BGSF INC

Previous wording

Property Management Revenues: Property Management revenues decreased approximately $3.9 million (13.6%). The decrease was primarily due to a decrease in billed hours.

Current wording

Property Management Revenues: Property Management revenues decreased approximately $5.4 million (17.2%). The decrease was primarily due to a reduction in billed hours, which is driven by a combination of increased competition in certain markets and lower demand from cost pressures at the property management companies.

Previous wording

Property Management Gross Profit: Property Management gross profit decreased approximately $2.0 million (17.7%), primarily due to a decrease in total revenues and lower permanent placement business, which has no cost of service.

Current wording

Property Management Gross Profit: Property Management gross profit decreased approximately $5.1 million (21.1%), primarily due to a decrease in total revenues. The gross profit decline was driven by increased competition and lower permanent placement business, which has no cost of service.

Previous wording

Depreciation and Amortization: Depreciation and amortization charges increased approximately $0.3 million (14.2%) primarily due to amortization of intangible assets related to the 2023 Arroyo Consulting acquisition.

Current wording

Depreciation and Amortization: Depreciation and amortization charges increased approximately $0.3 million (7.9%) primarily due to amortization of intangible assets related to the 2023 Arroyo Consulting acquisition.

Previous wording

Income Tax Benefit: Income tax benefit decreased $5.4 million, primarily due to a higher taxable loss in 2023 related to the trade name impairment.

Current wording

Income Tax Benefit (Expense): Income tax benefit decreased $4.3 million (94.5%) primarily due to a higher taxable loss in 2023 related to the trade name impairment.

Previous wording

We define “Adjusted EBITDA” as earnings before interest expense, income taxes, depreciation and amortization expense, impairment losses, transaction fees, and certain non-cash expenses such as share-based compensation expense. Omitting interest, taxes, and the other items provides a financial measure that facilitates comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness and tax structures that other companies have are different from ours, we omit these amounts to facilitate investors’ ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of property and intangible assets. We also believe that investors, analysts and other interested parties view our ability to generate Adjusted EBITDA as an important measure of our operating performance and that of other companies in our industry. Adjusted EBITDA should not be considered as an alternative to net loss from operations for the periods indicated as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Current wording

We define “Adjusted EBITDA” as earnings before interest expense, income taxes, depreciation and amortization expense, impairment losses, costs associated with the evaluation of potential strategic alternatives (“Strategic alternatives review”), transaction fees, and certain non-cash expenses such as share-based compensation expense. Omitting interest, taxes, and the other items provides a financial measure that facilitates comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness and tax structures that other companies have are different from ours, we omit these amounts to facilitate investors’ ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of property and intangible assets. We also believe that investors, analysts and other interested parties view our ability to generate Adjusted EBITDA as an important measure of our operating performance and that of other companies in our industry. Adjusted EBITDA should not be considered as an alternative to net (loss) income from operations for the periods indicated as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Previous wording

The use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from, or as an alternative to, GAAP measures such as net loss. Adjusted EBITDA is not a measure of liquidity under GAAP or otherwise, and is not an alternative to cash flow from operating activities. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from that term or by unusual or non-recurring items. The limitations of Adjusted EBITDA include: (i) it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) it does not reflect changes in, or cash requirements for, our working capital needs; (iii) it does not reflect income tax payments we may be required to make; and (iv) it does not reflect the cash requirements necessary to service interest or principal payments associated with indebtedness.

Current wording

The use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from, or as an alternative to, GAAP measures such as net (loss) income. Adjusted EBITDA is not a measure of liquidity under GAAP or otherwise, and is not an alternative to cash flow from operating activities. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from that term or by unusual or non-recurring items. The limitations of Adjusted EBITDA include: (i) it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) it does not reflect changes in, or cash requirements for, our working capital needs; (iii) it does not reflect income tax payments we may be required to make; and (iv) it does not reflect the cash requirements necessary to service interest or principal payments associated with indebtedness.

Previous wording

To properly and prudently evaluate our business, we encourage you to review our unaudited consolidated financial statements included elsewhere in this report and the reconciliation to Adjusted EBITDA from net loss, the most directly comparable financial measure presented in accordance with GAAP, set forth in the following table. All of the items included in the reconciliation from net loss to Adjusted EBITDA are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect operating performance. In the case of the other items that management does not consider in assessing our on-going operating performance, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact may not reflect ongoing operating performance.

Current wording

To properly and prudently evaluate our business, we encourage you to review our unaudited consolidated financial statements included elsewhere in this report and the reconciliation to Adjusted EBITDA from net (loss) income, the most directly comparable financial measure presented in accordance with GAAP, set forth in the following table. All of the items included in the reconciliation from net (loss) income to Adjusted EBITDA are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect operating performance. In the case of the other items that management does not consider in assessing our on-going operating performance, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact may not reflect ongoing operating performance.

