Q3 2024 BGSF Inc Earnings Call
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation there.
There will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
As a reminder, this conference call is being recorded.
Sandy Martin: I will now turn the conference over to Sandy Martin three part advisors.
Sandy Martin: Please go ahead.
Speaker Change: Good morning, Thank you for joining us today for <unk> third quarter 2024 earnings Conference call with me on the call are Beth Garvey Chair, President and Chief Executive Officer, and John Barnett Chief Financial Officer. After our prepared remarks, there will be a Q&A session. As noted today's call is.
Speaker Change: Being webcast live a replay will be available later today and archived on the company's Investor Relations page at Investor Dot <unk> Dot com.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Please I will turn the call over to Beth Garvey.
Beth Garvey: Thanks, Sandy and thank you all for joining us to discuss our third quarter earnings.
Beth Garvey: I wanted to start by saying our comments today will be brief as we are still under a process of evaluating options related to the company's review of strategic alternatives.
Beth Garvey: I look forward to discussing this more in the future when we have additional information to share we will be taking operational questions on today's call. However, we will not take questions concerning the process.
Beth Garvey: While the last 18 months had been a challenging operating environment for our industry and specifically for I T and professional services. We believe that our results are beginning to stabilize with more consistency and even recovery as evidenced by sequential sales improvements at the I T consulting on the professional side.
We also launched exciting lead generation technology in Q3 as part of an ongoing technology enhancements made possible by our investment into modernization of our tech stack.
Beth Garvey: I'll discuss this more after we cover our results.
Beth Garvey: In the third quarter total revenues were $71 million, which includes almost $30 million in cells and property management and $41 million in sales for the professional segment.
Beth Garvey: Broadly speaking the property management sales increased due to typical seasonality as well as for progression of a number of important strategic initiatives.
Beth Garvey: And the professional side revenues were under pressure during the third quarter sequentially and versus a year ago due to declines in the finance and accounting Division.
Beth Garvey: Excluding perm placement B D. S. S. I T consulting sales represent the largest revenue category at almost 70% of quarterly revenues.
Beth Garvey: During the third quarter I T consulting sales were up slightly on a sequential basis compared to the second quarter.
Beth Garvey: We are encouraged by the leveling off of revenues and we believe if macro and industry pressures subside. We are more optimistic today that stability could turn into growth in future quarters.
Beth Garvey: Although I T consulting stabilized and grew slightly in the quarter, the finance and accounting division was sequentially softer than the second quarter.
Beth Garvey: Consistent with strengths in previous periods, our managed solutions business experienced double digit growth over a year ago, and 10% sequential lift compared to the second quarter.
Beth Garvey: Managed solutions continues to be strong growth business for P. J S F.
Speaker Change: Based on our unique and differentiated services and solutions after John walks through our detailed financial results for the quarter I'll return with closing remarks John.
John Barnett: Thank you Beth and good morning, everyone.
As mentioned this challenging environment continues to impact our industry and today I plan to highlight some of the areas of progress at Bgs F.
John Barnett: Third quarter revenues were $71 2 million versus $83 5 million in the year ago quarter.
John Barnett: And up sequentially by four 5%.
On a sequential basis property management revenues reflect a seasonal lift with an increase of 15, 9% from the second quarter of 2024.
John Barnett: For the third quarter revenue in our professional segment remained soft compared to the second quarter and.
John Barnett: And declined in line with competitors down 12, 9% versus the prior year period.
Speaker Change: As Beth mentioned managed solutions continues to show strength due to new contract wins.
Speaker Change: More recently, we are seeing elevated perm placement activity at the start of this quarter.
Speaker Change: Gross profit and margins in the third quarter were $24 3 million and 34, 2% compared to $30 million.
Speaker Change: And 35, 9% in the year ago period.
Speaker Change: Much of this 170 basis point margin pressure was primarily attributed to cost pressures impacting our clients and demand for our services and lower Perm placement, which carries a lower GP margin and <unk>.
Speaker Change: To a lesser extent increased competition.
Compared to the second quarter group gross profit margins declined by 50 basis points again, mostly due to dynamics and the property management segment.
Speaker Change: SG&A expenses for the third quarter were $22 million compared to $21 6 million in the second quarter and $22 7 million in the prior year's quarter.
Speaker Change: SG&A in the period included 526000 in nonrecurring fees associated with the strategic alternatives process.
Speaker Change: We continued to re baseline costs and prudently managed spending in the quarter.
