BGSF Q1 2025 Earnings Call Transcript

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May 8, 2025

Key Takeaways

  • Total Q1 revenue fell 8% year-over-year to $63.2 million, with Professional down 4.2% and Property Management down 14.9%, although Professional revenues rose 5.6% sequentially and continued improving into April.
  • Adjusted EBITDA increased to $2.4 million (3.8% margin) and adjusted EPS was $0.05, reflecting the early benefits of cost-reduction actions that will be fully realized in Q2.
  • Professional segment momentum accelerated with a 5% rise in billable hours, a newly awarded Workday AMS partnership, launch of a compliance reporting product, and signing 23 new logos (up over 60% year-over-year).
  • Property Management has realigned its sales force and secured exclusive/semi-exclusive service agreements (improving 7% year-over-year), and expects to benefit from rising U.S. apartment rental rates in its seasonally strong Q2.
  • Management remains cautious as tariff uncertainties and broader macroeconomic headwinds have led many clients to adopt a wait-and-see approach, delaying project hiring and spending.
AI Generated. May Contain Errors.
Earnings Conference Call
BGSF Q1 2025
00:00 / 00:00

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Operator

Day, everyone. Welcome to the BGSF Inc. Fiscal twenty twenty five First Quarter Financial Results Conference Call. At this time, all participants have been placed on a listen only mode, and the floor will be open for questions and comments after the presentation. As a reminder, this conference call is being recorded.

Operator

Now I will turn the call over to Sandy Martin, three part advisers. Please go ahead.

Sandy Martin
Managing Director at Three Part Advisors

Good morning. Thank you for joining us today for BGSF's first quarter twenty twenty five earnings conference call. With me on the call are Beth Garvey, Chair, President and Chief Executive Officer and Keith Schrader, Chief Financial Officer. After our prepared remarks, there will be a Q and A session. As noted, today's call is being webcast live.

Sandy Martin
Managing Director at Three Part Advisors

A replay will be available later today and archived on the company's Investor Relations page at investor.vgsf.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 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. Management will refer to non GAAP measures, including adjusted EPS and adjusted EBITDA.

Sandy Martin
Managing Director at Three Part Advisors

Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. I'll now turn the call over to Beth Garvey.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Thanks, Sandy, and thank you all for joining us today. We've continued our strategic alternative work in the first quarter and believe that the twelve to eighteen month timeline we previously communicated remains realistic. This month marks the first twelve months since we communicated the launch of the strategic review. Our restructuring initiatives aimed to recalibrate costs by reducing direct and indirect expenses throughout headcount reductions as well as other measures were included in the strategic work. We will not be taking questions related to the strategic review today.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Total revenues for the first quarter of twenty twenty five were $63,200,000 down 8% from prior year, comprised of professional down 4.2% and property management down 14.9% versus a year ago. Sequentially, professional segment revenues increased by 5.6% compared to the December, while the property management division declined sequentially by 14.1%. During the quarter, business strengthened month over month and this trend continued into April, which is higher than March's revenue. We generated adjusted EBITDA of $2,400,000 with an EBITDA margin of 3.8% and our adjusted EPS was $05 per share. For most U.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

S. Businesses, tariffs did not impact first quarter results. However, uncertainties and concerns over the administration's trade policies created headwinds and project hiring and spending. Although we expect clients to remain diligent, we are cautiously optimistic that consulting projects and business spending will continue to move forward. We are confident that we are well positioned in the markets we serve with differentiated model that includes professional consulting and project resources, primarily in high value IT and finance and accounting talent.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

