Good morning, everyone. Welcome to the BGSF Inc. Fiscal 2023 Fourth Quarter and Full Year Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded. Now I'd like to turn the call over to Sandy Martin, Three Part Advisors. Ma'am, please go ahead.

Thank you. Good morning, and welcome to the BGSF 2023 Fourth Quarter and Full Year Earnings Conference Call. With me on the call today are Beth Garvey, Chair, President and Chief Executive Officer; and John Barnett, Chief Financial Officer. After our prepared remarks, there will be a Q&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 discussions 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. During the call, management will also reference certain non-GAAP financial measures, which can be useful in evaluating the company's operations related to the financial condition and results. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered as a substitute. GAAP and non-GAAP measures are reconciled in today's earnings press release. I'll now turn the call over to Beth Garvey. Beth?

Thank you, Sandy, and greetings to everyone on today's call. Fiscal 2023 marked a pivotal year for BGSF characterized by significant achievements and the successful execution of our strategic and transformative plans. We are pleased to report over $20 million in operating cash flow, accompanied by a nearly 5% increase in revenues to $313 million. It's worth noting that fourth quarter of 2022 included an extra week of operations due to a calendar shift. On a same-day basis, we estimate 7% growth in total 2023 revenue compared to an adjusted 2022. In specific segments, Property Management revenues grew by almost 5% on a same-day basis for the year, while professional revenues experienced an 8% increase on a same-day basis. Notably, professional revenue in the second half of 2023 was intentionally lower due to a strategic shift away from lower-margin IT placements. Our 2023 initiatives involved successfully integrating Home Solutions acquired in December of 2022 and acquiring a Royal Consulting in April of 2023. These acquisitions provide clients with high-end finance and accounting workforce solutions and robust nearshore and offshore development capabilities. Furthermore, our strength in partnerships with leading technology companies, including Workday, ServiceNow, Microsoft, SAP, Oracle and Salesforce have amplified the BGSF brand fostering new business opportunities. The rebranding to BGSF from various acquired trade names further enhance our brand recognition in 2023 as well. I'm immensely proud of our team's dedication and hard work, which has been instrumental in advancing our vision. The March CEO Confidence Index pole hitting its highest level since 2021. It gives us confidence in the continued growth of U.S. businesses. Our strategic decisions regarding service offerings are well positioned for growth in 2024 and beyond. Now I'll turn the call over to John.

Thank you, Beth, and good morning, everyone. As Beth mentioned, 2022 was a 53-week fiscal year and 2023 was a 52-week fiscal year. The extra week in 2022 was in the fourth quarter, making the as-reported year-over-year fourth quarter comparison difficult. 2023 total revenue was $313.2 million, up 4.9% on an as-reported basis. On a same-day basis, adjusting 2022 for the extra five days, total revenue was up 7%. For the segments, reported professional revenue for the year was up 6.1% on an as-reported basis and 8% on a same-day basis. The increase was driven by the acquisition of our Royal Consulting and Horn Solutions. As we integrated Horn Solutions in 2023, we lost the ability to cleanly separate our organic or existing business from the Horn Solutions business. For the year, and on a same-day basis, we estimated that our organic professional business declined in the mid-teens in percentage terms. Property Management increased 3.3% on an as-reported basis and 5% on a same-day basis. Gross profit for the year was $112 million, up 8% from the prior year, and gross margins were 35.7%, up 100 basis points from 2022. Recall that our 2023 operating results included a onetime $22.5 million pretax noncash brand name impairment charge related to the rebranding project. Excluding the nonrecurring impairment charge, transaction fees and acquisition amortization, our reported loss from continuing operations of $0.95 per share is adjusted to $1.19 earnings per share compared to $1.26 earnings per share in 2022. We increased adjusted EBITDA from continuing operations by 15.9% to $25 million compared to $21.7 million. Our adjusted EBITDA margin grew from 7.3% of revenue in 2022 to 8% in 2023. Turning to the fourth quarter, revenues were $73.6 million compared to $77.3 million in 2022. On a same-day basis, adjusting 2022 for…

