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BGSF, Inc. Reports First Quarter 2023 Financial Results

BGSF Go-to-Market Re-branding Project for All Business Units Well Underway

BGSF, Inc. (NYSE: BGSF), a leading national provider of consulting, managed services, and workforce solutions, today reported financial results for its first quarter ended April 2, 2023.

Q1 2023 Highlights from Continuing Operations:

  • Revenues were $75.3 million, up 9.9% from 2022.
  • Gross profit was $26.8 million, up 14.3% from 2022. Gross profit percent increased 140 basis points to 35.6% in 2023.
  • Operating income (loss) includes a non-cash charge of $22.5 million ($16.9 million after-tax or $1.58 per diluted share) related to the impairment of trade name intangible assets from the re-branding to BGSF for all entities. Therefore, the other trade names have no value.
  • Net loss from continuing operations was $(16.5) million, or $(1.54) per diluted share.
  • Adjusted EBITDA1 from continuing operations was $4.3 million up from $3.9 million in 2022.
  • Adjusted EPS1 from continuing operations was $0.16 in 2023 compared to $0.23 in 2022, primarily due to increased debt, associated with the Horn Solutions acquisition, and higher interest rates.

Beth A. Garvey, Chair, President and CEO, said, “First quarter results were within our expectations for both Professional and Real Estate. Our Professional segment benefited from incremental revenues from our Horn Solutions acquisition, and we are encouraged by expanded cross-selling opportunities. Our recent strategic acquisition of Arroyo Consulting will strengthen our go-to-market cross-selling efforts providing our clients a cost effective alternative offering nearshore and offshore IT resources.

“We remain cautiously optimistic and feel our specialized offerings in both segments will put us in a position to manage the current uncertain economic times, and allow us better resiliency. Our rebranding efforts support the strength of our brand and allow us to approach the market as one voice with a stronger and broader BGSF platform."

Conference Call

BGSF will discuss its first fiscal quarter 2023 financial results during a conference call and webcast at 9:00 a.m. ET on May 11, 2023. Interested participants may dial 1-833-470-1428 (U.S. Toll Free) or 1-404-975-4839 (U.S. Callers) and provide access code 382695. A replay of the call will be available until May 18, 2023. To access the replay, please dial 1-929-458-6194 (U.S. Callers), 1-866-813-9403 (U.S. Toll Free), or +44 204-525-0658 (all other locations) and enter access code 467420. The live webcast and archived replay are accessible at the investor relations section of the Company’s website at www.bgsf.com.

About BGSF

BGSF provides consulting, managed services, and professional workforce solutions to a variety of industries through its various divisions in IT, Cyber, Finance & Accounting, Managed Services, and Real Estate (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 94th largest U.S. staffing company and the 49th largest IT staffing firm in 2022. 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 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 (loss) income from continuing operations by reportable segment to consolidated results for the periods indicated.

Results of Operations

 

 

 

Thirteen Weeks Ended

 

 

April 2,

2023

 

March 27,

2022

 

 

(dollars in thousands)

Revenues

 

$

75,316

 

 

$

68,542

 

Cost of services

 

 

48,532

 

 

 

45,111

 

Gross profit

 

 

26,784

 

 

 

23,431

 

Selling, general and administrative expenses

 

 

23,212

 

 

 

19,717

 

Impairment losses

 

 

22,545

 

 

 

 

Depreciation and amortization

 

 

1,757

 

 

 

899

 

Operating (loss) income

 

 

(20,730

)

 

 

2,815

 

Interest expense, net

 

 

(1,200

)

 

 

(273

)

(Loss) income from continuing operations before income taxes

 

 

(21,930

)

 

 

2,542

 

Income tax benefit (expense) from continuing operations

 

 

5,464

 

 

 

(534

)

(Loss) income from continuing operations

 

 

(16,466

)

 

 

2,008

 

Income from discontinued operations:

 

 

 

 

Income

 

 

 

 

 

1,235

 

Gain on sale

 

 

 

 

 

17,273

 

Income tax expense

 

 

 

 

 

(4,716

)

Net (loss) income

 

$

(16,466

)

 

$

15,800

 

 

 

 

 

 

Net (loss) income per share - diluted

 

 

 

 

Net (loss) income from continuing operations

 

$

(1.54

)

 

$

0.19

 

Net income from discontinued operations:

 

 

 

 

Income

 

 

 

 

 

0.11

 

Gain on sale

 

 

 

 

 

1.66

 

Income tax expense

 

 

 

 

 

(0.45

)

Net (loss) income per share - diluted

 

$

(1.54

)

 

$

1.51

 

Business Segments

 

 

 

Thirteen Weeks Ended

 

 

April 2,

2023

 

March 27,

2022

 

 

(dollars in thousands)

Revenue:

 

 

