Q4 2024 BGSF Inc Earnings Call
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Good day, and welcome to the BDSF Inc. fiscal year, 4th quarter, 2024 earnings conference
All participants will be in a listen only mode. Should you need assistance, please signal conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: We are opening questions only for analysts today. And to ask questions, you may press star than one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event has been recorded. I would now like to turn the conference over to Miss Andy Martin with three part advisers. Please go ahead
Sandy Martin: Good morning. Thank you for joining us for today's BGF's fourth quarter and full-year 2024 earnings conference call.
Speaker Change: With me on the call today are Beth Garvey, Chair, President, and Chief Executive Officer in Keith Trader, newly appointed Chief Financial Officer.
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 Security's litigation Reform Act of 1995.
Speaker Change: Actual results made different 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 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.
Speaker Change: Management will refer to non-GAAP measures , including adjusted EPS and adjusted EBITDA. Reconciliation to the nearest GAAP measures can be found at the end of our earnings release. I'll now turn the call over to Beth Garvey.
Beth Garvey: Thank you Sandy and good morning, everyone. I appreciate you joining us today I'd like to begin by addressing our CFO transition yesterday, we announced the appointment of Keith Schrader as our new Chief Financial Officer, We are thrilled to welcome Keith just P. J S. F. <unk> is a transformational leader with extensive public company experience, bringing.
Beth Garvey: Strategic operational and financial expertise that will strengthen our finance and accounting functions. I also want to express my deep appreciation for John Barnett and his contributions to D. G. S. F. During a pivotal and transformative period in our company's history on behalf of our leadership team and the board I. Thank John for his dedication and wish him that.
Beth Garvey: Very best in his future endeavors.
Beth Garvey: Additionally, I'm proud to share that bgs that has once again been recognized as one of the best places for working parents, marking our fifth consecutive year, receiving this award.
Beth Garvey: Moving onto restructuring our strategic updates as you recall in December we announced a significant restructuring plan aimed at reducing costs, improving operational performance and positioning <unk> for profitable growth.
Beth Garvey: We anticipate cash savings of approximately seven to 9 million in 2025 from Nathan initiatives, which included head count reductions on streamlined indirect costs.
Beth Garvey: Friday more by shifting our I T middleware maintenance and development to lower cost near shore support with the ROI out we expect to save an additional 800000 annually and capital and cash expenditures.
Beth Garvey: Both of our business segments also underwent an organizational restructure which we believe will enhance communication improve operational consistency and drive efficiency gains ultimately supporting long term growth.
Regarding our strategic alternative process, our timeline remains unchanged. We continue to expect this to be a 12 to 18 month process from our initial announcement in May of 2024, while we are making progress we recognize the economic and political uncertainties have created more cautious environment.
Beth Garvey: <unk> remains committed to providing updates when we have definitive developments to share.
Beth Garvey: Before Keith provides financial results I'd like to highlight key trends in our business segments.
Beth Garvey: Professional segment.
Beth Garvey: Our monthly I T contract revenue normalized for billing days reached its lowest point in June of 2024. However, since then revenue has stabilized or grown sequentially with positive trends continuing into January and February of 2025.
Beth Garvey: Fourth quarter revenues were down 3% sequentially, reflecting normal holiday seasonality. However, adjusted for billing days Q4 was approximately.
Beth Garvey: 2% sequentially.
Beth Garvey: Encouragingly, we added 15, new logos in Q4 and saw a 30% increase in signed Master service agreements compared to Q4 of 2023.
Beth Garvey: Increased customer engagement and scope mining suggests a growing opportunity pipeline reinforcing our confidence in positive trajectory.
Beth Garvey: And the property management segment, we took decisive action to align direct and indirect operating costs with revenue improving overall efficiency.
Beth Garvey: The broader multifamily housing sector remains challenged by rising operating expenses and credit challenges. However, we are optimistic about improvement in revenue trends starting in mid 2025, our territory mapping initiative in key markets drove a 23% increase in revenue and remains a top priority for expansion in 2025.
Keith Schrader: We continue to see year over year growth for our exclusive in semi exclusive preferred vendor agreements positioning B G. S. F. As a go to partner for a property management clients now I'll turn the call over to Keith to walk us through the financial results.
Keith Schrader: Thank you Beth and good morning, everyone.
Speaker Change: Honored to join <unk> and look forward to meeting many of you as we engage with investors.
Keith Schrader: How many months.
Keith Schrader: Now turning to our fourth quarter performance, our fourth quarter revenue was $64 4 million compared to $73 6 million in Q4 of 2023, which is reflecting declines in both segments.
Keith Schrader: Our professional segment revenue declines narrowed to eight 7% year over year and 3% sequentially on a billing day adjusted basis, our professional revenue grew 2% sequentially.
Keith Schrader: Operating management segment absorbed significant restructuring changes, which while challenging have now all lines of business with forecasted revenue levels.