Previous wording

Our primary sources of liquidity are cash generated from operations and borrowings under our amended and restated credit agreement with BMO, that provides for a revolving credit facility maturing March 12, 2028 (the “Revolving Facility”). Our primary uses of cash are payments to field talent, team members, related payroll liabilities, operating expenses, capital expenditures, cash interest, cash taxes, dividends and contingent consideration and debt payments. We believe that the cash generated from operations, together with the borrowing availability under our Revolving Facility, will be sufficient to meet our normal working capital needs for at least the next twelve months, including investments made, and expenses incurred, in connection with opening new markets throughout the next year. Our ability to continue to fund these items may be affected by general economic, competitive and other factors, many of which are outside of our control. If our future cash flow from operations and other capital resources are insufficient to fund our liquidity needs, we may be forced to obtain additional debt or equity capital or refinance all or a portion of our debt.

Current wording

Our primary sources of liquidity are cash generated from operations and borrowings under our amended and restated credit agreement with BMO, that provides for a revolving credit facility maturing March 12, 2028 (the “Revolving Facility”). Our primary uses of cash are payments to field talent, team members, related payroll liabilities, operating expenses, capital expenditures, cash interest, cash taxes, contingent consideration, and debt payments. We believe that the cash generated from operations, together with the borrowing availability under our Revolving Facility, will be sufficient to meet our normal working capital needs for at least the next twelve months, including investments made, and expenses incurred, in connection with opening new markets throughout the next year. Our ability to continue to fund these items may be affected by general economic, competitive and other factors, many of which are outside of our control. If our future cash flow from operations and other capital resources are insufficient to fund our liquidity needs, we may be forced to obtain additional debt or equity capital or refinance all or a portion of our debt.

Previous wording

The indebtedness under the Credit Agreement with a maturity date of July 16, 2024, had been classified within current liabilities as of December 31, 2023. The Credit Agreement was amended and restated on March 12, 2024. See “Note 8 — Debt” of our our unaudited consolidated financial statements. A summary of our working capital, operating, investing and financing activities are shown in the following table:

Current wording

A summary of our working capital, operating, investing and financing activities are shown in the following table:

Previous wording

Cash provided by operating activities consists of net loss adjusted for non-cash items, including depreciation and amortization, share-based compensation expense, interest expense, impairment losses, and the effect of working capital changes. The primary drivers of cash inflows and outflows are accounts receivable, accrued payroll and expenses, and other current assets.

Current wording

Cash provided by operating activities consists of net (loss) income adjusted for non-cash items, including depreciation and amortization, share-based compensation expense, interest expense, provision for credit losses, impairment losses, and the effect of working capital changes. The primary drivers of cash inflows and outflows are accounts receivable, accrued payroll and expenses, and other current assets.

Previous wording

During Fiscal 2024, net cash provided by operating activities was $7.4 million, an increase of $3.5 million compared with net cash provided by operating activities of $3.9 million for Fiscal 2023. This increase is primarily due to less payments on accrued payroll and expenses, reduced payments on prepaid expenses, offset by the Sentech deferred consideration received on other current assets.

Current wording

During Fiscal 2024, net cash provided by operating activities was $14.7 million, an increase of $2.2 million compared with net cash provided by operating activities of $12.5 million for Fiscal 2023. The increase is primarily due to decreased payments on accrued payroll and expenses, increased payments on accounts receivable, and lower payments in accounts payable.

Previous wording

Cash used in investing activities consists primarily of capital expenditures.

Current wording

Cash used in investing activities consists primarily of cash paid for businesses acquired and capital expenditures.

Previous wording

In Fiscal 2024, we made capital expenditures of $0.5 million primarily related to continued IT improvements. In Fiscal 2023, we made capital expenditures of $0.7 million mainly related to the IT improvement project.

Current wording

In Fiscal 2024, we made capital expenditures of $1.0 million primarily related to continued IT improvements. In Fiscal 2023, we paid $6.8 million for the acquisition of Arroyo Consulting and made capital expenditures of $1.5 million mainly related to the continued IT improvements.

Previous wording

For Fiscal 2024, we reduced our Revolving Facility $4.9 million for increased operating needs and we disbursed $1.6 million in cash dividends on our common stock. For Fiscal 2023, we disbursed $1.6 million in cash dividends on our common stock, we paid down $1.0 million on the Term Loan, and reduced our Revolving Facility $0.6 million.

Current wording

For Fiscal 2024, we reduced our Revolving Facility $10.8 million, and we disbursed $1.6 million in cash dividends on our common stock, and we paid down $0.9 million on the Term Loan. For Fiscal 2023, we disbursed $3.2 million in cash dividends on our common stock, we paid down $2.0 million on the Term Loan, we made payments of $1.1 million of contingent consideration related to the Momentum acquisition, and borrowed on our Revolving Facility $2.4 million for increased operating needs.