Yahoo Finance BGSF, Inc. (NYSE:BGSF) Q1 2024 Earnings Call Transcript
BGSF, Inc. (NYSE:BGSF) Q1 2024 Earnings Call Transcript May 11, 2024
BGSF, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to the BGSF Inc. Fiscal 2024 First Quarter Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Sandy Martin, Three Part Advisors. Please go ahead.
Sandy Martin: Thank you, Chad. Good morning, and welcome to the BGSF First Quarter 2024 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 discussion 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's 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 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 Garvey : Thank you, Sandy, and thank you all for joining us in reviewing our performance so far this year. Before we discuss our first quarter earnings, I want to address last night's release announcing our decision to review strategic alternatives for BGSF. Over the past 5 years, we have worked hard to execute our long-term strategy for growing the company organically and through M&A, enhancing our margins, paying down debt and returning capital to shareholders. I wholeheartedly believe what we have built will create value for shareholders over time. However, our valuation has not reflected that in progress today. And the Board and I know that this is the right time to evaluate our options. We also think suspending the cash dividend is appropriate as part of this decision.
This strategic process includes a full range of value creation opportunities to accelerate growth or improve the structural return profile of the company. John and I are fully engaged with our advisers and the Board to explore ways to unlock value for the shareholders of BGSF. We have not set a time line for the conclusion of the review, and I do not have an update today. So I will not be taking calls -- or will not be taking questions related to the company's strategic review process. Turning to our results. The first quarter of 2024 met our near-term expectations. Although there continues to be caution around hiring, we are encouraged by recent trends in our project and consulting work related to IT and finance and accounting. Despite choppiness in the past few quarters, we saw significant momentum for both areas, resulting in a 7% increase sequentially over last quarter.
Our recent project wins have bolstered our confidence in our strategic repositioning and important tech investments, bringing us closer to our clients' needs in 2024. Our actions during the challenging macro backdrop over the last few years have helped us transition into a structural high margin profile business. We acknowledge that there is more work to be done and are increasing our focus on accelerating revenue growth and scale. We're proud to offer high-value professional and property management services and solutions in highly specialized niches in growing addressable markets. Our business is built on state-of-the-art technology platform with proven process excellence. Looking at our professional segment, I'd like to start by highlighting just a few recent wins we are excited about.
In the first quarter, we commenced one of the nation's largest SAP cloud projects with a Fortune 500 company that ranks in Fortune 100's fastest-growing companies list. We would not have been in a position to bid on this project a few years ago. But today, we are because of our strategic implementations, process changes and platform upgrades we've made. We're also actively engaged in projects to support 2 large divestitures for Fortune 500 clients and are engaged in supporting other merger and acquisition projects this year. These projects excite us and give us confidence that our strategic high-end consulting solutions are uniquely positioned on what clients are looking for in 2024 and beyond. We're at the leading edge of the best technologies available to top companies worldwide.
Turning to a discussion about property management. As we look at the first quarter sales, we were up against strong sales from the prior year, which were up almost 10%. Competition coupled with increased operating expenses for property owners has resulted in a reevaluation of our sales process to overcome these factors for our valued clients. In the first quarter, we included restructuring of our sales organization and more importantly, a change in how we compensate them. Our property management sales leaders now are directly compensated for sales and are no longer tied to a specific market, empowering them to drive sales and see the success of their own personal production. This was based on our proprietary CRM technology we implemented last year.
Now we have full visibility into each market and the number of units, which is a game changer for the sales leadership and property management. We expect our work to show -- to begin showing up in the results in the second half of 2024. With that, I'll turn the call over to John.
John Barnett: Thank you, Beth, and good morning, everyone. Beth gave some great insight into a few key metrics, but let me provide a deeper dive into our numbers. First quarter revenues were $68.6 million compared to $75.3 million in the prior year quarter. Property management revenue declined 13.6%. And as Beth mentioned, we were up against an increase of 10% in the year ago period. Property management is experiencing increased competition. In addition, property management companies, our clients are facing cost pressures, adding complexities to our sales efforts. The Professional segment was down 5.7% from the prior year quarter and up slightly on a sequential basis as we continue to see the business stabilize. Gross profit and margins in the first quarter were $23.4 million and 34.1% compared to $26.8 million and 35.6% in the prior year quarter.