Speaker Change: Third quarter, adjusted EBITDA was $3 2 million or four 5% of revenue compared to $2 6 million or three 8% in the second quarter.
Speaker Change: Nice sequential step up in both dollars and margins.
Speaker Change: We reported adjusted earnings of <unk> 10 per diluted share.
Speaker Change: Prudent from seven per share in the 2020 for second quarter.
Speaker Change: Which compared to 36 per share in the third quarter of 2023.
Speaker Change: We generated cash from operating activities for the first nine months of $21 2 million cap.
Speaker Change: Capital spend was $1 4 million for the nine months, which is primarily it investments are.
Speaker Change: Debt to EBITDA leverage ratio was three eight times, which is compliant with our new credit facility Amendment terms included with our Form 10-Q filing.
Speaker Change: With that I would like to turn the call back to Beth.
Beth Garvey: Thank you John I'm pleased to share that we successfully launched our advanced lead generation engine in the third quarter. This technology now drives our sales funnels for both divisions, although still early days. This targeted engine generated almost 400 marketing qualified leads and 171 sales call.
Late in the quarter, which translated into more than $1 million in booked revenue.
Beth Garvey: We know that by strategically harnessing data driven insights generative AI and leveraging marketing automation, we are able to streamline the acquisition and enhanced conversion rates across both divisions.
Beth Garvey: This is an important strategic initiative that we had envisioned with our I T roadmap investments made in 2022 and 2023.
Beth Garvey: We know that this milestone demonstrates our commitment to be G. S. S digital transformation client engagement and delivering value to our cutting edge work force solutions.
Beth Garvey: Both segments have seen pockets of strength and have demonstrated either stability or forward progress, especially in managed services near shore offshore AI and software engineering solutions as well as Perm placement in the professional segment this quarter.
Beth Garvey: Recall in the spring that we hired had touched pilati Deloitte veteran as P. J S. S SVP of strategy and innovation on the professional side.
Beth Garvey: <unk> focus has been on large strategic customers and I'm, bringing consolidated packages with wallet expansion initiatives to our solutions based offering.
Beth Garvey: Together, we have successfully secured several proof of concept engagements as well as platform design session is by starting with clients Tech stack and building accustomed framework for solutions for their business.
Beth Garvey: These engagements discovery sessions facilitate a discussion at briskin pros and cons to properly scope technology technological innovations into organizations ecosystem.
Beth Garvey: This consultative approach to technology allows our team to whiteboard and properly scope for the best solutions, which leads to comprehensive statement of work for a professional team.
Beth Garvey: Not surprisingly September was the highest revenue and gross profit margin for the year and the highest contribution to overhead since October of 2023.
Beth Garvey: We know that our relentless work can and will build momentum as supply will begin at that time, we also know that accessibility and responsiveness to our clients and prospects are continued improvements of our digital tools is empowering our sales teams across the company to capture and convert leads faster.
Beth Garvey: And ensuring our clients have swift access to the right talent solutions is our number one priority.
Beth Garvey: Also we know that getting past the election and with lower interest rates will eliminate some distractions and obstacles from key decision makers.
Beth Garvey: Using our lead generation technology, we are actively working to accelerate property management business. We also continue to target properties using the strategic territory mapping to drive sales teams performance and increased customer relationship touch points.
Beth Garvey: We continue to sign partnership agreements that place B G. S. F. On a short list of preferred vendors for owners and property management companies.
Beth Garvey: We will work hard to earn business based on premium services that deliver exceptional trained and skilled talent. We continue to believe that there is a backlog of or Paris and capital improvements in most multifamily communities data prolonged period of higher interest rates and cost of capital as well as recessionary pressures.
Beth Garvey: If macro economic pressures ease in our business.
Beth Garvey: Please their budgeting cycles, we expect to benefit from better project and business flight throughout 2025 and beyond.
Beth Garvey: Also on property management side, our S. E. T S cells, Andrew Hill is leading sales teams and his experience coupled with our enhanced efforts around sales training and development are improving the speed and effectiveness of the sales teams onboarding and training efforts.
Beth Garvey: Speaking of training, we continue to invest in talent by internally training property management candidates in all areas, including leasing maintenance and graphs, keeping we want clients to see and experience differentiated skill sets and experience of our trained workforce.
Beth Garvey: I know that this industry is a dynamic and we're staying in front of innovation in markets with expanding industry apartments luxury communities and commercial conversions to residential.
Beth Garvey: This is especially important given the notable shortage of housing today and shortages forecasted throughout North America.
Beth Garvey: Our B J S F leaders and their teams continue to foster culture.
