Q4 2021 BGSF Inc Earnings Call

Good morning, everyone and welcome to the BG F F Inc, fourth quarter and fiscal year 2021 financial results Conference call. As a reminder, this conference call is being recorded if you would like to ask a question. During the presentation you may do so by press.

And the star followed by one on your telephone keypad now I will turn the call over to how long it'll better see me investor relations to provide the instructions introductions and read the Safe Harbor statement. Please Hello go ahead.

Thank you and welcome to the Bgs at fourth quarter and fiscal year 'twenty 'twenty. One earnings result conference call with me today are Beth Garvey, President and CEO and Dan Hollenbach, Chief Financial Officer. After the Speakers' opening remarks, there will be a Q&A session. As noted today's call is being <unk>.

Recorded and webcast live a replay will be available later today and archived for 90 days on the Companys Investor Relations page.

Now for the Safe Harbor statement.

I want to take a moment to remind you today that describe today's discussion will include forward looking statements, which are based on certain assumptions made by BG is that based on.

Made under the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

The company's actual results may 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 company's annual report on Form 10-K quarterly reports on Form 10-Q and.

In other company 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 and time of this call and Bgs that 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 management believes can be useful in evaluating the company's operating activities and business trends related to the 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.

Filiation unknown of non-GAAP measures to the most directly comparable GAAP measures are provided in today's earnings release posted on the company's website.

I'll now turn the call over to President and CEO Beth Garvey Beth.

Thank you Paula and thank you to everyone for joining today's call to discuss our fourth quarter results and another eventful year.

Before we begin a regular review of operational and segment performance I'd like to highlight the announcement, we made last Tuesday regarding the strategic sale of our light industrial segment, which is expected to close later this month, we disclosed the purchase price of $32 3 million, which represents seven and a half times adjusted EBITDA multiple.

And the form 8-K filed on March 2nd.

From a strategic rationale perspective, when the company was founded in 2007, our revenues were 100 per cent lot industrial as we evolved in strategically diversifying into professional and real estate sectors. In staff continued to develop long term client relationships, creating deep onsite engagements in logistics and warehousing and.

Maintained high client retention.

We completed several strategic initiatives over the past two years to support our overall platform for future growth the sale aligns perfectly with our core strategy to focus on higher margin opportunities with the divestiture. We can fully turn our attention to professional high end IP consulting higher project based opportunities in managed services.

In addition to our niche position in real estate.

We are pleased with our fourth quarter results, which reflect a strong finish to a year that began with considerable uncertainty our ability to quickly and effectively address industry and macro headwinds and to execute internal realignment and restructuring initiatives enabled us to report progressive improvement throughout 2021.

Sully, our timely and strategic acquisition of momentum solutions early in the year drove solid contributions within our I T consulting brands we.

We have greatly improved our market position, which solidifies our outlook going forward.

Underscoring our success is a digital transformation in critical technology, and cyber security system upgrades, which will go live as we entered the second quarter.

So some testing has gone quite well and we look forward to improved operating and process efficiencies later in 2022.

Performance for the quarter was strong the professional segment reported top and bottom line gains led by I T consulting brands, which drove growth in key customer wins and strong collaboration across accounting and finance and our infrastructure and development teams.

I N D is making progress on its rebuild from pandemic disruptions and it's on a continuously improving pace.

Overall, we are working through a productive pipeline to capture higher end I T consulting and managed service opportunities bolstered by elevated cross selling efforts and a broader geographic footprint.

Now looking at real estate the fourth quarter ended the year with the highest revenue and gross profit of 2021 as a result of improved recruiting and direct license. Our teams have excelled in ramping strategic partner programs advancing market Relaunches and supporting our field talent across multiple initiatives I'm also proud to acknowledge several of our.

Team members who've received key accolades from the National apartment Association for leadership and volunteer roles that advance not only our industry position, but our commitment to community engagement.

Overall, we closed 2021 and in a position of strength and executed our strategic leadership alignment operational restructuring and set a course for continued success with that I'd like to turn the call over to Dan to discuss the financial Thank you Beth and good morning, everyone. We filed our annual report on Form 10-K for the fiscal year ended December 26.

2021 last night.

As a result of the definitive agreement to sell our light industrial segment, which operates as in staff. We have determined that this represents a strategic shift in our business model and meets the criteria for classification as held for sale. Therefore, our consolidated financial statements reflect this segment as discontinued operations for the historical period.

