Q4 2020 BGSF Inc Earnings Call
Good afternoon, everyone welcome to the.
The BG S F Inc, fourth quarter and year end 2020 financial results Conference call.
As a reminder, this conference call is being recorded.
Now I will turn the call over to Holla I'll share Beanie Investor relations to provide instruction and read the Safe Harbor statement. Please go ahead.
Thank you and welcome to the Bgs that fourth quarter and year end 2020 earnings results Conference call with me today on Beth Garvey, President and CEO, and Dan Hollenbach, Chief Financial Officer after.
After the Speakers' opening remarks, there will be a Q&A session. As noted today's call is being recorded and webcast live a replay will be available later today and archived for 90 days on the company's Investor Relations page.
Now for the Safe Harbor statement.
The discussions today will include forward looking statements, which are based on certain assumptions made my B G. S. That's 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 one a of the Companys annual report on form 10-K, and quarterly reports on form 10-Q and in the Companys other filings and reports with the Securities and exchange.
<unk> 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.
Those these forward looking statements are made as of the date on this call and BG S. F assumes no obligation to update these statements publicly even if new information becomes available in the future.
This broadcast is covered by your 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 the call management will discuss some non-GAAP measures, which are used for internal evaluation and to report the results of the business as useful information to management the board of directors and investors of 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 a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. Please see today's news release posted on the Companys website I will now turn the call over to Beth Garvey Beth.
Thank you Paula and thank you to everyone for joining today's call to discuss our fourth quarter result in a very eventful 2020.
First I hope everyone is remaining healthy and safe.
I'll begin today's call with a review of our operational highlights and segment performance I will then turn the call over to Dan to discuss our financial results and return at the end with some closing remarks on on general outlook.
I'd like to start by taking a moment to acknowledge all our team members at each of our BG S. S business units for their continued hard work and dedication, especially during such a tough year on.
Our business continuity plan executed mid March and the bedrock of our resiliency and fortifying our ability to support our team members to continue servicing our field talent on class partners.
We're in a fortunate position as a stronger company today and with more purpose.
Before I review, our 2020 performance I would also like to welcome our new team members from our recently announced acquisition of momentum solution. We have partnered with this team for many years selling solutions for a drop in technology and we are excited about the opportunities to expand our reach into higher end markets and to drive higher.
Recruiting revenues.
Their expertise that's greatly into on professional segment I T solutions more broadly across our capabilities and client client partner base and <unk>.
Mission their tools are easy to integrate and will elevate our cross selling strategy even further.
Also a great cultural fit and I'm confident that they will add to our growth story in 2021 and beyond.
A year ago. The COVID-19 pandemic had just begun we write a position of strength, having completed some of the targeted investments in our business prior to the onset.
However, no one day, what the duration or the impact of the coronavirus would be personally or professionally.
While the pandemic impacted our 2020 results our teams delivered resilient performance through quick response measures and collaborative strategy to mitigate the downside of ourselves on profitability.
During the year, we took the opportunity to be more intentional and strategically go on the offense when.
We made it a priority to focus on how we can strengthen the business each and every day to emerge stronger as the pandemic subsides.
Most notably we completed several initiatives to support our platform for future growth.
I'd like to highlight several of them.
In February of 2020, we acquired <unk> technologies and neither in 19 consulting and managed services supporting a diversified client base.
<unk> continues to perform a heightened level for us we.
We made great progress on our digital transformation, bringing critical work force technology to our business.
<unk> completed several priority projects during the year, including the implementation of our new deep 365 E Archive ERP system.
We are also seeing the benefits of the power be eye platform for cloud based data insights.
Our website upgrades have enhanced our applicant from client partner and digital experience with much improved functionality scale and speed.
And our automated time card system in real estate is gaining higher adoption levels weekly is currently 72 per cent.
Overall, we completed 14 technology projects out of the original 21 identified in early 2019.
We are making significant progress on the seven additional projects to improve payroll and HR system enhance our applicant tracking system.
Fully transitioned our data center cloud migration and boost our cyber security efforts.
Long term, we will continually integrate enhancements to optimize our technology position.
We also launched a new client contract management system, which will increase the speed and compliance to which new business contracts are executed.
We improved our operational structure with realignment of our division leadership as Berthing further strategically integrating our recent acquisitions.