 

 

 

 

 

 

Real Estate

 

$

28,405

 

 

38

%

 

$

25,916

 

 

38

%

Professional

 

 

46,911

 

 

62

%

 

 

42,626

 

 

62

%

Total

 

$

75,316

 

 

100

%

 

$

68,542

 

 

100

%

 

 

 

 

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

 

 

Real Estate

 

$

11,347

 

 

42

%

 

$

9,971

 

 

43

%

Professional

 

 

15,437

 

 

58

%

 

 

13,460

 

 

57

%

Total

 

$

26,784

 

 

100

%

 

$

23,431

 

 

100

%

 

 

 

 

 

 

 

 

 

Operating (loss) income:

 

 

 

 

 

 

 

 

Real Estate

 

$

4,690

 

 

 

 

$

4,035

 

 

 

Professional - without impairment losses

 

 

2,627

 

 

 

 

 

3,470

 

 

 

Professional - impairment losses

 

 

(22,545

)

 

 

 

 

 

 

 

Home office

 

 

(5,502

)

 

 

 

 

(4,690

)

 

 

Total

 

$

(20,730

)

 

 

 

$

2,815

 

 

 

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 for the periods indicated.

Condensed Balance Sheets

 

 

 

April 2,

2023

 

January 1,

2023

Assets

 

(dollars in thousands)

Current assets

 

$

72,381

 

$

76,162

Property and equipment, net

 

 

1,249

 

 

2,081

Intangible assets, net

 

 

23,410

 

 

47,552

Goodwill

 

 

55,635

 

 

55,193

Other

 

 

19,206

 

 

13,685

Total assets

 

$

171,881

 

$

194,673

Liabilities and stockholders' equity

 

 

 

 

Long-term debt, current portion

 

$

4,000

 

$

4,000

Other current

 

 

20,986

 

 

24,208

Line of credit

 

 

21,697

 

 

22,302

Long-term debt, less current portion

 

 

39,368

 

 

40,368

Other long-term

 

 

2,672

 

 

3,059

Total liabilities

 

 

88,723

 

 

93,937

Total stockholders' equity

 

 

83,158

 

 

100,736

Total liabilities and stockholders' equity

 

$

171,881

 

$

194,673

Working Capital

 

 

April 2,

2023

 

January 1,

2023

 

 

(dollars in thousands)

Working capital

 

$

47,395

 

 

$

47,954

 

Working capital ratio

 

 

2.90

 

 

 

2.70

 

 

 

 

 

 

Condensed Statements of Cash Flows

 

 

Thirteen Weeks Ended

 

 

April 2,

2023

 

March 27,

2022

 

 

(dollars in thousands)

Net cash provided by (used in) continuing operations:

 

 

 

 

Operating activities

 

$

3,939

 

 

$

(1,060

)

Investing activities

 

 

(745

)

 

 

28,262

 

Financing activities

 

 

(3,124

)

 

 

(27,963

)

Net change cash provided by discontinued operations

 

 

 

 

 

649

 

Net change in cash and cash equivalents

 

$

70

 

 

$

(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 contingent consideration gains 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 (Loss) Income from Continuing Operations to Adjusted EBITDA

 

 

 

Thirteen Weeks Ended

 

 

April 2,

2023

 

March 27,

2022

 

 

(dollars in thousands)

(Loss) income from continuing operations

 

$

(16,466

)

 

$

2,008

 

Income tax (benefit) expense from continuing operations

 

 

(5,464

)

 

 

534

 

Interest expense, net

 

 

1,200

 

 

 

273

 

Operating (loss) income

 

 

(20,730

)

 

 

2,815

 

Depreciation and amortization

 

 

1,757

 

 

 

899

 

Impairment losses

 

 

22,545

 

 

 

 

Share-based compensation

 

 

361

 

 

 

211

 

Transaction fees

 

 

319

 

 

 

 

Adjusted EBITDA from continuing operations

 

$

4,252

 

 

$

3,925

 

Adjusted EBITDA Margin (% of revenue)

 

 

5.6

%

 

 

5.7

%

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 contingent consideration gains, 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

 

 

April 2,

2023

 

March 27,

2022

 

 

 

 

 

Net (loss) income from continuing operations per diluted share

 

$

(1.54

)

 

$

0.19

 

Acquisition amortization

 

 

0.13

 

 

 

0.05

 

Impairment losses

 

 

2.10

 

 

 

 

Transaction fees

 

 

0.03

 

 

 

 

Income tax expense adjustment

 

 

(0.56

)

 

 

(0.01

)

Adjusted EPS from continuing operations

 

$

0.16

 

 

$

0.23

 

 

Contacts

Steven Hooser or Sandy Martin

Three Part Advisors

ir@bgstaffing.com 214.872.2710 or 214.616.2207

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