Earnings call transcript: BGSF Inc. beats EPS expectations in Q1 2025

BGSF Inc. (market cap: $36.89M) reported its Q1 2025 earnings, showcasing a better-than-expected performance with an adjusted earnings per share (EPS) of $0.05, surpassing the forecast of a loss of $0.08. The company’s revenue, however, fell short of expectations, coming in at $63.2 million against a forecast of $67.75 million. Following the earnings release, BGSF’s stock saw a 4.06% increase, reflecting investor optimism despite the revenue miss. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, with analysts setting price targets between $9-12.

Key Takeaways

• BGSF’s EPS exceeded forecasts, indicating effective cost management.
• Revenue fell short of expectations, declining 8% year-over-year.
• Stock price increased by 4.06% after the earnings announcement.
• The company is cautiously optimistic about future business momentum.
• BGSF has streamlined operations and reduced costs significantly.

Company Performance

In Q1 2025, BGSF demonstrated resilience in a challenging market environment. While total revenues decreased by 8% compared to the same period last year, the company achieved a positive EPS, highlighting its successful cost-cutting measures. The professional segment experienced a 4.2% decline, while the property management segment saw a sharper drop of 14.9%. Despite these challenges, BGSF’s strategic restructuring and operational efficiencies have positioned it well for future growth. InvestingPro data shows the company maintains strong liquidity with a current ratio of 1.75, and notably offers an impressive 18.75% dividend yield, having maintained dividend payments for 11 consecutive years.

Financial Highlights

• Revenue: $63.2 million, down 8% year-over-year
• Adjusted EPS: $0.05 per share, exceeding the forecast of -$0.08
• Adjusted EBITDA: $2.4 million, with a 3.8% margin
• Cash from operating activities: $1.1 million
• Capital expenditures: $23,000, mainly for IT investments

Earnings vs. Forecast

BGSF’s actual EPS of $0.05 significantly outperformed the forecast of a -$0.08, a positive surprise of 162.5%. However, the revenue fell short by approximately 6.7%, which may indicate ongoing market pressures. This EPS beat suggests effective management of expenses, contrasting with the revenue miss that highlights areas needing improvement.

Market Reaction

Following the earnings announcement, BGSF’s stock rose by 4.06%, closing at $3.33. This movement suggests that investors are encouraged by the company’s ability to exceed EPS expectations despite revenue challenges. The stock’s performance remains within its 52-week range of $2.91-$9.26, though it has declined 65% over the past year. Get deeper insights into BGSF’s valuation and financial health with a comprehensive Pro Research Report, available exclusively on InvestingPro, along with 8 additional ProTips and extensive financial metrics.

Outlook & Guidance

Looking ahead, BGSF remains cautiously optimistic about its business momentum. The company is focusing on rightsizing and growth, leveraging investments in technology and operational excellence. While macroeconomic uncertainties persist, BGSF anticipates that client confidence will improve, driving future investment and growth.

Executive Commentary

• CEO Beth Garvey stated, "We are confident that we are well positioned in the markets we serve."
• CFO Keith Schrader noted, "We are seeing signs of improvement in this business unit."
• Garvey also highlighted the industry’s resilience, saying, "Historically, our industry is the first to go down and the first to come back up."

Risks and Challenges

• Macroeconomic uncertainties could impact business spending.
• The U.S. job market’s slow growth may affect staffing demand.
• Trade policy uncertainties present potential hiring and spending headwinds.
• Competitive pressures in the staffing industry remain significant.
• Continued revenue declines in key segments could pressure future earnings.

Q&A

During the earnings call, analysts inquired about the impact of macroeconomic factors on BGSF’s segments and the company’s cost reduction strategies. Executives confirmed the full rollout of their technology platform and ongoing efforts to streamline operations, emphasizing their commitment to sustaining growth and profitability.

Full transcript - BG Staffing Inc (BGSF) Q1 2025:

Conference Operator: Day, everyone. Welcome to the BGSF Inc. Fiscal twenty twenty five First Quarter Financial Results Conference Call. At this time, all participants have been placed on a listen only mode, and the floor will be open for questions and comments after the presentation. As a reminder, this conference call is being recorded.

Now I will turn the call over to Sandy Martin, three part advisers. Please go ahead.