As discussed, we saw competitive pressure in the property management segment, which has impacted our GP margins. Slightly lower margins for the Professional segment are expected to recover in the second quarter. SG&A expenses for the first quarter were $20 million and 30.6% of revenue, an improvement from $23.2 million and 30.8% of revenue in the prior year quarter. Reported operating income was $415,000 versus an operating loss of $20.7 million in the prior year quarter. Recall that we recorded a onetime noncash brand name impairment charge of $22.5 million related to our rebranding initiatives. Fourth quarter adjusted EBITDA was $2.7 million or 3.9% of revenue compared to $4.3 million or 5.6% in the prior year quarter. We reported adjusted earnings of $0.07 per diluted share compared to $0.16 per share in the prior year quarter.
As Beth mentioned, we have suspended our dividend as we work with Houlihan Lokey on our strategic review. While our strategic review may change our near-term outlook, we currently have no plans for acquisitions in 2024. Funded debt to trailing 12-month pro forma adjusted EBITDA was 2.53x at March 31. With that, I would like to call Beth turn the call back to Beth.
Beth Garvey : Thank you, John. Over the last several years, our strategic directives have focused us on transforming our business from a lower-margin staffing agency to a premier high-value consulting, managed solutions, workforce solutions, and property management organization. Today, our tech stack includes business and technical expertise with over 100 technologies covering the software development life cycle. BGSF's collective knowledge is highly valuable to our clients because we bring an unbiased approach that ranges from selection to implementation, to expansion, and that often includes every part of a tech cycle. For professional consulting, we see a steady ramp-up of new client relationships, strategic IT consulting, executive search and senior level projects related to tax and mergers and acquisitions, to name few.
As discussed, we've secured an important partnership with Workday. This means that we now are a partner company, and our people are Workday-certified resources with credentials that validate their skills and knowledge in all Workday products and services. Although our legacy Workday assignments continue to benefit our Professional segment, this new credential Workday relationship will benefit us beginning in late Q2 and into Q3. Our relationship with Workday is stronger than ever, and we are happy to accelerate Workday's progress, which translates to acceleration of our growth. Managed solutions has been another growth area in our successful -- after our successful acquisition of Momentum Solutionz a few years ago. This offering is a high-value proposition for clients looking for us to give them advisory services.
After further assessing our growth strategy, we strategically hired a leader from the consulting world to help us grow this practice. I'm proud to announce that Hitesh Talati, a 20-plus-year veteran of Deloitte has joined BGSF to focus on key customers and bring consolidated packages with various service offerings while helping us explore new revenue streams, including artificial intelligence, product development, cloud initiatives and delivery excellence. Hitesh has a depth of experience and a strategic division that will help us be a valuable asset as we navigate our next growth phase and continue to deliver value to our customers, employees and shareholders. In property management, we continue offering proprietary training to attract an upscale talent, a unique differentiator in the marketplace.
Our operational teams have added an important sales training facilitator role, and we have completed 4 different training modules in the first quarter alone. We know this industry is evolving and growing, and we are excited to continue to be on the leading edge of innovation and expanding industry of apartments, luxury communities, and commercial conversions to residential. Multifamily is a dynamic industry that grows especially as single-family housing becomes less affordable and high interest rates remain. I am pleased with BGSF's growth prospects. Even with the strategic review underway, we will continue to focus on sales, profitability and cash flow growth. I want to thank our associates, our partners, our shareholders and our Board for their support and dedication to our business strategy.
We would now like to open the call for operational and financial questions concerning the business. We do not plan to discuss the strategic review or the suspension of the dividends on this call. However, we have something -- when we have something to report, we will include it in future calls or releases. Operator?
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