We entered the Canadian market in Q4, which is a new geography from professional and Barry and in January of this year, we renamed the company could be G. S. S and further solidify our offerings to the broader workforce solutions provider.
Before I go into the segment highlights I'd like to reiterate that during these rapidly changing times the durability of our diversification model continues to help mitigate pressure on our results Bob on creating diversity in both our earnings and our revenue streams.
Let's begin with real estate segment, which continues to experience the largest pressure from COVID-19 pandemic.
Headwinds, including the overnight stop at all non emergency maintenance early on for a sustained period the move to virtual leasing during our high volume season, and the eviction moratorium also played a role and owners management owners and management companies tightening all expenses to prepare for any impact.
The moratorium has been extended through March 31st recently had been under review in the courts.
Despite these headwinds I'm extremely pleased by the progress we have made to strategically position. This segment for growth behind the pandemic and respond to what we believe is a great deal of pent up demand.
As previously mentioned our sales process is evolving from both multifamily and BG talent.
We are selling on new and unique way addressing virtual and in person approaches.
Our sales execution on stronger and we launched a talent acquisition center to optimize our recruiting across our markets and streamlined customer on talent relations.
We have an aggressive plan to accelerate our time on acquisition pool in multiple markets throughout the throughout the year and are pleased they are breaking down and we are breaking down our individuals and our hubs to work day market will now have a local sales person and a recruiter in the market versus the recruiter beaten and hub it wasn't asked.
As mentioned, we are working on differentiated approaches and seeing solid progress as we fill the pipeline with client opportunities. We are better positioned for the planned recovery of this segment with expectations of a stronger second half of this year.
Turning to the professional segment. This segment continues to benefit from higher demand as customers move to the cloud and cyber security is prioritized.
Sequentially stronger.
On order flow tapered off in the fourth quarter with the completion of some large projects. We also saw extended time off during the holidays due to the pandemic and some engagements were pushed into Q1.
However, we are seeing a solid pipeline of proposal activity with the reset of January 2021 budget and the expansion of our strategic accounts teams.
Additionally, Additionally, as I mentioned the momentum solutions team brings greater opportunity for our managed services offering and builds on our base at multiyear engagements.
Our division restructuring in Q4 is now aligned with Ed drop American partners extrinsic and momentum solutions into our I T consulting business unit, while XI from envision technology now make up our infrastructure and development business we.
We expect this realignment will position that came for a resurgence in revenue to pre pandemic levels.
Additionally, we integrated our finance and accounting brands into one business business unit, which would also drive cost efficiencies over all of the restructuring efforts better aligning our leadership and resources across our professional solutions offering and we expect it will support sales growth and strong client partner relationships going forward.
Lastly on industrial had tremendous finished the year during the quarter, we saw significant growth with current clients as well as new engagements. This segment provided a nice lift to our overall performance driving better than expected results given the tailwind in online shopping and warehouse labor shortages as a reminder, we are well.
All positioned in this vertical at 17% of our business is on site with a high retention rate. We are pleased to see momentum continuing at this team built their pipeline.
During the year, a tremendous challenges we proved our ability to overcome adversity and execute in a very different environment.
We accomplished a lot of heavy lifting in 2020, making strategic changes in our sales efforts on marketing, our technology and strengthening our leadership structure.
Our culture is also driven by continuous improvement one that harnesses, our individual and collective perspective and is built on diversity equity and inclusion as.
As we discussed last quarter, we formed a day Eni Council, which is now comprised of more than 45 people and represents broad perspective across our organization.
We will continue to build out our kpis to support our DNI pillars of excellence and work to enhance our diversity foster inclusive experiences and deepen our community engagement with that said I'll now turn the call over to Dan to discuss the questions. Thank you Beth and good afternoon, everyone. Thank you for joining US today, we filed our form 10-K for the fiscal year.
Ended December 27, 2020 earlier today, so I'll focus my remarks on the key financial highlights for the quarter.
Full year period.
We ended the year on solid footing supported by our diversified business model as Beth mentioned, we leveraged several IP roadmap projects that were well underway at the onset of the pandemic and has put us in a much better position domestic.
While we are maintaining our conservative approach to expense management, we are resuming our remaining projects.
As a reminder, the board approved $10 million in early 2019 for a three year plan to support these projects.