Sandy Martin, Investor Relations, Three Part Advisers: Good morning. Thank you for joining us today for BGSF’s first quarter twenty twenty five earnings conference call. With me on the call are Beth Garvey, Chair, President and Chief Executive Officer and Keith Schrader, 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.vgsf.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 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 Inc.: Thanks, Sandy, and thank you all for joining us today. We’ve continued our strategic alternative work in the first quarter and believe that the twelve to eighteen month timeline we previously communicated remains realistic. This month marks the first twelve months since we communicated the launch of the strategic review. Our restructuring initiatives aimed to recalibrate costs by reducing direct and indirect expenses throughout headcount reductions as well as other measures were included in the strategic work. We will not be taking questions related to the strategic review today.

Total revenues for the first quarter of twenty twenty five were $63,200,000 down 8% from prior year, comprised of professional down 4.2% and property management down 14.9% versus a year ago. Sequentially, professional segment revenues increased by 5.6% compared to the December, while the property management division declined sequentially by 14.1%. During the quarter, business strengthened month over month and this trend continued into April, which is higher than March’s revenue. We generated adjusted EBITDA of $2,400,000 with an EBITDA margin of 3.8% and our adjusted EPS was $05 per share. For most U.

S. Businesses, tariffs did not impact first quarter results. However, uncertainties and concerns over the administration’s trade policies created headwinds and project hiring and spending. Although we expect clients to remain diligent, we are cautiously optimistic that consulting projects and business spending will continue to move forward. We are confident that we are well positioned in the markets we serve with differentiated model that includes professional consulting and project resources, primarily in high value IT and finance and accounting talent.

We are also well equipped to meet the needs of property management companies, particularly as we approach the high season for apartment turn overs. In 2024, we restructured both divisions and streamlined costs to align management more closely with the producers and we believe that this will benefit our results in 2025. Starting with the professional segment, we managed the consulting ends well in March and did not experience a typical first quarter drop off that we have seen in prior years. We are focusing on team specializations in staffing and consulting, which support improved project efficiencies. Our build hours for the quarter were up approximately 5%.

Margins in Q1 were about 32% in the professional division, down slightly on a sequential and on a year over year basis. Our permanent placement business got off to a strong start in the first few months of twenty twenty five and we remain optimistic about the business momentum. Additionally, we were officially awarded the Workday Application Management Service Partnership. We expect this to expand our support sales in pre and post implementation projects. We also launched a newly developed product with Workday focusing on compliance reporting support for colleges and universities.

Finally, we signed 23 new logos in the first quarter of twenty twenty five, up over 60% from 14 in the twenty twenty four first quarter. This business is moving in the right direction and we are confident it is gaining tangible momentum. Shifting to property management, last year we eliminated direct and indirect operating costs in the segment to better align our expenses with projected revenues. We are entering our seasonally high sales period for property management and the second quarter will serve as a barometer of the effectiveness of our strategic initiatives. We implemented key workflows and reorganization initiatives over the last nine months including the completion of property management sales force realignment last fall as well as expense reductions in the fourth quarter of twenty twenty four.

Since rental and property management companies have faced challenges over the last eighteen months due to the macroeconomic headwinds, our property management segment continues to operate under pressure. However, we believe the industry is finally shifting, U. S. Apartment rental rates are starting to elevate again, which we expect will allow better economics for property management companies. Internally, our sales territory initiatives are expanding and our maintenance training platforms are industry specific.

We continue to work on the exclusive and semi exclusive property management service agreements that have resulted in 7% improvement over prior years. When property management companies need support, we want to be the preferred vendor and expand the number of service agreements is vital. We have strong relationships and a good reputation in the marketplace and I’m optimistic yet cautious that our trained talent and high service levels will positively impact business trends in property management starting in the second quarter of twenty twenty five. If macroeconomic uncertainties persist, we will continue to manage what we can control and prepare for this choppiness. After Keith walks through the detailed financial results for the quarter, I will return with closing remarks.

Keith?

Keith Schrader, Chief Financial Officer, BGSF Inc.: Thank you, Beth, and good morning to everyone. First quarter revenues were $63,200,000 versus $68,800,000 in the year ago quarter. We are pleased to report that the professional revenues increased sequentially from the December by 5.6%. Although organic professional segment sales declined 4.2% compared to the prior year’s quarter, This is a significantly improving trend from more recent quarters. Despite the 4.2% decline in revenue on a year over year basis, operating income and professional increased, which is proof of the effectiveness of our cost reduction activities taken in December and again in March and April of this year.

Property management revenues declined by over 14% on both a sequential and year over year basis. We are seeing signs of improvement in this business unit as revenues per billing day have steadily increased during February, March and April. We made significant transformations in the sales marketing group and property management at the end of last year and early this year and understand that fully executed initiatives take time to show up in financial results. Our gross profit margins in the first quarter were $20,900,000 and 33.1% compared to $23,400,000 and 34% in the year ago period. On a sequential basis, compared to the fourth quarter of twenty twenty four, gross margins were basically flat, with the Professional segment down 20 basis points and Property Management up 30 basis points.