As presented.

As a discontinued operation our discussions today on performance and growth rates exclude the light industrial segment for.

For additional details on the Seo. Please refer to our 8-K filed March 2nd and our 2021 and Form 10-K .

Moving to our financial highlights from continuing operations fourth quarter revenue surged 37, 8% to 67.7 million.

Real estate delivered a stellar performance up 54% and professional climbed 28, 6%.

Real estate benefit from continued pent up demand market re launches and improved recruiting.

Professional segment benefited from increasing demand and a $1 $2 million contribution from the 21 momentum solutions acquisition.

Which was offset by a five 5% decline in the infrastructure and development Division.

<unk> has been slower to recover from the effects of the pandemic.

We remain encouraged by activity we are seeing early in 2022.

Gross profit improved 43, 6% to $23 4 million benefit even for real estate growth of 62, 8% and professional up 36%.

As a percent of revenue gross margin increased 141 basis points to 34, 6%.

SG&A expenses for the fourth quarter increased by $2 8 million or 20% due to higher compensation on growth and the addition of momentum solutions.

All set by a net $2 $1 million of cares tax credit.

As a percent of revenue SG&A expenses for the fourth quarter was 24, 4% versus 27, 9% last year.

Adjusted for the carriers credit SG&A increased $4 8 million or 35, 4% and was 27, 4% of revenue.

Net income of $4 3 million or <unk> 41 per diluted share.

Compared with net income of $1 1 million or 10 cents per diluted share in the same quarter a year ago.

As noted Q4 'twenty one included a cares act tax credit of $1 6 million net of tax.

<unk> 15 cents per diluted share.

Adjusted EBITDA was $5 5 million or eight 1% of revenues compared to $3 1 million or six 3% of revenues in 'twenty.

Adjusted diluted EPS was <unk> 29 per diluted share versus <unk> 17 cents per diluted share in the same quarter a year ago.

Sequentially strong momentum carried into the fourth quarter with Q4 revenues up five 5% from Q3, we.

We saw a progressive improvement across both segments with real estate up 10, 6% and professional up two 3%.

And now for year end results.

Only one revenues increased 15, 4% to $239 million.

Real estate was up 33, 8% and professional climbed six 2%.

Gross profit improved 22, 6% to $80 9 million gross margin percent from continuing operations was up 2% to 33, 9%.

Professional segment cross selling continues to drive successful wins and represented 17, 4% of revenues and gross profit in 'twenty one this.

This is up from five 5% of revenues and six 4% of gross profit in 'twenty.

Our SG&A expenses for the year increased 17, 9% to $65 1 million primarily related to additional compensation on increased gross profit.

<unk> solution acquisition and reopening of the real estate locations offset by the $2 1 million carats credit.

Net income for 'twenty, one was $10 5 million or $1 per diluted share compared with net loss of $2 1 million or a negative <unk> 20 per diluted share.

Last year fiscal.

Fiscal 'twenty one included a $2 million adjustment net of tax due to the contingent consideration adjustment and a $1 $6 million net of tax credits.

<unk> net income included an impairment of goodwill and certain intangible assets of $5 4 million net of tax.

Our effective tax rate was 21% for 'twenty, one compared to 26, 3% in 'twenty.

A breakout at net income and per share amounts for continuing and discontinued operations for the year and fourth quarter is available in our 2021 and Form 10-K .

Adjusted EBITDA from continuing operations was $16 7 million or 7% of revenue versus $13 8 million or six 6% of revenues in 2000.

Adjusted diluted earnings per share increased to 98.

Versus 74.

In 'twenty.

As a reminder, in early 2019, the board approved a three year roadmap plan to rebuild our it infrastructure.

Fiscal 'twenty, one, including Capex and SG&A of $4 9 million related to this plan.

We expect spend to trend lower in 'twenty, two as project implementation winds down.

Going forward it spend will address technology enhancements as we continue to improve our systems as well as grow and scale our business.

Moving to the balance sheet, our liquidity position is solid and our leverage ratio of funded debt overall trailing 12 months EBITDA improved to $1 83 at year end.

On a pro forma basis, we estimate our leverage ratio to be under <unk> nine.

Lastly, the board of directors approved and increased our 29 consecutive quarterly dividend payment increasing it to <unk> 15 per share in support of our long term strategy and the overall recovery of our business.