We are well underway to maximizing our digital transformation, which should allow us to benchmark our goal of achieving 10% operating efficiencies. Additionally, we are going to open roles that were on hold last year.
Before I review the numbers as Beth mentioned, we announced the acquisition on momentum solutions early in February I would also like to welcome the entire team to the Bgs debt family. We are excited about the opportunities. This partnership brings across our professional division to expand our footprint into a higher end market with increased margin potential.
And now moving on to the numbers.
Overall consolidated fourth quarter revenues declined by three 6% to $69 7 million compared to Q4 2019 revenues were largely impacted by a 23, 9% decline in real estate offset by an eight 2% increase on light industrial and a $9 $9 million.
<unk> from our two acquisitions on the professional division.
So on fee showed solid improvement up 83% compared to the same quarter last year driven by the addition of our retained search firm.
Jeff mentioned the extension of the moratorium on evictions and other headwinds continue to pressure revenues from real estate.
Keep in mind this may be delayed spending, which we believe is creating a revenue backlog post moratorium.
Sequentially. We saw continued stabilization with Q4 revenues down two 5% versus an eight 9% sequential decline last year. This was supported by light industrial exceeding expectations and delivering a 12, 3% sequential increase versus the three 4% increase last year.
Real estate declined seven 1% versus a 27% sequential decline in 2019.
Our professional division showed solid progress early in the fourth quarter, followed by a slowdown due to an extended holiday break from large project completions and a year end budgeting shifts compared with historical norms.
I wanted it on 8% sequential decline versus the 5% decline last year.
Cross selling efforts for the professional growth remained robust as we continue to accelerate these efforts, which are becoming a more meaningful part of our overall revenues for 2025, 9% on professional revenues and six 7% of gross profit were generated by this program up from three 8% and five one.
Percent in 2019, respectively.
Our current goal is to generate 8% of revenues from cross selling yielding 10% of gross profit.
For the quarter consolidated gross profit improved by 6% to $19 3 million compared to Q4 2019.
As a percent of revenue gross margin increased by 110 basis points to 27, 7% benefiting from the higher revenues in professional as a result of the <unk> acquisition offset by decline in real estate.
SG&A expenses increased by $1 3 million or nine 7% compared to the same quarter last year, primarily due to the additional expenses from our two acquisitions offset by our cost mitigating actions and reduced legacy operations selling costs.
As a percent of revenue consolidated SG&A expenses in the fourth quarter was 21, 5% versus 18, 4% last year, reflecting the deleveraging impact from revenue declines discussed earlier.
Fourth quarter net income was $2 2 million or <unk> 21 cents per diluted share compared with net income of $2 7 million or <unk> 26 per diluted share in the same quarter a year ago.
Adjusted EBITDA was $4 6 million or 28 cents per diluted share compared to $6 3 million or <unk> 37 per diluted share in the same quarter a year ago.
Physical revenues for 2020.
Were $227 9 million down five 6% year over year, while gross profit was $76 2 million down five 5%.
Okay.
Joining us.
The effects of the COVID-19 pandemic greatly impacted revenues and drove a 28, 7% decline in real estate offset by $36 $1 million revenue contribution from our two acquisitions gross profit held steady at 27, 4% per both periods benefited from higher gross profit.
But across our professional segment.
Net income for 2020 was $1 4 million or <unk> 14 per diluted share compared to net income of $13 2 million or $1 28 per diluted share 2019.
Current year net income included an impairment of goodwill and certain intangible assets of $5 4 million net of tax. This was recognized in Q2 on our finance and accounting divisions.
Our effective tax rate was 26, 3% this year compared to 24, 5% from 2019 net.
Adjusted EBITDA was $18 7 million versus $26 6 million in 2019, and adjusted earnings per share decreased to $1 34 versus $1 68.
Our SG&A expenses for the year increased by $4 4 million, primarily due to the additional costs from our two recent acquisitions additional Iot roadmap costs and transaction fees offset by a $7 $3 million decrease in legacy operations selling cost.
And our cost mitigation actions.
While full year 2020 results reflected challenges presented by the pandemic, we maintained steady margins continued to generate solid cash flow and preserved our liquidity position.
Cash generated from operations increased by $4 3 million, primarily due to the question on receivables and the impact of a $7 $2 million FICA deferral.
Dsos at the end of the quarter increased to 58 days versus 53 days at the end of Q3 and 55 days at the end of 2019.
