Thank you for standing by. This is the conference operator. Welcome to the BG Staffing 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 at Bibicoff and MacInnis. Please go ahead.

Thank you, Saviz. It's my pleasure to welcome you to the BG Staffing conference call to discuss Q4 and year end 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. A question-and-answer session will follow their prepared remarks. A copy of this morning's news release announcing the company's financial results as well as the Form 10-K are available in the Investor Relations section on BG's website at bgstaffing.com. Our call today is being webcast live and recorded. A replay will be available later today on the company's website and will remain available for at least 90 days following the call. Our discussions today include forward-looking statements. These statements are based on certain assumptions made by BGSF 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 BGSF assumes no obligation to update these statements publicly, even if the 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. Additionally, the financial covenants in BGSF's credit agreement are based on adjusted EBITDA. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered in isolation as a substitute for or as 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 and Form 10-Q posted on the company's website. It's now my pleasure to turn the call over to Dan Hollenbach, Chief Financial Officer. Dan?

Thanks, Terri, and good afternoon to everyone. We appreciate your interest in BGSF. First, I'd like to address the recent stock market volatility and the decline in our stock price. As we're all painfully aware, the markets are being materially impacted by both the coronavirus pandemic and the oil production pricing and production issues. We do track our stock alongside many of our peers and unfortunately we have all been impacted negatively by the decline in our sector over the past three months. Despite strong job market growth over the last three months, we are diligently vigilant, I can't say that word. We are really working on monitoring the uncertainty in the market around the impact and the duration of the coronavirus outbreak. Our fiscal 2019 results did not include any material impact from the virus. The impact of the outbreak on the labor market will depend among other things on the length of time that disrupts the economic activity. The effect over the next few months may be reflected in a drop in hours worked and reduced hiring. However, the disruption continues longer and the impacted companies are likely to reduce their workforce including layoffs, especially to those unable to work remotely. We've outlined these risks and uncertainties in our annual report on Form 10-K filed earlier today. It's simply too early to have disability about the potential impacts from disruptions to the labor market and business operations. No determination to the impact on our financial condition and our results of operations can be made at this time. We continue to be in close contact with our team members, clients, partners, and field talent while watchfully monitoring this fluid situation, Beth will chat a little bit more about this later. We are pleased with the growth of BGSF top…

Thanks, Dan. Good afternoon everyone. Despite the volatility in today's choppy stock market, I'm happy you're joining us for our review in the 2019 operating results and our overall performance. I'm pleased to note that in 2019 organic revenue growth continued as we grew gross profit and successfully expanded our cross-sell efforts. I continue to be incredibly proud of the team's hard work, including the continued implementation of our technology roadmap and our successful market expansion with the addition of seven new offices in 2019, which helps to drive our success. I'd like to update you on the progress of our three 2019 initiatives, which we discussed in last quarter's call. As a reminder, they are the entry into the California market, our technology enhancement and building a company culture supporting our overall values to corporate citizenship efforts. We opened our first BG Multifamily sales office in California late in Q1 and I'm happy to report that the business is doing well and continues to meet our targeted plan. Our 2020 goal is to open two additional offices in that state for the Real Estate Division and we are closely monitoring any kind of impact that coronavirus may have in the markets that we've identified. In addition, our IT expansion is on track with four of our specialty brands billing in California as well. Our ongoing technology enhancement initiative continues to be on target. Of our 26 projects, we have completed 10 and have 10 in current production. The initiative with the biggest impact to our stakeholders is the new website that includes capabilities for a client on-boarding, which will be going live at the end of this month followed by the automated timecard collection process that we’ll be launching in June. This investment in leveraging technology will benefit our…

Thank you. We will now being the question-and-answer session. [Operator Instructions] Our first question comes from Jeff Martin with Roth Capital Partners. Please go ahead.

Thanks. Good afternoon Beth and Dan. And thank you for hosting the call during a very challenging time for all of us here. Wanted to get a sense of what some of your clients are saying what you're hearing from them and what some of the responses that you may be contemplating or enacting as a result of kind of the environment that everybody is facing today?

