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BGSF, Inc. Reports Third Quarter 2023 Financial Results

Announces 36th Consecutive Quarterly Dividend

Quarterly Revenues Up 6%

Generated $15 Million of Operating Cash Flow Year-to-Date

BGSF, Inc. (NYSE: BGSF), a growing provider of consulting, managed services, and professional workforce solutions, today reported financial results for the third quarter ended October 1, 2023.

Q3 2023 Highlights from Continuing Operations:

  • Revenues were $83.5 million, up 6.3% from 2022. Property Management sales grew organically by 8.2% versus the prior year quarter. Professional revenues grew by 5.0%, including acquired revenues, partially offset by an organic contraction of 20.6%, compared to the prior year.
  • Gross profit was $30.0 million, up 7.1% from 2022. Gross profit margins increased to 35.9% in 2023, from 35.7% in 2022.
  • Net income from continuing operations was $2.6 million, or $0.24 per diluted share, compared to $4.7 million in 2022, primarily due to increased acquisition amortization and interest expense.
  • Adjusted EBITDA1 from continuing operations was $7.9 million (9.4% of revenues), vs. $8.0 million in 2022.
  • Adjusted EPS1 from continuing operations was $0.36 per diluted share, vs. $0.48 per diluted share in 2022.

Nine Month 2023 Highlights from Continuing Operations2:

  • Revenues were $239.6 million, up 8.3% from 2022.
  • Gross profit was $86.3 million, up 12.9% from 2022. Gross profit margins increased to 36.0% in 2023, from 34.6% in 2022.
  • Operating income (loss) in 2023 includes a non-cash impairment of $22.5 million related to trade name intangible assets from the rebranding to BGSF for all entities. The after-tax impact was $17.1 million or $1.59 per diluted share, using the year-to-date effective tax rate.
  • Net loss from continuing operations was $11.2 million, or $1.04 per diluted share, compared to net income of $9.8 million in 2022, primarily due to trade name impairment and increased acquisition amortization and interest expense.
  • Adjusted EBITDA1 from continuing operations was $19.6 million (8.2% of revenues), vs. $17.4 million in 2022.
  • Adjusted EPS1 from continuing operations was $0.93 per diluted share in 2023, vs. $1.05 per diluted share in 2022.

Beth A. Garvey, Chair, President, and Chief Executive Officer, stated, “Our performance for the third quarter reflects the continued progression of our long-term strategic plans to grow through a combination of organic and inorganic revenues, and by diversifying into higher value, specialized property management and professional consulting that drive improving gross margins. Total third quarter revenues grew by 6.3% to $83.5 million through a combination of acquired revenues and organic growth in property management, partially offset by sales softness on the professional side. For the first nine months of the year, we generated net cash from operations of $15 million.

“Despite a challenging and uncertain macro environment, we continue to focus on our controllable initiatives to drive long-term shareholder value and cash flow to fund additional growth and generate sustainable returns to shareholders through our quarterly cash dividends,” concluded Garvey.

1Non-GAAP financial measure. See reconciliation below for details.

22023 operation results includes twenty-three weeks of Arroyo Consulting and thirty-nine weeks of Horn Solutions.

Q3 2023 Cash Dividend Declared:

The Company further announced that its Board of Directors has declared a quarterly cash dividend of $0.15 per share of common stock. The dividend is payable on November 28, 2023 to all shareholders of record as of the close of business on November 20, 2023. This marks the 36th consecutive quarterly dividend.

Conference Call

BGSF will discuss its third fiscal quarter and nine month 2023 financial results during a conference call and webcast at 9:00 a.m. ET on November 9, 2023. Interested participants may dial 1-877-317-6789 (Toll Free) or 1-412-317-6789 (International). A replay of the call will be available until November 16, 2023. To access the replay, please dial 1-877-344-7529 (Toll Free), or 1-412-317-0088 (International) and enter access code 2158975. 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 Services, and Property Management (formally known as Real Estate which includes apartment communities and commercial buildings). BGSF has integrated several regional and national brands achieving scalable growth. The Company was ranked by Staffing Industry Analysts as the 121st largest U.S. staffing company and the 52nd largest IT staffing firm in 2023. 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 https://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 those 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,” “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.

BGSF, Inc.

GAAP Financial Measures

The following tables have been derived from our unaudited consolidated financial statements and summarize key components of our statements of operations for the periods indicated, as well as a reconciliation of revenue and operating income (loss) from continuing operations by reportable segment to consolidated results for the periods indicated.

