BGSF, Inc. Reports Full Year and Fourth Quarter 2023 Financial Results

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In this article:

Record Full Year Revenues of $313.2 million, up 4.9%

Generated $20.4 Million of Operating Cash Flow

New Credit Facility Closed March 12, 2024

PLANO, Texas, March 13, 2024--(BUSINESS WIRE)--BGSF, Inc. (NYSE: BGSF), a growing provider of consulting, managed services, and professional workforce solutions, today reported financial results for its fiscal year and fourth fiscal quarter ended December 31, 2023.

Note: Fiscal 2023 financial results are on a 52-week year ended December 31, 2023, compared to Fiscal 2022 financial results on a 53-week year ended January 1, 2023.

Full Year 2023 Highlights from Continuing Operations2,3:

  • Revenues were $313.2 million, up 4.9% from 2022. Property Management revenues grew organically by 3.3% versus the prior year. Professional revenues grew by 6.1% from prior year, with Arroyo Consulting acquisition contributing $14.8 million in new revenues, partially offset by a decline in the existing Professional business.

  • Gross profit was $111.8 million, up 8.0% from 2022. Gross profit margins increased 100 basis points to 35.7%.

  • Operating 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 $17.5 million or $1.63 per diluted share, using the year-to-date effective tax rate.

  • Net loss from continuing operations was $10.2 million, or $0.95 per diluted share, vs. net income from continuing operations of $11.3 million, or $1.07 per diluted share in 2022, primarily due to the trade name impairment and increased acquisition amortization and interest expense.

  • Adjusted EBITDA1 from continuing operations was $25.1 million (8.0% of revenues), up from $21.7 million (7.3% of revenues) in 2022, an increase of 15.9% year over year.

  • Adjusted EPS1 from continuing operations was $1.19 in 2023, vs. $1.26 in 2022.

Fiscal 2023 Same Day Revenue(1), Same Day Gross Profit(1) and Same Day EBITDA(1) increased 7.1%, 10.2%, and 18.1% from 2022, respectively.

Note: Fourth quarter 2023 financial results are on a 13-week period ended December 31, 2023, compared to fourth quarter 2022 financial results on a 14-week period ended January 1, 2023.

Q4 2023 Highlights from Continuing Operations2,3:

  • Revenues were $73.6 million, vs. $77.3 million in 2022.

  • Gross profit was $25.4 million, compared to $27.1 million in 2022.

  • Operating income was $3.2 million in 2023, up from $2.8 million in 2022.

  • Net income from continuing operations was $1.0 million, or $0.11 per diluted share, vs. net income from continuing operations of $1.4 million, or $0.14 per diluted share in 2022, primarily due to increased acquisition amortization and interest expense.

  • Adjusted EBITDA1 from continuing operations was $5.5 million (7.5% of revenues), vs. $4.3 million (5.6% of revenues) in 2022, an increase of 27.6% over prior year.

  • Adjusted EPS1 from continuing operations was $0.21 for 2023 up from $0.19 in 2022.

Fourth quarter 2023 Same Day Revenue(1), Same Day Gross Profit(1) and Same Day EBITDA(1) increased 3.1%, 1.8%, and 38.2% from 2022, respectively.

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

22022 includes three weeks of operating results from the Horn Solutions acquisition.

3 2023 includes 39 weeks of Arroyo Consulting and a full year of Horn Solutions.

On March 12, 2024, our credit agreement was amended with BMO Bank, N.A., as administrative agent, and swing line lender, and BMO Capital Markets Corp., as sole lead arranger and sole book runner, with a maturity date of March 12, 2028. The revolving credit facility with an outstanding balance of approximately $22 million provides for the borrowing of funds from time to time in an aggregate amount up to $40 million. Term loans with an outstanding principal balance of $34 million were outstanding under the Credit Agreement and remain outstanding under the amended agreement.

Beth A. Garvey, Chair, President and CEO, said, "Fiscal 2023 was a significant year for BGSF. We successfully executed our long-term strategic plans through an accretive acquisition, rebranding all our businesses, and building stronger relationships with world-class ERP technologies. For the year, we grew revenues to $313 million, up almost 5%, and generated over $20 million of cash from operations. I am proud of our team’s ability to achieve key objectives in 2023 despite project delays and persistent macroeconomic headwinds impacting corporations throughout North America. Our confidence in BGSF’s business and strategy was demonstrated through our return to shareholders by consistent quarterly cash dividends."