Beth Garvey: Adaptability and resilience, our disciplined sales and marketing efforts are pursuing a robust process of defining target markets, enabling new technology understanding our audiences optimizing our sales process, therefore, gaining competitive advantage in the short term and the long term.
Beth Garvey: We also continue to re baseline expenses and make careful spending decisions. We are relentlessly focused on sales profitability and cash flow.
Beth Garvey: I appreciate your time today, and we want to again, thank our employees clients partners and investors for their support and belief in Bgs exhibition for the future.
Speaker Change: Now we'd like to open the call for operational questions for the analysts come out of it operator.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily.
Two.
Speaker Change: Assemble our roster.
Speaker Change: The first question comes from Tyler <unk> with Roth Capital Partners. Please go ahead.
Speaker Change: Hi, Rob.
Speaker Change: Morning.
Speaker Change: Good morning, good morning.
Speaker Change: Hi, I'm filling in for Jeff morning backing gone. So my first question was.
The demand for property management has been impacted by budget constraints in the recent past.
Speaker Change: Hi, good pest.
Speaker Change: Maintenance demand materialize and can provide an update on your territory mapping initiatives and property management with respect to your ability to differentiate from the competitors.
Speaker Change: So I'll take the first question.
Speaker Change: We don't think that pent up demand has shown up yet when we look sequentially at the business from.
Speaker Change: From Q1 to Q2.
Speaker Change: We think that's kind of the low point for the.
Speaker Change: Demand depression related to all the eggs.
Speaker Change: Expense pressures that they're feeling so our growth there that we would typically see.
Speaker Change: Was moderated we still saw an uplift at typical seasonal uplift, but it wasn't what we expected and they're really while we were at a lower level year over year right. What we saw Q2 to Q3 was.
Speaker Change: Right in line with what we would historically see dollar wise.
Speaker Change: A lift from seasonality and we didn't see.
Speaker Change: Any more than what you would normally expect so that leads us to believe that.
Speaker Change: There is quite a bit.
Demand out there that.
Speaker Change: He is going to come through at some time.
Speaker Change: Awesome perfect that was very helpful.
Speaker Change: And my second question was last quarter, you were cautiously optimistic about potential lift in the professional segment.
Speaker Change: With project wins exceeding project and did that momentum carry through in the third quarter end.
Speaker Change: Any timing issues that may suggest fourth quarter maybe.
Speaker Change: Nice to control improvement.
Speaker Change: We did see him.
Speaker Change: Take in the third quarter, especially late in September for the professional group again, we we've had a great uptick in wins and outpacing our ends so their work at many new things that may have gotten pushed a few weeks that kind of made them go into October, but so far we've had a pretty.
Speaker Change: Good traction in the right direction for what we expected.
Speaker Change: Very nice right and then my last question was on you have.
Speaker Change: The timeline on when the strategic alternatives review is going to end.
Speaker Change: We don't at this point, we continue to work diligently to move forward on that but we don't have a timeline right now.
Speaker Change: Perfect. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Again, if you have a question. Please press Star then one.
So that leads us to believe that
There is quite a bit of pent-up demand out there that is going to come through at some time.
Speaker Change: At this time there are no further questions I will turn the call back over to management for any closing remarks.
Awesome, perfect, that was very helpful.
Speaker Change: Thank you Debbie. Thank you for your time today. We appreciate your continued support and we look forward to updating you with our fourth quarter results in March have a great day.
Speaker Change: And my second question was, last quarter you were cautiously optimistic about a potential lift in the professional segment.
So with Project WINS exceeding Project ENDS, did that momentum carry through in the third quarter and are there any timing issues that may suggest fourth quarter maybe see a nice sequential improvement?
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
We did see.
uptick in the third quarter, especially late in September for the professional group. Again, we have had a great uptick in wins outpacing our ends.
So there were many new things that may have gotten pushed a few weeks that kind of made them go into October, but so far we've had pretty good traction in the right direction from what we expected.
Very nice, Mike. And then my last question was, do you have a timeline on what the strategic alternatives review is going to end?
Speaker Change: We don't at this point. We continue to work diligently to move forward on that, but we don't have a timeline right now.
Perfect. Thank you, guys.
Thank you.
Speaker Change: Again, if you have a question, please press star, then 1.
Speaker Change: At this time, there are no further questions. I will turn the call back over to management for any closing remarks.
Speaker Change: Thank you, Debbie. Thank you for your time today. We appreciate your continued support and we look forward to updating you with our fourth quarter results in March. Have a great day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.