BGSF INC

Previous wording

Our Property Management segment provides office and maintenance field talent in 37 states and D.C., to property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations.

Current wording

Our Property Management segment provides office and maintenance field talent in 39 states and D.C., to property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations.

Previous 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.

Current wording

Property Management Revenues: Property Management revenues decreased approximately $6.2 million (17.1%). The decrease was primarily due to a reduction in billed hours, which was driven by a combination of increased competition in certain markets and lower demand from cost pressures at the property management companies.

Previous wording

Total Company gross profit decreased approximately $5.9 million (20.1%) due to reduced customer demand in both segments. As a percentage of revenue, gross profit decreased to 34.7% from 36.6%, primarily due to the margin decline in Property Management.

Current wording

Total Company gross profit decreased approximately $5.7 million (18.8%) due to reduced customer demand in both segments. As a percentage of revenue, gross profit decreased to 34.2% from 35.9%, primarily due to the margin decline in Property Management.

Previous wording

Property Management Gross Profit: Property Management gross profit decreased approximately $3.1 million (24.2%), primarily due to a decrease in total revenue. The gross profit decline was driven by increased competition and lower permanent placement business, which has no cost of service.

Current wording

Property Management Gross Profit: Property Management gross profit decreased approximately $3.5 million (24.7%), The decrease was primarily due to to a reduction in revenue, which was driven by a combination of increased competition in certain markets, lower demand from cost pressures at the property management companies and lower permanent placement business, which has no cost of service.

Previous wording

Selling, General and Administrative Expenses: Selling, general and administrative expenses decreased $1.0 million (4.5%), primarily due to expense reduction and cost control efforts in response to the decline in revenues. The components of selling, general and administrative expense are detailed in the following table:

Current wording

Selling, General and Administrative Expenses: Selling, general and administrative expenses decreased $0.7 million (3.1%), primarily due to expense reduction and cost control efforts in response to the decline in revenues. The components of selling, general and administrative expense are detailed in the following table:

Previous 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.

Current wording

Depreciation and Amortization: Depreciation and amortization charges decreased $0.1 million (6.9%) primarily due to lower amortization of intangible assets related to the 2023 Arroyo Consulting acquisition.

Previous wording

Interest Expense, net: Interest expense decreased $0.4 million (15.0%) primarily due primarily due to reduced accretion in 2024 on contingent consideration associated with Arroyo Consulting and the lower average balance on the Revolving Facility.

Current wording

Interest Expense, net: Interest expense, net decreased $0.5 million (26.9%) primarily due to lower average balance on the Revolving Facility and reduced accretion in 2024 on contingent consideration associated with the 2023 Arroyo Consulting acquisition.

Previous wording

Income Tax Benefit (Expense): Income tax expense decreased $1.2 million (123.2%) primarily due to lower pre-tax operating results and lower state tax expense.

Current wording

Income Tax Expense: Income tax expense decreased $0.9 million (94.6%) primarily due to lower pre-tax operating results and lower state tax expense.

Previous wording

Twenty-six Week Fiscal Period Ended June 30, 2024 (“Fiscal 2024”) Compared with Twenty-six Week Fiscal Period Ended July 2, 2023 (“Fiscal 2023”)

Current wording

Thirty-nine Week Fiscal Period Ended September 29, 2024 (“Fiscal 2024”) Compared with Thirty-nine Week Fiscal Period Ended October 1, 2023 (“Fiscal 2023”)

Previous wording

Property Management Revenues: Property Management revenues decreased approximately $9.2 million (15.5%). 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.

Current wording

Property Management Revenues: Property Management revenues decreased approximately $15.4 million (16.1%). The decrease was primarily due to a reduction in billed hours, which was driven by a combination of increased competition in certain markets and lower demand from cost pressures at the property management companies.

Previous wording

Professional Revenues: Professional revenues decreased approximately $10.0 million (10.4%). The April 2023 Arroyo Consulting acquisition contributed $7.1 million of incremental revenues. The remaining Professional segment declined $17.1 million (18.5%) primarily due to a decrease in billed hours as clients continued to delay projects or expand project timelines using less field talent.

