Thank you for standing by. This is the conference operator. Welcome to the BG Staffing fourth quarter and fiscal year end results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]. I would now like to turn the conference over to Terri Macinnis, Vice President of Investor Relations of Bibicoff and MacInnis, Inc. Please go ahead.

Thank you operator and good afternoon everyone. It's my pleasure to welcome you to the company's conference call to discuss Q4 and year-end financial and operating results and provide a progress report on the company's business strategy. With me today on the call is Allen Baker, Chief Executive Officer and Dan Hollenbach, Chief Financial Officer. This morning's news release announcing BG's record Q4 and year-end 2017 financial results can be found on the Investor Relations page on BG's website at bgstaffing.com. Today's call is being webcast live and recorded. A replay of the event will be available later today on the company's website and will remain available for at least 90 days following the call. I remind you that our discussions today include forward-looking statements. These statements are based on certain assumptions made by BG Staffing based on and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The company's actual results could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including those listed in Item 1A of the company's Annual Report on Form 10-K and in the company's other filings with the SEC. All of the risks and uncertainties are beyond the ability of the company to control and in many cases, the company cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. These forward-looking statements are made as of the date of this call and BG Staffing assumes no obligation to update these statements publicly, even if new information becomes available in the future. This broadcast is covered by U.S. Copyright Laws and any use or rebroadcast of all or any portion of this conference call may only be done with the company's express written permission. During our call, we will discuss some non-GAAP measures which we use for internal evaluation and to report the results of the business as useful information to management, our Board of Directors and investors about our operating activities and business trends related to our financial conditions and results of operations. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered in isolation, as a substitute for or superior to financial measures calculated in accordance with GAAP. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see today's earnings release posted on BG's website. I will now turn our call over to Dan Hollenbach, BG Staffing's Chief Financial Officer. Dan?

Thank you Terri. Good afternoon everyone and thank you for joining us today. Financially, 2017 was a terrific year for BG Staffing as our focus on maximizing gross profit margin resulted in our first ever annual gross profit margin above 25%. We believe our ability to increase our gross profit margin was made possible by the significant investments we have made in value added businesses to provide our customers with superior services in combination with our pricing discipline. Maximizing gross profit margin has always been a priority of BG Staffing, but over the past few years, we have placed a renewed focus on the businesses that we believe will drive growth and profitability on a sustained basis. We seek to continue our growth both organically and through accretive acquisitions in those businesses. BG Staffing provides temporary staffing services to a variety of industries through its various divisions, and we have integrated several regional and national brands into our platform. We provide these temp staffing services within three industry segments, multifamily, professional, and commercial through 65 branches and 15 on-site locations in 26 states. Growth in our multifamily segment has given us what we believe is a market leading position in a business segment where we foresaw significant growth for our new, complementary, and highly profitable service category. We believe we have the largest multifamily staffing business in the U.S. This rapidly growing segment provides temporary staffing needed to run apartment complexes, namely office and maintenance personnel. We generated $71.8 million annual 2017 revenues in this segment. Approximately, a third of our revenue in multifamily comes from the office leasing side and the other two-third comes from various maintenance activities. Most of our clients are asset management companies who manage the apartment complexes for the owners. Multifamily is our highest gross…

Thanks Dan. I appreciate your effort. I am obviously pleased that we finished 2017 as our highest revenue year and more importantly our highest gross profit percentage year in the company's history. Our 2017 results are a reflection of BG Staffing's unique value proposition, the solid performance from our recent acquisition and our disciplined approach to cost control. We believe we have been able to continue growing our market share through our unique diversification strategy. Over the past nine years, our business plan to diversify by segment and by geography has paid dividends as our exposure to more profitable market segments in multifamily, IT and finance and accounting has significantly mitigated the anticipated declines in commercial. On the cost side, we separate selling cost from general and administrative costs for internal financial reporting purposes. Selling relates to the field production of revenue and gross margin while G&A consists of back-office costs. This separation allows us to analyze contribution margin or how much each of our businesses is contributing to the coverage of overhead. We consistently target G&A expense to be approximately 2% to 2.5% of revenues and I am pleased to note that once again we achieved this goal in 2017. During 2017, we opened 11 new multifamily offices contributing to our organic growth which is consistent with our belief that generally speaking, it is more advantageous to open new multifamily offices than to buy them. Our expectation is that multifamily offices deliver 15% contribution to overhead and start positive cash flow within 90 days of opening the office. In 2018, our plan, as usual, is to open five new multifamily offices. Turning to M&A. In 2017, we completed two acquisitions increasing our total to nine companies since I took over as CEO in 2009. Since joining the BG Staffing…

[Operator Instructions]. Our first question comes from Jeff Martin of ROTH Capital Partners.