Conference Call

BGSF will discuss its fourth fiscal quarter and full year 2023 financial results during a conference call and webcast at 9:00 a.m. ET on March 14, 2024. 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 March 21, 2024. To access the replay, please dial 1-877-344-7529 (Toll Free), or 1-412-317-0088 (International) and enter access code 6349244. 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 (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 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.

GAAP FINANCIAL MEASURES

Portions of 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.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

December 31,
2023

January 1,
2023

ASSETS

Current assets

Accounts receivable (net of allowance for credit losses of $554 and $558, respectively)

$

56,776

$

66,285

Prepaid expenses

2,963

2,418

Other current assets

7,172

7,459

Total current assets

66,911

76,162

Property and equipment, net

1,217

2,081

Other assets

Deposits

2,699

2,616

Other, net

5,026

4,411

Deferred income taxes, net

7,271

2,196

Right-of-use asset - operating leases

5,435

4,462

Intangible assets, net

30,370

47,552

Goodwill

59,588

55,193

Total other assets

110,389

116,430

Total assets

$

178,517

$

194,673

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

95

$

587

Accrued payroll and expenses

14,902

19,171

Line of credit (net of debt issuance costs of $128)

24,746

—

Long-term debt, current portion

34,000

4,000

Accrued interest

438

273

Income taxes payable

282

253

Contingent consideration, current portion

4,208

1,081

Convertible Note

4,368

—

Other current liabilities

—

1,000

Lease liabilities, current portion

2,016

1,842

Total current liabilities

85,055

28,207

Line of credit (net of debt issuance costs of $259)

—

22,303

Long-term debt, less current portion

—

36,000

Contingent consideration, less current portion

4,112

—

Convertible note

—

4,368

Lease liabilities, less current portion

3,814

3,049

Other long-term liabilities

—

10

Total liabilities

92,981

93,937

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, 10,887,509 and 10,772,515 shares issued and outstanding, respectively, net of treasury stock, at cost, of 3,930 and 1,845 shares, respectively

52

70

Additional paid in capital

68,551

67,003

Retained earnings

16,933

33,663

Total stockholders’ equity

85,536

100,736

Total liabilities and stockholders’ equity

$

178,517

$

194,673

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share amounts)

Fiscal Quarter Ended

Fiscal Year Ended

December 31,
2023

January 1,
2023

December 31,
2023

January 1,
2023

(unaudited)

Revenues

$

73,567

$

77,283

$

313,167

$

298,422

Cost of services

48,120

50,225

201,383

194,874

Gross profit

25,447

27,058

111,784

103,548

Selling, general and administrative expenses

20,175

23,210

88,650

83,211

Impairment losses

—

—

22,545

—

Depreciation and amortization

2,045

1,087

7,774

4,054

Operating income (loss)

3,227

2,761

(7,185

)

16,283

Interest expense, net

(1,601

)

(644

)

(5,976

)

(1,363

)

Income (loss) from continuing operations before income taxes

1,626

2,117

(13,161

)

14,920

Income tax benefit (expense) from continuing operations

(627

)

(699

)

2,938

(3,659

)

Income (loss) from continuing operations

999

1,418

(10,223

)

11,261

Income from discontinued operations:

Income

—

—

—

1,235

Gain on sale

—

409

—

17,675

Income tax expense

—

95

—

4,810

Net income (loss)

$

999

$

1,732

$

(10,223

)

$

25,361

Net income (loss) per share - diluted

Net (loss) income from continuing operations

$

0.11

$

0.14

$

(0.95

)

$

1.07

Net income from discontinued operations:

Income

—

—

—

0.12

Gain on sale

—

0.03

—

1.69

Income tax expense

—

(0.01

)

—

(0.46

)

Net income (loss) per share - diluted

$

0.11

$

0.16

$

(0.95

)

$

2.42

BUSINESS SEGMENTS

(dollars in thousands)

Fiscal Quarter Ended

Fiscal Year Ended

December 31,
2023

January 1,
2023

December 31,
2023

January 1,
2023

(unaudited)