Leverage remains under two X is debt to adjusted trailing 12 month EBITDA ratio was 185 at December 27, and during the quarter, we reduced outstanding debt by $2 4 million.
We were pleased to see the board of directors approved our 25th consecutive quarterly dividend payment of <unk> 10 per share.
While the board reduced the quarterly rate of <unk> in Q2, as a precautionary measure to preserve liquidity during the initial peak of the pandemic before a double the rate to 10 since after the third quarter.
So further evidence of the strength of our business our balance sheet on our cash generation potential.
I will now turn the call back over to Beth for closing remarks.
General outlook for 2021.
Dan I'm extremely pleased with how our entire company is executing 2020 was a year of resilience preparation automation and restructuring for BG assets.
We executed well to optimize our operational structure and we are already off to a strong start to the year.
We were also honored with several industry awards in 2020, including the number seven top staffing agency by the Dallas Business Journal 70 largest staffing agency and 15th largest stack.
Staffing agency in the U S by staffing industry analysts.
And we received accolades from smart resources and capital starts from best of staffing and client and talent satisfaction.
From an outlet perspective, our teams have aligned strategic plans to drive improvement relative.
The improvement results for 2021, our real estate segment is working to relaunch markets. After the 2020 pandemic created a pause with the moratorium in place there is still some level of uncertainty.
Another extension, but we anticipate a better second half as delayed capital projects that should come back online.
For our professional group, we anticipate strong synergies from the momentum solutions acquisition and addition to follow on project activity.
We also see our cross selling focus drive higher demand for our differentiated solutions offering flat.
Industrial continues to execute well strengthening existing client relationships and building new engagements.
The M&A pipeline remains fairly robust with a steady flow of acquisition opportunities. We have a disciplined approach focused on quality companies that offer geographic and brand diversification within our sector specialties.
We seek new are complementary high growth areas and those that are synergistic to margin enhancement quickly accretive to EBITDA and a strong cultural fit.
We believe continuing to build our IP solutions metrics.
Further scale, our offerings and expertise and our professional segment our.
Our momentum solutions acquisition is a great demonstration of our M&A strategy to enhance and expand our portfolio of service offerings and capabilities.
From an industry perspective, we are encouraged to see that staffing industry analysts forecast for overall industry growth of 12% for 2021. Additionally.
Additionally, labor market reports and temporary staffing volume point to improving employment trends from the trough of the pandemic.
Within workforce solutions. The U S Bureau of Labor Statistics showed solid improvement with February 2021, temporary penetration rate, 194% compared to the April 2020 trough of 157%, which is about the February 2020 pre pandemic level.
Of 193%, we are very well positioned to improve our market share and leverage our diversified offerings.
In summary, we turned the disruptions we faced in 2020 into a positive force to reset our opportunities for growth and to seek ways to empower our team members.
In turn this drives innovation ideas and promotes overall value creation for our stakeholders. It's also believes that the hallmark of our success relies on a strong corporate culture.
And holding true to that philosophy has kept our teams engaged supported and invigorated as we manage through the crisis.
Please emerge stronger with higher conviction to deliver improved results as we enter our next phase of long term growth on.
Truly excited about the year ahead and remain highly confident in our ability to take advantage of the many opportunities in front of us to build long term shareholder value.
Bad debt I will open the call up for questions.
Thank you we will now begin the question comes from the question.
To ask a question you May Press Star then one on your Touchtone plus on your if youre using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Brian can Slinger with Alliance Global Partners. Please go ahead.
Hi, everyone from Jacob on for Brian.
Earlier this week, a federal judge in Texas to clear the eviction moratorium unconstitutional and NAV it seems somewhat.
Theyre comply or there could be on it jumped is from.
Injunctive relief Whats your view on the Wyndham Moratoriums and when it does can you quantify the step up in revenue in PT staffing business and how long it might take after that moratorium is lifted.
And well I think that would be better able to answer that question at the end of this week. So national apartment Association actually has there.
Lobbying week is actually happening right now so they are in front of a lot.
As the.
Logging people there in front of a lot of the.
Government people there in front of a lot of the people that are making these decisions on moratorium. So.
Article flying around everywhere, there's speculation flying around everywhere, so I'm not really sure how to answer that today, but I feel like we would be in a better position after.