 

Results of Operations

(in thousands, except per share amounts)

 

 

 

Thirteen Weeks Ended

 

Thirty-nine Weeks Ended

 

 

October 1,

2023

 

September 25,

2022

 

October 1,

2023

 

September 25,

2022

Revenues

 

$

83,484

 

 

$

78,508

 

 

$

239,600

 

 

$

221,139

 

Cost of services

 

 

53,505

 

 

 

50,508

 

 

 

153,263

 

 

 

144,649

 

Gross profit

 

 

29,979

 

 

 

28,000

 

 

 

86,337

 

 

 

76,490

 

Selling, general and administrative expenses

 

 

22,679

 

 

 

20,386

 

 

 

68,475

 

 

 

60,001

 

Impairment losses

 

 

 

 

 

 

 

 

22,545

 

 

 

 

Depreciation and amortization

 

 

2,033

 

 

 

1,145

 

 

 

5,729

 

 

 

2,966

 

Operating income (loss)

 

 

5,267

 

 

 

6,469

 

 

 

(10,412

)

 

 

13,523

 

Interest expense, net

 

 

(1,672

)

 

 

(376

)

 

 

(4,375

)

 

 

(718

)

Income (loss) from continuing operations before income taxes

 

 

3,595

 

 

 

6,093

 

 

 

(14,787

)

 

 

12,805

 

Income tax (expense) benefit from continuing operations

 

 

(955

)

 

 

(1,441

)

 

 

3,565

 

 

 

(2,961

)

Income (loss) from continuing operations

 

 

2,640

 

 

 

4,652

 

 

 

(11,222

)

 

 

9,844

 

Income from discontinued operations:

 

 

 

 

 

 

 

 

Income

 

 

 

 

 

 

 

 

 

 

 

1,235

 

Gain on sale

 

 

 

 

 

 

 

 

 

 

 

17,266

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

(4,716

)

Net income (loss)

 

$

2,640

 

 

$

4,652

 

 

$

(11,222

)

 

$

23,629

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share - diluted

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

0.24

 

 

$

0.44

 

 

$

(1.04

)

 

$

0.93

 

Net income from discontinued operations:

 

 

 

 

 

 

 

 

Income

 

 

 

 

 

 

 

 

 

 

 

0.12

 

Gain on sale

 

 

 

 

 

 

 

 

 

 

 

1.65

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

(0.45

)

Net income (loss) per share - diluted

 

$

0.24

 

 

$

0.44

 

 

$

(1.04

)

 

$

2.25

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

10,791

 

 

 

10,492

 

 

 

10,753

 

 

 

10,465

 

Diluted

 

 

10,803

 

 

 

10,533

 

 

 

10,753

 

 

 

10,511

 

 
 

Business Segments

(in thousands)

 

 

 

Thirteen Weeks Ended

 

Thirty-nine Weeks Ended

 

 

October 1,

2023

 

September 25,

2022

 

October 1,

2023

 

September 25,

2022

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Property Management

 

$

35,976

 

43

%

 

$

33,241

 

42

%

 

$

95,453

 

40

%

 

$

89,137

 

40

%

Professional

 

 

47,508

 

57

%

 

 

45,267

 

58

%

 

 

144,147

 

60

%

 

 

132,002

 

60

%

Total

 

$

83,484

 

100

%

 

$

78,508

 

100

%

 

$

239,600

 

100

%

 

$

221,139

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

Property Management

 

$

14,197

 

47

%

 

$

13,548

 

48

%

 

$

38,196

 

44

%

 

$

35,093

 

46

%

Professional

 

 

15,782

 

53

%

 

 

14,452

 

52

%

 

 

48,141

 

56

%

 

 

41,397

 

54

%

Total

 

$

29,979

 

100

%

 

$

28,000

 

100

%

 

$

86,337

 

100

%

 

$

76,490

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Property Management

 

$

7,212

 

 

 

$

6,148

 

 

 

$

17,676

 

 

 

$

15,000

 

 

Professional - without impairment losses

 

 

3,253

 

 

 

 

5,172

 

 

 

 

9,666

 

 

 

 

12,458

 

 

Professional - impairment losses

 

 

 

 

 

 

 

 

 

 

(22,545

)

 

 

 

 

 

Home office

 

 

(5,198

)

 

 

 

(4,851

)

 

 

 

(15,209

)

 

 

 

(13,935

)

 

Total

 

$

5,267

 

 

 

$

6,469

 

 

 

$

(10,412

)

 

 

$

13,523

 

 

 

The following tables have been derived from our unaudited consolidated financial statements and summarize key components of our balance sheets and statements of cash flows.