Revenue:

Property Management

$

29,624

40

%

$

31,956

41

%

$

125,077

40

%

$

121,093

41

%

Professional

43,943

60

%

45,327

59

%

188,090

60

%

177,329

59

%

Total

$

73,567

100

%

$

77,283

100

%

$

313,167

100

%

$

298,422

100

%

Gross profit:

Property Management

$

11,589

46

%

$

12,602

47

%

$

49,785

45

%

$

47,695

46

%

Professional

13,858

54

%

14,456

53

%

61,999

55

%

55,853

54

%

Total

$

25,447

100

%

$

27,058

100

%

$

111,784

100

%

$

103,548

100

%

Operating income (loss):

Property Management

$

5,479

$

4,803

$

23,155

$

19,803

Professional -without impairment losses

2,626

3,146

12,292

15,604

Professional - impairment losses

—

—

(22,545

)

—

Home office

(4,878

)

(5,188

)

(20,087

)

(19,124

)

Total

$

3,227

$

2,761

$

(7,185

)

$

16,283

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years ended December 31, 2023, January 1, 2023 and December 26, 2021

2023

2022

2021

Cash flows from operating activities

Net (loss) income

$

(10,223

)

$

25,361

$

14,109

(Income) from discontinued operations

—

(1,235

)

(4,570

)

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Depreciation

446

597

685

Amortization

7,328

3,457

3,013

Gain on sale of discontinued operations

—

...

(17,675

)

—

Impairment losses

22,545

—

—

CARES Act credit

—

—

(2,368

)

Loss on disposal of property and equipment

17

6

8

Contingent consideration adjustment

—

—

(2,403

)

Amortization of debt issuance costs

199

172

75

Interest expense on contingent consideration payable

740

128

252

Provision for credit losses

798

315

221

Share-based compensation

1,029

1,085

1,058

Deferred income taxes, net of acquired deferred tax liability

(5,075

)

2,353

1,279

Net changes in operating assets and liabilities, net of effects of acquisitions:

Accounts receivable

12,163

(14,793

)

(15,178

)

Prepaid expenses and other current assets

(2,159

)

(866

)

(200

)

Deposits

(83

)

1,503

(126

)

Other assets

720

660

319

Accounts payable

(492

)

(228

)

156

Accrued payroll and expenses

(7,426

)

1,633

5,730

Accrued interest

165

171

24

Income taxes receivable and payable

729

(1,202

)

(560

)

Other current liabilities

(1,000

)

(4,551

)

19

Operating leases

(35

)

(127

)

(107

)

Other long-term liabilities

—

(64

)

(78

)

Net cash provided by (used in) continuing operating activities

20,386

(3,300

)

1,358

Net cash (used in) provided by discontinued operating activities

—

(3,822

)

5,305

Net cash provided by (used in) operating activities

20,386

(7,122

)

6,663

Cash flows from investing activities

Businesses acquired, net of cash acquired

(6,917

)

(33,940

)

(3,791

)

Businesses sold

—

30,722

—

Capital expenditures

(2,597

)

(5,680

)

(3,204

)

Proceeds from sale of property and equipment

—

—

5

Net cash used in continuing investing activities

(9,514

)

(8,898

)

(6,990

)

Net cash used in discontinued investing activities

—

(26

)

(34

)

Net cash used in investing activities

(9,514

)

(8,924

)

(7,024

)

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)

Years ended December 31, 2023, January 1, 2023 and December 26, 2021

2023

2022

2021

Cash flows from financing activities

Net borrowings under line of credit

2,312

9,781

6,804

Proceeds from issuance of long-term debt

—

40,000

—

Principal payments on long-term debt

(6,000

)

(26,863

)

(2,063

)

Payments of dividends

(6,507

)

(6,290

)

(4,567

)

Issuance of ESPP shares

512

653

340

Issuance of shares under the 2013 Long-Term Incentive Plan and Form S-3 registration statement costs, net of exercises

(10

)

(1

)

(41

)

Contingent consideration paid

(1,110

)

(1,110

)

—

Debt issuance costs

(69

)

(236

)

—

Net cash (used in) provided by continuing financing activities

(10,872

)

15,934

473

Net change in cash and cash equivalents

—

(112

)

112

Cash and cash equivalents, beginning of year

—

112

—

Cash and cash equivalents, end of year

$

—

$

—

$

112

Supplemental cash flow information:

Cash paid for interest, net

$

4,668

$

641

$

879

Cash paid for taxes, net of refunds

$

1,378

$

7,562

$

3,676

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, Same Day EBITDA, Adjusted EPS, Same Day Adjusted EPS, Same Day Revenue, and Same Day Gross Profit.

