Q1 2025 BGSF Inc Earnings Call
Unknown Executive, Beth Garvey, John Barnett
Speaker Change: Good day, everyone. Welcome to the BG SF Inc. Fiscal 2025 First Quarter Financial Results Conference Call. At this time, all participants have been placed on the listen only mode, and the floor will be open for questions and comments after the presentation.
Speaker Change: As a reminder, this conference call is being recorded. Now, I will turn the call over to Sandy Martin, three part advisors. Please go ahead.
Unknown Speaker 0
Sandy Martin: Good morning. Thank you for joining us today for BGSS First Quarter 2025 Earnings Conference Call. With me on the call are Beth Garvey, Chair, President, and Chief Executive Officer and Keith Trader, Chief Financial Officer. After I've prepared remarks, there will be a Q&A session.
Sandy Martin: Today's discussion will include forward-looking statements which are based on certain assumptions made by the company under the safe, parable provisions of the Private Security Solidigation Reform Act of 1995.
Sandy Martin: Actual results may differ materially from those indicated by the forward-looking statements because of various risk and uncertainties, including those listed in the company's following with the Securities and Exchange Commission.
Sandy Martin: 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.
Sandy Martin: 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: Thanks Sandy, and thank you all for joining us today. We've continued our strategic alternative work in the first quarter and believed that the 12-18 month timeline we previously communicated remains realistic. This month marks the first 12 months since we communicated the launch of the strategic review.
Beth Garvey: Our Restruction Initiative aimed to recalibrate costs by reducing direct and indirect expenses throughout head count reductions as well as other measures were included in the strategic work. We will not be taking questions related to the strategic review today.
Beth Garvey: Total revenues for the first quarter of 2025 were 63.2 million, down 8% per prior year, comprised for personal down 4.2% and property management down 14.9% versus a year ago.
Beth Garvey: Sequentially professional segment revenues increased by 5.6% compared to the December quarter while the Property Management Division declines sequentially by 14.1%.
Beth Garvey: During a quarter of business strength and month over month, and this trend continued into April , which is higher than March's Revenue.
Beth Garvey: We generated a adjusted EBITDA of 2.4 million with an EBITDA margin of 3.8% and our adjusted EPS with 5 cents per share.
Beth Garvey: For most US businesses, tariffs did not impact first quarter result. However uncertainties and concerns over the administration's trade policies created headwinds and project hiring and spending. [inaudible]
Beth Garvey: Although we expect clients to remain diligent, we are cautiously optimistic that consulting projects and business spending will continue to move forward.
Beth Garvey: We are confident that we are well positioned in the markets. We serve with a differentiated model that includes professional consulting and project resources, primarily in high value IT and financial accounting talent.
Beth Garvey: We are also well equipped to make the needs of property management companies, particularly as we approach the high season for apartment turnovers. In 2024, we restructured both divisions and streamlined costs to align the management more closely with the producers, and we believe that this will benefit our results in 2025.
Beth Garvey: Starting with the professional segment, we managed the consulting ends well in March and did not experience a typical first quarter drop off that we have seen in prior years.
Beth Garvey: We are focusing on team specializations in staffing and consulting which support improved project efficiencies. Our build hours for the quarter were at approximately 5%. Margins and Q1 were about 32% in the professional division down slightly on a sequential and on a year over your basis.
Beth Garvey: Additionally, we were officially awarded the Workday Application Management Service Partnership. We expect this to expand our support sales and pre and post-implementation projects. We also launched a newly developed product with Workday, focusing on compliance reporting support for colleges and universities.
Beth Garvey: Finally, we signed 23 new logos in the first quarter of 2025, up over 60% from 14 in the 2024 first quarter. This business is moving in the right direction and we are confident in its gaining tangible momentum.
Beth Garvey: Shifting to Property Management, last year we eliminated direct and indirect operating costs in the segment to better align our expenses with projected revenues. We are entering our seasonally high sales period for property management and the second quarter will serve as a barometer of the effectiveness of our strategic initiatives.
Beth Garvey: We implemented key workflows and reorganization initiatives over the last nine months, including the completion of property management's self-force re-alignment last fall, as well as the expense reductions in the fourth quarter of 2024.
Beth Garvey: Since rental and property management companies have faced challenges over the last 18 months due to the macroeconomic headwinds, our property management segment continues to operate under pressure.
Beth Garvey: However, we believe the industry is finally shifting US apartment rental rates are starting to elevate again, which we expect will allow better economics for property management companies.