We are also well equipped to meet the needs of property management companies, particularly as we approach the high season for apartment turn overs. In 2024, we restructured both divisions and streamlined costs to align management more closely with the producers and we believe that this will benefit our results in 2025. Starting with the professional segment, we managed the consulting ends well in March and did not experience a typical first quarter drop off that we have seen in prior years. We are focusing on team specializations in staffing and consulting, which support improved project efficiencies. Our build hours for the quarter were up approximately 5%.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Margins in Q1 were about 32% in the professional division, down slightly on a sequential and on a year over year basis. Our permanent placement business got off to a strong start in the first few months of twenty twenty five and we remain optimistic about the business momentum. Additionally, we were officially awarded the Workday Application Management Service Partnership. We expect this to expand our support sales in pre and post implementation projects. We also launched a newly developed product with Workday focusing on compliance reporting support for colleges and universities.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Finally, we signed 23 new logos in the first quarter of twenty twenty five, up over 60% from 14 in the twenty twenty four first quarter. This business is moving in the right direction and we are confident it is gaining tangible momentum. Shifting to property management, last year we eliminated direct and indirect operating costs in the segment to better align our expenses with projected revenues. We are entering our seasonally high sales period for property management and the second quarter will serve as a barometer of the effectiveness of our strategic initiatives. We implemented key workflows and reorganization initiatives over the last nine months including the completion of property management sales force realignment last fall as well as expense reductions in the fourth quarter of twenty twenty four.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Since rental and property management companies have faced challenges over the last eighteen months due to the macroeconomic headwinds, our property management segment continues to operate under pressure. However, we believe the industry is finally shifting, U. S. Apartment rental rates are starting to elevate again, which we expect will allow better economics for property management companies. Internally, our sales territory initiatives are expanding and our maintenance training platforms are industry specific.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

We continue to work on the exclusive and semi exclusive property management service agreements that have resulted in 7% improvement over prior years. When property management companies need support, we want to be the preferred vendor and expand the number of service agreements is vital. We have strong relationships and a good reputation in the marketplace and I'm optimistic yet cautious that our trained talent and high service levels will positively impact business trends in property management starting in the second quarter of twenty twenty five. If macroeconomic uncertainties persist, we will continue to manage what we can control and prepare for this choppiness. After Keith walks through the detailed financial results for the quarter, I will return with closing remarks. Keith?

Keith Schroeder
Keith Schroeder
CFO at BGSF

Thank you, Beth, and good morning to everyone. First quarter revenues were $63,200,000 versus $68,800,000 in the year ago quarter. We are pleased to report that the professional revenues increased sequentially from the December by 5.6%. Although organic professional segment sales declined 4.2% compared to the prior year's quarter, This is a significantly improving trend from more recent quarters. Despite the 4.2% decline in revenue on a year over year basis, operating income and professional increased, which is proof of the effectiveness of our cost reduction activities taken in December and again in March and April of this year.

Keith Schroeder
Keith Schroeder
CFO at BGSF

Property management revenues declined by over 14% on both a sequential and year over year basis. We are seeing signs of improvement in this business unit as revenues per billing day have steadily increased during February, March and April. We made significant transformations in the sales marketing group and property management at the end of last year and early this year and understand that fully executed initiatives take time to show up in financial results. Our gross profit margins in the first quarter were $20,900,000 and 33.1% compared to $23,400,000 and 34% in the year ago period. On a sequential basis, compared to the fourth quarter of twenty twenty four, gross margins were basically flat, with the Professional segment down 20 basis points and Property Management up 30 basis points.

Keith Schroeder
Keith Schroeder
CFO at BGSF

SG and A expenses for the first quarter were 18,900,000.0 compared to $20,800,000 in the fourth quarter and $21,000,000 in the prior year's quarter. These improvements were primarily a result of our restructuring actions taken in December. Our first quarter EBITDA was $2,400,000 or 3.8% of revenue, up sequentially from $1,400,000 or 2.2% in the fourth quarter. This improvement is further evidence of the positive effects of the cost cuts on our profitability as this improvement came in the face of a $1,200,000 sequential shortfall in revenue. We reported a first quarter GAAP loss of $07 per diluted share and adjusted EPS of zero five dollars Starting with the first quarter's results, we are beginning to see improvements in BGS profitability.

Keith Schroeder
Keith Schroeder
CFO at BGSF

During the first three months of twenty twenty five, we generated $1,100,000 in cash from operating activities. Capital expenditures were minimal at $23,000 primarily IT investments. As previously discussed in our Form 10 ks filing in March of this year, the company was not in compliance with its financial covenants at year end twenty twenty four and was not expected to be in compliance at the end of our first quarter this year. As a result, we entered to a waiver and second amendment with BGSF's lenders on March 12 with a further amendment on May 7. These amendments, among other things, provide time for us to properly structure our capital needs.