Thank you, John. As we reflect on 2023, we recognized the challenges posed by tough double-digit sales comps from 2022, coupled with economic uncertainty. Despite these challenges, our commitment to short-term and long-term strategic initiatives supporting our teams and streamlining operations has positioned us for success in 2024 and beyond. Looking ahead to 2024, we plan to leverage our proprietary territory mapping tool for better sales force deployment and property management and continue up-scaling talent through our virtual training partnerships. On the professional side, our partnerships with leading technologies and our recent appointment as a direct Workday service partner elevates us to new heights. We are also seeing momentum growing in the Managed Solutions and cross-selling of our nearshore and offshore IT services. Our strategic repositioning including higher value consulting, management solutions and a unique property management platform sets us up for long-term success and shareholder value creation. I'm extremely proud of the progress and execution on building blocks for our future growth and profitability, our team's dedication and nimble approach position us well for the opportunities that lie ahead. I look forward to what we can achieve at BGSF in the future. Before we open the line for questions, I wanted to mention that we will be at the ROTH Investor Conference next week and hope to see many of you there. With that said, I will turn it over to the operator for questions.

[Operator Instructions] Our first question today comes from Jeff Martin from Roth MKM. Please go ahead with your question.

Thanks. Good morning Beth and John. Beth, I was hoping you could give us a little more insight in the Professional segment. You mentioned the uptick in the CEO survey first time in two years or so that you've seen that level. Are you seeing that trickle through to the pipeline of business in Professional?

We definitely are. So there's a lot of optimism going on right now at BGSF, the professional group is -- they're a buzzing right now. It's all good.

Great. And then with the Royal acquisition with you now probably coming on a year here. How is the progress towards -- I know the initial reaction towards near-shoring and off-shoring was very positive, seeing that flow through and if so, maybe you can give some anecdotes on what you've seen?

Well, it took us a while to really figure out their capabilities down there. They have such a robust, what they call products that work so they can do many different things. And so it took us a while to pick out all the many different things that they could do. We're mostly excited about the way they can build some different tools. We have a connector tool that we're working with that connect some ERP systems. Not all the time, do you have tools that connect ERP systems to like a pricing tool, right? So we're able to start to build some AI products that help connect those things. We've also got a team of AI group down there that's actually working a lot in building products for some of our other customers. And so the more that we recognize what they do and the more we talk to our customers about what they need. Louis Sanchez, who runs that group has done an amazing job talking to our customers in regards to what they would able -- what's your pain point and what we could do to help them. And so it's been really fun to see all that play out.

And then on the Workday partnership, maybe you could elaborate what that means for BGSF?

In the past, we were -- like a third party, we were proved to be able to do some more, but we were not direct. So we would have -- a second party could walk us into one of our customers. This gives us the ability to be able to go direct. So they have us on their website now as a preferred implementer. And so it allows us really a lot of visibility and not having to wait for somebody else to tag us on the shoulder.

Great. And then I know strategically, BGSF has made strides towards more technologically advanced solutions. And maybe talk about the progression that you've made over the past year, one and a half years since you've layered in some acquisitions to enhance the technology aspect of the offering?

I think there's a lot of things. It's a great question, Jeff. So I think there's a lot of things that we realized as we started to look at the business and acquisitions going through and talking to our customers about that you're needing and then looking at our business as a puzzle pace. What do our customers start with? Well, first, they have to pick their software, then they have to implement it, then they have to customize it. And so how do we make sure that we are that player that goes all the way around the circle. And I think we've done an amazing job in being able to figure those things out. And in doing so, we figured out that we had teams of people who could do really great things and move the business into higher margin. And some of these other project type of work that we had customers asking us to do were really higher volume, lower margin business, and it took two or three people to actually keep that going. And we just decided that it was strategically a good idea for us to shift to be able to do that higher-margin business where we were seeing our customers see the benefit of us closing the gap on their needs. And so that was kind of how we shifted last year. One of the main reasons we shifted last year to get away from that lower margin business to really double down on the things that our customers needed and that we were finding we're really, really good at.