Our balance sheet position and expect to deleverage as a result of the sale gives us ample flexibility to fund our operations, while continuing to invest in future growth and return shareholder value.

I'll now turn the call back over to Beth for her closing remarks, and a general outlook for 2022.

Thanks, Dan.

Like everyone else, we continue to see challenges in the overall labor market given continued workforce shortages.

The labor market is poised for growth with continued signs of recovery ahead within workforce solutions. The U S Bureau of Labor Statistics recorded a temporary penetration rate of 2.09% in January of 2022, which is an all time high.

The September 2021 staffing industry analysts report forecast, 4% growth for the staffing industry in 2022 compared to 16% in 2021, which benefited from a broad based resurgence in temporary staffing within our focus industries I T is projected to grow 6% year over year.

As you move into 2022, we remain laser focused on it and extremely optimistic on the real estate and professional segments. Both of these businesses have made great strides back to pre pandemic levels and we look forward to that natural continuation as we return it to a higher cadence of growth.

As I mentioned earlier, we spent a lot of time over the past year and a half implementing a strategic changes that will make each of these segments even stronger.

Turning to M&A the sell up in stack will allow for debt reduction and more capital to deploy into high end IP consulting installations and high margin managed services as well as drive geographic expansion in real estate, we will focus more time on continuing our organic build growing our professional and real estate segments as well.

And as we look to deploy the capital we will be seeking the right strategic partner that provides geographic and brand diversification into new complementary high growth areas that are synergistic to margin enhancement quickly accretive to EBITDA and have a strong culture fit.

We continue to be grateful to our entire team for their passion and diligence and I want to publicly thank our entire light industrial team and personal languished them. The very best with that I will turn the call over to the operator for questions operator.

Thank you Don if you would like to ask a question at this point. Please press the star followed by number one on your telephone keypad now when propane to ask a question. Please ensure your phone is on mute it locally.

And the first question comes from the line of Jeff Martin from Roth Capital Partners. Please yes. Your line is now open.

Thanks, Good morning, Doug and Dan Hope you're doing well.

Good morning.

Can you can you hear me okay, great. Great can you help me Ruth I wanted to get.

Thanks.

Wanted to give us a little more under the Hood look into real estate looks like things are progressing well good growth in the quarter margin expansion just was curious with respect to your market reopening there.

Yeah.

Can you give us a breakdown of markets reopened in and those that are still kind of opening back up and maybe what percentage of back to normal you are with the real estate.

And while we're tracking where we.

We're tracking way ahead of schedule and actually at this point, which is a good thing and all of the market reopened last year that we expected reopen and we're ahead of schedule now we just had in New York, We have six openings for this year and New York Am I supposed to be and is scheduled for May and I'm happy to report that we had our first plant placement there too.

Weeks ago so.

Things are really progressing very very well.

Yeah.

Great and then you mentioned any slower to recover.

Yeah.

Maybe give us a little bit of detail as to why that is and what your expectation is for that part of the professional segment over the balance of 2022.

Okay.

Well I and they really got hit if you recall from a lot of our customers to just.

That's kind of the lower.

Margin business, and so they've gotten hit pretty hard with some of our larger clients. It just didn't rebound quickly and we have secured some new wins within the R&D group and expanded some of that business and the clients that we typically have that you've heard us talk about going deep and wide into our customers and the team has done a really.

Good job and going in and looking for other business within those customers that we had so we've had some wins hitting that last month or two and should start seeing them and have a nice little recovery into 2022.

Okay, Great and then maybe you could give us a sense for professional in real estate from a high level.

In terms of what's a reasonable growth assumption for 2022, I would imagine professional somewhere in the mid single digit range, maybe a little higher.

In real estate, you know maybe getting back to that.

Historic growth rates, which are now well into the twenty's, if not 30% ranges.

Oh no.

Yeah.

Thank you for the confidence and as Jeff, but yeah.

I think as far as predicted the professional was in the low single digits.

High single digits next year, and we think Thats a reasonable growth plan.

I think on the on the real estate side.

We're sort of maybe a little bit more conservative than that.

Low double digit range right now it's very early we're just in February so yes.

Okay. That's great I appreciate the context, thanks for taking my questions.

Sure.

<unk>.

Thank you. Our next question comes from Paul what Heartburn from Doubleclick.

Please <unk> your line is now open.

Well congratulations on the year end.

