BGSF, Inc.

Thank you for standing by. This is the conference operator. Welcome to the BG Staffing Q1 2020 Financial Results Conference call. As a reminder, all participants are in a 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 any 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 McInnes, VP of Avista Relations at Biblicoff and McInnes, Inc. Please go ahead.

Thank you, Taylor. It's my pleasure to welcome you to the BG Staffing Conference Call to discuss Q1 financial and operating results and an update on operations in the COVID-19 environment. With me today on our call is Beth Garvey, President and CEO, and Dan Hollenbach, Chief Financial Officer. A question and answer session will follow their prepared remarks. 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 BGSS' website at bgstacking.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. Discussions today include forward-looking statements, which are based on certain assumptions made by DGSS 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, in the quarterly report on Form 10-Q filed today, 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 DGSS 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 of 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 is 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 news release and Form 10-2 posted on the company's website. It's now my pleasure to turn the call over to Dan Hollenbach, Chief Financial Officer. Dan?

Thank you, Terri. Good afternoon, everyone. We appreciate your interest in BGSF. In these unprecedented times where everyone is impacted by the COVID-19 pandemic, our heartfelt thanks and appreciation to each and every member of our extended BGS family have even deeper meaning. Their invaluable contributions made our swift and successful response to the pandemic possible, allowing us to keep everyone safe, to work remotely, and to continue to provide the highest level of service and support to our stakeholders and our shareholders alike. When we reported our year-end results in March, we noted that the impact of the COVID-19 outbreak on the labor market with Japan, among other things, on the length of time it disrupts the economic activity. While Q1 results were in line with our expectations, we started seeing the first COVID-19 impact the last week of March as overall revenue dropped 15% from pre-COVID-19 levels. As a result of these workforce trends and the continuing social distancing and shelter-in-place orders, We took actions in late March to reduce actual and planned operating costs by approximately 10% compared with pre-COVID levels. These actions included eliminating all travel, client visits, meals, and entertainment, as well as conferences and associated events, implementing a hiring freeze, laying off lower-performing team members, and delaying the start of any new IT roadmap initiatives. In April, the first month of Q2, overall revenues had declined 26% from pre-COVID-19 levels. We had significant revenue declines in the real estate and light industrial segments of 54% and 26%, respectively, while the professional segment revenue was down 11%. Early in Q2, we also took steps to fortify our balance sheet and liquidity, including funding $4 million on our term loan and reducing our revolver balance, delaying non-essential capital expenditures, increasing emphasis on our liquidity forecasting, stricter compliance with vendor payment terms, and our election to delay the payment of the employer's share of Social Security under the CARES Act. To further preserve near-term liquidity, our Board of Directors has temporarily reduced our regular quarterly cash dividend to $0.05 per share from its normal $0.30. While return to shareholders remains an important part of our capital allocation framework, maintaining a strong balance sheet right now is primary. Also under the CARES Act, we may qualify for the employee retention tax credit, which is a fully refundable tax credit equal to 50% of up to $10,000 of qualified wages paid to team members. We are currently gathering the information necessary to utilize this credit. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, and local authorities, or that we determine are in the best interest of our stakeholders. It's too early to gauge the continuing impacts from disruptions to the labor market and business operations, and we can't know the full impact on our financial condition or results of operations. What we can do and what we are doing is stay close, stay in close regular contact with our team members and our client partners while carefully monitoring and managing this fluid situation. And now for our numbers. Revenues for Q1 2020 were $74.1 million, up 7.7% from Q1 2019, while gross profit increased $1.8 million, up 10%. Our gross profit percentage was 27.4 versus 26.8 for the first quarter of 2019. The increase in revenues was fueled by a 4.4% growth in real estate and $6.9 million from our two recent acquisitions. Net income for Q19 was $1.5 million, or $0.14 per diluted share, with a net income of $2.5 million, or $0.24 per diluted share, for Q1 2019. On a comparative basis, Q1 this year was impacted by transaction fees and IC roadmap expenses, $979,000 greater than last year, as well as an effective tax rate of 31.9% in 2020 versus 22.8% last year. Adjusted EBITDA for Q1 of 2020 was $5.27 million, slightly higher than $5.16 million in 2019. Adjusted EPS in 2020 decreased to 28 cents, versus $0.31 in 2019, primarily due to the higher tax rate. Our SG&A expenses for the year increased approximately 2.6 million, or 19% over 2019, due primarily to our two acquisitions, which added $1.9 million of selling costs, $520,000 higher transaction fees, and $459,000 related to the IQ Roadmap Initiative, which we started in Q2 last year. A breakout over SG&A is included in the management discussion section of our core report on Form 10-Q. Although we have delayed new initiatives on the IT roadmap, we continue to spend on projects that were active as we feel they are critical to our success in the short term. We anticipate the impact of this spending on remaining 2020 earnings per share of approximately three to four cents per quarter. Our higher effective income tax rate for 2020 is primarily due to the non-deductibility of transaction costs related to the EDGROC acquisition and a higher state tax rate. We are currently estimating 26% effective rate for the remaining periods in 2020. We continue to generate robust operating cash flows as a result of our strong balance sheet, effective working capital management, and solid earnings. Cash generation operations increased 1.3 million over Q1-19. Our debt to pro forma adjusted trailing 12-month EBITDA at the end of Q1-2020 was 1.64. Day sales outstanding at the end of March was 50 days, in line with the industry. However, we have seen a deterioration during April to 58 days, a slowdown we anticipated. Explanations of our use and reconciliations of adjusted EBITDA to net incomes as well as adjusted earnings for shared and net income for diluted share, are available in our latest quarterly report on 10Q and in our earnings release, both of which are available on our website. This completes my financial review. Now I'll turn it over to Beth.