BGSF, INC.

Previous wording

On May 8, 2024, we announced that our Board of Directors has initiated a process to evaluate potential strategic alternatives and engaged financial advisors in an endeavor to maximize shareholder value (“Strategic alternatives review”). During December 2024, we announced a cost restructuring plan as part of our strategic review process.

Current wording

On May 8, 2024, we announced that our Board of Directors had initiated a process to evaluate potential strategic alternatives and engaged financial advisors in an endeavor to maximize shareholder value (“Strategic alternatives review”). During December 2024, we announced a cost restructuring plan as part of our strategic review process. On June 14, 2025, we entered into an Equity Purchase Agreement with INSPYR Solutions Intermediate, LLC, pursuant to which we will sell substantially all of our outstanding equity interest pertaining to the Professional segment. The Professional segment financial results for periods prior to the sale have been reflected as discontinued operations in our Unaudited Consolidated Financial Statements, see “Note 3 - Discontinued Operations.”

Previous wording

Our Property Management segment provides office and maintenance field talent in 38 states and D.C., to property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations.

Current wording

We currently operate primarily within the United States of America in our Property Management segment. Our Property Management segment provides office and maintenance field talent in 38 states and D.C., to property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations.

Previous wording

The following tables summarize key components of our results for the periods indicated, both in dollars and as a percentage of revenues, and have been derived from our unaudited consolidated financial statements.

Current wording

The following tables summarize key components of our results from continuing operations for the periods indicated, both in dollars and as a percentage of revenues, and have been derived from our unaudited consolidated financial statements.

Previous wording

Property Management Revenues: Property Management revenues decreased approximately $3.6 million (14.9%). The decrease was primarily due to a reduction in billed hours, which was driven by a combination of lower demand from cost pressures at the property management companies and increased competition in certain markets offset by higher permanent placement business.

Current wording

Revenues: Revenues decreased approximately $2.2 million (8.6%). The decrease was primarily due to a 9.7% reduction in billed hours, which was driven by a combination of lower demand from cost pressures at the property management companies and increased competition in certain markets with partial offsets by higher permanent placement business, average bill rate, and multi-family property owners.

Previous wording

Selling, General, and Administrative Expenses: Selling, general, and administrative expenses decreased $2.1 million (10.0%), primarily due to expense reduction and cost control efforts enacted primarily in December 2024 and to smaller effect, with additional reduction measures taken March of 2025 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 increased $1.8 million (17.1%), primarily due to additional costs related to the Strategic alternatives review. The components of selling, general, and administrative expense are detailed in the following table:

Previous wording

Depreciation and Amortization: Depreciation and amortization charges decreased $0.3 million (16.7%) primarily due to lower amortization of intangible assets related to the 2022 Horn Solutions acquisition that were fully amortized during 2024.

Current wording

Depreciation and Amortization: Depreciation and amortization charges decreased $0.1 million (22.0%) primarily due to lower amortization of intangible assets for computer software.

Previous wording

Income Tax Benefit: Income tax benefit increased $0.1 million primarily due to lower equity related discrete tax items.

Current wording

Income Tax Benefit: Income tax benefit increased $0.9 million primarily due to increased net loss before taxes and a higher effective tax rate in Fiscal 2025.

Previous wording

Property Management Gross Profit: Property Management gross profit decreased approximately $1.7 million (19.1%), The decrease was primarily due to to a reduction in revenue, which was driven by a combination of increased competition in certain markets and lower demand from cost pressures at the property management companies offset by higher permanent placement business, which has no cost of service.

Current wording

Revenues: Revenues decreased approximately $5.9 million (11.7%). The decrease was primarily due to a 12.5% reduction in billed hours, which was driven by a combination of lower demand from cost pressures at the property management companies and increased competition in certain markets with partial offsets by higher permanent placement business, average bill rate, and multi-family property owners.

Previous wording

We define “Adjusted EBITDA” as earnings before interest expense, income taxes, depreciation and amortization expense, impairment losses, costs associated with the Strategic alternatives review, transaction fees, software as a service costs, 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 equipment 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, costs associated with the Strategic alternatives review, software as a service costs, 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 equipment 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.

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, provision for credit losses, and the effect of working capital changes. The primary drivers of cash inflows and outflows are accounts receivable and accounts payable.

Current wording

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

Previous wording

During Fiscal 2025, net cash provided by operating activities was $1.1 million, a decrease of $6.3 million compared with net cash provided by operating activities of $7.4 million for Fiscal 2024. The decrease is primarily due to decreased receipts on accounts receivable and decreased payments on accounts payable.

Current wording

During Fiscal 2025, net cash provided by operating activities was $3.0 million, a decrease of $11.6 million compared with net cash provided by operating activities of $14.6 million for Fiscal 2024. The decrease is primarily due to decreased receipts on accounts receivable and partially offset by decreased payments on accrued payroll and expenses.

Previous wording

Cash used in investing activities consists primarily of capital expenditures.

Current wording

Cash used in investing activities from continuing operations consists primarily of capital expenditures.

Previous wording

In Fiscal 2025, capital expenditure were flat. In Fiscal 2024, we made capital expenditures of $0.5 million primarily related to the continued IT improvements.

Current wording

In Fiscal 2025, capital expenditure were minimal. In Fiscal 2024, we made capital expenditures of $0.9 million primarily related to the continued information technology improvements.

Previous wording

Cash flows from financing activities consisted principally of borrowings and payments under our credit agreement and payment of dividends.

Current wording

Cash flows from financing activities from continuing operations consisted principally of borrowings and payments under our credit agreement and payment of dividends.