And the other things that have gone on since the beginning of the year.

<unk>.

So in terms of the you know.

The technology roadmap most of it now gonna be activated.

By the second half of this year and <unk>.

Start to impact.

Ill.

Your mining operations and improving operating expenses.

And well that is the goal we actually go live on the 21st so what is that seven business days, so where everybody is.

Prepared for that we've got two months in what we're calling hyper care.

That will do additional support you know because we we anticipate as much testing and end to end testing we've already done over the last two months that to try to make sure that it's a smooth transition there'll still be some bugs that will need to be worked out so.

Once we everybody gets used to the system and gets up and going and we've got all the little Kinks worked out of it we anticipate seeing some of that.

Efficiencies that we expected later in the year.

Okay and based on what you've seen in our warehouse.

Oh last fiscal year and going into this fiscal year in terms of cross selling opportunities to generate revenue growth. What what are you seeing as we enter 2022.

Our Gulf of cross sell has always been around 10% and we exceeded that last year. So the teams have done a really good job are our alignment last year with our teams and getting them.

Reporting to one manager or if it's in S. E. P manager I work day manager that'll realignment and restructure we did last year with Super beneficial for them. How we produced in the fourth quarter and so I anticipate that that cross sell effort will continue just based off the fact that the realignment really supports that.

Herds.

Okay and within real estate.

I know you said.

You're ahead of schedule, a little bit in openings, but how has.

Alan.

Figured into how things how growth will proceed in 2022.

Yeah.

And I'm, assuming you mean in regard to the shortage of.

Oh Wow.

I mean it.

Real estate segment you merged the talent.

Part of it.

All of it.

How is that operating within real estate.

It's doing very well and and we've discovered that there is you know a lot of our opportunities in direct hire in real estate and a lot of that comes from the talent side that BG talent side, but.

But the integration of those two together with the management team has also been very good brunch finished success.

Okay, and just lastly in terms of the.

Merger and acquisition landscape out there.

Being in terms of.

Multiple you know multiples out there are things.

Normalizing compared to maybe last year and what you're seeing.

Uh huh.

So I think we've seen the turn in that market that we play in.

And that $5 million ish, plus or minus EBITDA range.

The multiple turns are up a half to a point where they were prepaying.

Pre pandemic so yes.

Okay.

Okay, well gratulation and keep up the good work.

Great. Thank you.

Thank you. The next question comes from the line O'brien inconsistent from Allianz Global Please <unk>. Your line is now open.

Yes, hi back and Dan Nice nice work on the sale of light industrial.

Thank you just to be clear.

Just to be clear on M&A that up.

Last point from pre pandemic, that's significantly down from say the last 12 months similar to the similar to how valuations are training and small caps or are they not coming down that much.

Uh huh.

Sure right I understand.

You can probably depleted sorry, you compare evaluations pre pandemic, which is now Oh I'm just curious how do they compare to say a year ago.

Well, we didn't see much of a year ago.

Yes, so we saw a lot of activity early on probably last summer.

I think in anticipation of the tax rate.

And that's probably the pricing that I'm talking about because that's when we saw activity at startup at least for US went a little cold in the fourth quarter.

I think because everybody was either not going to do it when the tax changed or everybody is so busy they couldnt get anybody to help them.

We just sort of started entertaining again.

And seeing activity flow so.

We were a little busy.

All in and stuff.

And.

Yes.

Yes.

Yeah, Yeah, and then with the increased capital that youre going to be bringing in what kind of investments are you, making both from a go to market strategy, maybe business development resources. In addition to recruiting investor.

Investments that you may need to make.

Well, we're definitely looking at our recruiting efforts in regards to bringing in more recruiters and seeing how that plays out so that that and that definitely is and where the expansion of the real estate group.

They're easy to expand in the market. So we're looking at and things along those lines.

And then once our IP roadmap goes live.

There'll probably be some additional things that we're going to need to bolt on to kind of later in the year I'd say everybody gets used to it. So you know we're going to add.

Going live on what our I T. R. C. I would say is the minimal viable product. So we just want to make sure. We can pay them build putting people out on assignment and then all the bells and whistles will start happening later in the year. So there may be some additional costs with that later on.

Lastly, can you talk about how the spreads are trending for billable staff versus.

Salaries.

Spreads are up.

Most categories.

Yes, so it's.

Spreads spreads certainly are up in real estate.