 

Condensed Balance Sheets

(in thousands)

 

 

 

October 1,

2023

 

January 1,

2023

Assets

 

 

Current assets

 

$

72,689

 

$

76,162

Property and equipment, net

 

 

1,603

 

 

2,081

Intangible assets, net

 

 

31,619

 

 

47,552

Goodwill

 

 

58,453

 

 

55,193

Other

 

 

19,310

 

 

13,685

Total assets

 

$

183,674

 

$

194,673

Liabilities and stockholders' equity

 

 

 

 

Line of credit, current

 

$

26,666

 

$

Long-term debt, current portion

 

 

35,000

 

 

4,000

Other current

 

 

25,582

 

 

24,207

Line of credit

 

 

 

 

22,303

Long-term debt, less current portion

 

 

4,368

 

 

40,368

Contingent consideration

 

 

3,309

 

 

Other long-term

 

 

2,833

 

 

3,059

Total liabilities

 

 

97,758

 

 

93,937

Total stockholders' equity

 

 

85,916

 

 

100,736

Total liabilities and stockholders' equity

 

$

183,674

 

$

194,673

 

Working Capital

(in thousands)

 

 

October 1,

2023

 

January 1,

2023

Working capital

 

$

(14,559

)

 

$

47,955

 

Working capital ratio

 

 

0.83

 

 

 

2.70

 

 

 

 

 

 

Condensed Statements of Cash Flows

(in thousands)

 

 

Thirty-nine Weeks Ended

 

 

October 1,

2023

 

September 25,

2022

Net cash provided by (used in) continuing operations:

 

 

 

 

Operating activities

 

$

15,094

 

 

$

(5,557

)

Investing activities

 

 

(8,759

)

 

 

25,633

 

Financing activities

 

 

(6,335

)

 

 

(17,888

)

Net change in cash used in discontinued operations

 

 

 

 

 

(2,300

)

Net change in cash and cash equivalents

 

$

 

 

$

(112

)

 

BGSF, Inc.

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, 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.

 

Reconciliation of Income (Loss) from Continuing Operations to Adjusted EBITDA

(in thousands)

 

 

 

Thirteen Weeks Ended

 

Thirty-nine Weeks Ended

 

Trailing Twelve

Months Ended

 

 

October 1,

2023

 

September 25,

2022

 

October 1,

2023

 

September 25,

2022

 

October 1,

2023

Income (loss) from continuing operations

 

$

2,640

 

 

$

4,652

 

 

$

(11,222

)

 

$

9,844

 

 

$

(9,805

)

Income tax expense (benefit) from continuing operations

 

 

955

 

 

 

1,441

 

 

 

(3,565

)

 

 

2,961

 

 

 

(2,866

)

Interest expense, net

 

 

1,672

 

 

 

376

 

 

 

4,375

 

 

 

718

 

 

 

5,019

 

Operating income (loss)

 

 

5,267

 

 

 

6,469

 

 

 

(10,412

)

 

 

13,523

 

 

 

(7,652

)

Depreciation and amortization

 

 

2,033

 

 

 

1,145

 

 

 

5,729

 

 

 

2,966

 

 

 

6,816

 

Impairment losses

 

 

 

 

 

 

 

 

22,545

 

 

 

 

 

 

22,545

 

Share-based compensation

 

 

408

 

 

 

411

 

 

 

844

 

 

 

865

 

 

 

1,064

 

Transaction fees

 

 

149

 

 

 

6

 

 

 

901

 

 

 

6

 

 

 

1,166

 

Adjusted EBITDA from continuing operations

 

$

7,857

 

 

$

8,031

 

 

$

19,607

 

 

$

17,360

 

 

$

23,939

 

Adjusted EBITDA Margin (% of revenue)

 

 

9.4

%

 

 

10.2

%

 

 

8.2

%

 

 

7.9

%

 

 

7.6

%

 

We define “Adjusted EPS” as diluted earnings per share eliminating amortization expense of intangible assets from acquisitions, 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 Adjusted EPS

 

 

 

Thirteen Weeks Ended

 

Thirty-nine Weeks Ended

 

 

October 1,

2023

 

September 25,

2022

 

October 1,

2023

 

September 25,

2022

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations per diluted share

 

$

0.24

 

 

$

0.44

 

 

$

(1.04

)

 

$

0.93

 

Acquisition amortization

 

 

0.15

 

 

 

0.05

 

 

 

0.42

 

 

 

0.16

 

Impairment losses

 

 

 

 

 

 

 

 

2.10

 

 

 

 

Transaction fees

 

 

0.01

 

 

 

 

 

 

0.08

 

 

 

 

Income tax expense adjustment

 

 

(0.04

)

 

 

(0.01

)

 

 

(0.63

)

 

 

(0.04

)

Adjusted EPS from continuing operations

 

$

0.36

 

 

$

0.48

 

 

$

0.93

 

 

$

1.05

 

 

Contacts

Steven Hooser or Sandy Martin

Three Part Advisors

ir@bgstaffing.com 214.872.2710 or 214.616.2207

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