I would say also that we did go through a pretty big transformation, right? Bringing these two acquisitions on board, we had some redundancies, not necessarily, I'd say, redundancies because I think the finance and accounting expertise that Horn brought on board was more higher end, but we had similar groups, right? And so we needed to really organize our business and Eric Peters did a great job working with the professional team to kind of organize our business around finance and accounting, IT, managed solutions and then Arroyo, the near shore, offshore. So -- we spent -- he spent and we spent a lot of time as an organization to get that alignment. And we feel really good about how we're set up and especially in the face of some of this economic flog lifting and more optimism, which we expect to result in higher spend by our customers.

And then one more for me, if I could. On the Property Management side, a segment that's traditionally grown at a very attractive and rapid rate. Do you foresee getting back to, say, double-digit growth in the property management side? And if you're not seeing it now, what kind of environment are you seeing out there currently?

I think we've had to do some adjusting in that segment. We've got more competition out there than we've had before. We've had to change some of the ways we look at different things along those lines. I think our property management, the territory tool that we've mentioned earlier, is really going to help us be able to be more targeted in our sales approach. And I think that's going to be beneficial for us going forward. So we're optimistic about where it's headed, but we also understand that there's -- it's a different environment out there now than what it was three years ago.

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

Congratulations on the solid results and looking forward to 2024. In terms of property management, how many locations did you end the year with? And what are the prospects for increasing the number of locations or splitting locations in 2024?

Believe we are at 64% right now, Howard. And then -- but the way we're doing this territory mapping tools, I'm going to use Atlanta as an example, where we may have two sales people out there now, we may end up having six out there. And so that's kind of how we're expanding our growth from that perspective. So they won't have as many one person won't have as many properties they need to hit. So it will be more targeted. And then as always, we've always kind of looked at being able to be opportunistic in opening different markets out in the U.S. And so we've got a couple that are identified. But right now, we're really going to focus on this territory side because we think that, that's closest to the dollar.

And in terms of how you're set up for 2024. What are you seeing in terms of your own internal productivity based on all the technology that you've put in place to grow the business?

Yes. I think we continue to evolve our systems. And if you look at what we did last year, in addition to -- in addition to the work we did to align the organization on the professional side. We also went through the process of rightsizing the organization and becoming more efficient there. So you would see that in our cost as we went through the year and our SG&A cost as a percent of revenue as we went through the quarters. So we feel like we are in good shape today. Obviously, as we grow, we'll continue to add on to our organization. And we still believe that there are efficiencies to be gained out of our system. And we continue to work on evolving our system to get those efficiencies out.

And I will add to that. I think that we've done a really good job through last year with some of the economic pressures that we had to really kind of rightsize the players on the team. So when we look at it, we're to a position right now where we can bring on a lot more revenue and not have to bring on any more G&A expense. And so I think we feel really confident about that and how we've restructured and position ourselves for this year.

And one last one. You talked a little bit about the customer side and the outlook there. How are you seeing the talent side and bringing on people to fill those to fill the request of customers.

We've talked about in the past, we just have such a great group of consultants and field talent that are loyal to us. And so we aren't really seeing a problem in recruiting right now because we do a very good job in making sure people once they work for us, they continue to work for us. So we're able to redeploy people back out. So we're not feeling a lot of pressure in that area right now, and that's a testament to the team.

Our next question comes from Bill Donohue from Teton Capital. Please go ahead with your question.

Great. Thank you. Would you please dive into a bit more detail on that additional competition that you're seeing on the property management side? And how it's manifesting itself, please?