In a week when they on that and I believe on the Hill I should say.
And what that means to us there are a lot. There's a lot of moving right now with rent relief and those things do give a positive spin to the management companies and now that theyre getting something thats, just where they weren't getting anything so now if there's some sort of rent relief and that they can manage day, we do see that there we do feel like the opportunity.
For us in the future. It's just depends on how quickly that really starts to hit the management company.
Okay, Oh, I know most of the M&A is around adding more geographies and logos, but has the company thought about and tuck in acquisitions on the payment side of the real estate business.
And I'm, sorry on what side of the real estate business.
Payments.
And we have not.
Any tuck in acquisitions in general.
Well in that sector. We are the largest we've had several that have been brought to us for real estate that do the same thing, but they're always in markets that we're already in and we already have the bulk of the business. So theres really not reached impressive by an acquisition of some place that we're already in and we are the largest as far as we know.
In real estate supplier.
So I just don't think from an acquisition in that area is.
In the works right now that doesn't mean that we wouldn't look at other opportunities that help support the real estate business and we have launched a supplier.
Project right now so people who are suppliers to multifamily and we have started to help in those areas and I think that that could be an expansion for us as well, but as far as.
It's doing on payments out of it now we have not looked at that.
Okay, and just one more from me as more businesses open up can you talk about the challenges on staffing deliveries such as personal versus you'll note delivery do you expect there will be a hybrid model going forward or will that be determined on a customer by customer basis.
There already is a hybrid model out there and it all and it is on a customer by customer basis. So theres a lot of people that are.
Are adopting they work from wherever forever and model and then there are some that are starting to think about and how they may want to do their new hires. So if you are being on boarded on your new higher than you would come in for a while and then be able to have some kind of opportunity to go out there is people who are looking at it from our perspective.
And whether or not some of the successful and being able to work from home and if they're not successful BNET from work from home, bringing him and for additional coaching so there's different models on that and that regardless for the most part I don't think that everybody is really decided how that's going to shake out and I believe as the shot start to be more and more prevalent around the U S.
I think that people are still at the point right now where we're getting ready to start really looking at a matter of fact I'm on.
Paul This next week on for Dallas Regional Chamber in regards to what some of the businesses around Dallas are getting now that you no doubt that Texas is up and that massive smart and people are starting to be able to get shot. So I think it's still evolving I don't think we're there yet, but I think debt and I don't know that it'll ever go back to everybody has to be in the office on a very good company.
And then you decided to do that but I do think there'll be more of a hybrid model.
Great. Thanks for taking my question.
Hello.
Our next question comes from Jeff Martin with Roth Capital. Please go ahead.
Thanks, Hi, Beth I day, I hope Youre doing well.
Hey, Dan it's Jeff.
Beth I was hoping you could speak to.
The larger geographies with what's your and I know you touched on it a little bit on real estate side, but curious if you're seeing different.
<unk> dynamics within your different markets given each state has its own.
Different sets of guidelines on timing of listening restrictions.
I know youre not.
As much to California.
But curious about some of the other major geographies that youre in.
And what the trends youre seeing on lately.
Well, we have a lot of our markets that kind of went on pause during COVID-19. So you know keeping in mind that if we have one person in a market and that person leaves and we're not actually in that market right now right. So and we had about 18 locations that came offline during 2020.
And we are in the process and really bringing back 10 of those this year slowly.
We're not seeing any every market's a little bit different.
Net market share more.
Suburban kind of away from and.
Net New York city's or the Dcs are the Chicago, we're seeing a little more activity in those and we are in the larger markets.
But again I think we're still early in that I will say in the last two day.
And we have hit our head count on our budget, which is the first time, we have done that said.
February of last year.
And that's across all three business lines or that's just that's just real estate okay.
Real estate.
Hey.
And then relative to debt.
That's a industry growth estimate of 12% per this year.
Not counting on real estate segment, how do you feel about that type of growth rate potential for.
Yeah, Youre light industrial on your professional units.
That's a combined percentage Jeff.
I believe that.
Our.
Hey, professional is right around that 12% I think theyre predicting something around 2% to 3% for light industrial So I think it's just you know what.
But the net adds at the combined rate and we feel good about and overall growth along those lines.
If you put if you roll this all together.
Got it okay.
And then with respect to your actually your road map.