<unk> been very good at keeping their pricing model working I Wanna say professional.

Probably hanging in there may be down a hair in the Q4, but probably more of a mix of business than it is pricing.

Yes.

Okay. Thank you so much.

Okay.

Thank you. The next question comes from the line of that really babies, who is a private investor. Please <unk>. Your line is now open.

Hey, congrats on multiple fronts Baton Dan.

Thanks.

Hey, Dan.

This is a numbers question I'm not sure if you're going to have at your fingertips, but what we're seeing on our real estate I'm wondering if you have data.

Or rather news for this January .

'twenty two.

Versus pre pandemic. If we said in January 2020 was sort of unaffected by the pandemic do you have those figures.

I don't.

I can tell you that when you look at their third and fourth quarter numbers.

On a run rate there are in excess of their of their 2019 revenue numbers.

Got you that's very helpful.

And then sort of a big question traditional.

Annual looking back on things if you look back at 2021 Beth.

What are one or two of these.

P. J S f's best move and one or two of VTS absolute worst moves.

Okay.

Great question.

I would tell you our best moves, whereas at the acquisition early on aluminum installation.

That was a game changer, it's the professional brands.

We didn't realize how much of a game changer. It was going to be till we got them in and it's just it just continues to evolve into something special.

I would also say that the the restructure of the professional group and aligning those teams you know we had nine different brands and aligning those teams.

It really has helped solidify we saw those results in fourth quarter really kind of just pop out. So I think those are two things that we really did well.

Well as you know supporting the real estate group as they continue to start to reopen some of their brands and some of their markets I think what we could've done better on and you know we when we started seeing life back into things. We got really excited and started doing a whole lot of other stuff and we underestimated the impact that that would have.

On the mental health kind of side of it you know the pandemic and Covid didn't go away. So there were still people that we're dealing with a lot of you know the childcare issues or parent issues or things along those lines and so as we started opening up offices again in and getting all excited and pushing out more initiatives.

We're really good at doing.

Pulse checks with the group every quarter and they were like enough and so we pulled back and paid attention to what we were doing and then got really strategic but the executive team and really started aligning what we were going to push out is it initiative and what projects we were going to work on so that we are.

Everybody in the organization and the executive team knew every initiative that was going on because I think we we're working kind of in silos. It at some point where did.

Did I T group would do something and then your profession was doing something and we didn't realize that was affecting all the stakeholders in it so we had to adjust for that.

Got you.

Specifically.

Very happy with the light industrial sale really congratulations on that.

Big move.

Thank you. Thank you.

I'll put somebody in that thank you.

[laughter].

Thank you. The next question comes from the line of Michael Douglas from tackling robust place Mike July .

It's not open alright.

Alright, good morning, and great quarter.

And Dan Congratulations for us Okay.

Thank you so I guess the first blush is.

Our real estate should have a record year this year right or am I wrong to say that.

I think they're off to a banner year, yes, and Mike how are you thinking there.

Well I'm just doing the math on what you said answer he answered the previous question. So I'm looking at last quarter, So which is spectacular so.

Absolutely terrific.

A couple of quick questions.

Sure.

The I T roadmap what has that done.

And what what kind of payoff should we start seeing from it.

And we go live on the twenty-first so right around the corner so.

We figured you know what it's going to take up the team some time to get adjusted to what the I mean everything changes. So we I mean, it's the applicant tracking system. The CRM the payroll system. The invoicing system. So it's going to take some time to make sure that you know before everybody gets at 100% on it. So we anticipate we'll start seeing some of the efficiencies.

Later on an end of year and I think we've indicated in the past that we're looking to try to get in that 10% efficiency range and based off what we've heard from other people who've gone through the same type of upgrades.

Yeah.

10% of what.

So a.

A lot of it's on the recruiting side, Michael So you know when we get the new system in and then we bolt on a lot of the enhancements that make some of the AI stuff that will probably bring them that will make recruiting faster and easier and allow them to focus on fulfilling orders.

Versus finding people, we think that will provide some efficiencies on the recruiting side. So it's going to have a really big impact on the real estate group and their real estate great brands, you know several different systems between an excel spreadsheets for scheduling and going into temp work and they have another system that they do they're sitting there.

E R M on and all of that gets consolidated and so that that's going to free up the recruiting team bore in in real estate significantly and so we were we really we'll probably see the biggest side of it with them. So I think it's a combination and you get some recruiting efficiencies probably some cost.

