Earnings call transcript: BG Staffing Q4 2024 beats EPS forecast, stock dips

BG Staffing Inc. (BGSF) reported its fourth-quarter 2024 earnings, surpassing EPS expectations but falling short on revenue. Despite the earnings beat, the company’s stock dropped by 2.45% in after-hours trading. The company posted an adjusted loss of $0.06 per share, better than the expected loss of $0.09. However, revenue came in at $64.4 million, below the forecasted $68.5 million. According to InvestingPro data, this continues a concerning trend, with revenue declining 11.12% over the last twelve months.

Key Takeaways

• BG Staffing reported a smaller-than-expected loss of $0.06 per share.
• Revenue fell short of expectations, totaling $64.4 million.
• The stock declined by 2.45% in after-hours trading.
• The company launched a new lead generation engine, contributing $2 million in revenue.
• A restructuring plan is expected to save $7–$9 million in 2025.

Company Performance

BG Staffing’s performance in the fourth quarter of 2024 showed mixed results. While the company succeeded in reducing its expected loss per share, revenue decreased from the same period last year, dropping from $73.6 million to $64.4 million. The company is undergoing significant restructuring, aiming to enhance efficiency and reduce costs.

Financial Highlights

• Revenue: $64.4 million, down from $73.6 million in Q4 2023.
• Adjusted EPS: -$0.06, compared to a forecast of -$0.09.
• Gross Profit: $21.5 million, representing a 33.3% margin.
• Adjusted EBITDA: $1.4 million, 2.2% of revenue.

Earnings vs. Forecast

BG Staffing reported an adjusted EPS of -$0.06, beating the forecast of -$0.09 by 33.3%. Revenue, however, missed expectations, coming in at $64.4 million against a forecast of $68.5 million. This marks a notable discrepancy from previous quarters where revenue met or exceeded projections.

Market Reaction

Following the earnings announcement, BG Staffing’s stock fell by 2.45%, closing at $3.78. The stock’s performance reflects investor concerns about the revenue shortfall and broader market trends. The stock remains near its 52-week low of $3.78, indicating challenges in regaining investor confidence. InvestingPro analysis suggests the stock is currently undervalued, with technical indicators showing oversold conditions. Despite recent challenges, the company maintains a strong 15.46% dividend yield and has consistently paid dividends for 11 consecutive years. For deeper insights into BGSF’s valuation and more exclusive ProTips, visit InvestingPro.

Outlook & Guidance

Looking forward, BG Staffing is focused on revenue growth and profitability. The company anticipates stabilization and potential growth in 2025, driven by continued investment in technology and strategic partnerships. The restructuring plan is expected to yield significant cost savings. The company maintains a healthy financial position with a current ratio of 1.75, indicating sufficient liquidity to meet short-term obligations. BGSF trades at a modest price-to-book ratio of 0.52, suggesting potential value for long-term investors.

Executive Commentary

CEO Beth Garvey emphasized the company’s commitment to growth and efficiency, stating, "We are laser-focused on revenue growth and profitability improvement." Garvey also highlighted the restructuring efforts, saying, "Our restructuring plans have positioned us for greater financial efficiency."

Risks and Challenges

• Revenue shortfall: Continued revenue misses could impact investor confidence.
• Market conditions: Rising operating expenses in the multifamily housing sector pose a challenge.
• Restructuring risks: Execution of cost-saving measures may face hurdles.
• Competitive pressures: Maintaining competitive edge against larger players.
• Economic uncertainty: Broader economic trends could influence performance.

Q&A

During the earnings call, analysts questioned the timeline for realizing restructuring savings and the potential impact on revenue. The company also discussed its AI capabilities and plans for expanding territory mapping, reflecting ongoing strategic initiatives.

Full transcript - BG Staffing Inc (BGSF) Q4 2024:

Conference Operator: Good day, and welcome to the BDSF Inc. Fiscal Year Fourth Quarter twenty twenty four Earnings Conference Call. All participants will be in a listen only mode. After today’s presentation, there will be an opportunity to ask questions. We are opening questions only for analysts today.

Please note this event is being recorded. I would now like to turn the conference over to Ms. Sandy Martin with three part Advisors. Please go ahead, ma’am.