You've made tons of progress I think you've done a lot of heavy lifting what what does it look like for this year and how does that impact.
EPS I know you've quantified that in the past I was curious if you can do that for you.
For us again this year.
Okay.
It's the same as it was last year in terms of the P&L.
P&L impact cash flow is there'll be about the same because capex is around the same.
So I think.
So it shouldnt be much different this year, so we'll see a tail off beginning.
In the latter half of 2023.
Got it and in terms of the of the initiatives what are some of the bigger pieces that are there.
Theyre going on now and you know what what's the timing in terms of completion on those this year.
Well, we actually have some pretty big ones that are going on right now the ones that we initially worked on all the things that we're gonna be behind the scenes the ERP the power be eye and things like that so we've now moved into the things that are more front office.
Related.
We're working on payroll billing.
Our applicant tracking system at <unk>, and our CRM and so on.
All of those things are now and the I T Department has done an amazing job in doing.
Information gathering and as to what what we're looking for and what we need.
And they put together.
A spreadsheet and they're using a tool called all loans to go through and didn't have the rfps and do that and get the gathering back in and they're supposed to present to us in April what there.
Suggesting that we do for those technologies and then launching it this year, which would then go live date in April of 2022. So.
It's a very big initiative, but we've done a lot of work in making sure that we can.
Line them up together, so that when we have our front office capabilities with our applicant tracking system that it lines up.
Well with our payroll billing so that all launches out at the same time seamlessly.
Okay great.
I wish you luck to share and nice job managing through a tough time last year.
Thank you.
Good to talk to you.
Me too.
Again, if you'd like to ask a question. Please press Star then one.
Our next question comes from Howard Halpern with <unk>.
Talk with brothers. Please go ahead.
Youre welcome.
Congratulations on the fourth quarter guys.
Thanks Howard.
What do you believe the impact from momentum will be first in terms of what did they generate in revenue last year and what are they going to bring to the table in terms of cross selling or enhancing your current operations.
There are about there about three they were running about $3 million in revenue.
<unk> of that was through being marketed basically through edge rock.
So a couple of things one day to a higher end.
Delivery model.
Do you use a bench model, which is a new thing for us and they have a lot of long term contracts.
We think that the ability to cross sell and leverage that higher end business.
Could be.
That's why we bought them.
Okay.
And then the.
Other thing you've always look at is what if somebody else was Boston what would happen to that business.
But if you think about Howard and project management tools. So they they have technologies.
Oh you.
<unk> is putting in a people soft at platform.
So with <unk>, we now are going to be able to have them go through and project managers and Oracle and then work day in and serve its now so we can really build out the technologies that we have and have them project manage it for us.
Huge opportunities for us and they're they're coming on strong.
And have we've already put them in front of several of our customers that we have and they are already winning deals across the board for us. So we're super excited about them.
Okay and you had mentioned early in the call.
About entering Canada, what do you view, the short and long term opportunities are in Canada.
Yeah.
And it's hard to tell it's early we don't know, but I mean these are these are a lot of our bigger companies.
The consulting companies that we would do business with the baskets together.
And with Amazon and Amazon Amazon.
And so these are bigger companies in there. So we don't really know we just have had a lot of people ask us to go and a lot of business that we've had to turn down because of these work there. So.
We'll see what happens we're just putting the word out now that we're ready to go and bring it we're ready.
On a structure in place.
Yes.
And I guess you had mentioned that also capex should be in that low 2 million dollar area for this year.
Yes, I think we are at 2122. This year, we should we should be right around that number again.
Okay.
Just one final one I mean, hopefully you survived the Texas storms, but debt.
Disrupt any business for a couple of weeks down in Texas for you.
It did yes.
One week was totally yes it was.
So.
Oh, no, okay, but everybody says that.
We're seeing that bounce back from it you know so business still has to happen. So you know some other companies that didnt necessarily get to work that week are doing double duty to make up for it but it wasn't it was a tough week.
Okay.
Okay.
Thanks, and keep up the great work guys.
Alright I appreciate it.
Okay.
Next question comes from Michael Glick with Chocolate Brothers. Please go ahead.
Please go ahead.
Uh huh.
Good day.
I'm, sorry, Hi, it's Mike Tag, which I had the mute button on like in India.
I just want to thank you guys from working working day last year wasn't the year you wanted to be when you started the year, but that's true for everybody, but thanks.