And we've always had competition, but there's more and more people who've decided that this is an interesting niche to be in. And so we get followed around. So when we open a market, we have some of our competitors that will actually go in and follow us. And so again, it's a testament to us being able to go in and double down on our relationships. That is a relationship business. It is deep and wide. And if you recall last year, we got Supplier of the Year with the National Apartment Association and I think those kinds of things help benefit us and move us above the pack. But still, it changes a little bit how the sales team has to sell, and we are structuring that and moving forward in those directions.

And when you first purchased Royal, there appeared to be some interesting organic growth opportunities. Could you expand on what you're seeing now, please?

There is a lot of cross-sell opportunity with their Royal teams and many things that the capabilities that they have that we've uncovered, as I mentioned earlier. Just knowing what they're capable of doing and then talking to our customers, they do a really good job listening to the pain points of where our customers are going through and figuring out if there's a way that they can help. And we are very careful in making sure that we get Lewis and his team in front of the right people and they move things in a direction. But I think that as we continue to talk to our customers and they continue to understand what we can do, I think there's great opportunity for us in growth in that area.

Bill, this is one of these areas where companies have existing relationships, right? And they may have a nearshore, offshore resources working. And what we've had to do through this process is start with a few people, right? build our reputation with our current customer base and with the goal of proving our capabilities and getting more work from them.

That is helpful. And I do want one point of clarification from your opening remarks. You had talked about learning the capabilities and the ability to tie pricing to an ERP system, that was Arroyo. Is that correct? Or was that another part of the business and I just missed what you were saying.

Tried to tie business -- I'm sorry, I'm struggling with that segment.

So you had referenced that one of the capabilities that you have learned that you have from one of the acquisitions was the ability to tie pricing to our ERP system?

I'm sorry. So there are companies out there that do pricing tools like manufacturing pricing or how to price this product, right? And we have the ability now to do connections with -- the Royal team has built connecting tools that take a ERP system and tie it to a manufacturing pricing tool, right? That capability of feeding that into an ERP system has been lacking. And so we've done a really good job of being able to build that out.

Our next question comes from Brian Kinstlinger from Alliance Global Partners. Please go ahead with your question.

Great. Thanks for taking my question. Sorry, I joined late, so I'm not sure if this was asked. Can you talk about your current appetite for M&A with your recent transactions and solid cash flow trends? And then maybe can you speak to valuation expectations for private companies and how they may have changed over the last few quarters? .

Yes. I think right now where we're at, at making two very large acquisitions going through our realignment process and where we are from a leverage standpoint. We -- unless something that was really a good fit came up. We are looking at acquisition opportunities as they come up. But I highly doubt that we would pull the trigger on anything, except something that was exceptional at a low price this year. This year, we're really focused on execution. We've done the alignment. We believe we have some final -- finally have some tailwinds from the economy behind us, and we need to focus on driving business and full adoption of selling in what we have acquired across our sales platform.

Our next question comes from Mike Taglich from Taglich Brothers.

I hope I didn't miss that. One question. Is there a high low on the growth range on the Property Management business and then the tech business for this coming year?

In percentages about how high we think -- are you asking for guidance?

Are you going to beat inflation or not in tech? Are you going to beat inflation or not in real estate?

I feel very good about 2024.

All right. You want to give a little more specific or you don't feel like it?

I feel like we have great momentum going in our professional group. We have had numerous conversations with a lot of customers who are starting to break free with what they have going on. I was traveling last week with the professional team and with wildly overwhelmed with the positivity that was coming from our customers. So I feel very, very good about what is happening in that area. And I think from the property management group, as we continue to move forward, I know the interest rates for some of these mortgage leases that are coming up. I know there's been some conversations about some concerns out there with owners of the properties in that. So we're just going to watch that. And so -- but all in all, I think that the restructure that we have made through the last couple of years with the systems and with the realignment of our teams, I feel very, very good going into 2024 about the potential of our growth.

Ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Beth Garvey for any closing remarks.

Thank you, everyone, for your time today, and we appreciate your continued support. We look forward to updating you with our first quarter results in early May. Have a great day.

Ladies and gentlemen, with that, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.