Keith Schroeder
Keith Schroeder
CFO at BGSF

With that, I would like to turn the call back to Beth. Beth?

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Thank you, Keith. Reviewing our sales performance through April, we remain cautious yet optimistic recognizing that ongoing business disruptions resulting from trade policy changes could impact many U. S. Companies, including BGSF. When companies suspend their earnings guidance like so many public companies are doing right now, they are more likely to delay decisions and opt to preserve cash where possible.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

This will negatively impact most companies in The U. S. And Canada and likely slow growth for many industries. We will continue to manage our business by staying close to our clients and communicating with them about their plans and pain points. We are committed to our growth initiatives and managing the things we can control.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Our trend reports for revenue per billing continue to improve each month. Although progress is slower than we would like, we are seeing measurable progress. Last Friday, we saw that employers added 177,000 jobs in April, which signals that the labor market remains solid. The jobless rate remained steady at 4.2%, a positive development in the face of macroeconomic and tariff uncertainties this year. Our strategic initiatives include rightsizing and also growing our business, as well as leveraging prior investments in people, technology and best in class processes to drive long term shareholder value.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

As the broader markets and industries adjust to economic changes and normalize, we are confident that corporate leaders will invest grow, which will provide a positive environment for BGSS growth with our customer partners. Now I'll turn the call back over to the operator. Operator?

Operator

Certainly. The floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a few moments while we poll for any questions.

Operator

Your first question is coming from Jeff Martin with Roth Capital Partners. Please pose your question. Your line is live.

Jeff Martin
Director of Research & Senior Research Analyst at Roth Capital Partners, LLC

Thank you. Good morning, Beth and Keith. Beth, could we start with the new logos? That's an impressive figure up 60% year over year. Maybe put some context around that in terms of average deal size and maybe give us a sense of when those projects will are on the calendar to commence.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Sure. We several of the contracts that we have were signed in March, and so I don't have that data as to how much was associated with each one of them, but I can get it, and we can circle back.

Jeff Martin
Director of Research & Senior Research Analyst at Roth Capital Partners, LLC

Okay. And then with respect to existing clients, are you seeing a lot of discussions in terms of what happens once the tariff uncertainty becomes more clear. Do you get a sense that there's potential for pent up demand as we come at the back end of this and imagine you don't have a ton of visibility, but just wanted to throw that out there for comment.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Yeah, I don't I do believe that there is pent up demand in both segments, right? So I think that everybody's just very cautious right now. And as the tariff conversations continue, most of our customers are just telling us that we're on a wait and see kind of mode. And but there's still conversations that are happening. So I don't feel like once that gets settled, I do feel like we'll start to have some things moving along because the conversations are actually happening.

Jeff Martin
Director of Research & Senior Research Analyst at Roth Capital Partners, LLC

Great. Good to hear. Could you give us an update on the technology platform? I know that that's been several years in the making, and, you know, we've been rolling out various pieces of that over the past couple of quarters. Is there still go lives to occur here in the future? Or is that fully rolled out at this point?

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Everything's fully rolled out. What we do right now is that we have two week sprints where we go in and we implement certain things that help efficiency gains. We have captured several million dollars in just having web push, where we have applicants that can come into the portals and get pushed out. So we're seeing really good results from just making sure that the technology is working in the way we wanted it to work and then continuous improvements. Because we did launch I think I talked about it last quarter our operational excellence program that we launched.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

And that is really taking the processes and running them through the technology to make sure we're pulling as much friction out of it as possible to make it work faster. And then we've had some really great conversations this week in regards to other benefits that we should be able to start to do just by using our internal team to continue that enhancement for the efficiency gains.

Jeff Martin
Director of Research & Senior Research Analyst at Roth Capital Partners, LLC

Okay. And then with the expense reductions you put in place last year, is that fully factored in the full benefit factored into the first quarter? Or is there further benefit from those actions taken? And then are there any further expense reductions on the horizon?

Keith Schroeder
Keith Schroeder
CFO at BGSF

So first question, the answer to that is about 65% to 70% was essentially baked into the first quarter. Second quarter, we'll see 100%. Okay. And as far as to the last question, we are always looking at ways to improve our cost effectiveness, whether it's implementing new IT things where we can basically get people into our system and out in the field faster or just taking out costs. So those that sort of work goes on continually.