Hello. This is Sarra Schuster, calling in on behalf of Jeff Martin. Last quarter, you mentioned that BG is exploring the commercial markets with a strategy similar to the multifamily segment. Can you outline what the initiative entails over the course of the first couple of years? And do you have a targeted launch for the commercial market?

We are going to do that, I hope, sometime this year and it has a performance criteria that it has to hit. We have currently got working in that section about 40 people. We would like to have a few more than that. But I am seeing that it's doing well and we are looking forward to do about $6 million in revenue this year.

Okay. Thank you. And last quarter was too soon to comment on the Smart acquisition. Now that you have had the business under BG for five months, can you provide a status report on the acquisition, specifically regarding the broader strategy and the firm taking additional skill sets to more geographies?

I would say that it's still too soon to comment on it, mainly because it's a small operation and I just haven't had time to look at it. So next call we will have something for you.

Okay. Thank you. And lastly, in the professional segment, could you please provide an update regarding your expectation for growth as it pertains to the IT component of the segment as well as finance and accounting for 2018?

It's probably going to grow about $2 million, that would be IT.

Okay.

And finance and accounting is probably going to grow, we are just talking revenue growth here, probably substantially more than that, say $4 million.

Okay. Thank you very much.

Thank you.

Our next question comes from Howard Halpern of Taglich Brothers.

Congratulations. Great quarter, great end to the year. First question is with regard to multifamily. How many existing offices accounted for the nice revenue in 2017?

Wow, we don't look at it.

I know you had 11 new offices, you said. So I don't know how many it has to be 30 or more?

Well, we have got over 40 offices in multifamily. And so how many of them contributed, I don't know. They are not all growing at the same pace. I think we had growth in multifamily about 23% growth, it looks like, almost 24%. So I don't know --

Was the fourth quarter growth a little bit of an anomaly or was it pretty substantial year-over-year?

No. It was a small anomaly. But I would not say that -- I haven't had a chance, Howard, to look into that. I am sorry. I will get that for you.

Okay. And you did talk about the seasonality. But is there any change to the magnitude in it due to the tax reform that went on?

The magnitude in what?

In the bump in the payroll – in the expenses for the payroll taxes in Q1 normally?

Those were all corporate income taxes, not payroll taxes.

Okay. And in terms of Zycron, are you seeing growth in the Zycron business itself?

Right now, we have got another two, three months to go on their earnout period. I am just looking for $4 million in revenue and I think we are going to hit that and that's a contribution number I am giving you.

Okay.

So we will just see if that works out, and if does, I am going to call that a success.

Okay. And one last one. You talked about 2018, five new multifamily, is that five brand new ones or does that include maybe a split or two of an existing office?

It's five brand new ones according to plan.

Okay. Thanks and keep up the great work.

All right. Appreciate it. Thank you Howard.

Our next question comes from John Rolfe of Argand Capital.

Hi guys. Just a couple of quick questions for you. One, I just wanted to confirm, did you say that your expectation on the consolidated tax rate was 25.7% for 2018?

Yes, sir.

Okay. Great. And it looked like SG&A ticked up about $1.5 million sequentially from 3Q from $11.2 million to $12.8 million despite it being, I guess, often a seasonally weaker quarter. What were sort of the pieces of that? And was there anything unusual in the SG&A line item for the fourth quarter?

So you had a full quarter of Smart in there, which is about $800,000.

Okay.

And a little bit of rent increase on the multifamily side, and I would say, a little bit of bad debt adjustments in the fourth quarter. But primarily, it was the Smart. You had a full quarter of that SG&A in there.

Okay. So would you expect, and then lastly, I guess on the commercial side, I mean I know you guys have been sort of culling some business there that doesn't meet your internal bogey from a margin or profitability standpoint, but would you expect the declines in commercial to abate this year? Do you think on a full-year basis, commercial will grow once again or how should we be thinking about sort of your focus on that business and what revenue might look like?

My view is, it's going to stay about flat, probably about $77 million of revenue.

Okay. Great. Thanks guys. Appreciate it.

Thank you.

We have no more questions at this time. I would like to turn the conference back over to Mr. Allen Baker for any closing remarks.

Thanks operator. On behalf of our entire team here at BG Staffing, I would like to thank all of you for participating in today's call. I would also want to thank all of our loyal employees, customers, and stockholders for their continued support and commitment, which has helped shape BG Staffing into the strong company that it is today. We look forward to a productive 2018. Have a great day and thanks again for joining us.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.