Efficiencies there, but the bigger part of it is variable hotel more orders and create faster growth.

Okay, because I'm lazy, how much money you spend on it.

In total when we shut it down in seven days, we would have been a bit north of $11 million.

$1 million add on it.

Yeah that was created to spend 383 Grand.

You spent about 400 Gram last quarter.

We've been I've seen a million seven on your year for last year, an it roadmap.

That's on the P&L side, and then there's another $3 million in Capex.

The software side of it.

Okay. So you spent $4.7 million ish.

Last year correct, yes that was the.

That was the biggest year.

Worked on implementing really the biggest part of it a new brand new Ats system ran new payroll system and integrating that in with our.

Dynamics 365 that we put in two years ago.

So two two weeks from now that spending is behind us.

The implementation cost goes away.

Then we start doing some add ons to make it more efficient so.

Okay.

Yeah.

We anticipate the spend for us well kind of hover around the 2% of revenue for us to be able to say to stay ahead of that sustainable yes.

Gotcha.

So.

But that that will that is.

Over and above the IP roadmap, which is more of a one time expense I suppose.

Presenting.

So a lot of the Capex side of it was a one time expense most.

Significant portion of that sort of drops off at the end of Q1 will still have operating cost and some capex and as we add so as we add add ons.

Some of the AI software in and whatever that we add on that would be on the capex side.

But the the consultant side, particularly the third party consultant side will drop off dramatically.

Beginning in Q2.

And we might be.

I will I can put those numbers together and we can certainly share that with everybody on next quarters call if that would be helpful.

Well it would be really help us so when you guys.

Yeah.

Certainly as you point out there is capex or spending on I T is a fact of life in the business that we're in here the.

But this is a big one time spend which is why you guys carve it out and hopefully there's a big one time boost productivity I don't understand how much your pickup in productivity.

Going forward from this big spend.

In dollars okay.

So you you said, 10%, 10% a reduction of cost on what or I want to get that Street again, you got to talk to people like them for years old Okay.

So and I don't have the numbers at my fingertips right now, but we can certainly put them together.

So we talked about <unk>.

Yes pardon me, we created great partners with us on the recruiting.

Mike I literally.

I would have to start pulling spreadsheets and I guess I can work on some numbers and sure off the call, but yes. It is.

Alright.

Beth.

We used $11 million spend does it.

Pick up two or $3 million in EBITDA going forward or is it that kind of thing.

Well it depends on how much more I recruiter, Ken can produce I'm intelligent to say, we have a recruiter right now who produces you know 500.

<unk> thousand in gross profit, but because of the efficiencies, they're now able to produce 650000 in gross profit. So it just depends on what we what we're going to see from that perspective, and that's how we're that's how we'll look at it might well look at it. This is what you were doing before now we have all the systems and now you're able to produce.

It's more and we would have to go in and really.

Take it down to that level by producer to get that number.

Alright, so I'm going to hold you to it so basically.

If recruiter does five underground now they do.

650.

<unk> earnings grew 30% real estate.

Sure.

[laughter] alright.

I have an idea on order of magnitude.

You must have pitched your board some number okay.

When you when you when the green light the spend.

We've talked about a 10%.

As you can see primarily on the recruiting cost I don't have that number at my fingertips right now alright, alright, so that'd be when we did that would be the real estate.

Right.

Yeah that'd be in the professional line real estate both of them both of the segments are growing on the software right.

Probably much more efficient on the real estate side right.

Because there.

Recruiting and fulfillment process was.

Burdensome more burdensome than professional.

And then there is an enhancement.

By creating more again as we mentioned earlier by creating more efficient recruiters.

There is a much better chance of increasing sales and gross profit. So you've got two sides of the equation going on more efficient recruiters that can sell more our fillmore. So you're you don't have to have as many recruiters you get some savings on the sell side SG&A side, and they're filling more sort of youre getting gross profit.

Improvement, so and the other thing might be to keep in mind as you know we because we did not have any of our systems to kind of talk together, we did management my excel spreadsheet and so with the new systems every manager will have new dashboards, we will be able to know on a daily basis, where there where their team.

Is that so that we can help prop them up and give them support so just having visibility into the better visibility into the activity of each of the team members will be helpful for us to be able to to be ahead in and manage and support the team. So just as that part of the visibility is gonna be a game changer for us as well.

