BGSF, Inc. (NYSE:BGSF) Q4 2023 Earnings Call Transcript
BGSF, Inc. (NYSE:BGSF) Q4 2023 Earnings Call Transcript March 14, 2024
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Operator: Good morning, everyone. Welcome to the BGSF Inc. Fiscal 2023 Fourth Quarter and Full Year Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded. Now I'd like to turn the call over to Sandy Martin, Three Part Advisors. Ma'am, please go ahead.
Sandra Martin: Thank you. Good morning, and welcome to the BGSF 2023 Fourth Quarter and Full Year Earnings Conference Call. With me on the call today are Beth Garvey, Chair, President and Chief Executive Officer; and John Barnett, Chief Financial Officer. After our prepared remarks, there will be a Q&A session. As noted, today's call is being webcast live. A replay will be available later today and archived on the company's Investor Relations page at investor.bgsf.com. Today's discussions will include forward-looking statements, which are based on certain assumptions made by the company under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including those listed in the company's filings with the Securities and Exchange Commission.
Management statements are made as of today, and the company assumes no obligation to update these statements publicly even if new information becomes available in the future. During the call, management will also reference certain non-GAAP financial measures, which can be useful in evaluating the company's operations related to the financial condition and results. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered as a substitute. GAAP and non-GAAP measures are reconciled in today's earnings press release. I'll now turn the call over to Beth Garvey. Beth?
Beth Garvey: Thank you, Sandy, and greetings to everyone on today's call. Fiscal 2023 marked a pivotal year for BGSF characterized by significant achievements and the successful execution of our strategic and transformative plans. We are pleased to report over $20 million in operating cash flow, accompanied by a nearly 5% increase in revenues to $313 million. It's worth noting that fourth quarter of 2022 included an extra week of operations due to a calendar shift. On a same-day basis, we estimate 7% growth in total 2023 revenue compared to an adjusted 2022. In specific segments, Property Management revenues grew by almost 5% on a same-day basis for the year, while professional revenues experienced an 8% increase on a same-day basis.
Notably, professional revenue in the second half of 2023 was intentionally lower due to a strategic shift away from lower-margin IT placements. Our 2023 initiatives involved successfully integrating Home Solutions acquired in December of 2022 and acquiring a Royal Consulting in April of 2023. These acquisitions provide clients with high-end finance and accounting workforce solutions and robust nearshore and offshore development capabilities. Furthermore, our strength in partnerships with leading technology companies, including Workday, ServiceNow, Microsoft, SAP, Oracle and Salesforce have amplified the BGSF brand fostering new business opportunities. The rebranding to BGSF from various acquired trade names further enhance our brand recognition in 2023 as well.
I'm immensely proud of our team's dedication and hard work, which has been instrumental in advancing our vision. The March CEO Confidence Index pole hitting its highest level since 2021. It gives us confidence in the continued growth of U.S. businesses. Our strategic decisions regarding service offerings are well positioned for growth in 2024 and beyond. Now I'll turn the call over to John.
John Barnett: Thank you, Beth, and good morning, everyone. As Beth mentioned, 2022 was a 53-week fiscal year and 2023 was a 52-week fiscal year. The extra week in 2022 was in the fourth quarter, making the as-reported year-over-year fourth quarter comparison difficult. 2023 total revenue was $313.2 million, up 4.9% on an as-reported basis. On a same-day basis, adjusting 2022 for the extra five days, total revenue was up 7%. For the segments, reported professional revenue for the year was up 6.1% on an as-reported basis and 8% on a same-day basis. The increase was driven by the acquisition of our Royal Consulting and Horn Solutions. As we integrated Horn Solutions in 2023, we lost the ability to cleanly separate our organic or existing business from the Horn Solutions business.