Keith Schrader: Property management revenue experience normal seasonality increase in Q3.
Keith Schrader: As we move into Q4, we experienced a larger than normal seasonality decline. We attribute this decline in part due to actions we took to stop servicing certain credit risks and disruption as we executed the restructuring.
Keith Schrader: Got it.
Keith Schrader: Now turning to our profitability and margins.
Keith Schrader: Our gross profit it was.
Keith Schrader: $21 5 million in Q4 with a margin of 33, 3% as compared to 34, 6% in the prior year. This is.
Keith Schrader: Largely due to increased competition and economic pressures and property.
Keith Schrader: Right.
Keith Schrader: SG&A expenses were $20 8 million compared to $22 1 million in Q3, and $20 2 million in Q4 of 2023 are.
Keith Schrader: Our adjusted EBITDA was $1 4 million or two 2% revenue versus $3 4 million or four 8% in Q3.
Keith Schrader: On a net income basis, we reported a GAAP loss of 10 cents per diluted share and an adjusted loss of six cents per diluted share, which includes a 1.4 million gain resulting from reduction in the expected royal earn out.
Our priority remains enhancing profitability in 2025.
Beth Garvey: With that I'll hand, it back to Beth for closing remarks.
Speaker Change: Thank you Keith as I mentioned last quarter, we launched an advanced lead generation, Oregon, Inc, Q3, generating $2 million in revenue in just six months for our property management teams.
Speaker Change: Cards by success, we expanded this initiative to our finance and accounting teams last month, where we are already seeing positive early results.
Speaker Change: Additionally, we recently restructured our technology and digital marketing teams launching an operational excellence team focused on streamlining workflows and service delivery identifying gaps and opportunities and leveraging AI to improve productivity and eliminating repetitive tasks. This initiative reflects.
Speaker Change: Our data driven approach to business process optimization, ensuring discipline execution of repeatable high impact processes simply put we are applying our own best practices at consulting expertise to drive operational excellence with M. P. J S F.
Speaker Change: Looking ahead, we are laser focused on revenue growth and profitability improvement, which will enhance cash flow and shareholder value. Our restructuring plans has positioned us for greater financial efficiency, while our investments in technology partnership and people continue to drive long term value creation, we've built strong relationships.
Speaker Change: And she is with industry leaders across the I T with our S. E T Workday Oracle service now and Microsoft partnerships and property management large commercial and residential leasing companies. Additionally, our managed solutions near shore offshore engineering, and AI capabilities give us a competitive edge in an evolving market.
Speaker Change: I want to thank our team members, our board and our investors for their continued dedication and belief in our strategy now let's open the call for questions. As a reminder, we have no new updates on the strategic alternative process. So we kindly ask you to refrain from questions on that topic operator.
Speaker Change: We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you're using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: Anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
Howard: And the first question will come from Howard.
Howard Halpern: Halpern with <unk> partners. Please go ahead Sir.
Speaker Change: Good morning, guys.
Howard Halpern:
Howard Halpern: Nice to talk to you Keith.
Howard Halpern: Good morning.
Howard Halpern: So.
Howard Halpern: Terms of the restructuring.
Howard Halpern: Restructuring and streamlining.
Howard Halpern: What type of cadence could we expect in terms of seeing that on the SG&A line as we go through.
Howard Halpern: Upcoming quarters.
Howard Halpern: The majority of those cuts Howard took place in December and so they will start showing up in Q1 and the majority of that was in people. So you'll see in the results for Q1 and some of those reductions some of the other reductions will take place throughout the year as we eliminate contracts that we were not going to renew.
Howard Halpern: And they start to fall off.
Howard Halpern: Got it.
Howard Halpern: How is the process I guess going with.
Howard Halpern: Relocating.
Howard Halpern: Some of what you're going to you're Arroyo operations, and how is that process going and how old are you.
Howard Halpern: Seeing that.
Howard Halpern: And well, we're super proud of the abilities that they're right. Our team has and as we move we start to identify things that we can move it to the team down there and we will continue to try to streamline costs that are in both our home office efforts and our I T efforts.
Howard Halpern: To be able to utilize the team down there.
Okay and then.
You talked about I guess, you're still seeing some of the headwinds in property management.
Howard Halpern: But what do you hope to see in the second half that will turn those headwinds into a tailwind.
Speaker Change: Well as you know we're very active in the National apartment Association and there's been many many conversations that Kelly Brown has had and mongst.
Speaker Change: It appears that she deals with there and they are all hopeful for the second half of the year.
Speaker Change: Oh, okay.
Speaker Change: And in the.
Speaker Change: Professional services, what kind of feedback you're getting from your customers on.
Speaker Change: What youre offering.
Speaker Change: Oh.
Speaker Change: Are you just seeing are you seeing more activity you talked about I guess 15, new logos are you, making progress with new logos.
Speaker Change: We are as the quarters unfold.
