Good day, everyone. Welcome to the BGSF, Inc. Fiscal 2025 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 Advisors. Please go ahead.

Good morning. Thank you for joining us for today for BGSF's first quarter 2025 earnings conference call. With me on the call today are Beth Garvey, Chair, President and Chief Executive Officer; and Keith Schroeder, 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 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's 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.

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 12 to 18-month timeline we previously communicated remains realistic. This month marks the first 12 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 this strategic work. We will not be taking questions related to the strategic review today. Total revenues for the first quarter of 2025 were $63.2 million, down 8% for prior year comprised 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 quarter, 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 $2.4 million with an EBITDA margin of 3.8%, and our adjusted EPS was $0.05 per share. For most US businesses, tariffs did not impact first quarter results. However, uncertainties and concerns over the administration's trade policies created headwinds in 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 a 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 turnovers. In 2024, we restructured both divisions and streamlined costs to align management more closely with the producers and we…

Thank you, Beth and good morning to everyone. First quarter revenues were $63.2 million versus $68.8 million in the year ago quarter. We are pleased to report that the Professional revenues increased sequentially from the December quarter 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 in 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 in 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 $20.9 million and 33.1% compared to $23.4 million and 34.1% in the year ago period. On a sequential basis compared to the fourth quarter of 2024, gross margins were basically flat with the Professional segment down 20 basis points and Property Management up 30 basis points. SG&A expenses for the first quarter were $18.9 million compared to $20.8 million in the fourth quarter and $21 million in the prior year's quarter. These improvements were primarily a result of our restructuring actions taken in December. Our first quarter EBITDA was $2.4 million or 3.8% of revenue, up sequentially from $1.4 million 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 $1.2 million sequential shortfall in revenue. We reported a first quarter GAAP loss of $0.07 per diluted share and adjusted EPS of $0.05. Starting with the first quarter's results, we are beginning to see improvements in BGSF profitability. During the first three months of 2025, we generated $1.1 million in cash from operating activities. Capital expenditures were minimal at $23,000, primarily IT investments. As previously discussed in our Form 10-K filing in March of this year, the company was not in compliance with its financial covenants at year-end 2024 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 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?

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 US 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 US 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 day continue to improve each month. Although, progress is slower than we would like, we are seeing measurable progress. Last Friday we saw the employers added 177,000 jobs in April, which signals that the label market remained 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. And as the broader markets and industries adjust to economic changes and normalize, we are confident that corporate leaders will invest to grow which will provide a positive environment for BGSF growth with our customer partners. Now I'll turn the call back over to the operator. Operator?

Certainly. The floor is now open for questions. [Operator Instructions] Your first question is coming from Jeff Martin with Roth Capital Partners. Please pose your question. Your line is live.

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.

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.

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 I would imagine you don't have a ton of visibility, but just wanted to throw that out there for comment.

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.

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 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?

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 like 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 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.

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?

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' 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.

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 have you made recent progress with securing those preferred partner type agreements? Is there still a long runway to go there?

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's 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 and 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.

Great. And 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 timeframe of when that may occur?

We're doing everything that we can to get us back to the position of the growth trajectory that we were on. And we are seeing positive signs in that happening right now.

Great. Thanks for taking my questions.

Sure. Thanks, Jeff.

Thank you.

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

Good morning, Keith. And good morning, Beth.

Good morning.

Good morning.

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.

Well, we beat the estimates for the first quarter on the revenue line. We beat them on 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.

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

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.

Okay. Great. All right, thanks.

Thanks.

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

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.

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 that -- 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.

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 build 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?

Talking about a shift within Professional?

Yes. So Professional segment revenues declined in the fourth quarter, but they increased here in the first quarter.

Yeah. They did increase in the first quarter. Hang on a second. Let me pull up the numbers. Make sure exactly what you're looking at here. 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 let's say April looked good in both sides of business.

And Keith, that's the normal seasonal trend then that I'm getting confused here with, is it not? Q1 is normally up versus Q4.

Q1 in Professional. In Q2, there's some uptick, but it's not huge. It's PM where it starts to grow. And from a -- so -- 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, that growth for the last three months. So, not only are we seeing growth on a quarter-over -- or month-over-month basis, we are seeing it come in above what we expect seasonality. Does that make sense?

I think so. But were you talking professional services or were you talking…?

About property. Property is much more seasonal than Professional.

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?

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 map, territory cities that we went in and territorized because we had the salesforce technology.

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 there a green shoot with that or is that just what we would have come to expect in Q1 versus Q4?

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.

And Beth, that would primarily be due to just timing or these projects that get extended because…?

It's year-end, Bill. It's like a lot of our customers will have their budgets reset. And so, we usually see some adjustments because of budgets being reset at the end of the year.

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 cost and they want to come out stronger? Or is it simply existing projects that get released?

Historically, in a recession, our industry is the first to go down and the first to come back up. But I will say that that's not -- 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 18 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 pursue 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 for a certain amount of time. So, 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.

Thank you both.

Thank you.

Thank you, Bill.

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

Thanks again for joining us for our second -- first quarter reviews. So, we look forward to talking to you in August. Thanks.

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.