For the year, and on a same-day basis, we estimated that our organic professional business declined in the mid-teens in percentage terms. Property Management increased 3.3% on an as-reported basis and 5% on a same-day basis. Gross profit for the year was $112 million, up 8% from the prior year, and gross margins were 35.7%, up 100 basis points from 2022. Recall that our 2023 operating results included a onetime $22.5 million pretax noncash brand name impairment charge related to the rebranding project. Excluding the nonrecurring impairment charge, transaction fees and acquisition amortization, our reported loss from continuing operations of $0.95 per share is adjusted to $1.19 earnings per share compared to $1.26 earnings per share in 2022.
We increased adjusted EBITDA from continuing operations by 15.9% to $25 million compared to $21.7 million. Our adjusted EBITDA margin grew from 7.3% of revenue in 2022 to 8% in 2023. Turning to the fourth quarter, revenues were $73.6 million compared to $77.3 million in 2022. On a same-day basis, adjusting 2022 for the extra five days, fourth quarter revenue was up 3% versus same-day basis revenue of $71.4 million in the prior year quarter. For the segments, on a same-day basis, property management revenue increased at an estimated 0.4% and Professional increased by 5%, which included the benefit of acquired revenues. As stated earlier, as the Horn Solutions integration progressed, it became difficult to separate out our organic or existing business.
We estimate it that the organic professional revenue contracted in the high mid teens on a same-day basis during the fourth quarter. We continue to see pressure in the fourth quarter on staff augmentation, project starts and permanent placement. However, the opportunity pipeline has grown as we moved through the first quarter, and we were optimistic about 2024. Gross profit margins in the fourth quarter were $25.4 million and 34.6% compared to $27.1 million and 35% in the prior year quarter. The slight decline in margin is attributed to lower permanent placement business, which carries a gross margin of 100%. SG&A expenses for the fourth quarter were $20.2 million and $27.4 million of revenue, which was an improvement versus the prior year quarter of $23.2 million and 30% of revenue.
Operating income increased $3.2 million from $2.8 million in the prior year quarter, driven by lower SG&A expenses. Fourth quarter adjusted EBITDA was $5.5 million or 7.5% of revenue compared to $4.3 million or 5.6% of revenue in the prior year quarter. We reported adjusted earnings of $0.21 per diluted share compared to $0.19 per share for the 2022 fourth quarter. I'm happy to announce that we closed the refinancing of our credit facility this past Tuesday. We have a great group of banks in this syndicate, and we are appreciative of their partnership. We prudently manage our balance sheet, focusing on working capital efficiencies and carefully evaluating our leverage ratio. Funded debt to trailing 12 months pro forma adjusted EBITDA was 2.48 times at year-end.
We maintain a disciplined approach to our capital allocation strategy, which includes investments in capital expenditures, organic growth, cash to pay down debt, a quarterly cash dividend with an annualized yield of approximately 6% and strategic acquisitions. We have no immediate plans for acquisitions in 2024. With that, I would like to turn the call back to Beth.
Beth Garvey: Thank you, John. As we reflect on 2023, we recognized the challenges posed by tough double-digit sales comps from 2022, coupled with economic uncertainty. Despite these challenges, our commitment to short-term and long-term strategic initiatives supporting our teams and streamlining operations has positioned us for success in 2024 and beyond. Looking ahead to 2024, we plan to leverage our proprietary territory mapping tool for better sales force deployment and property management and continue up-scaling talent through our virtual training partnerships. On the professional side, our partnerships with leading technologies and our recent appointment as a direct Workday service partner elevates us to new heights. We are also seeing momentum growing in the Managed Solutions and cross-selling of our nearshore and offshore IT services.
Our strategic repositioning including higher value consulting, management solutions and a unique property management platform sets us up for long-term success and shareholder value creation. I'm extremely proud of the progress and execution on building blocks for our future growth and profitability, our team's dedication and nimble approach position us well for the opportunities that lie ahead. I look forward to what we can achieve at BGSF in the future. Before we open the line for questions, I wanted to mention that we will be at the ROTH Investor Conference next week and hope to see many of you there. With that said, I will turn it over to the operator for questions.
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