estimates," "should," "would," "may," "might," "forward," "will," "intends," "continue," "outlook," "temporarily," "progressing," "prospects," and "anticipates" and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements. Except as required by law, the Company is not obligated to publicly release any revisions to these forward-looking statements to reflect the events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
		September 29, 2024			December 31, 2023
ASSETS
Current assets
Cash and cash equivalents		$	262		$	-
Accounts receivable (net of allowance for credit losses of $933 and $554, respectively)			46,074			56,776
Prepaid expenses			2,355			2,963
Other current assets			2,760			7,172
Total current assets			51,451			66,911
Property and equipment, net			1,204			1,217
Other assets
Deposits			2,092			2,699
Software as a service, net			4,592			5,026
Deferred income taxes, net			7,587			7,271
Right-of-use asset - operating leases, net			5,065			5,435
Intangible assets, net			26,193			30,370
Goodwill			59,151			59,588
Total other assets			104,680			110,389
Total assets		$	157,335		$	178,517
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	221		$	95
Accrued payroll and expenses			15,361			14,902
Line of credit (net of debt issuance costs of $128)			-			24,746
Long-term debt, current portion (net of debt issuance costs of $27 and $0, respectively)			3,373			34,000
Accrued interest			286			438
Income taxes payable			172			282
Contingent consideration, current portion			4,047			4,208
Convertible note			4,368			4,368
Lease liabilities, current portion			1,586			2,016
Total current liabilities			29,414			85,055
Line of credit (net of debt issuance costs of $305)			7,381			-
Long-term debt, less current portion (net of debt issuance costs of $220)			33,780			-
Contingent consideration, less current portion			-			4,112
Lease liabilities, less current portion			3,815			3,814
Total liabilities			74,390			92,981

Commitments and contingencies
Preferred stock, $0.01 par value per share, 500,000 shares authorized, -0- shares issued and outstanding			-			-
Common stock, $0.01 par value per share; 19,500,000 shares authorized 11,006,696 and 10,887,509 shares issued and outstanding, respectively, net of 3,930 shares of treasury stock, at cost, respectively.			53			52
Additional paid in capital			69,955			68,551
Retained earnings			12,937			16,933
Total stockholders' equity			82,945			85,536
Total liabilities and stockholders' equity		$	157,335		$	178,517

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share and dividend amounts)
For the Thirteen and Thirty-nine Week Periods Ended September 29, 2024 and October 1, 2023
		Thirteen Weeks Ended								Thirty-nine Weeks Ended
			2024				2023				2024				2023
Revenues		$	71,186			$	83,484			$	208,089			$	239,600
Cost of services			46,857				53,505				136,692				153,263
Gross profit			24,329				29,979				71,397				86,337
Selling, general and administrative expenses			21,966				22,679				64,549				68,475
Impairment losses			-				-				-				22,545
Depreciation and amortization			1,893				2,033				5,881				5,729
Operating income (loss)			470				5,267				967				(10,412	)
Interest expense, net			(1,222	)			(1,672	)			(3,518	)			(4,375	)
(Loss) income before income taxes			(752	)			3,595				(2,551	)			(14,787	)
Income tax (expense) benefit			(52	)			(955	)			194				3,565
Net (loss) income		$	(804	)		$	2,640			$	(2,357	)		$	(11,222	)
Net (loss) income per share:
Basic		$	(0.07	)		$	0.24			$	(0.22	)		$	(1.04	)
Diluted		$	(0.07	)		$	0.24			$	(0.22	)		$	(1.04	)
Weighted-average shares outstanding:
Basic			10,919				10,791				10,882				10,753
Diluted			10,919				10,803				10,882				10,753
Cash dividends declared per common share		$	-			$	0.15			$	0.15			$	0.45

BUSINESS SEGMENTS
(dollars in thousands)
(unaudited)
		Thirteen Weeks Ended												Thirty-nine Weeks Ended
		September 29, 2024						October 1, 2023						September 29, 2024						October 1, 2023
Revenue:
Property Management		$	29,824		42	%		$	35,976		43	%		$	80,096		38	%		$	95,453		40	%
Professional			41,362		58				47,508		57				127,993		62				144,147		60
Total		$	71,186		100	%		$	83,484		100	%		$	208,089		100	%		$	239,600		100	%
Gross profit:
Property Management			10,696		44	%		$	14,197		47	%			29,635		42	%		$	38,196		44	%
Professional			13,633		56				15,782		53				41,762		58				48,141		56
Total		$	24,329		100	%		$	29,979		100	%		$	71,397		100	%		$	86,337		100	%
Operating income (loss):
Property Management		$	4,175					$	7,212					$	10,780					$	17,676
Professional -without impairment losses			1,474						3,253						4,704						9,666
Professional - impairment losses			-						-						-						(22,545	)
Home office			(5,179	)					(5,198	)					(14,517	)					(15,209	)
Total		$	470					$	5,267					$	967					$	(10,412	)