Speaker Change: We are there is there are several new logos coming in there's a lot of activity in the pipeline. Our teams are having more scope meetings and iPad probably in the last 18 months and which is a good sign as we continue to power forward through the.
Speaker Change: For the year I think that there is and there is some optimism that came out of the election and then there's been a slight pause on that optimism as we discussed as the tariff conversations continue and but for the most part I think there's a cautious optimism out there.
Speaker Change: Okay, Okay, guys keep up keep up the good and hard work that you have to get that done in this in this industry. Thank you.
Speaker Change: Thanks, Howard. Thank you Allen. The next question will come from Jeff Martin with Roth Capital. Please go ahead.
Jeff Martin: Thanks, Good morning, guys.
Jeff Martin: Hey, guys. Good morning, I was wondering if you can characterize on the professional side.
Jeff Martin: And allocation among clients.
A lot of companies.
Jeff Martin: Towards AI related projects.
Jeff Martin: Wondering if that can benefit you going forward or if that's been a headwind that you should have to overcome.
Jeff Martin: Okay.
Jeff Martin: Yeah.
Speaker Change: You know AI is one of those tricky things, so and I I think the great thing about where we are right now is our acquisition of their ROI out of pain. They have those capabilities and so we are having many conversations with clients in regards to AI tools that we can offer and I think that that's you know.
Speaker Change: It's interesting to see how our clients come to us with our problems and then when we get engaged with the Orion team, how they can come through and actually solve those problems and it's all through AI technology and and that's it.
Speaker Change: I think.
Speaker Change: Dipping our toe in what the capabilities are at this point, but what we're seeing early is very very exciting.
Speaker Change: Great and then at what point in 2025.
Speaker Change: Seven to 9 million.
Speaker Change: Uh huh.
Speaker Change: Yeah.
Speaker Change: As I understand it now.
Speaker Change: That work was done in Q4, but it'll be a little more.
Speaker Change: We progressed throughout 2024.
Great.
Speaker Change: Jeff you are really cutting out and so if I understood. Your question is when are we going to see the full effect of the cuts that we made was that the question.
Speaker Change: Yeah.
It is I apologize I got rid of my my headset is this better.
Speaker Change: That's perfect. Thank you.
Speaker Change: Okay. Yeah I was just I was curious the extent of what kind of timeframe to realize the full run rate in the seven to 9 million savings and as I understand it most of that was done in Q4, but theres a little more to go.
Speaker Change: We progressed throughout the year in 2025, just curious if you can elaborate on that well.
Speaker Change: Well again, the majority of those of the cost savings with some people and those took place in December so you'll see those.
Speaker Change: And I think it's.
Speaker Change: In Q1 for sure and then the other the other changes really was kind of in cost structure changing of commission plans and does took place in February and in March So you'll see the full effect of the commission plans going into Q2.
Speaker Change: Okay.
Speaker Change: And just curious out of those those cuts in personnel.
Speaker Change: Could you help us understand how many of those were revenue driving it are we going to.
Speaker Change: See some revenue impact related to that in the first half of the year and what strategically can you do too.
Speaker Change: So your way back out of that.
Speaker Change: A lot of the cuts were back office. They were home office folks and we did have some restructure when they're both divisions did their restructure we got rid of kind of a mid model manager level and out in the field.
Speaker Change: And that restructure was a little disruptive on the property management side, because you know we have Marty.
Speaker Change: Markets that are a salesperson so that salesperson has the relationships in the market. So when we changed some of those it took our mid level folks and push them down into I selling roll back out in the field.
Speaker Change: They had to reestablish those relationships. So we will see we'd see little disruption in that and I think they have leveled out we saw that early in December.
Speaker Change: And in early January but I think that is all leveled out right now and then prefer it professional has been really kind of managing the under performers all along and so they it was less disruptive for the professional team.
Yes.
Speaker Change: Okay, Great and then on the on the property management side.
How much.
Speaker Change: Of your footprint is.
Speaker Change: Utilizing the territory mapping today is at a 100% or is it you know.
Speaker Change: A lower percentage than what if that's the case.
Speaker Change: What's the timeline for reaching 100% on the territory mapping.
Speaker Change: And we've launched Houston, which is where we had the growth that I mentioned earlier and then Atlanta has launched as well and we are in the process of launching Dallas. So we just thought we put we started we have started to hire that team here in Dallas Fort worth and and I believe there's a few other markets that will go after this year.
Speaker Change: It'll be in June.
Speaker Change: Excellent that's it for me thank you.
Speaker Change: Thanks, Jeff. Thank you. This concludes our question and answer session.
Speaker Change: I would like to turn the conference back over to MS. Beth Garvey for any closing remarks. Please go ahead ma'am.
Beth Garvey: Thank you for your time today and we appreciate your continued support and we look forward to updating you on our quarter results in May have a great day.
Beth Garvey: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Beth Garvey: Yeah.
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Beth Garvey: Yeah.
Beth Garvey: [music].