SG and A expenses for the first quarter were 18,900,000.0 compared to $20,800,000 in the fourth quarter and $21,000,000 in the prior year’s quarter. These improvements were primarily a result of our restructuring actions taken in December. Our first quarter EBITDA was $2,400,000 or 3.8% of revenue, up sequentially from $1,400,000 or 2.2% in the fourth quarter. This improvement is further evidence of the positive effects of the cost cuts on our profitability as this improvement came in the face of a $1,200,000 sequential shortfall in revenue. We reported a first quarter GAAP loss of $07 per diluted share and adjusted EPS of zero five dollars Starting with the first quarter’s results, we are beginning to see improvements in BGS profitability.

During the first three months of twenty twenty five, we generated $1,100,000 in cash from operating activities. Capital expenditures were minimal at $23,000 primarily IT investments. As previously discussed in our Form 10 ks filing in March of this year, the company was not in compliance with its financial covenants at year end twenty twenty four and was not expected to be in compliance at the end of our first quarter this year. As a result, we entered to a waiver and second amendment with BGSF’s lenders on March 12 with a further amendment on May 7. These amendments, among other things, provide time for us to properly structure our capital needs.

With that, I would like to turn the call back to Beth. Beth?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: Thank you, Keith. Reviewing our sales performance through April, we remain cautious yet optimistic recognizing that ongoing business disruptions resulting from trade policy changes could impact many U. S. Companies, including BGSF. When companies suspend their earnings guidance like so many public companies are doing right now, they are more likely to delay decisions and opt to preserve cash where possible.

This will negatively impact most companies in The U. S. And Canada and likely slow growth for many industries. We will continue to manage our business by staying close to our clients and communicating with them about their plans and pain points. We are committed to our growth initiatives and managing the things we can control.

Our trend reports for revenue per billing continue to improve each month. Although progress is slower than we would like, we are seeing measurable progress. Last Friday, we saw that employers added 177,000 jobs in April, which signals that the labor market remains solid. The jobless rate remained steady at 4.2%, a positive development in the face of macroeconomic and tariff uncertainties this year. Our strategic initiatives include rightsizing and also growing our business, as well as leveraging prior investments in people, technology and best in class processes to drive long term shareholder value.

As the broader markets and industries adjust to economic changes and normalize, we are confident that corporate leaders will invest grow, which will provide a positive environment for BGSS growth with our customer partners. Now I’ll turn the call back over to the operator. Operator?

Conference Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a few moments while we poll for any questions.

Your first question is coming from Jeff Martin with Roth Capital Partners. Please pose your question. Your line is live.

Jeff Martin, Analyst, Roth Capital Partners: Thank you. Good morning, Beth and Keith. Beth, could we start with the new logos? That’s an impressive figure up 60% year over year. Maybe put some context around that in terms of average deal size and maybe give us a sense of when those projects will are on the calendar to commence.

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: Sure. We several of the contracts that we have were signed in March, and so I don’t have that data as to how much was associated with each one of them, but I can get it, and we can circle back.

Jeff Martin, Analyst, Roth Capital Partners: Okay. And then with respect to existing clients, are you seeing a lot of discussions in terms of what happens once the tariff uncertainty becomes more clear. Do you get a sense that there’s potential for pent up demand as we come at the back end of this and imagine you don’t have a ton of visibility, but just wanted to throw that out there for comment.

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: Yeah, I don’t I do believe that there is pent up demand in both segments, right? So I think that everybody’s just very cautious right now. And as the tariff conversations continue, most of our customers are just telling us that we’re on a wait and see kind of mode. And but there’s still conversations that are happening. So I don’t feel like once that gets settled, I do feel like we’ll start to have some things moving along because the conversations are actually happening.

Jeff Martin, Analyst, Roth Capital Partners: Great. Good to hear. Could you give us an update on the technology platform? I know that that’s been several years in the making, and, you know, we’ve been rolling out various pieces of that over the past couple of quarters. Is there still go lives to occur here in the future?

Or is that fully rolled out at this point?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: Everything’s fully rolled out. What we do right now is that we have two week sprints where we go in and we implement certain things that help efficiency gains. We have captured several million dollars in just having web push, where we have applicants that can come into the portals and get pushed out. So we’re seeing really good results from just making sure that the technology is working in the way we wanted it to work and then continuous improvements. Because we did launch I think I talked about it last quarter our operational excellence program that we launched.

