Welcome to the BG Staffing Yearend 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 not like to turn the conference over to Terri MacInnis, VP of IR with Bibicoff & MacInnis. Please go ahead.

Thank you, Ben. It's my pleasure to welcome you to the BG Staffing conference call to discuss Q4 and yearend financial and operating results and a progress report on the company's business strategy. With me today on our call is Beth Garvey, President and CEO; and Dan Hollenbach, Chief Financial Officer. By now you should have seen a copy of this morning's press release announcing BG's Q4 yearend financial results, as well as the Form 10-K. If you do not have a copy of the press release or Form 10-K, you can find it in the Investor Relations section on BG's website at bgstaffing.com. I remind you that this 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'd also like to 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 and reports with the Securities and Exchange Commission. All 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 expressed 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 condition 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 reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see today's earnings release posted on the company's website. I'll now turn our call over to Dan Hollenbach, BG Staffing's Chief Financial Officer. Dan?

Thanks, Terri, and good afternoon to everyone. We appreciate your interest in BG Staffing. We're enormously pleased with the performance of BG Staffing in 2018 and I'd like to start by again taking a moment to acknowledge all of our team members at each of our BG Staffing business units for their hard work and dedication to our company's continued success and strong gross profit margins. Their contributions are vitally important and we are very proud of the job they continue to do for us. BG Staffing provides contingent staffing services within three industry segments. Our real estate segment operates in apartments via BG Multifamily and in commercial buildings via BG Talent. Our professional segment includes our finance and accounting and IT groups and we have our light industrial segment. Today, BG Staffing operates 75 branch offices and 19 onsite locations across 27 states. Our real estate division opened three new offices and split four existing offices in 2018. We currently plan to open five new real estate offices in 2019 and expand in California. Beth will talk more about our initiative in California in her remarks. I'll review our financial results before turning the call over to Beth Garvey, our President and CEO, for her comments on the reporting period just ended, in addition to our company strategy, execution and outlook on current industry conditions. I'll start by noting that fourth quarter 2018 results are for a 13 week period versus 14 weeks ended December 2017, and the 2018 yearend results are for 52 weeks versus 53 weeks in 2017. We've provided a reconciliations of these numbers on a same day bases, in both our earnings release and our annual report on 10-K. For the quarter, our revenues for Q4 2018 were $72 million, down 4.9% from Q4 2017,…

Thank you, Dan. Good afternoon, everyone, and thank you for joining us today. I'm pleased to review 2018 strong operating results in which once again we met our -- met or exceeded our goals in every significant category. Based on our financial strength, overall growth and increasing profitability and cash flow, we are optimistic about 2019. We continue to see strong customer demand, once again, our success was led by solid operational performance by our management team in the field. We are proud to have reported 26% annual consolidated gross profit, our seventh consecutive quarter with consolidated gross profit percentage in excess of 25%. BG's gross margin percentage has steadily increased from 19.1% as of fiscal yearend 2013 to 26.7% for 2018. We believe that not all revenue is created equal and consistently strive to partner with clients, where our services are not massified [ph]. While our revenue growth over the past several years has certainly been impressive, we believe our laser focus on the strategic priority of growing returns, as measured by gross profit margin percentage, adjusted EBITDA and adjusted EBITDA margin benefits our shareholders with sustained value creation. Value creation grows by increasing margins, which we do to focus operational discipline, organic growth initiatives and selective value creating M&A. We believe targeted acquisitions allow us to build our service offerings more quickly and at a lower cost than if we built them in-house. Our goal is to seek acquisitions primarily in our professional segment that will expand our footprint into new geographic markets or provide a skill set that helps complete our talent offerings puzzle. We feel this provides an ease of use for our client partners offering a one stop solution in their staffing needs. In addition, it helps us strengthen our cross-sell efforts around the country.…

Thank you. We will now be conducting the question-and-answer session. [Operator Instructions] The first question comes from Jeff Martin, who is with ROTH Capital Partners. Please go ahead, sir.

Thank you. Hi, Beth. Hi, Dan. How are you?

Hi, Jeff.

Great. Dan, you touched on the segment performance for the year. I was curious if you and Beth could comment on the segment performance in Q4 and some of the trends that are driving those segments?

I think we saw probably continued momentum through Q4, except in our F&A group, because of large project on that relocation, we saw a sequential revenue growth in that group from three into four sequential growth in the end staff, which of course is normal in the fourth quarter. Real estate was down in the fourth quarter, which is consistent with third quarter being their largest. And in IT we had a slight decrease in the fourth quarter. Basically we do some project and whatnot so.

Okay. And then, Beth, could you elaborate on the strategy to enter the California market. Is it just Multifamily right now? Are you looking at taking the Talent division there over time and what about staffing in general?

Right now, we've got people in the Multifamily division that will probably be billing by the end of March. And then the IT group, they already have orders. They're just waiting for us to be able to say go, which is why in my notes I said they would be billing in April. And we've already got orders pending on both sides for the Professional IT side and for Multifamily. As far as Talent goes, I think we're just going to try to figure out right now how it works with us going into just the Multifamily, but we anticipate to be able to grow the Talent group in that market as well. We will hold off on Light Industrial and not sure we want to play in that arena right now. I think we need to do the other one first, so we'll hold off on the Light Industrial sector for that.

Okay. And then, in terms of the tactical strategy there, are you going in there by opening a couple of offices? And if so, what parts of California are first and over the next couple of years what is that platform looks like in terms of the footprint?