I just had one follow up question. If you will because most of my questions are answered.
If you had to guess about the coming real estate recovery and what the backlog of activity might be I mean, how.
From the hip but how do you feel how do you feel kind of laid out this year.
We anticipate remaining relatively flat through.
Through the first two quarters, Mike so in.
I guess, hoping as the war.
Right forecasting expecting debt.
As the openings develop and as the shops.
Become more prevalent that we should see some ramp up in the third and fourth quarter correct.
Good I guess.
Find out like everybody else.
Yes.
Yes.
Alright, Thanks, Melissa keep up the good work and.
I'm thrilled okay.
Okay, Yes, looking forward to it.
Take care.
You too.
Okay.
And our next question comes from Daryl Davis private Investor. Please go ahead.
Hey, Beth day Dan.
Hey, Dara.
Congrats on setting yourself up for a successful future and closing the door on 2020.
I got it.
[laughter].
Mike My question your focuses on SG&A, but I have to apologize first off.
Disconnected during this call. So if this has already been hit I missed the second I'm only on page 26 of the 10-K and I haven't seen the answer yet so it might be in there.
So historically you have maintained SG&A expenses, I mean going back five six years seven years.
That were non intuitive I mean like <unk>.
Lower as a percentage of revenue, though your operating margins were higher as a percentage of revenues and I can give companies names, but just think of some low margin peers. They run.
Tight SG&A, but also low.
Operating margins there she and Dave might be on the 12 13 14 per cent range and on some of your higher end peers and you can think of those where I could name them more on the IP space.
They run.
Operating margin like eight 910%, but they might have SG&A 'twenty to 'twenty, 632%.
You always have been weird because youre like teens.
14, 16, 18% per.
Or is she.
SG&A, but your operating margin has really been like cream of the crop really impressive.
So it's non intuitive and that's what I mean, when I say non intuitive.
I'm curious this past year, you jumped about 200 basis points and you explained that in your release that.
The one from about 19% to about 21% was attributed to the two acquisitions both of them on the IP space.
I'm wondering generally speaking looking forward, we probably should expect similar things going forward as you expand on it.
More specifically looking backward at legacy this is really aimed at Dan.
If we just looked at legacy SG&A year over year.
2019 versus 2020, where they essentially the same.
No.
As a percent.
Yes.
They probably were up slightly because we couldnt day leverages, particularly on real estate, we couldnt deleverage excuse me as fast as revenues were dropping.
Because you just can't cut out all your head count and your.
You do have your fixed salary costs.
A big portion of their numbers, which are commission driven where obviously you affected in bonuses were affected.
And we dropped out travel and entertainment.
I haven't seen a meal come through and forever. So.
So.
I think across the across the operational divisions, we could probably say debt on the on the on the.
Home office side.
We started investing in a year and a half go on our IP.
And you see that both in the IP roadmap numbers as well as our IP team and our HR team when Beth took over three years ago, We had one benefit an analyst and our HR team. So we've been investing heavily in that HR team.
As compliance changes.
As.
As we expand in to now 44 States and Canada.
Our risk from from not only a labor standpoint, but from an insurance standpoint becomes higher so so we've made significant investments there.
Got you.
I do want to just mentioned one thing just for anybody who's listening are going to read this tomorrow regarding the eviction moratoriums.
I think a lot of interest investors might think they come and go they are historically singular and you'll have to take my word for it anymore. Just curious can read Emily been for.
Wake Forest.
Herbert starts have been very helpful. These don't come around we should not be associated with regularly with sanctions. They theres been three in the past on the.
A history of our country.
Theyre not theyre not usual.
Okay great.
Great.
But nothing that will take too much guidance.
Yes.
Our industry is helpful for everything is moving forward. So I mean, we had our staffing industry conference this week and.
But what we're definitely in a V recovery.
And I think that that's that's a good thing.
Great. Thanks, so much.
Hi, good afternoon.
Again, if you'd like to ask a question. Please press Star then one at this time.
Showing no further questions. This concludes our question and answer session I would like to turn the conference back over to Beth Garvey for any closing remarks.
Thank you Sir we appreciate you taking the time to join us for our call today and we appreciate your continued support we look forward to updating you on on our first quarter results in May.
Please stay safe and healthy.
The conference.
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