Current wording

Professional Revenues: Professional revenues decreased approximately $16.1 million (11.2%). The 2023 Arroyo Consulting acquisition contributed $6.8 million of incremental revenues with twenty-three weeks in prior period compared to thirty-nine weeks in current period. The remaining Professional segment declined $22.9 million (17.0%) primarily due to a decrease in billed hours in the Finance and Accounting division, as clients continued to delay projects or expand project timelines using less field talent in the IT division. The Professional segment decrease was partially offset by growth in Managed Solutions.

Previous wording

Total Company gross profit decreased approximately $9.3 million (16.5%) due to reduced customer demand in both segments. As a percentage of revenue, gross profit has decreased to 34.4% from 36.1%, primarily due to the margin decline in Property Management.

Current wording

Total Company gross profit decreased approximately $14.9 million (17.3%) due to reduced customer demand in both segments. As a percentage of revenue, gross profit has decreased to 34.3% from 36.0%, primarily due to the margin decline in Property Management.

Previous 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.

Current wording

Property Management Gross Profit: Property Management gross profit decreased approximately $8.6 million (22.4%). The decrease was primarily due to to a reduction in revenue, which was driven by a combination of increased competition in certain markets, lower demand from cost pressures at the property management companies and lower permanent placement business, which has no cost of service.

Previous wording

Professional Gross Profit: Professional gross profit decreased approximately $4.2 million (13.1%). The April 2023 Arroyo Consulting acquisition contributed $2.3 million of incremental gross profit, while the remaining Professional business decreased $6.5 million (21.1%) primarily due to lower billed hours.

Current wording

Professional Gross Profit: Professional gross profit decreased approximately $6.4 million (13.3%). The April 2023 Arroyo Consulting acquisition contributed $2.3 million of incremental gross profit with twenty-three weeks in prior period compared to thirty-nine weeks in current period., while the remaining Professional business decreased $8.7 million (19.5%) primarily due to lower revenue. The Professional segment decrease was partially offset by growth in Managed Solutions.

Previous wording

Selling, General and Administrative Expenses: Selling, general and administrative expenses decreased $3.2 million (7.0%) primarily due to expense reduction and cost control efforts in response to the decline in revenues. The components of selling, general and administrative expense are detailed in the following table:

Current wording

Selling, General and Administrative Expenses: Selling, general and administrative expenses decreased $3.9 million (5.7%) primarily due to expense reduction and cost control efforts in response to the decline in revenues. The components of selling, general and administrative expense are detailed in the following table:

Previous wording

Depreciation and Amortization: Depreciation and amortization charges increased $0.1 million (2.1%) primarily from amortized intangible assets related to internally used software.

Current wording

Depreciation and Amortization: Depreciation and amortization charges increased approximately $0.2 million (2.7%) primarily from amortized intangible assets related to internally developed software.

Previous wording

Interest Expense, net: Interest expense, net decreased $0.4 million (29.4%) primarily due to reduced accretion in 2024 on contingent consideration associated with Arroyo Consulting and the lower average balance on the Revolving Facility.

Current wording

Interest Expense, net: Interest expense decreased $0.9 million (19.6%) primarily due to reduced accretion in 2024 on contingent consideration associated with Arroyo Consulting and the lower average balance on the Revolving Facility.

Previous 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.

Current wording

Income Tax Benefit: Income tax benefit decreased $3.4 million (94.6%) primarily due to a higher taxable loss in 2023 related to the trade name impairment.

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, 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 first amendment under our amended and restated credit agreement with BMO, that provides for a revolving credit facility maturing December 31, 2026 (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

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.

Current wording

During Fiscal 2024, net cash provided by operating activities was $21.2 million, an increase of $6.2 million compared with net cash provided by operating activities of $15.1 million for Fiscal 2023. The increase is primarily due to increased payments on accounts receivable, decreased payments on accrued payroll and expenses, and within other current assets there were payments made in 2024 related to the 2023 Arroyo Consulting acquisition which were partially offset by payments received in 2023 related to sale of the Light Industrial segment.

Previous 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.