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Thirty-nine Week Periods Ended September 29, 2024 and October 1, 2023
			2024				2023
Cash flows from operating activities
Net loss		$	(2,357	)		$	(11,222	)
Adjustments to reconcile net loss to net cash provided by activities:
Depreciation			271				343
Amortization			5,610				5,386
Impairment losses			-				22,545
Loss on disposal of property and equipment			12				-
Amortization of debt issuance costs			129				145
Interest (income) expense on contingent consideration payable			(23	)			468
Provision for credit losses			1,670				658
Share-based compensation			788				844
Deferred income taxes, net of acquired deferred tax liability			(316	)			(5,092	)
Net changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable			9,033				1,795
Prepaid expenses			609				313
Other current assets			4,868				3,179
Deposits			607				(84	)
Software as a service			537				543
Accounts payable			126				(337	)
Accrued payroll and expenses			459				(4,251	)
Other current liabilities			-				(1,000	)
Accrued interest			(152	)			23
Income taxes receivable and payable			(566	)			938
Operating leases			(59	)			(100	)
Net cash provided by operating activities			21,246				15,094
Cash flows from investing activities
Businesses acquired, net of cash received			-				(6,740	)
Capital expenditures			(1,370	)			(2,019	)
Net cash used in investing activities			(1,370	)			(8,759	)

Cash flows from financing activities
Net (payments) borrowings under line of credit		(17,188	)			4,282
Proceeds from issuance of long-term debt		4,250				-
Principal payments on long-term debt		(850	)			(5,000	)
Payments of dividends		(1,639	)			(4,874	)
Issuance of ESPP shares		355				412
Issuance of shares under the 2013 Long-Term Incentive Plan, net of exercises		262				19
Contingent consideration paid		(4,250	)			(1,110	)
Payments of debt issuance costs		(554	)			(64	)
Net cash used in financing activities		(19,614	)			(6,335	)
Net change in cash and cash equivalents		262				-
Cash and cash equivalents, beginning of period		-				-
Cash and cash equivalents, end of period	$	262			$	-
Supplemental cash flow information:
Cash paid for interest, net	$	3,419			$	3,573
Cash paid for taxes, net of refunds	$	666			$	569

NON-GAAP FINANCIAL MEASURES

The financial results of BGSF, Inc. are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the rules of the U.S. Securities and Exchange Commission. To help the readers understand the Company's financial performance, the Company supplements its GAAP financial results with Adjusted EBITDA and Adjusted EPS.

A non-GAAP financial measure is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of a company. Adjusted EBITDA and Adjusted EPS are not measurements of financial performance under GAAP and should not be considered as alternatives to net income, net income per diluted share, operating income, or any other performance measure derived in accordance with GAAP, or as alternatives to cash flow from operating activities or measures of our liquidity. We believe that Adjusted EBITDA and Adjusted EPS are useful performance measures and are used by us to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under GAAP can provide alone. In addition, the financial covenants in our credit agreement are based on EBITDA as defined in the credit agreement.

We define "Adjusted EBITDA" as earnings before interest expense, income taxes, depreciation and amortization expense, costs associated with the evaluation of potential strategic alternatives ("Strategic alternatives review"), transaction fees, and certain non-cash expenses such as impairment losses and share-based compensation expense, as well as certain specific events that management does not consider in assessing our on-going operating performance.

We define "Adjusted EPS" as diluted earnings per share eliminating amortization expense of intangible assets from acquisitions, the Strategic Alternatives Review, transaction fees, and certain non-cash expenses such as impairment losses, as well as certain specific events that management does not consider in assessing our on-going operating performance, net of the respective income tax effect.

Reconciliation of Net (Loss) Income to Adjusted EBITDA
(dollars in thousands)
		Thirteen Weeks Ended								Thirty-nine Weeks Ended								Thirteen Weeks Ended
		September 29, 2024				October 1, 2023				September 29, 2024				October 1, 2023				June 30, 2024
Net (loss) income		$	(804	)		$	2,640			$	(2,357	)		$	(11,222	)		$	(761	)
Income tax expense (benefit)			52				955				(194	)			(3,565	)			(219	)
Interest expense, net			1,222				1,672				3,518				4,375				1,061
Operating income (loss)			470				5,267				967				(10,412	)			81
Depreciation and amortization			1,893				2,033				5,881				5,729				1,981
Impairment losses			-				-				-				22,545				-
Share-based compensation			317				408				788				844				236
Strategic alternatives review			526				-				874				-				280
Transaction fees			2				149				42				901				25
Adjusted EBITDA		$	3,208			$	7,857			$	8,552			$	19,607			$	2,603
Adjusted EBITDA Margin (% of revenue)			4.5	%			9.4	%			4.1	%			8.2	%			3.8	%

Reconciliation of Net (Loss) Income EPS to Adjusted EPS
		Thirteen Weeks Ended								Thirty-nine Weeks Ended								Thirteen Weeks Ended
		September 29, 2024				October 1, 2023				September 29, 2024				October 1, 2023				June 30, 2024
Net (loss) income per diluted share		$	(0.07	)		$	0.24			$	(0.22	)		$	(1.04	)		$	(0.07	)
Acquisition amortization			0.13				0.15				0.42				0.42				0.15
Impairment losses (pre-tax)			-				-				-				2.10				-
Strategic alternatives review			0.05				-				0.08				-				0.03
Transaction fees			-				0.01				-				0.08				-
Income tax expense adjustment			(0.01	)			(0.04	)			(0.04	)			(0.63	)			(0.04	)
Adjusted EPS		$	0.10			$	0.36			$	0.24			$	0.93			$	0.07

Contacts

Steven Hooser or Sandy Martin
Three Part Advisors
[e-mail] 214.872.2710 or 214.616.2207