BGSF, Inc.

Thank you for standing by. This is the conference operator. Welcome to the BG Staffing third 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 then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Terry McInnis, Vice President of Investor Relations at Bibicoff & McInnis. Please go ahead.

Thank you, Ariel. It's my pleasure to welcome you to the BG Staffing Conference Call to discuss Q3 and nine-month 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 of and Dan Hollenbach, Chief Financial Officer. A question and answer session will follow their prepared remarks. A copy of this morning's news release announcing the company's financial results, as well as the Form 10-Q, are available in the Investor Relations section on BG's website at bgstaffing.com. Our call today is being webcast live and recorded. A replay will be available later today on the company's website, and will remain available for at least 90 days following the call. 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 and BG 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. Additionally, the financial covenants in BG Staffing's credit agreement are based on adjusted EBITDA. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered as a substitute for or superior to financial measures calculated in accordance with GAAP. For reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see today's earnings release and Form 10-Q posted on the company's website. It's now my pleasure to turn the call over to Dan Hollenbach, Chief Financial Officer. Dan?

Dan Hollenbach Thanks, Terri. Good afternoon, everyone. Thank you for joining us today and for your support of BG Staffing. We had a very nice day in the market today. I'd like to start our call by taking a moment to acknowledge all of our talented team members at each of our BG Staffing business units for their hard work and their dedication to our company's continued success and our strong gross profit margins. Their contributions are vitally important, and we are truly 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 division, which operates in apartments via BG Multifamily. and in commercial buildings via BG Talent, our professional division, which includes our finance and accounting, IT and creative groups, and our light industrial division. Today, BG Staffing operates 78 branch offices and 14 onsite locations, providing services in 42 states and the District of Columbia. After I complete my review of our financial results, I'll turn the call over to Beth for her comments on the reporting period, our company's strategy, how we are executing on our business plan, and the outlook for the current industry conditions. First, our Q3 results. Consolidated revenues for Q3 of 2019 were $79.4 million, up 3% from Q3 2018. Gross profit increased $803,000, or 3.8%, with gross profit percentage of 27.9, up from 27.7 for the third quarter of 2018. This continues a string of quarterly increases in gross profit percent. Net income for Q3 of 19 was 4.2 million versus 5.1 million in Q3 2018. 2018 was positively impacted by the recognition of a $1 million gain on contingent earn out and an effective tax rate at 21.3% versus 21.4% this year. Diluted earnings per share was 41 cents, sorry, versus $0.49 in Q3 2018, while adjusted diluted earnings per share was $0.52 versus $0.43 in 2018. Adjusted EPS was normalized for amortization, a loss on extinguishing the debt, the contingent gain, and the option cancellation tax impact last year. Adjusted EBITDA for the quarter was $8.3 million, or 10.5% of revenues in 2019, up from $8.2 million or 10.7 percent of revenues for 2018. And now for our year-to-date results. Consolidated revenues for the first nine months of 2019 were $222 million, up 3.3 percent from 2018. Gross profit increased $3.6 million or 6.2 percent, with gross profit percentage of 27.7 percent, up from 26.9 percent in 2018. Net income for 2019 was $10.5 million versus $12.7 million in 2018. Again, 2018 was positively impacted by the previous and discussed gain and an effective tax rate of 17.7%. Diluted earnings per share was $1.00 in a penny versus $1.32 in Q3 of 2018, while adjusted diluted earnings per share was $1.26 versus $1.33 in 2018. Adjusted EPS was normalized for the impact as described in the quarterly discussion. Looking at our business segment results, Q3 2019 real estate revenues increased $3 million or 11.1% to $29.5 million with talent contributing $1.4 million of the total. Gross profit increased $1.2 million or 12.1% to $11.3 million Gross profit percentage was 38.2% for 2019, up from 37.9% for the same period in 2018, and our operating income increased 11.4% to $5.5 million. Professional revenues for the quarter were $31.5 million, up $2.3 million, or 8% compared with 2018. Our IT division produced the growth, while our F&A group was down $1.7 million. Gross profit increased 154,000, or 1.9%. Gross profit percentage for the professional segment decreased to 26.2% from 27.8% in the prior year, primarily due to a decrease in placement revenue. Operating income was flat year over year. Light industrial Q3 revenues decreased to $3 million to $18.4 million, or 13.9% versus 2018. Gross profit decreased $571,000 or 17.7%. Light industrial gross profit percentage was 14.4% compared to 15.1% in 2018. Operating income decreased 24.8% to $1.2 million. Sell-in expenses increased approximately $629,000 or 5.4% over 2018, led by continued expansion and growth in our real estate segment up $656,000. Professional segment expenses were up 5.1%, or $238,000, and light industrial segment decreased $175,000, or 11%. G&A expenses increased $481,000, or 3%, due to increased spend in our IT and HR support units, as well as SEC-related costs. G&A expenses were 2.5% of revenues in Q3-19, which compared to 2.1%, for the third quarter of 2018. And now for year-to-date segment results. 2019 real estate revenues increased 7.1 million, or 10.9%, to 73 million, with talent contributing 3.8 million of the total. Gross profit increased 3 million, or 12%. Gross profit percentage was 38.4 for 2019, up from 38% for the same period in 2018. Operating income increased 10.4% to $12.5 million. Professional revenues were 93.4 million, up 3 million, or 3.3%, compared with 2018. Our IT division produced a growth, while F&A was down 1.8 million. Gross profit increased 1.3 million, or 5.3%. IT had growth, while F&A was flat. Year-to-date gross profit percentage for the professional segment increased to 27.1% from 26.6% in the prior year. Operating income decreased 4.7% to 6.2 million. Light industrial revenues decreased 3.1 million to 55.5 million, or 5.2% versus 2018. Gross profit decreased 669,000, or 7.6%. The light industrial gross profit percentage was 14.6% compared with 15% in 2018. Operating income decreased 11% to $3.5 million. Now turning to selling expenses, which increased 3.1 million or 9.4% over 2018, with real estate segment up 1.8 million or 13.1%, and the professional segment up 1.4 million or 10%. Light industrial segment expenses decreased 3.6%. G&A expenses increased $851,000, or 17.9%, due to increased spend, as previously discussed in the quarterly. G&A expenses were 2.5% of revenues in 2019, which compares with 2.2% in 2018. Our effective income tax rate was 23.3% for 2019, compared with 17.7% last year. Our expected rate going forward will approximate 25% due to changes in the mix of business in the states we provide services. Adjusted EBITDA for the first nine months of 2019 was $20.3 million, or 9.2% of revenues, compared with $20.7 million, or 9.6% of revenues, in 2018. Cash provided from operations increased $2.6 million to $14 million. We continue to generate robust operating cash flows as a result of our strong balance sheet, effective working capital, and solid earnings, allowing us to reduce debt, invest in technology, while at the same time returning capital to our shareholders in the form of a regular quarterly dividend, currently set at $30 per share, with an approximate yield around 6%. BG Staffing has now paid a dividend for 20 consecutive quarters. Our current debt to adjusted trailing 12-month EBITDA is a very low 0.8. I'd like to share a few observations about the overall economy before I turn the call over to Beth. The Commerce Department just reported that in Q3, U.S. GDP grew at 1.9% annualized rate, beating expectations of 1.6%. While there has been a drop in business confidence due to uncertainty, macroeconomic advisors were quoted in the New York Times last week saying, quote, The economy is not slowing into a recession, end quote. There continues to be expansion in hiring and consumer spending, and we are still seeing strong demand and have more orders than we have talent to fill. Further, this month's job report was very positive. I'm pleased to report that our transition to BMO Harris Bank for our treasury services is progressing smoothly. This completes my financial review, and now I'll turn the call over to Beth. Beth?