Sandy Martin, Three Part Advisors Representative, Three Part Advisors: Good morning. Thank you for joining us for today’s BGSF’s fourth quarter and full year twenty twenty four earnings conference call. With me on the call today are Beth Garvey, Chair, President and Chief Executive Officer and Keith Schroeder, newly appointed Chief Financial Officer. After our prepared remarks, there will be a Q and 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 at investor.bgsf.com. Today’s discussion will include forward looking statements, which are based on certain assumptions made by the company 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’s 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. Management will refer to non GAAP measures, including adjusted EPS and adjusted EBITDA.

Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. I’ll now turn the call over to Beth Garvey.

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: Thank you, Sandy, and good morning, everyone. I appreciate you joining us today. I’d like to begin by addressing our CFO transition. Yesterday, we announced the appointment of Keith Schroeder as our new Chief Financial Officer. We are thrilled to welcome Keith to BGSF team.

He’s a transformational leader with extensive public company experience, bringing strategic, operational and financial expertise that will strengthen our finance and accounting functions. I also want to express my deep appreciation for John Barnett and his contributions to BGSF during a pivotal and transformative period in our company’s history. On behalf of our leadership team and the Board, I thank John for his dedication and wish him the very best in his future endeavors. Additionally, I’m proud to share that BGSF has once again been recognized as one of the best places for working parents, marking our fifth consecutive year of receiving this award. Moving on to restructuring our strategic updates.

As you recall in December, we announced a significant restructuring plan aimed at reducing costs, improving operational performance and positioning BGSF for profitable growth. We anticipate cash savings of approximately $7,000,000 to $9,000,000 in 2025 from these initiatives, which included headcount reductions and streamlined indirect costs. Furthermore, by shifting our IT middleware maintenance and development to lower cost nearshore support with Arroyo, we expect to save an additional $800,000 annually in capital and cash expenditures. Both of our business segments also underwent an organizational restructure, which we believe will enhance communication, improve operational consistency and drive efficiency gains, ultimately supporting long term growth. Regarding our strategic alternative process, our timeline remains unchanged.

We continue to expect this to be a twelve to eighteen month process from our initial announcement in May of twenty twenty four. While we are making progress, we recognize the economic and political uncertainties have created a more cautious environment. We remain committed to providing updates when we have definitive developments to share. Before Keith provides financial results, I’d like to highlight key trends in our business segments. Professional segment, our monthly IT contract revenue normalized for billing days reached its lowest point in June of twenty twenty four.

However, since then, revenue has stabilized or grown sequentially with positive trends continuing into January and February of twenty twenty five. Fourth quarter revenues were down 3% sequentially reflecting normal holiday seasonality. However, adjusted for billing days, Q4 was approximately up 2% sequentially. Encouragingly, we added 15 new logos in Q4 and saw a 30% increase in signed master service agreements compared to Q4 of twenty twenty three. Increased customer engagement and scope meaning suggests a growing opportunity pipeline, reinforcing our confidence in positive trajectory.

In the Property Management segment, we took decisive action to align direct and indirect operating costs with revenue, improving overall efficiency. The broader multifamily housing sector remains challenged by rising operating expenses and credit challenges. However, we are optimistic about improvement in revenue trends starting in mid-twenty twenty five. Our territory mapping initiative in key markets drove a 23% increase in revenue and remains a top priority for expansion in 2025. We continue to see year over year growth for our exclusive and semi exclusive preferred vendor agreements positioning BGSF as a go to partner for our property management clients.

Now I’ll turn the call over to Keith to walk us through the financial results. Keith?

Keith Schroeder, Chief Financial Officer, BGSF: Thank you, Beth, and good morning, everyone. I’m honored to join BGSF and look forward to meeting many of you as we engage with investors in the coming months. Now turning to our fourth quarter performance, our fourth quarter revenue was $64,400,000 compared to $73,600,000 in Q4 of twenty twenty three, which is reflecting declines in both segments. Our professional segment revenue declines narrowed to 8.7% year over year and 3% sequentially. On a billing day adjusted basis, our professional revenue grew 2% sequentially.

Property Management segment absorbed significant restructuring changes, which while challenging have now aligned the business with forecasted revenue levels. Property management revenue experienced normal seasonality increase in Q3. As we moved into Q4, we experienced a larger than normal seasonality decline. We attribute this decline in part due to actions we took to stop servicing certain credit risk and disruption as we executed the restructuring initiative. Now turning to our profitability and margins.