And that is really taking the processes and running them through the technology to make sure we’re pulling as much friction out of it as possible to make it work faster. And then we’ve had some really great conversations this week in regards to other benefits that we should be able to start to do just by using our internal team to continue that enhancement for the efficiency gains.

Jeff Martin, Analyst, Roth Capital Partners: Okay. And then with the expense reductions you put in place last year, is that fully factored in the full benefit factored into the first quarter? Or is there further benefit from those actions taken? And then are there any further expense reductions on the horizon?

Keith Schrader, Chief Financial Officer, BGSF Inc.: So first question, the answer to that is about 65% to 70% was essentially baked into the first quarter. Second quarter, we’ll see 100%. Okay. And as far as to the last question, we are always looking at ways to improve our cost effectiveness, whether it’s implementing new IT things where we can basically get people into our system and out in the field faster or just taking out costs. So those that sort of work goes on continually.

Jeff Martin, Analyst, Roth Capital Partners: Okay, great. And then Beth, could you give us an update on the competitive dynamic within property management? Has it been much change there? And you made recent progress with securing those preferred partner type agreements? Is this still a long runway to go there?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: The competitive environment is staying the same. I mean, there’s no change in that. Competition is not necessarily a bad thing. You just got to adjust to it. And our team has done a really amazing job to be able to pivot and know what to do and how to overcome.

But it’s all about speed and quality. And the property management team does an amazing job of being able on both of those factors. And then as far as the strategic agreements that we have, they continue to sign them. They’re all in the works, it’s an ongoing effort. And I think they closed one this week that was a pretty substantial one.

So very proud of the work that they’re doing on that.

Jeff Martin, Analyst, Roth Capital Partners: Great. Then if you had to take a forward view on property management in terms of a return to year over year, maybe stability in terms of comparisons, Do you care to pinpoint the time frame of when that may occur?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: We’re doing everything that we can to get us back to the position that we’re of the growth trajectory that we were on, and we are seeing positive signs in that happening right now.

Jeff Martin, Analyst, Roth Capital Partners: Great. Thanks for taking my questions.

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

Conference Operator: Your next question is coming from Michael Taglich with Taglich Brothers. Please pose your question. Your line is live.

Michael Taglich, Analyst, Taglich Brothers: Good morning, Keith, and good morning, Beth.

Keith Schrader, Chief Financial Officer, BGSF Inc.: Good morning.

Michael Taglich, Analyst, Taglich Brothers: I was looking for, first of all, a comment. How are you comfortable at this point? We’re about a third of the way into the year with the Street estimates for in light of where the results were in the first quarter and are continuing to the second?

Keith Schrader, Chief Financial Officer, BGSF Inc.: Well, beat the estimates for the first quarter. On the revenue line would be the one net income and EPS. And to be frank, I haven’t really looked at what the estimates are for Q2. I’m sure they may change some after this call. So I need to take a look at that, but I will get back to you on that.

Michael Taglich, Analyst, Taglich Brothers: Okay. Beth, this is for you. But away from the macro, which no one knows in light in light of what you’re seeing halfway into Q2, what would be the adjective that’s most applicable to how you believe you’re tracking versus your plan?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: I think we’re tracking where we thought we were going to be. So I think that that’s a positive move on our part. I think that both divisions have got some momentum in the right direction. We’re just being cautious about it. But I’m not fearful about it at all.

I do think that we’re moving in the right direction.

Michael Taglich, Analyst, Taglich Brothers: Okay, great. All right, thanks.

Keith Schrader, Chief Financial Officer, BGSF Inc.: Thanks.

Conference Operator: Your next question is coming from Bill Dezellem with Tieton Capital. Please pose your question. Your line is live.

Bill Dezellem, Analyst, Tieton Capital: Thank you. I have a group of questions. First of all, would you reconcile kind of what you are seeing or sharing relative to the wait and see mindset that your customers have versus the new logos being up 60%? Those seem to be in a bit of contrast with each other.

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: It depends on the sector, Bill. So there’s some of our manufacturing companies are the ones that are in the wait and see area. And some of our other customers that we have, we do a lot in education. So some of those are moving in the right direction. So it’s kind of a mix in business.

So it is a mixed bag on which area is holding and which area is moving.

Bill Dezellem, Analyst, Tieton Capital: Thank you. And then looking at the professional services, fourth quarter, the headline was that the billing days were down 5%. Excuse me, the revenues were down 5%. But this quarter, your billed hours are up 5%. That seems like there is a shift that took place between the quarters.

