BGSF, INC.

Previous 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.”

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 sold substantially all of our outstanding equity interest pertaining to the Professional segment on September 8, 2025. 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

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.

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 44 states and D.C., to property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations.

Previous wording

Our business normally experiences seasonal fluctuations, primarily in the Property Management segment. Our quarterly operating results are affected by the number of billing days in a quarter, as well as the seasonality of our client partners’ business. Demand for our Property Management workforce solutions typically increase in the second quarter and is highest during the third quarter of the year due to the increased turns in multifamily units during the summer months when schools are not in session. Overall first quarter demand can be affected by adverse weather conditions in the winter months. In addition, our cost of services typically increases in the first quarter primarily due to the reset of payroll taxes.

Current wording

Our business normally experiences seasonal fluctuations. Our quarterly operating results are affected by the number of billing days in a quarter, as well as the seasonality of our client partners’ business. Demand for our Property Management workforce solutions typically increase in the second quarter and is highest during the third quarter of the year due to the increased turns in multifamily units during the summer months when schools are not in session. Overall first quarter demand can be affected by adverse weather conditions in the winter months. In addition, our cost of services typically increases in the first quarter primarily due to the reset of payroll taxes.

Previous 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.

Current wording

Revenues: Revenues decreased approximately $2.9 million (9.8%). The decrease was primarily due to a 12.0% reduction in billed hours, which was driven by a combination of lower demand from cost pressures on property owners and property management companies and increased competition in certain markets.

Previous wording

Gross Profit: We determine spread as the difference between bill rate and pay rate. Gross profit decreased approximately $1.2 million (12.4%), which is in line with revenues and a 3% decrease in average spread with a partial offset by higher permanent placement business that have no cost of service.

Current wording

Gross Profit: Gross profit decreased approximately $1.0 million (9.7%), which is in line with revenues with a partial offset by higher permanent placement business that have no cost of service.

Previous 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:

Current wording

Selling, General, and Administrative Expenses: Selling, general, and administrative expenses decreased $1.1 million (10.0%), primarily due to reduced compensation costs on less headcount. The components of selling, general, and administrative expense are detailed in the following table:

Previous wording

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

Current wording

Depreciation and Amortization: Depreciation and amortization charges increased $0.5 million (145.2%) primarily due to higher amortization of intangible assets for computer software.

Previous wording

Interest Expense, net: Interest expense, net increased $0.7 million 65.5% primarily from the adjustment of amortization of debt issuance costs on the May 2025 Waiver and Amendment with BMO Bank, N.A. (“BMO”).

Current wording

Interest Expense, net: Interest expense, net increased $0.3 million (28.5%) primarily from the adjustment of amortization of debt issuance costs from paying the BMO Bank, N.A. (“BMO”) balance on the existing Term Loan and Revolving Facility using the proceeds from the sale of BGSF Professional.

Previous wording

Twenty-six Week Fiscal Period Ended June 29, 2025 (“Fiscal 2025”) Compared with Twenty-six Week Fiscal Period Ended June 30, 2024 (“Fiscal 2024”)

Current wording

Thirty-nine Week Fiscal Period Ended September 28, 2025 (“Fiscal 2025”) Compared with Thirty-nine Week Fiscal Period Ended September 29, 2024 (“Fiscal 2024”)

Previous 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.

Current wording

Revenues: Revenues decreased approximately $8.8 million (11.0%). The decrease was primarily due to a 12.3% 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 property owners and permanent placement business, average bill rate, and as well as multi-family property owners.

Previous wording

Gross Profit: We determine spread as the difference between bill rate and pay rate. Gross profit decreased approximately $2.9 million (15.7%) which is in line with revenues and a 3.7% decrease in average spread with a partial offset by higher permanent placement business that have no cost of service.

Current wording

Gross Profit: Gross profit decreased approximately $4.0 million (13.5%) which is in line with revenues with a partial offset by higher permanent placement business that have no cost of service.

Previous wording

Selling, General, and Administrative Expenses: Selling, general, and administrative expenses increased $0.6 million (2.8%) 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:

Current wording

Selling, General, and Administrative Expenses: Selling, general, and administrative expenses decreased $0.6 million (1.7%) primarily due to reduced compensation costs on less headcount. The components of selling, general, and administrative expense are detailed in the following table:

Previous wording

Depreciation and Amortization: Depreciation and amortization charges decreased approximately $0.1 million (12.4%) primarily due to lower amortization of intangible assets for computer software.

Current wording

Depreciation and Amortization: Depreciation and amortization charges increased approximately $0.4 million (40.1%) primarily due to higher amortization of intangible assets for computer software.

Previous wording

Interest Expense, net: Interest expense increased $0.5 million (22.8%) primarily from the adjustment of amortization of debt issuance costs on the May 2025 Waiver and Amendment with BMO.

Current wording

Interest Expense, net: Interest expense increased $1.1 million (30.6%) primarily from the adjustment of amortization of debt issuance costs from the BMO May 2025 Waiver and Amendment and then paying the balance on the existing Term Loan and Revolving Facility using the proceeds from the sale of BGSF Professional.

Previous wording

Income Tax Benefit: Income tax benefit increased $1.0 million primarily due to increased net loss before taxes and a higher effective tax rate in Fiscal 2025 and lower state tax expense.