Previous wording

For Fiscal 2025, we borrowed $1.6 million on our Revolving Facility for increased operating needs and we paid down $1.0 million on the Term Loan. For Fiscal 2024, we reduced our Revolving Facility $4.9 million for decreased operating needs and we disbursed $1.6 million in cash dividends on our common stock.

Current wording

For Fiscal 2025, we borrowed $1.6 million on our Revolving Facility for increased operating needs and we paid down $1.9 million on the Term Loan. For Fiscal 2024, we reduced our Revolving Facility $10.8 million, we disbursed $1.6 million in cash dividends on our common stock, and we paid down $0.9 million on the Term Loan.

Previous 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.

Current wording

On July 16, 2019, we entered into a 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

We were not in compliance with the foregoing financial covenants and certain affirmative covenants as of the fiscal quarters ended December 29, 2024 and March 30, 2025. On March 13, 2025, we entered into a Waiver and Second Amendment to Restated Agreement (the “Second Amendment”) pursuant to which, among other things, the lenders unanimously waived noncompliance with the foregoing covenants as of December 29, 2024 and March 31, 2025, and certain amendments were made to the Restated Agreement including, but not limited to, a new definition of Applicable Margin, a reduction of the swing line sublimit to zero, and limiting the aggregate revolving credit borrowings to $8 million. The amendments described in the Second Amendment are effective as of March 13, 2025. Additionally, per the terms of the Second Amendment, we are subject to the satisfaction or waiver of certain conditions described therein relating to, among other things, debt financing and refinancing and our previously announced strategic alternatives review.

Current wording

We were not in compliance with the foregoing financial covenants and certain affirmative covenants as of the quarter ended December 29, 2024, March 30, 2025, and June 29, 2025. On March 13, 2025, we entered into a Waiver and Second Amendment to Restated Agreement (the “Second Amendment”) pursuant to which, among other things, the lenders unanimously waived noncompliance with the foregoing covenants as of December 29, 2024 and March 30, 2025, and certain amendments were made to the Restated Agreement including, but not limited to, a new definition of Applicable Margin, a reduction of the swing line sublimit to zero, and limiting the aggregate revolving credit borrowings to $8.0 million. The amendments described in the Second Amendment are effective as of March 13, 2025 and we incurred nominal fees in debt issuance costs. Additionally, per the terms of the Second Amendment, we are subject to the satisfaction or waiver of certain conditions described therein relating to, among other things, debt financing and refinancing and our previously announced strategic alternatives review.

Previous wording

We anticipate not being in compliance with the foregoing financial covenants and certain affirmative covenants as of the fiscal quarters ending June 29, 2025 and September 28, 2025. The failure to comply with such covenants would result in an event of default which, if not cured or waived, would trigger prepayment obligations. There can be no assurances that any lender will waive any defaults. If we refinance our indebtedness, there can be no assurance that such refinancing would be available or that such refinancing would not have a material adverse effect on our business, financial condition, or results of operations. The terms of any such refinancing could be less favorable and our business, financial condition, and results of operations could be materially adversely affected by increased costs and interest rates. We are actively engaging in the previously announced strategic alternatives review process and actively evaluating equity and debt financing opportunities that may be available.

Current wording

The failure to comply with such covenants would result in an event of default which, if not cured or waived, would trigger prepayment obligations. There can be no assurances that any lender will waive any defaults. If we refinance our indebtedness, there can be no assurance that such refinancing would be available or that such refinancing would not have a material adverse effect on our business, financial condition, or results of operations. The terms of any such refinancing could be less favorable and our business, financial condition, and results of operations could be materially adversely affected by increased costs and interest rates. We are actively engaging in the previously announced strategic alternatives review process and actively evaluating equity and debt financing opportunities that may be available.

Previous wording

In conjunction with the EdgeRock acquisition, we entered into a standby letter of credit arrangement, which expired, for purposes of protecting a lessor against default on lease payments. As of December 29, 2024, we had a maximum financial exposure from this standby letter of credit totaling $0.1 million, all of which was considered usage against our Revolving Facility.

Current wording

In conjunction with the EdgeRock acquisition, we entered into a standby letter of credit arrangement, which expired, for purposes of protecting a lessor against default on lease payments. As of December 29, 2024, we had a maximum financial exposure from this standby letter of credit totaling $0.1 million that ended in 2025, all of which was considered usage against our Revolving Facility. The Company has no history of default, nor is it aware of circumstances that would require it to perform under any of these arrangements and believes that the resolution of any disputes thereunder that might arise in the future would not materially affect the Company’s consolidated financial statements. Accordingly, no liability has been recorded in respect to these arrangements as of June 29, 2025.

Previous wording

We derive our revenues from operations in our Property Management and Professional segments. We provide workforce solutions, placement services, and managed services. Revenues are recognized when promised workforce solutions are delivered to client partners, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. We recognize revenue through the following types of services: workforce solutions, contingent placements, and managed services.

Current wording

We derive our revenues from continuing operations by providing workforce solutions and placement services. Revenues are recognized when promised services are delivered to client partners, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. We recognize revenue through the following types of services: workforce solutions and contingent placements.

Previous wording

We hold intangible assets with finite lives. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, ranging from three to ten years, based on a pattern in which the economic benefit of the respective intangible asset is realized. We develop and implement software modifications to our IT infrastructure with direct internal payroll costs and external costs capitalized. Minor upgrades and enhancements to software systems are expensed in the period incurred as software maintenance and training costs.

Current wording

We hold intangible assets with finite lives. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, ranging from three to ten years, based on a pattern in which the economic benefit of the respective intangible asset is realized. We develop and implement software modifications to our information technology infrastructure with direct internal payroll costs and external costs capitalized. Minor upgrades and enhancements to software systems are expensed in the period incurred as software maintenance and training costs.