Current wording

In Fiscal 2024, we made capital expenditures of $1.4 million primarily related to continued IT improvements. In Fiscal 2023, we paid $6.8 million for the acquisition of Arroyo Consulting and we made capital expenditures of $2.0 million mainly related to the continued IT improvements.

Previous 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.

Current wording

For Fiscal 2024, we reduced our Revolving Facility $17.2 million, we made a payment of $4.3 million of contingent consideration related to the Arroyo Consulting Acquisition, 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 $4.9 million in cash dividends on our common stock, we paid down $5.0 million on the Term Loan, we made payments of $1.1 million of contingent consideration related to the Momentum acquisition, and borrowed $4.3 million on our Revolving Facility for increased operating needs.

Previous wording

On July 16, 2019, the Company entered into a Credit Agreement (the “Credit Agreement”), which would have matured on July 16, 2024, led by BMO, as lead administrative agent, lender, letters of credit issuer, and swing line lender. The Company entered into four amendments from August 18, 2022 through May 19, 2023, which changed the interest rate component from LIBOR to the Secured Overnight Financing Rate (“SOFR”), exercised the option to borrow $40.0 million, required 2.5% of the original principal balance of the new term loan, permitted a foreign entity acquisition, modified the distributions terms, and increased a revolving credit facility (the "Revolving Facility") by $6.0 million.

Current wording

On July 16, 2019, we entered into a Credit Agreement (the “Credit Agreement”), which would have matured on July 16, 2024, led by BMO, as lead administrative agent, lender, letters of credit issuer, and swing line lender. We entered into four amendments from August 18, 2022 through May 19, 2023, which changed the interest rate component from LIBOR to the Secured Overnight Financing Rate (“SOFR”), exercised the option to borrow $40.0 million, required 2.5% of the original principal balance of the new term loan, permitted a foreign entity acquisition, modified the distributions terms, and increased a revolving credit facility (the "Revolving Facility") by $6.0 million.

Previous wording

On March 12, 2024, the Credit Agreement was amended and restated through our entry into an Amended and Restated Credit Agreement, maturing March 12, 2028, led by BMO as administrative agent, letter of credit issuer, and swing line lender (the “Restated Agreement”). The Restated Agreement provides for a revolving credit facility (the "Revolving Facility") permitting us to borrow funds from time to time in an aggregate amount up to $40 million. The Restated Agreement also provides for a term loan commitment, permitting us to borrow funds from time to time (the “Term Loan”) and for a delayed draw term loan commitment of $4.3 million. We are required to repay the Term Loan in quarterly principal installments equal to 2.5% of the aggregate principal balance. The Restated Agreement provides for interest either at the Base Rate plus the Applicable Margin, or the Adjusted Term SOFR plus the Applicable Margin (as defined in the Restated Agreement). Our obligations are secured by a first priority security interest in substantially all tangible and intangible property of ours. The Restated Agreement provides for a maximum Leverage Ratio and a minimum Fixed Charge Coverage Ratio (as defined in the Restated Amendment). We will pay an unused commitment fee on the daily average unused amount of Revolving Facility. We were in compliance with the affirmative and negative covenants as of June 30, 2024.

Current wording

On November 6, 2024, we entered into the First Amendment to Amended and Restated Credit Agreement, maturing December 31, 2026, led by BMO as administrative agent, letter of credit issuer, and swing line lender (the “First Credit Amendment”). The availability on the Revolving Facility, which permits us to borrow funds from time to time, was reduced in an aggregate amount up to $20 million. We are required to repay the Term Loan in quarterly principal installments equal to 2.5% of the aggregate principal balance. The First Credit Amendment provides for interest either at the Base Rate plus the Applicable Margin, or the Adjusted Term SOFR plus the Applicable Margin (as defined in the First Credit Amendment). Our obligations are secured by a first priority security interest in substantially all our tangible and intangible property. The First Credit Amendment provides for an amended financial covenants with a maximum Leverage Ratio, a minimum Fixed Charge Coverage Ratio, and a minimum EBITDA (as such terms are defined in the First Credit Amendment). We will pay an unused commitment fee on the daily average unused amount of Revolving Facility. We were in compliance with the affirmative and negative covenants as of September 29, 2024.