Am I mixing nuances here? Or was there actually a shift that took place?

Keith Schrader, Chief Financial Officer, BGSF Inc.: Talking about a shift within professional?

Bill Dezellem, Analyst, Tieton Capital: Yes. So professional segment revenues declined in the fourth quarter, but they increased here in the first quarter.

Keith Schrader, Chief Financial Officer, BGSF Inc.: Yeah, they did increase in the first quarter. Hang on a second. I pull up the numbers, make sure exactly what you’re looking at here. How about that? Yeah, we did see nice growth.

So that the growth in Q1 is versus Q4 of last year. So that is the comparison when talking about the current quarter. We are still down some from the Q1 of last year. Okay. But we are up on a sequential basis and the trends continue to look strong in both sectors into the current month.

Well, that’s the prior month, but say April look good. And both sides of business.

Bill Dezellem, Analyst, Tieton Capital: And Keith, that’s the normal seasonal trend then that I’m getting confused here with. It not Q1 is normally up versus Q4?

Keith Schrader, Chief Financial Officer, BGSF Inc.: Q1 in professional and Q2, there’s some uptick, but it’s not huge. It’s PM where it starts to grow. And we look at what is our actual growth on a quarter over quarter basis versus what we call the seasonal growth expectation. And we’ve been over that growth for the last three months. So not only are we seeing growth on a quarter over month over month basis, we are seeing it come in above what we expect in seasonality.

Does that make sense?

Bill Dezellem, Analyst, Tieton Capital: I think so. But were you talking professional services or were you talking about property?

Keith Schrader, Chief Financial Officer, BGSF Inc.: About property. Property is much more seasonal than professional.

Bill Dezellem, Analyst, Tieton Capital: Okay, so I’m sorry, let me make sure I get these dissected then correctly. So relative to the property business, you are seeing revenues increase slightly faster than the normal seasonal rebound. Are you attributing that to your sales effort? Or is that simply the market improving?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: I think it’s a combination of things, Bill. I think that it’s the restructure with the team last year and putting more focus on the managers being closer to their people and driving those results, as well as the strategic agreements we have in addition to the territory cities that we went in and characterized because we had the Salesforce technology.

Bill Dezellem, Analyst, Tieton Capital: Okay, that’s helpful. And then relative to the professional services, that was up in Q1 versus Q4. And that does or does not is or is not part of seasonality. I guess what I’m trying to get my head wrapped around here is, is there a green shoot with that? Or is that just what we would have come to expect in Q1 versus Q4?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: We didn’t have as many ends in Q1 as we typically have seen in prior years. And so that was a good thing. And I think that that helped us come into the quarter stronger.

Bill Dezellem, Analyst, Tieton Capital: And Beth, that would primarily be due to just timing? Or are these projects that get extended because

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: It’s year end, Bill. It’s like a lot of our customers will have their budgets reset. And so that we usually see some adjustments because of budgets being reset at the end of the year.

Bill Dezellem, Analyst, Tieton Capital: All right, thank you. And then one additional question. Coming out of a recession, what is the historic behavior in the rebound? And I recognize that businesses in general increase their spending. But do you hear customers saying that they want to accelerate spending because part of what you are doing for them is lowering costs and they want to come out stronger?

Or is it simply existing projects that get released?

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: Historically, in a recession, our industry is the first to go down and the first to come back up. But I will say that we’re not seeing that happening right now. It’s kind of a weird environment for our industry. But I do think that we’ve had the last eighteen months of really everybody being pretty cautious about how they wanted to move forward. And at some point, because of where we play in our specialties, there are areas where people are going to want to go ahead and proceed with changing out their ERP systems going forward.

So I think that just our mix of business helps us in that when people start having a little more confidence. So I feel good about where we’re going on that. And then from a property management perspective, if you look at things, people can only hold their updates on their properties They’re starting to see some rent growth in that area which will actually help management companies move in a direction where they want to spend more money, which is good for us.

Bill Dezellem, Analyst, Tieton Capital: Thank you both.

Keith Schrader, Chief Financial Officer, BGSF Inc.: Thank you, Bill.

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: Thank you, Bill.

Conference Operator: Thank you. That does conclude the end of our Q and A session. I would now like to turn the floor back over to Beth Garvey for closing remarks.

Beth Garvey, Chair, President and Chief Executive Officer, BGSF Inc.: Thanks again for joining us for our second first quarter review. So we look forward to talking to you in August. Thanks.

Conference Operator: Thank you, everyone. This does conclude today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

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