BGSF, Inc.

Thank you for standing by. This is the conference operator. Welcome to the BG Staffing First Quarter 2019 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star 0. I would now like to turn the conference over to Terry McInnis, VP of Investor Relations at Bibicoff and McInnis, Inc. Please go ahead.

Thank you, Savvy. It's my pleasure to welcome you to the BG Staffing Conference Call to discuss Q1 financial and operating results and a progress report on the company's business strategy. With me today on our call is Beth Garvey, President and CEO, and Dan Hollenbach, Chief Financial Officer. By now you should have seen a copy of this morning's press release announcing BG's Q1 financial results as well as the Form 10Q. If you do not have a copy of either, you can find it in the investor relations section on BG's website at bgstaffing.com. I remind you that this call is being webcast live and recorded. A replay of the event will be available later today on the company's website and will remain available for at least 90 days following the call. I would also like to remind you that our discussions today include forward-looking statements. These statements are based on certain assumptions made by BG Staffing based on and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The company's actual results could differ materially from those indicated by the forward-looking statements because of various 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 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. These forward-looking statements are made as of the date of this call MBG staffing assumes no obligation to update these statements publicly, even if new information becomes available in the future. This broadcast is covered by U.S. copyright laws, and any use or rebroadcast of all or any portion of this conference call may only be done with the company's express written permission. During our call, we will discuss some non-GAAP measures, which we use for internal evaluation and to report the results of the business as useful information to management, our board of directors, and investors about our operating activities and business trends related to our financial condition and results of operations. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered in isolation as a substitute for or as superior to financial measures circulated in accordance with GAAP. For reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see today's earnings release posted on the company's website. I will now turn the call over to Dan Hollenbach, BG Staffing's Chief Financial Officer. Dan?

Thanks, Terry, and good afternoon, everyone. We appreciate your interest in BG Staffing. I would like to start again by taking a moment to acknowledge all of our team members at each of our BG Staffing business units for their hard work and dedication to our company's continued success and strong gross profit margins. Their contributions are vitally important, and we are very proud of the job they continue to do for us. As a reminder, BG Staffing provides contingent staffing services within three industry segments. Our real estate segment, which operates in apartments via BG Multifamily and in commercial buildings via BG Talent. Our professional segment, which includes our finance and accounting, IT, and creative group, as well as our light industrial segment. Today, BG Staffing operates 79 branch offices and 17 on-site locations, providing services in 44 states. Our 2019 plan was to open five new real estate offices, excluding the recent expansion into California, and we have already opened four plus our first location in California. Beth will talk more about our recent entry into California in her remarks. After my review of our financial results, I'll turn the call over to Beth for her comments on the quarter just ended and on our company's strategy, execution, and outlook on current industry conditions. Our consolidated revenues for Q1 2019 were $68.8 million, up 2.9% from Q1 2018. Gross profit increased $1.1 million, or 6.5%, with gross profit percentage of 26.8%, up from 25.9% in Q1 of 2018. Gross profit percent was up in all of our segments, Q over Q, and this continues a string of quarterly increases in gross profit percent. While Q1 is typically our softest period due to seasonality in our real estate and light industrial segment, we were also impacted by weather in all of our segments. Net income for Q1 2019 was $2.5 million, up slightly versus Q1 2018, and diluted earnings per share was $0.24 versus $0.27 in Q1 of 2018. Customer sentiment remains positive, and demand momentum was steady as we moved sequentially from Q4 into Q1 of 2019. Now turning to our segment results. Our real estate revenues, which continue to be from organic growth, increased 1.1 million, or 6.3%, to 19.2 million as we continue to scale this highest profit margin segment of our business. Gross profit increased 507,000, or 7.4%. Gross profit percent was 38.5 for 2019, up from 38.1 for the same period in 2018. Operating income increased 8.2% to $2.8 million. Talent contributed $300,000 of the revenue increase, and multifamily contributed $800,000. Today, multifamily operates 49 offices, and talent has six offices, together servicing 28 states. Professional revenues for the quarter were $30.6 million, a decrease of half a million, or 1.6%, compared with 2018. The revenue decrease was due to decreased volume in our IT group. Finance and accounting was flat, even with an $800,000 decrease from one client partner in 2019 versus 2018, a client we've discussed in previous queues. While revenue decreased, gross profit increased 411,000 or 5.2%. Year-to-date gross profit percentage for the professional segment increased to 27.1%, from 25.3% in the prior year, but operating income decreased 19.1% to $1.8 million. Light industrial revenues increased $1.3 million to $19 million, or 7.2% versus 2018, outperforming industry expectations. Gross profit increased $211,000, or 8.2%. Light industrial gross profit percentage was 14.6%, compared with 14.4% for the prior year period. Operating income increased 13.9% to $1.2 million. Turning now to selling expenses, which increased approximately $1.1 million, or 10.8% over 2018, due to continued expansion in the real estate segment, including $112,000 attributed to new offices and accelerated office openings in 2019. As mentioned, we have five set to open, and we've already opened four in the first quarter. Professional segment expenses increased $746,000, or 17.1%, primarily a result of compensation adjustments in our commission plans driving higher margin business. We continue to review our compensation plans. Light industrial segment increased $91,000, or 6.5%. G&A expenses increased $273,000, or 16.8%, due to increased spend in our IT and HR support units. Beth will discuss both of these strategic initiatives in her remarks. G&A expenses were 2.8% of revenues in Q1 of 2019, which compares to 2.4% for the first quarter of 2018. Our effective income tax rate was 22.8% for 2019, compared with 22.1% for 2018. And we currently estimate a 22.8% effective rate for the rest of the year. Cash provided from operations increased $1.8 million over the same quarter in 2018. We continue to generate robust operating cash flows as a result of our strong balance sheet, effective working capital management, and solid earnings. allowing us to reduce debt, invest in technology, and while at the same time returning capital to our shareholders in the form of a regular quarterly dividend, currently set at $0.30 per share, an approximate yield of 5.5%. PG Staffing has now paid a dividend for 18 consecutive quarters. Our current debt to adjusted $1.12 trillion EBITDA is 0.71%. Adjusted EBITDA for the quarter was $5.2 million, or 7.5% of revenues in 2019, compared with 5.5 million, or 8.2% of revenues in 2018. We believe that it's just as useful for performance measure, and it's used by us to facilitate a comparison of our operating performance on a consistent basis from period to period, and to provide a more complete understanding of factors and trends affecting our business. We also believe that investors, analysts, and other interested parties view our ability to generate adjusted EBITDA as an important measure of operating performance and that of other companies in our industry. Additionally, the financial covenants in our credit agreement are based on adjusted EBITDA. Reconciliations of adjusted EBITDA net income are available in our latest quarterly report on Form 10Q and our earnings release, both of which are available on our website. Now I'd like to turn the call over to Beth.