Yes.

Okay, So you're running the business better, but you're expecting significant topline growth because you'll be able to fulfill more unmet need.

A dramatic improvement in productivity.

From a.

From us.

Efficiency standpoint until we need.

Correct, I mean, it sounds pretty dramatic or should I look at like the I mean, it's the best acquisition you've ever made if you get like a 10% improvement in your <unk> and <unk>.

In your profit.

But gross margins I should say and to drive some top line on top of that.

Okay.

10% I would say it would be great. It would be great to get a really good understanding of that because.

I mean, it was material enough from an expense standpoint, you carve it out it's material it Mike.

Hopeful I guess, it's that it's material enough on me.

To drive results.

Now you're right there'll be it would be a great to show us what it's gonna do besides just obviously with.

The P&L rollout over the next four quarters right.

Again, the visibility into the reporting side of it will be will be super beneficial for us to be able to give you better information in future.

On the tech sites up as the switches that one more question and I'll, let everybody else speak on the tech side, what kind of visibility you have on demand.

Today, and how does the IP roadmap change that.

And our sales pipeline.

Okay.

Okay.

I'm not sure I understand your question Mike.

Okay, how much visibility you have on the IP sales pipeline now and how much you habit when you let me.

When their roadmap is implemented.

Well again I think it right now.

Because we have such a strong management team.

The I T group is able to but again, it's on an excel spreadsheet right and and.

They'll be able to kind of move things through a lot quicker, but I.

I think the team is very he's got good visibility on the pipeline and.

We have I have a one on one call with the division President every week and we go through the pipeline and they've got.

Part of activity out there right now so it'll be interesting I don't know that the roadmap will change.

What they've already got them in place.

It or increase it sounds efforts because I think that their pipeline is super full right now I think what it'll do is it'll help us figure out from the time that we get a sale or we put in an RFP how long does it take to close it and we will be able to see what the funnel a lot better.

Sales funnel a lot better.

Alright, terrific well great quarter I'm delighted the year that we're really back on track and making real money and I'm looking forward to a great year. Thank you.

Thank you Sir.

Thank you as a reminder to ask any further question. Please press the star followed by number one on your telephone keypad now.

The next question comes from Bruce Wella from Willow Bend towards police Bruce Your line is now open.

Hi, Good morning, it's Bruce Geller.

Congratulations on the nice progress.

Probably.

I'm, probably asking a redundant question.

Relative to the last caller.

But can you quantify the annual benefit in either dollars or margins are there.

You're expecting from this system's transition.

Yeah, I think as we just answered Bruce.

All right now.

We don't have the numbers in front of us to do that work on that and we will certainly share it.

Again, as we mentioned, it's a combination of.

Efficiencies on the recruiting side and ability for them to fill more orders, which drives the gross profit line. So we will put some numbers together and certainly share those with everybody.

On the next call.

But was there a payback period in your mind like when do you when you decided we're going to spend $12 million.

You know typically theres a thought of.

Hey, you know pay this back in two years three years four years and I'm just curious what's your.

You know without the need for a lot of spreadsheets well what was the dissipation in terms of payback period.

You know if if if I wanted to do a swag I would say the payback is three to four years that being said we were at a 0.3 years ago. Bruce that had we not spent any money we would not have been competitive in this world. So our systems three.

Three years ago were archaic.

Okay fair enough.

An improvement in years.

Okay. That's fair thank you.

With respect to the sale of your light Industrial Division.

It seems like the loss of that EBITDA in the near term at least is going to be dilutive until you.

We invest those proceeds would you agree that that is an accurate statement and then in terms of reinvesting those proceeds.

Is it likely that youre going to have to pay a higher multiple.

After you purchase than the multiple you received on the sale.

Well, we got a.

We got a great multiple for light industrial business.

Frankly, [laughter] as as we've had been discussions and again, it's probably been as I mentioned six months since we had serious talks with anybody.

But the multiples on the IP.

Side, which is primarily what we were looking at last summer were in the seven to eight range. So you know it.

If those haven't gone up dramatically.

Then we could probably buy much better margin business.

At the same price that we sold LOI with a far less workers' comp risk and management headaches.

Not headaches I won't say headaches.

[laughter] intensity so yeah.

Okay.

But in the interim period.

Once you have those proceeds and they're not going to be earning much.