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 operations, balance sheet or statement of cash flows of a company. Adjusted EBITDA, Same Day EBITDA, Adjusted EPS, Same Day Adjusted EPS, Same Day Revenue, and Same Day Gross Profit 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, revenue, gross profit, 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, Same Day EBITDA, Adjusted EPS, Same Day Adjusted EPS, Same Day Revenue, and Same Day Gross Profit are useful performance measures and are used by us to facilitate comparisons 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 share-based compensation expense, as well as certain specific events that management does not consider in assessing our on-going operating performance. We define "Same Day EBITDA" as Adjusted EBITDA on a fifty-two week fiscal year. We define "Same Day Revenue" and "Same Day Gross Profit" as revenue and gross profit on a fifty-two week fiscal year. 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 INCOME FROM CONTINUING OPERATIONS TO ADJUSTED AND SAME DAY EBITDA

(dollars in thousands)

Fiscal Quarter Ended

Fiscal Year Ended

December 31,
2023

January 1,
2023

December 31,
2023

January 1,
2023

Income (loss) from continuing operations

$

999

$

1,417

$

(10,223

)

$

11,261

Income tax expense (benefit) from continuing operations

626

699

(2,938

)

3,659

Interest expense, net

1,601

644

5,976

1,363

Operating income (loss)

3,226

2,760

(7,185

)

16,283

Depreciation and amortization

2,045

1,087

7,774

4,054

Impairment losses

—

—

22,545

—

Share-based compensation

184

220

1,029

1,085

Transaction fees

73

265

974

271

Adjusted EBITDA from continuing operations

5,528

4,332

25,137

21,693

Adjusted EBITDA Margin (% of revenue)

7.5

%

5.6

%

8.0

%

7.3

%

Adjusted EBITDA from continuing operations

$

5,528

$

4,332

$

25,137

$

21,693

Same day adjustment

—

(332

)

—

(410

)

Same Day EBITDA from continuing operations

$

5,528

$

4,000

$

25,137

$

21,283

RECONCILIATION OF ADJUSTED EPS AND SAME DAY ADJUSTED EPS

Fiscal Quarter Ended

Fiscal Year Ended

December 31,
2023

January 1,
2023

December 31,
2023

January 1,
2023

Net income (loss) from continuing operations per diluted share

$

0.11

$

0.14

$

(0.95

)

$

1.07

Acquisition amortization

0.15

0.05

0.57

0.22

Impairment losses

—

—

2.09

—

Transaction fees

0.01

0.03

0.09

0.03

Income tax expense adjustment

(0.06

)

(0.03

)

(0.61

)

(0.06

)

Adjusted EPS from continuing operations

$

0.21

$

0.19

$

1.19

$

1.26

Same day adjustment

—

(0.02

)

—

(0.03

)

Same Day Adjusted EPS from continuing operations

$

0.21

$

0.17

$

1.19

$

1.23

RECONCILIATION OF SAME DAY REVENUES AND SAME DAY GROSS PROFIT

(dollars in thousands)

January 1, 2023

Revenues

Gross Profit

Fourteen Weeks (65 revenue days) - GAAP

$

77,283

$

27,058

Five Days

(5,916

)

(2,068

)

Thirteen Weeks (60 revenue days) - Same Day

$

71,367

$

24,990

Fifty-three Weeks (254 revenue days) - GAAP

$

298,422

$

103,548

Five Days

(5,916

)

(2,068

)

Fifty-two Weeks (249 revenue days) - Same Day

$

292,506

$

101,480

View source version on businesswire.com: https://www.businesswire.com/news/home/20240313226666/en/

Contacts

Steven Hooser or Sandy Martin
Three Part Advisors
ir@bgstaffing.com 214.872.2710 or 214.616.2207

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