BGSF, Inc.

Thank you for standing by. This is the conference operator. Welcome to the BG Staffing Second Quarter 2020 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 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Terry McInnis, Vice President of Investor Relations at Bibicoff & McInnis, Inc. Please go ahead.

Thank you, Operator. It's been a pleasure to welcome you to the BG Staffing Conference Call to discuss Q2 and six-month 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 is available in the investor relations section on BGSF'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. Discussions today include forward-looking statements. which are based on certain assumptions made by BGSF 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 reports on Form 10-Q 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 BGSS 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 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 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, and we appreciate your interest in BGSF. First of all, I'd say we normally would have filed our 10-Q this morning. The additional review disclosures required for the impairment and swap accounting were new to us, and we wanted to ensure that they were complete and useful to the reader. We are planning on filing tomorrow. As I did last quarter when this COVID pandemic descended upon us all, I'd like to start today's call by acknowledging our exceptional team. It's due in large part to their agility, responsiveness, and hard work that we were able to continue to keep everyone safe while working remotely, all the while consistently providing the highest level of service and support to all of our stakeholders and shareholders. The actions taken earlier this year in response to the growing impact of the COVID-19 outbreak have served us well. Organic selling costs decreased 12.4% and recurring home office costs decreased 16.7% sequentially from Q1. We are closely scrutinizing all facets of the current environment and are ready to take further actions that alter our business operations as the federal, state, and local authorities may require. While returning capital to shareholders remains an important part of our capital allocation framework, maintaining a strong balance sheet is primary. Remaining cautious, the board has approved a $0.05 quarterly dividend for Q2. We're encouraged by a consistent week-over-week sequential growth in our business segments. For the last week of June, overall revenue was at 91% of pre-COVID levels. That's the first three weeks of March is what we measure by, up from 71% at our low point in mid-April. Light industrial is back to pre-COVID revenue numbers. and, in fact, in July was over their pre-COVID numbers. Although the virus has flared up and impacted various regions across the U.S., we are not seeing any particular geographic pressure on business as a result. And now for our Q2 numbers. Revenues for 2020 were $62.6 million, down 15.2% from Q2 2019, while gross profit was $16.9 million, down 19%. The overall decrease in revenues was fueled by a 52% decline in real estate, offset by $9.8 million from our two recent acquisitions. Gross profit percent of 27% was down from 28.2% in 2019, impacted by a 52% decline in term placements and a decrease in real estate noted. We incurred a net loss for the quarter due to the impairment of certain intangible assets of $5.4 million net of tax in our finance and accounting division. The net loss for Q220 was $4.8 million, or minus $0.47 per diluted share, compared with net income of $3.8 million, or $0.37 per diluted share in 2019. It should be noted that net income before the impact of the impairment was $600,000. Our effective tax rate was 25.9% versus 22.8% last year. Adjusted EBITDA was $3.3 million, down from $6.9 million last year. Adjusted EPS decreased to $0.16 from $0.44 last year. Our SG&A expenses for the quarter were flat in 2019 due primarily to a $2.6 million decrease in legacy organic costs offset by our two acquisitions, a $404,000 increase related to the IT roadmap initiative started in Q2 2019. Sorry, hand that. A breakout of our SG&A for both the Q and year-to-date are included in the management discussion section of our quarterly report on Form 10Q. And now for year-to-date. Revenues for the year were $136.7 million, down 4.2% from 2019, while gross profit was $37.2 million, down 5.4%. The overall decrease in revenues was fueled by a 27% decline in real estate, offset by $16.7 million from our two recent acquisitions. Our gross profit percent of 27.2% was down slightly from 19, impacted by a 24% decline in per placements, the decline in real estate. We incurred a net loss for the year due to the impairment. That was 3.3 million, or minus 32 cents per diluted share, compared with net income of 6.3 million, or 61 cents per diluted share, in 19. Our effective tax rate was 22.8% for both periods. Net income before the impact of the impairment was $2.1 million. Adjusted EBITDA was $8.5 million versus $12 million in 2019, and adjusted earnings per share decreased at $0.51 versus $0.76 in 2019. Our SG&A expenses for the year increased $2.7 million, primarily due to our acquisitions, an $863,000 increase in the IT roadmap initiative, and $532,000 increase in transaction fees, offset by a $3 million decrease in legacy or organic costs. Although we have delayed new initiatives on our IT roadmap, we continue to spend on projects that were active, as we feel they are critical to our success in the short term, and Beth will comment on those later. Cash generated from operations increased $5.9 million over 2019, primarily as a result of increased receivable collections offset with decreased sales. Day sales outstanding at the end of June was 51 days versus 50 at March. Please note that our balance sheet remains strong. Total senior debt was just under $40 million, and we had $24.6 million available under our revolver. Our debt to pro forma adjusted trailing 12-month EBITDA at the end of Q2 was 1.72. And finally, we entered into a three-year fixed rate swap on an initial notional amount of $25 million of our debt in early June. This completes my financial review. Before I turn the call over to Beth, I'd like to take a moment to welcome our two newest board members announced recently. Our CEO, Beth Garvey, and Cynthia St. Marshall, the current CEO of the Dallas Mavericks, have joined the board. Supporting diversity and inclusion throughout BGF is essential to our board, and these two appointments are significant from both the governance and corporate culture perspective. And, of course, I don't want to miss the opportunity to congratulate Beth on recently being named a finalist in the EY Entrepreneur of the Year 2020 Award for the Southwest region. This is the world's most prestigious awards program for entrepreneurs. We are proud of you, Beth, and we're looking forward to the contributions you and CENT bring to the BGF quadrant. And now I'll turn the call over to Beth.