Our gross profit was $21,500,000 in Q4 with a margin of 33.3% as compared to 34.6% in the prior year. This is largely due to increased competition and economic pressures in property management. SG and A expenses were $20,800,000 compared to $22,000,000 in Q3 and $20,200,000 in Q4 of twenty twenty three. Our adjusted EBITDA was $1,400,000 or 2.2% of revenue versus $3,400,000 or 4.8% in Q3. On a net income basis, we reported a GAAP loss of $0.1 per diluted share and an adjusted loss of $0.06 per diluted share, which includes a $1,400,000 gain resulting from reduction in the expected arroyo earn out.

Our priority remains enhancing profitability in 2025. With that, I’ll hand it back to Beth for closing remarks.

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: Thank you, Keith. As I mentioned last quarter, we launched an advanced lead generation engine in Q3, generating $2,000,000 in revenue in just six months for our property management team. Encouraged by success, we expanded this initiative to our finance accounting teams last month where we are already seeing positive early results. Additionally, we recently restructured our technology and digital marketing teams, launching an operational excellent team focused on streamlining workflows and service delivery, identifying gaps and opportunities and leveraging AI to improve productivity and eliminating repetitive tasks. This initiative reflects our data driven approach to business process optimization, ensuring disciplined execution of repeatable, high impact processes.

Simply put, we are applying our own best practices and consulting expertise to drive operational excellence within BGSF. Looking ahead, we are laser focused on revenue growth and profitability improvement, which will enhance cash flow and shareholder value. Our restructuring plans have positioned us for greater financial efficiency, while our investments in technology, partnership and people continue to drive long term value creation. We’ve built strong relationships with industry leaders across IT, with our SAP, Workday, Oracle, ServiceNow and Microsoft partnerships and property management, large commercial and residential leasing companies. Additionally, our managed solutions, nearshoreoffshore engineering and AI capabilities give us a competitive edge in an evolving market.

I want to thank our team members, our board and our investors for their continued dedication and belief in our strategy. Now, let’s open the call for questions. As a reminder, we have no new updates on the strategic alternative process, so we kindly ask you to refrain from questions on that topic. Operator?

Conference Operator: Thank you. We will now begin the question and answer session. And the first question will come from Howard Halpern with Taglich Partners. Please go ahead, sir.

Howard Halpern, Analyst, Taglich Partners: Good morning, guys. Nice to talk to you, Keith.

Keith Schroeder, Chief Financial Officer, BGSF: Good morning.

Howard Halpern, Analyst, Taglich Partners: So in terms of the restructuring and streamlining, what type of cadence could we expect in terms of seeing that on the SG and A line as we go through the upcoming quarters?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: The majority of those cuts, Howard, took place in December. And so they will start showing up in Q1. The majority of that was in people. So you’ll see in the results for Q1 some of those reductions. Some of the other reductions will take place throughout the year as we eliminate contracts that we were not going to renew and they start to fall off.

Howard Halpern, Analyst, Taglich Partners: Okay. And how is the process, I guess, going with relocating some of what you’ve done doing to your Arroyo operations and how is that process going and how are you seeing that?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: Well, we’re super proud of the abilities that the Royal team has. And as we move, we start to identify things that we can move to the team down there. We will continue to try to streamline costs that are in both our home office efforts and our IT efforts to be able to utilize the team down there.

Howard Halpern, Analyst, Taglich Partners: Okay. And now you talked about I guess you’re still seeing some of the headwinds in

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: Apartment Association and there’s been many, Apartment Association and there’s been many, many conversations that Kelly Brown has had amongst the peers that she deals with there and they are all hopeful for the second half of the year.

Howard Halpern, Analyst, Taglich Partners: Okay. And in the professional services, what kind of feedback are you getting from your customers on what you’re offering the Arroyo? And are you just seeing are you seeing more activity? You talked about, I guess, 15 new logos. Are you making progress with new logos as we as the quarters unfold?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: We are. There are several new logos coming in. There’s a lot of activity in the pipeline. Our teams are having more scope meetings than they’ve had probably in the last eighteen months and which is a good sign as we continue to power forward through the year. I think that there’s some optimism that came out of the election and then there’s been a slight pause on that optimism as we discussed as the tariff conversations continue.

But for the most part, I think there’s a cautious optimism out there.