Current wording

Income Tax Benefit: Income tax benefit increased $0.1 million primarily due to increased net loss before taxes and a higher effective tax rate in Fiscal 2025, which was partially offset by a $1.5 million valuation allowance recorded Fiscal 2025 against certain net deferred tax assets to offset future tax benefits and lower state tax expense.

Previous wording

We present Adjusted EBITDA (defined below), a measure that is not in accordance with accounting principles generally accepted in the United States of America (“non-GAAP”), in this Quarterly Report to provide investors with a supplemental measure of our operating performance. We believe that Adjusted EBITDA is a useful performance measure and is used by us to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under accounting principles generally accepted in the United States of America (“GAAP”) can provide alone. Our board and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in determining achievement of certain compensation programs and plans for our management. In addition, the financial covenants in our credit agreement are based on EBITDA, as defined in the credit agreement.

Current wording

We present Adjusted EBITDA (defined below), a measure that is not in accordance with accounting principles generally accepted in the United States of America (“non-GAAP”), in this Quarterly Report to provide investors with a supplemental measure of our operating performance. We believe that Adjusted EBITDA is a useful performance measure and is used by us to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under accounting principles generally accepted in the United States of America (“GAAP”) can provide alone. Our board and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in determining achievement of certain compensation programs and plans for our management.

Previous 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.

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, as well as certain specific events that management does not consider in assessing our on-going operating performance. 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

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.

Current wording

Our primary sources of liquidity were cash generated from operations and borrowings under our amended and restated credit agreement with BMO, that provided for a revolving credit facility (the “Revolving Facility”). On September 8, 2025, we paid the balance on the existing Term Loan and Revolving Facility using the proceeds from the sale of BGSF Professional. We declared a $2.00 per share special dividend which was paid on September 30, 2025, which means we currently hold approximately $20.0 million in available cash to fund the business. 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, 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 new debt or equity capital.

Previous wording

While we believe we have sufficient liquidity and capital resources to meet our current operating requirements and expansion plans, we may elect to pursue additional growth opportunities within the next year that could require additional debt or equity financing. If we are unable to secure additional financing at favorable terms in order to pursue such additional growth opportunities, our ability to pursue such opportunities could be materially and adversely affected.

Current wording

While we believe we have sufficient liquidity and capital resources to meet our current operating requirements and expansion plans, we may elect to pursue additional growth opportunities within the next year that could require new debt or equity financing. If we are unable to secure new financing at favorable terms in order to pursue such additional growth opportunities, our ability to pursue such opportunities could be materially and adversely affected.

Previous 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.

Current wording

During Fiscal 2025, net cash used in operating activities from continuing operations was $1.8 million, a decrease of $18.2 million compared with net cash provided by operating activities from continuing operations of $16.4 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 from continuing operations consists primarily of capital expenditures.

Current wording

Cash provided by investing activities from continuing operations consists primarily of net proceeds from the sale of BGSF Professional of approximately for $91.5 million, which was partially offset by minimal capital expenditures.

Previous 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.

Current wording

In Fiscal 2025, capital expenditure were minimal. In Fiscal 2024, we made capital expenditures of $1.1 million primarily related to the continued information technology improvements.

Previous 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.

Current wording

For Fiscal 2025, we paid off our Term Loan, Revolving Facility, and Convertible Note of $32.7 million, $10.2 million, and $4.4 million, respectively. For Fiscal 2024, we reduced our Revolving Facility by $17.2 million, we borrowed on a delayed term loan and 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.

Previous 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.

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 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, which would have matured on March 12, 2028, led by BMO as administrative agent, letter of credit issuer, and swing line lender (the “Restated Agreement”). The Restated Agreement provided for a Revolving Facility which permitted us to borrow funds in an aggregate amount up to $40 million. The Restated Agreement also provided for a term loan commitment, which permitted us to borrow funds from time to time (the “Term Loan”). In July 2024, we exercised the option to borrow on a delayed draw term loan of $4.3 million related to payments on the Arroyo Consulting Acquisition's working capital “true up”, hold backs, and year one contingent consideration.

Current wording

On March 12, 2024, the Credit Agreement was amended and restated (the “Restated Agreement”), which provided for a Revolving Facility which permitted us to borrow funds in an aggregate amount up to $40 million. The Restated Agreement also provided for a term loan commitment, which permitted us to borrow funds from time to time (the “Term Loan”). In July 2024, we exercised the option to borrow on a delayed draw term loan of $4.3 million related to payments on the Arroyo Consulting Acquisition's working capital “true up”, hold backs, and year one contingent consideration. On November 6, 2024, we entered into the First Amendment to Restated Agreement, which reduced the availability on the Revolving Facility an aggregate amount up to $20 million.

Previous wording

On November 6, 2024, we entered into the First Amendment to Restated 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.

Current wording

We were required to repay the Term Loan in quarterly principal installments equal to 2.5% of the aggregate principal balance. We paid an unused commitment fee on the daily average unused amount of Revolving Facility. Our obligations were secured by a first priority security interest in substantially all our tangible and intangible property. We obtained the waivers described above for the non compliance with the foregoing financial covenants and certain affirmative covenants as of the quarters ended December 29, 2024, March 30, 2025, and June 29, 2025.

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 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.

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 and no liability had been recorded, all of which was considered usage against our Revolving Facility. On September 8, 2025, we assigned the related lease in the sale of BGSF Professional.