We're starting on in San Diego and about a year ago we hired a guy who actually sit on the National Supplier Counsel for the apartment industry and he lives in San Diego. He has kind of been going out and being our cheerleader for the last year about the fact that we are coming. So we have a lot -- since most of our customers in Multifamily have a national presence, they are just waiting for us to give them the green light and we feel like it will be very positive along the way. We just extended an offer this week to a salesperson, who is going to start next week with her training, so we think that that's going to be positive along those lines. And then we will grow it from that perspective. But right now, the target is to just do San Diego and we will continue to do the hub environment like we have right now. So the California positions will be filled with the help of the Dallas hub, as well as a pretty nice Staffing coordinator out in California with them.

Okay. And then, in terms of your cross-selling initiative that I think catches people's attention. Do you have a category leader there and how is that structurally going to evolve over time? It sounds like a fairly new initiative mid-year, last year?

I think for the most part we have -- in January, everybody went on the same applicant tracking system. So everybody has access to everybody else's customer. So, in addition to that, instead of breaking it down to where we go in and we say, here's a meeting for the F&A Group and here's the meeting for the IT group, they are doing sales blitzes between all brands and those brands get together on a call and they do a training on a particular subject. So the subject for the mathematics is something to do with F&A, but the IT people were trying or vis-à-vis and then we go out and do that -- do a sale split on that. I think what is been very, very helpful is really educating the folks in our offices as to what the other brands do. So if someone in one office just provides Oracle or SAP and they make a phone call and they say, hey, we don't use Oracle or SAP we use Workday, then the person on the phone doesn't knows exactly that they can say we have a sister company that offers Workday and flip that business to them. Those kind of communications did not happen before. So it's been a big push in making sure that everybody understands what we have available.

Great. That's very helpful. Thank you.

You're welcome.

The next question comes from Howard Halpern, who is with Taglich Brothers. Please go ahead.

Congratulations, guys. Great year.

Thank you.

In terms of -- I guess, moving into California, specifically on the Multifamily. Is there going to be an initial bump in expenses. If so, what amount could we expect?

I don't know that we've identified the amount yet, but there have been additional costs and that's really just been on the compliance side. So we've had to get with attorneys and have attorneys help us with onboarding paperwork and the employment laws of California. Along with that, they have some requirements where you have to actually do a training for every single individual out there, that is -- got a cost associated with that. So we have not put all of those cost together, but there is some initial cost of going into California.

And remember, we're talking about one office initially, where the sales person –

And it's a Regis office.

And a Regis office, so not a lot of initial estimate.

Okay. And in terms of the Talent segment, you said you had six offices. How -- I know that probably not all mature yet, but how are they progressing and how many of those -- how many new offices will be added to that division, if any, this year?

Right now, we do not have any new offices budgeted for them for 2019. What we're finding with that group is, the sell process is a bit slower, but the gross profit and they pay and bill rights are a lot higher. So we're getting that in the 40% on the gross margin with that division. So we're trying to let them get there -- get established in the markets that we're in right now without stressing them out for growth and letting them kind of get that under their belts. Now, that doesn't mean that -- have a customer that wants them to go somewhere that we would open -- we would not open a new office, but right now we do not have any thing budgeted for them this year.

Okay. And just one last one on -- all the good cash that flows through the business, how much debt you estimate you might be able to repay in the coming year?

We -- sorry, I don't have that in front of me. I think I estimated that based on our current forecast, we will be out of debt by mid-2021.

Okay.

Absent acquisitions or anything like that.

Acquisitions, correct. Okay. Keep up the good work, guys.

Thank you so much.

The next question comes from Greg Hillman, who is a Private Investor. Please go ahead, Greg.

Yeah. Good afternoon. I wanted to ask a few question. First of all, for real estate, is there like a career path a person can have in your organization within real estate to start at a lower level and work his way up or her way up?

Absolutely, and they do really good job of bringing somebody in at certain levels and moving them up the ladder.

In fact, we just promoted -- how many people?

We've promoted six people.

Six people up to what we call..

An assistant hub manager.

Yeah.

so we had hub managers and then we have assistant hub managers. So we took some of the people that were actually working schedules and put them in a training mode, so that they could help get people trained in places and move them through.

And when you say hub, that's just an office, that's a regional office, right?

That's where we do all the recruiting. So that is like the Dallas office, the Tampa office, the Charlotte office. So that's where all the recruiting takes place.

Okay. That's good. And also, in terms of hiring from within versus without for new either hub managers or office managers, can you talk about that or do you try to hire from within or you've been able to just hire from within as you grow or do you have to go to the outside?

That's two fold. So when we go into a new market we go to the association and ask them to tell us who the rock star is in the association. So it maybe somebody who's got all the context within the properties but sells carpets. So they will tell us who the rock stars are and then we recruit them out of that sector, because they've got all the connections. As far as going in and having a staffing coordinator in place, that will be a ground level person. So that person is the person that we would develop and move them up through the ranks. Now staffing a salesperson can eventually be a regional sales person. So we kind of blossom that, but the initial person in a market, we go to the outside on. Otherwise we try to promote from within.

Okay, great. And then -- and finally, can you talk about just the time to fill in for the IT staffing, whether you measure that and whether that's improving. Can you give me like some kind of metrics on that? The direction they're going in?

We doesn't have those metrics right now. Like I said, we just put everybody on the same platform in January. So we are building out all of those dashboards and KPI's right now.

Okay. And when will that be operational, when we will have those metrics?

I anticipate to have them in sometime in the next quarter.

Okay. That'll be the quarter ended June?

Yes. There are no problem.

Okay.

My disclaimer -- I've got disclaimer here. I know they're making a lot of progress on it.

Okay. Thanks very much.

This concludes time allocated for questions on today's call. I'd now like to turn the conference back over to Beth Garvey for any closing remarks.

Thank you, Ben. And thanks to all of you joining our call today. I look forward to reporting our progress for you, as we drive forward our three year goal of generating $500 million in revenue with 10% plus adjusted EBITDA. Have a great afternoon. Talk to you all next quarter.

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