Jeff Martin
Director of Research & Senior Research Analyst at Roth Capital Partners, LLC

Okay, great. And then Beth, could you give us an update on the competitive dynamic within property management? Has it been much change there? And you made recent progress with securing those preferred partner type agreements? Is this still a long runway to go there?

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

The competitive environment is staying the same. I mean, there's no change in that. Competition is not necessarily a bad thing. You just got to adjust to it. And our team has done a really amazing job to be able to pivot and know what to do and how to overcome.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

But it's all about speed and quality. And the property management team does an amazing job of being able on both of those factors. And then as far as the strategic agreements that we have, they continue to sign them. They're all in the works, it's an ongoing effort. And I think they closed one this week that was a pretty substantial one.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

So very proud of the work that they're doing on that.

Jeff Martin
Director of Research & Senior Research Analyst at Roth Capital Partners, LLC

Great. Then if you had to take a forward view on property management in terms of a return to year over year, maybe stability in terms of comparisons, Do you care to pinpoint the time frame of when that may occur?

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

We're doing everything that we can to get us back to the position that we're of the growth trajectory that we were on, and we are seeing positive signs in that happening right now.

Jeff Martin
Director of Research & Senior Research Analyst at Roth Capital Partners, LLC

Great. Thanks for taking my questions.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Sure. Thanks, Jeff. Thank you.

Operator

Your next question is coming from Michael Taglich with Taglich Brothers. Please pose your question. Your line is live.

Michael Taglich
Chairman & President at Taglich Brothers

Good morning, Keith, and good morning, Beth.

Keith Schroeder
Keith Schroeder
CFO at BGSF

Good morning.

Michael Taglich
Chairman & President at Taglich Brothers

I was looking for, first of all, a comment. How are you comfortable at this point? We're about a third of the way into the year with the Street estimates for in light of where the results were in the first quarter and are continuing to the second?

Keith Schroeder
Keith Schroeder
CFO at BGSF

Well, beat the estimates for the first quarter. On the revenue line would be the one net income and EPS. And to be frank, I haven't really looked at what the estimates are for Q2. I'm sure they may change some after this call. So I need to take a look at that, but I will get back to you on that.

Michael Taglich
Chairman & President at Taglich Brothers

Okay. Beth, this is for you. But away from the macro, which no one knows in light in light of what you're seeing halfway into Q2, what would be the adjective that's most applicable to how you believe you're tracking versus your plan?

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

I think we're tracking where we thought we were going to be. So I think that that's a positive move on our part. I think that both divisions have got some momentum in the right direction. We're just being cautious about it. But I'm not fearful about it at all.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

I do think that we're moving in the right direction.

Michael Taglich
Chairman & President at Taglich Brothers

Okay, great. All right, thanks.

Keith Schroeder
Keith Schroeder
CFO at BGSF

Thanks.

Operator

Your next question is coming from Bill Dezellem with Tieton Capital. Please pose your question. Your line is live.

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

Thank you. I have a group of questions. First of all, would you reconcile kind of what you are seeing or sharing relative to the wait and see mindset that your customers have versus the new logos being up 60%? Those seem to be in a bit of contrast with each other.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

It depends on the sector, Bill. So there's some of our manufacturing companies are the ones that are in the wait and see area. And some of our other customers that we have, we do a lot in education. So some of those are moving in the right direction. So it's kind of a mix in business.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

So it is a mixed bag on which area is holding and which area is moving.

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

Thank you. And then looking at the professional services, fourth quarter, the headline was that the billing days were down 5%. Excuse me, the revenues were down 5%. But this quarter, your billed hours are up 5%. That seems like there is a shift that took place between the quarters.

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

Am I mixing nuances here? Or was there actually a shift that took place?

Keith Schroeder
Keith Schroeder
CFO at BGSF

Talking about a shift within professional?

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

Yes. So professional segment revenues declined in the fourth quarter, but they increased here in the first quarter.

Keith Schroeder
Keith Schroeder
CFO at BGSF

Yeah, they did increase in the first quarter. Hang on a second. I pull up the numbers, make sure exactly what you're looking at here. How about that? Yeah, we did see nice growth.