Did you you do lose some EBITDA here are you looking at a few months of dilution.

Prior to that where we are.

Yes.

On earnings per share we are looking at some dilution, where we lost probably on a net income basis.

About $3 5 million.

So we had 35 cents a share.

But we think in the long term.

Capital that it gives us to buy and expand on the professional side.

It was worth the transaction side.

Okay.

Thank you very much.

Okay.

Yes.

Yes.

Thank you. Our next question comes from the line of games Maxwell from Taco Bell. Please James Your line is now open.

Hey, good morning, guys.

I guess I was a little good morning, I guess over the last couple of years.

Maybe about $45 million of capital into the.

Professional.

And some of that has been impacted by Covid.

Covid et cetera.

We fully recovered.

In that segment has fully recovered to pre COVID-19 levels.

I'm just trying to understand the sort of the productivity of L. J K a drunk momentum.

So so specifically momentum is doing fantastic.

I think we bought that business around 3 million ish range.

And it will do well better than $3 million as we move forward.

<unk> is back to pre COVID-19 levels.

And our what we now call our ITC.

I mean, yeah, ITC, which is our sort of higher in <unk>.

Consulting side of the IP business is doing very very well.

As we mentioned and as we've mentioned probably every quarter this year.

The IMD side.

Suffered dramatically in the latter part of 'twenty.

It has been slower to recover so so we feel very good about all of that L.

L J K.

<unk>.

We we we are two years into that the principal.

That we bought with that has left.

And we're sort of restructuring that business to support the other two divisions.

On a retained search basis.

Okay.

And then one of the old adage capital needs of the real estate.

Segment and is there any way to accelerate growth by deploying more capital.

So it's really finding the right people in the right location, because it's really a sales person in a recruiter theres no theres no office space cost or whatever.

So it's really talent acquisition is is the cost of that expanding that business.

Okay.

And being able to make it immediately.

Pardon me I'm sorry.

Uh huh.

The professional business, so theres not a lot of it.

The proceeds from your divestiture.

Really grow the business organically, it's more to make additional profession.

Professional acquisitions.

Well I think it will allow us for both I mean, we're going to reduce our debt down to you know again less than one on on the new EBIT number.

So we do away totally with our with our our debt requirements.

Debt requirements.

Lowering interest so we do have additional cash available to us guys still available to us.

Uh huh.

When we planned this year.

Clearly, we when we budgeted we didnt share with the real estate team that we were considering selling and stuff. So you know I know Beth and Kelly will go back and take a look at that growth and see whether it makes sense, given our markets and our customers.

You know, whether we want to accelerate that or not so we certainly have the availability to do it. So I I spoke with both of our division Presidents last week in regards to.

Increasing our amount of recruiters out there for this year. So we're in the process right now is evaluating what that looks like how quickly we can do it and what we would expect to get out of it.

Okay do you have more real estate locations open today than you did pre pandemic.

I think we're I think we're back to where we were for him from in 2019, and but we do have six additional openings scheduled for this year.

We're also going into Canada, so there where that'll be an interesting venture for US I think we got came down the chart on the scheduled for May and so we do have we do have big expansion plans for that.

So it's sort of based on the Q4 results the productivity of each office.

Office location is much higher than it was pre pandemic.

Is it is that was that pent up demand.

So that is possibly not sustainable or does it.

In your opinion does that continue.

I think some of it was pent up demand, but but I mean, if you look around there's a but julian cranes out there and multifamily.

Locations are being built left and right. So I think that you know.

Yes.

The construction side of it opens up I think there was capital that was being held because of the moratorium. So I think once people started being able to open up their purse strings I think we saw some.

Additional activity just in the in that side of it. So it was part of it was that it was pent up stuffs, but another part of it was just everybody going Okay. Now we can go in and start spending money and that's always good for us.

Okay, great. Thank you I appreciate it.

Youre welcome.

Thank Gil we currently have no further questions. So I will hand, it back to Beth Garvey for any final remarks.

Thank you. We appreciate you taking time to join US today on the call and appreciate your continued support and we look forward to sharing our first quarter results with you Ed.

Late April so everybody stay safe and healthy.

Healthy and thank you again for joining the call.

Yeah.

This concludes today's call. Thank you so much for joining you may now disconnect your lines.

Uh huh.

Uh huh.

Uh huh.

Yes.

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Okay.

Okay.

Okay.

Yes.

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