Great question. When we first – this situation first started rearing its head, I immediately went into the team and started having them ask questions divisionally about how, what the impact would be. In the Professional Division most of the clients we’re hearing that they realize business has continued to go. They are all very much open to working remotely. We have our largest client actually that just sent a notice out yesterday that said that they would be doing remote next week and all of our people are going with them and they're supplying all the resources to be able to do that. In addition to that, we've been working with our IT department to be able to go in and be able to deploy resources, computers, printers, screens along those lines, in the event we have people in the Professional Division that need to be able to – where we need to be able to supply equipment. So they are launched up and ready to go to be able to meet that need as well. In the Real Estate Division, I talked to the division president, she feels like they will be fine because people if they do have to be home, they're going to be home and that's what they do. They hang out in their apartments. And so she feels like they're going to be fine from that sector. She feels like there could be some interesting things in the Talent side for commercial buildings that right now we have not seen anything along those lines. And then in the Light Industrial Group the only thing we are seeing right now is a little bit of slow down from any of the supply chain that has come in from China. And what that has done is just resulted in some of our customers who – who typically worked a lot of overtime. They're kind of working normal hours right now while that supply chain gets ramped back up.

Okay. Does this disrupt your ability to continue with your IT improvement plan? Does it put things on hold at all or are you able to continue to move forward with that?

Right now, no. But I think that a lot of these things that we're doing in the technology side will help reinforce us if we do end up having to go full on work from home. So a lot of those things right now help support that initiative. And I think that there's no reason for us to stop at this point.

We will look at initiatives that have not started and determine whether we can – depending on what happens over the next two, to three or four months whether we can push those out to the led that cost. It's part of initiative that Beth is leading now and especially over the next couple of days with her leadership team.

We've gone through with all of this with our leadership team saying, hey, this is where we are today, but, worst case scenario, how would you respond? And so we're putting together a business continuity plan right now and how we would respond to something in the event that it becomes a little bit more severe.

Okay. And then in terms of capital availability and capital allocation, could you Dan give us a sense of what is available on your credit facility today? And two if there's a potential scenario that the Board may reevaluate dividends versus share repurchases given the recent decline.

Yes, so currently we have about – we have $15 million available on our revolver. We have $20 million outstanding on a $35 million revolver. Just got confirmation from the bank today that they will support us in this endeavor. We have not had discussions with the Board concerning the ongoing dividends or any share back opportunities. We do have restrictions within our credit agreement on buyback, so that would have to go by the bank first.

Okay. Okay, great. Thanks for answering my questions.

You bet.

Thanks Jeff.

Our next question is from Michael Taglich with Taglich Brothers. Please go ahead.

I just want to say Beth great job and I'm looking forward to your working way through this crisis, see you all in May. Thanks.

Thank you, Mike.

Thank you, sir.

Our next question is from Howard Halpern with Taglich Brothers. Please go ahead.

Good afternoon guys.

Good afternoon

Hi Howard.

Hi. In terms of the acquisitions could you, I guess, talk a little bit about what you saw is the strategic importance to those? And also if you could just say, how does that fit in the gross margin in the Professional segment going forward?

Both of them are very creative to the margins, the cybersecurity group they're 100% since it's direct hire kind of retained search that definitely is going to give them a higher margin boost. That was something as we've talked about in the past we really wanted to get into the cybersecurity world. L.J. Kushner [ph] has a incredible reputation in the industry and the leader of that group has relationships with some of the top CSOs in the nation. And so we feel like as we continue to build that out and start to support him up with some contingent or consulting labor underneath it that there are some great possibilities for that group in the future. As far as EdgeRock goes, EdgeRock is similar to American Partners and Extrinsic in the fact that these are people where they are technology experts, so they run higher margins and they actually float out throughout the U.S. So we looked at them, we looked to see if we had any customers that we would share that would make it kind of not something that would be appealing to us, but what we found is there were very few customers that we shared which really gave us an opportunity to kind of lean out and blossom that support of that expert type IT consultant person.

Okay. And at the end of the year how many offices in Multifamily Talent combined did you have?

End of the year.

A lot.

We were right at 50 at the end of the year.

Yes.

Okay.

We have 50 Multifamily branches and six Talent offices.

Okay. And the expansion in Q1 adds one to that. And then are you planning on expanding Talent offices or do you just all going to let that grow from where it currently stands?

We've opened two new offices already and Multifamily this year. And I’ll let Beth talk now.

We have scheduled for 2020 four new offices for Talent and six for Multifamily.

Okay. And just lastly in terms of, I guess, the acquisitions and the borrowing, what is the interest rate now combined with the term loan that you have?

We're on the last reset, probably weighted average about 4%, rough numbers.

Okay. Okay well…

So think of Dan next time you read that, yes. Right, yes.

Yes, okay, it’s tied to the LIBOR correct?

A good portion of it is tied to the LIBOR and our liquidity is tied to prime.

Okay. Okay, keep up the good work guys.

Great, thanks.

Thank you.

Our next question is from Darryl Davis, a Private Investor. Please go ahead.

