BGSF, Inc.

Good morning. Welcome to the BGSS Inc. Fiscal 2023 Second Quarter Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. As a reminder, this conference call is being recorded. Now I will turn the call over to Sandy Martin, three-part advisors. Sandy, please go ahead.

Thank you. Good morning and welcome to the BGSF 2023 Second Quarter Earnings Conference Call. With me on the call today are Beth Garvey, Chair, President and Chief Executive Officer, and John Barnett, Chief Financial Officer. After our prepared remarks, there will be a Q&A session. As noted, today's call is being webcast live. A replay will be available later today and archived on the company's investor relations page. Today's discussion will include forward-looking statements, which are based on certain assumptions made by BGSF 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. During the call, management will also reference certain non-GAAP financial measures, which can be useful in evaluating the company's operations related to the financial conditions and results. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered a substitute. Reconciliations of GAAP to non-GAAP measures are provided in today's earnings press release. I'll now turn the call over to Beth Garvey.

Beth? Thank you, Sandy, and thank you, everyone, for joining us today for our second quarter earnings discussion. Our second quarter 2023 results reflect meaningful progress on our financial and operational initiatives. I want to thank the BGSF team for their tremendous contributions that supported our solid growth and progress, in higher revenue, profitability, and cash flow generation in the second quarter. We reported total revenues of $81 million, which reflected increases in both revenue and adjusted EPS of approximately 9% versus the year-ago quarter. Adjusted EBITDA increased almost 39% to $7.5 million over last year's quarter, which represented an adjusted EBITDA margin of 9.3%. Notwithstanding industry-wide headwinds and headlines in the sector last quarter, we performed well and achieved results that met or exceeded our expectations. We will discuss progress on our operational initiatives in a few moments. Second quarter professional segment results included 13 weeks of Horn Solutions acquired in December of last year and 10 weeks of Arroyo Consulting acquired in April of this year. Both of these acquisitions added to BGSF's high-value consulting businesses and strengthened our go-to-market value delivery proposition. The Arroyo acquisition also adds global IT resources and capabilities which is in demand from current clients and provides geographic resources from some of the best IT talent in the industry. As is typical in times of economic uncertainty, we are seeing that companies are reducing discretionary spend and capital spending by delaying or extending project timelines. On the contract side, we also are seeing elongated hiring cycles. As we look at our business today, I believe we are benefiting from the strategic transformation of the company that we started over five years ago. We have been focused on building high-end specialized consulting services through highly strategic acquisitions of professional and IT consulting, managed solutions, as well as real estate and property management workforce solutions. As part of this transformation, we sold our lower margin light industrial business last year that was more difficult operationally to manage than our other businesses. This important divestiture allowed us to transform the business from a line staffing company to a high value specialized professional consulting company with managed services and unique workforce solutions. I believe this strategic transformation at BGSF positioned us to respond well to the acceleration and growth of cloud computing and migrations. These projects have proven to be remarkably resilient. The pandemic fast tracked everyone's desire to move to the cloud and to respond quickly to work from home and hybrid models and to allow companies to save money, become more agile and drive innovation. Also, our specialized practices that support ERP software systems involve our teams in the build-out of important lifecycle projects and implementations for our clients. We continue to invest in the power of our people and technologies and believe that our higher-value, higher-margin consulting, managed services, and professional workforce solutions company will continue to be well-positioned to respond to long-term secular trends driving collaboration and differentiated service offerings. On the real estate property management side, we offer valuable training solutions, state-of-the-art technology, and market innovations for growing multifamily apartment industry across the country. We like the strength of our diversified markets and expect our strategic investments and growth initiatives will continue to benefit us in the second half of 2023 and beyond. Let me briefly touch on recent industry dynamics that are impacting the marketplace and how our teams are winning and differentiating themselves with unique offerings. In property management, we are seeing regional differences on rental pricing and occupancy rates. Our diversified platform benefiting from its geographic footprint across the United States positions us to hedge against changing market dynamics. In addition, we are seeing a trend back to normal seasonality on apartment turnovers. Our efforts toward innovation and technology gives us a distinct competitive advantage when it comes to partnering with our clients. especially surrounding our maintenance technician training solutions that we have rolled out to our teams across the country. This training tool has an AI component that allows apartment maintenance personnel in the field to access real-time expert solutions from their mobile device. This is just one example of how we're using technology to drive higher value services and solutions to our clients by providing unique offerings in the marketplace. On the professional side, the consulting and managed solutions backdrop has continued to evolve in 2023. Company leaders are making near-term decisions to delay or defer discretionary projects. However, we are not seeing project cancellations. All that said, we feel BGSF is well positioned and prepared for the remainder of 2023. We are especially benefiting from the additions of both Horn and Arroyo as they provide additional strategic value add-ons to our full product offerings. As I mentioned, we continue to see solid demand for ERP and cloud migration services, and importantly, we have consulting and managed solution specialties and resources in top enterprise-wide technologies that include SAP, Workday, PeopleSoft, ServiceNow, just to name a few. We are also seeing continued demand for nearshoring and offshoring projects related to software development and AI assignments. In summary, our higher value specialized solutions and offerings in both segments are ready to serve our clients' needs, which give us confidence to execute our initiatives this year by continuing to grow revenues, improve profitability, and generate incremental cash flow from our operations. With that said, I'll turn the call over to John.