Howard Halpern, Analyst, Taglich Partners: Okay. Okay, guys. Keep up the good and hard work that you have to get done in this industry. Thank you. Thanks Howard.

Thank you Howard.

Conference Operator: The next question will come from Jeff Martin with Roth Capital. Please go ahead.

Jeff Martin, Analyst, Roth Capital: Thanks. Good morning Jeff and

Howard Halpern, Analyst, Taglich Partners: Keith. Hi, Nikesh.

Nikesh, Analyst: I was wondering if you could characterize on the professional side, the budget debt allocation among your clients. I know a lot of companies have shifted their CapEx towards AI related projects.

Jeff Martin, Analyst, Roth Capital: Wondering if that can benefit you going forward or if that’s been a headwind that you have to overcome?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: You know, AI is one of those tricky things. So I think the great thing about where we are right now is our acquisition of their Royal team. They have those capabilities and so we are having many conversations with clients in regards to AI tools that we can offer. And I think that that’s it’s interesting to see how our clients come to us with our problems and then when we get engaged with the Arroyo team, how they can come through and actually solve those problems and it’s all through AI technology. And that’s it’s we’re just I think dipping our toe in what the capabilities are at this point, but what we’re seeing early is very, very exciting.

Nikesh, Analyst: Great. And then at what point in 2025 do you expect the full remit of the $7,000,000 to $9,000,000 annual cost savings to be captured? As I understand it now, majority of that work was done in Q4, but to be a little more as we progress throughout 2025, if we just keep it to the right rate?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: Jeff, you are really cutting out. So if I understood your question is when are we going to see the full effect of the cuts that we made? Was that the question?

Jeff Martin, Analyst, Roth Capital: It is. I apologize. I got rid of my headset. Is this better?

Howard Halpern, Analyst, Taglich Partners: That’s better. Yes, perfect. Thank you.

Jeff Martin, Analyst, Roth Capital: Okay. Sorry about

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: that. It’s okay.

Jeff Martin, Analyst, Roth Capital: Yes, I was just I was curious to the extent of when what kind of timeframe to realize the full run rate of the $7,000,000 to $9,000,000 savings. And as I understand it, most of that was done in Q4, but there’s a little more to go as we progress throughout the year in 2025. Just curious if you can elaborate on that.

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: Well, again, the majority of those of the cost savings was in people and those took place in December. So you’ll see those in I think it’s in Q1 for sure. And then the other changes really was kind of in cost structure for changing of commission plans And those took place in February and in March. So you’ll see the full effect of the commission plans going into Q2.

Jeff Martin, Analyst, Roth Capital: Okay. And just curious out of those cuts in personnel, could you help us understand how many of those were revenue driving? Are we going to see some revenue impact related to that in the first half of the year? And what strategically can you do to grow your way back out of that?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: A lot of the cuts were back office. They were home office folks. We did have some restructure when the both divisions did their restructure. We got rid of kind of a mid manager level, out in the field. And that restructure was a little disruptive on the property management side, because we have markets that are a salesperson, so that salesperson has the relationships in the market.

So when we change some of those and took our mid level folks and pushed them down into a selling role back out in the field, they had to reestablish those relationships. So we’ll see we’d see a little disruption in that. And I think they have leveled out. We saw that early in December and in early January, but I think that is all leveled out right now. And then professional has been really kind of managing the underperformers all along.

And so it was less disruptive for the professional team.

Jeff Martin, Analyst, Roth Capital: Okay, great. And then on the property management side, how much of your footprint is utilizing the territory mapping today? Is it 100% or is it a lower percentage? And what if that’s the case, what’s the timeline for reaching 100% on the territory mapping?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: We’ve launched Houston, which is where we had the growth that I mentioned earlier. And then Atlanta has launched as well. We are in the process of launching Dallas. So we’ve started we have started to hire that team here in Dallas Fort Worth and I believe there’s a few other markets that will go after this year, but and those will be in June.

Jeff Martin, Analyst, Roth Capital: Excellent. That’s it for me. Thank you.

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: Thanks, Jeff. Thank you.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Ms. Beth Garvey for any closing remarks. Please go ahead, ma’am.

Beth Garvey, Chair, President and Chief Executive Officer, BGSF: Thank you for your time today. We appreciate your continued support and we look forward to updating you on our quarter results in May. Have a great day.

Conference Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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