Hey Beth, hey Dan, congrats on another good quarter.

Thanks Darryl.

Thanks Darryl.

Sticking with the the Multifamily office certainly I am curious about Talent as well. But sticking with the Multifamily is it – is my memory correct, it takes about 18 months for those to get sort of ramped up to either 90%, or 95% or 100%.

Yes, that's a good memory, yes. Correct.

I'm trying to remember you said there was how many in 2019 and again, just a Multifamily was there seven?

There were seven.

New openings, yes.

And then I want to say if we go back to like Q4 of 2018, wasn't there like two or three more? And I know this is going back in time, so you may not have it off top of your head.

They’ve averaged anywhere between five and nine a year. And just depending on the need, because I mean if you recall a lot of big expansion in Real Estate and Multifamily has to do with a Property Manager who is then promoted to a Regional Manager, who is then promoted to a District Manager and then takes it with them. So there's a lot of that that kind of goes on with that. So I think from that perspective we usually try to target five a year and we usually see that based off the clients asking us to go with them.

Yes, Darryl in 2018 [indiscernible] four new locations and split three offices.

Got you. Okay. I'm just trying to get sort of a feel of when they roll up to be where we hope. And Beth you had said that so far, so good in California. I know you came up with some targets and maybe you have a low end target and medium end target and medium target, nice target. But so far, so good on what the newer offices are contributing especially in California.

Yes, they probably started out a little bit slower than what we anticipated, but when they finally got their feet really planted firmly, they've done a really, really good job, exceeded what we thought.

Very good. That takes care of my questions. Thank you.

Thank you, sir.

Thank you.

Our next question is from George Melas with MKH Management. Please go ahead.

Good afternoon, Beth and Dan. And congratulations on the work that you've done. It seems like company is in good hands in the primetime.

Thank you, George.

Thank you, George.

You are welcome. I have a question on the Real Estate side. Can you just give us a little bit more color on Multifamily versus the Talent side, may be on what some of the trends were in the fourth quarter? I just sort of plugged in a few numbers from the K in my model, and it seems like everything was quite good, the growth was, I think, 12% in the quarter, margins were strong. But give us a bit more color also maybe on build hours rate and kind of how things develop there?

Not quite sure what you're asking for George, I apologize.

Yes, no, I'm just trying maybe I'm just trying to get some color on the Real Estate side, maybe talking about Multifamily versus Talent. How the two are fairing? What are some of the – what you've seen in the Talent side because it's so new. And I'm trying to understand some of the trends related to, I know revenue was up roughly 12% in the quarter, but how much was build hours, how much was rate, how much was the contribution from Talent, sort of anything you can give us help understand that two segments.

Okay. Don’t have that at my finger tip I could certainly follow-up with you, that’s okay.

Okay. Okay that’s it thank you.

George I will add that the Real Estate Division, that Multifamily Group really is strong in the day to day temporary side of it. Whereas the Talent side has got a stronger presence in direct hires, so they have a higher margin. So they kind of complement each other in those areas. And then Dan can give you the specifics around that separately.

So maybe he may give me that side. I think you said you’re planning to open four offices for Talent in 2020.

Correct.

That suggests that you are comfortable with the model and the execution of the model if you are opening four offices. So maybe tell us a little bit – but what you've learned in 2019? And how your vision of that business has evolved during that period of time?

Well if you recall Charity Ellis took over that division back in April of last year. And since then, we’ve combined the management team where we had Talent kind of run by itself – and then multi-family ran by itself. So what Charity has done is gone through and take it because there's many, many lessons that you learn in the Multifamily side that can be taught in the Talent side. So we now have a management team that crosses both of the brands and that's been very helpful. We've identified some things that we feel will be helpful, being able to give them a little bit, some support that they didn't have before. And we also believe that one of the things that they've learned is if they go into a market that we need to be in a city that has, I think, it's six stories for it to be a market that makes sense for the Talent Group when you are talking about commercial buildings. So the expansion is not as many places because we've learned that it doesn't make sense if there's not the right type of buildings there, just like when we go in and expand the Real Estate and Multifamily, we know how many units make sense for us to be in there. So those are the things that we're learning right now. But I think the biggest change that we've seen in this past year has been the fact that we now have shared management between both of the brands. And I think that that's going to support and prop them up to be able to move forward.

Okay, great. Thanks for that.

There are no more questions at this time. I would like to turn the conference back over to Beth Garvey for any closing remarks.

Thank you. And thanks to all of you for joining our call today. As we close the books on a productive 2019, I'm looking forward to updating you in May with our Q1 results. Have a great rest of your day.

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