Keith Schroeder
Keith Schroeder
CFO at BGSF

So that the growth in Q1 is versus Q4 of last year. So that is the comparison when talking about the current quarter. We are still down some from the Q1 of last year. Okay. But we are up on a sequential basis and the trends continue to look strong in both sectors into the current month.

Keith Schroeder
Keith Schroeder
CFO at BGSF

Well, that's the prior month, but say April look good. And both sides of business.

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

And Keith, that's the normal seasonal trend then that I'm getting confused here with. It not Q1 is normally up versus Q4?

Keith Schroeder
Keith Schroeder
CFO at BGSF

Q1 in professional and Q2, there's some uptick, but it's not huge. It's PM where it starts to grow. And we look at what is our actual growth on a quarter over quarter basis versus what we call the seasonal growth expectation. And we've been over that growth for the last three months. So not only are we seeing growth on a quarter over month over month basis, we are seeing it come in above what we expect in seasonality. Does that make sense?

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

I think so. But were you talking professional services or were you talking about property?

Keith Schroeder
Keith Schroeder
CFO at BGSF

About property. Property is much more seasonal than professional.

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

Okay, so I'm sorry, let me make sure I get these dissected then correctly. So relative to the property business, you are seeing revenues increase slightly faster than the normal seasonal rebound. Are you attributing that to your sales effort? Or is that simply the market improving?

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

I think it's a combination of things, Bill. I think that it's the restructure with the team last year and putting more focus on the managers being closer to their people and driving those results, as well as the strategic agreements we have in addition to the territory cities that we went in and characterized because we had the Salesforce technology.

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

Okay, that's helpful. And then relative to the professional services, that was up in Q1 versus Q4. And that does or does not is or is not part of seasonality. I guess what I'm trying to get my head wrapped around here is, is there a green shoot with that? Or is that just what we would have come to expect in Q1 versus Q4?

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

We didn't have as many ends in Q1 as we typically have seen in prior years. And so that was a good thing. And I think that that helped us come into the quarter stronger.

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

And Beth, that would primarily be due to just timing? Or are these projects that get extended because

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

It's year end, Bill. It's like a lot of our customers will have their budgets reset. And so that we usually see some adjustments because of budgets being reset at the end of the year.

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

All right, thank you. And then one additional question. Coming out of a recession, what is the historic behavior in the rebound? And I recognize that businesses in general increase their spending. But do you hear customers saying that they want to accelerate spending because part of what you are doing for them is lowering costs and they want to come out stronger? Or is it simply existing projects that get released?

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Historically, in a recession, our industry is the first to go down and the first to come back up. But I will say that we're not seeing that happening right now. It's kind of a weird environment for our industry. But I do think that we've had the last eighteen months of really everybody being pretty cautious about how they wanted to move forward. And at some point, because of where we play in our specialties, there are areas where people are going to want to go ahead and proceed with changing out their ERP systems going forward.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

So I think that just our mix of business helps us in that when people start having a little more confidence. So I feel good about where we're going on that. And then from a property management perspective, if you look at things, people can only hold their updates on their properties They're starting to see some rent growth in that area which will actually help management companies move in a direction where they want to spend more money, which is good for us.

Bill Dezellem
Founder, President & Chief Investment Officer at Tieton Capital Management

Thank you both.

Keith Schroeder
Keith Schroeder
CFO at BGSF

Thank you, Bill.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Thank you, Bill.

Operator

Thank you. That does conclude the end of our Q and A session. I would now like to turn the floor back over to Beth Garvey for closing remarks.

Beth Garvey
Beth Garvey
Chair, President & CEO at BGSF

Thanks again for joining us for our second first quarter review. So we look forward to talking to you in August. Thanks.

Operator

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Executives
    • Beth Garvey
      Beth Garvey
      Chair, President & CEO
    • Keith Schroeder
      Keith Schroeder
      CFO
Analysts
    • Sandy Martin
      Managing Director at Three Part Advisors
    • Jeff Martin
      Director of Research & Senior Research Analyst at Roth Capital Partners, LLC
    • Michael Taglich
      Chairman & President at Taglich Brothers
    • Bill Dezellem
      Founder, President & Chief Investment Officer at Tieton Capital Management
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