Beth Garvey: Internally, our sales territory initiatives are expanding and our maintenance training platforms are industry specific.
Beth Garvey: We continue to work on the exclusive and semi-exclusive property management service agreements that have resulted in 7% improvement over prior years. When property management companies need support, we want to be the preferred vendor and expand the number of service agreements is vital.
Beth Garvey: We have strong relationships and a good reputation in the marketplace, and I'm optimistic yet cautious that our trained talent and high service levels will positively impact business trends and property management starting in the second quarter of 2025. If macroeconomic uncertainties persist, we will continue to manage what we can control and prepare for this choppiness.
Beth Garvey: After Keith walks through the detailed financial results for the quarter, I will return with closing remarks. Keith?
Keith Schrader: Thank you, Beth, and good morning to everyone. First quarter revenues were $63.2 million versus $68.8 million in the year ago quarter.
Keith Schrader: We are pleased to report that the professional revenues increased sequentially from the December quarter by 5.6 percent.
Keith Schrader: Despite the 4.2% decline in revenue on a year-over-year basis, operating income and professional increase, which is proof of the effectiveness of our cost reduction activities taken in December and again in March and April of this year.
Keith Schrader: Property Management revenues declined by over 14% on both a sequential and year-over-year basis. We are seeing signs of improvement in this business unit as revenues per billing day have steadily increased during February , March and April .
Keith Schrader: We made significant transformations in the sales marketing group and property management at the end of last year and early this year and understand it fully executed and initiatives take time to show up in financial results.
Keith Schrader: It goes profit margins in the first quarter, we're 20.9 million and 33.1% compared to 23.4 million and 34.1% in the year ago period.
Keith Schrader: On a sequential basis, compared to the fourth quarter of 2024, gross margins were basically flat, with the professional segment down 20 basis points and property management up to 30 basis points.
Keith Schrader: SG&A expenses for the first quarter were 18.9 compared to 20.8 million in the fourth quarter and 21 million in the prior year's quarter. These improvements were primarily a result of our restructuring actions taken 10 December .
Keith Schrader: Our first quarter, EBITDA, was 2.4 million or 3.8% of revenue, up sequentially, from 1.4 million or 2.2% in the fourth quarter.
Keith Schrader: This improvement is further evidence of the positive effects of the cost cuts on profitability as this improvement came in the face of a 1.2 million sequential shortfall in revenue.
Keith Schrader: We reported a first quarter gap loss of seven cents per diluted share and adjust the DPS of five cents.
Keith Schrader: Starting with the first quarter's results, we are regained to see improvements in BGF's profitability.
Keith Schrader: During the first three months of 2025, we generated 1.1 million in cash from operating activities. Capital expenditures were minimal at $23,000, primarily IT investments.
Keith Schrader: As previously discussed in our form 10K filing in March of this year, the company was not in compliance with its financial covenants a year in 2024 and was not expected to be in compliance at the end of our first quarter of this year.
Keith Schrader: As a result, we enter to a waiver and second amendment with BG SS Lenders on March 12th, with a further amendment on May 7th. These amendments, among other things, provide time for us to properly structure our capital needs.
Beth Garvey: With that, I would like to turn the call back to Beth, Beth.
Thank you, Key.
Beth Garvey: Reviewing ourselves performance through April , we remain cautious yet optimistic, recognizing that ongoing business disruptions resulting from trade policy changes could impact many U.S. companies, including BGSF. When companies suspend their earnings guidance, like so many public companies are doing right now, they are more likely to delay decisions and opt to preserve cash were possible.
Beth Garvey: This will negatively impact most companies in the US and Canada and likely slow growth from many industries.
Beth Garvey: We will continue to manage our business by staying close to our clients and communicating with them about their plans and pain points.
Beth Garvey: We are committed to our growth initiatives and managing the things we can control. Our trend reports for revenue per billing they continue to improve each month.
Beth Garvey: Although progress is slower than we would like, we are seeing measurable progress.
Beth Garvey: Last Friday, we saw the employers added 177,000 jobs in April , which signals that the libel market remain solid.
Beth Garvey: The jobless rate remained steady at 4.2% the positive development in the face of macroeconomic and tariff uncertainties this year. Our strategic initiatives include right sizing and also growing our business, as well as leveraging prior investments in people and technology and best-in-class processes to drive long-term shareholder value.
Beth Garvey: As the broader markets and industries adjust to economic changes and normalize, we are confident that corporate leaders will invest in growth, which will override a positive environment for BG-SS growth with our customer partners. Now I'll turn the call back over to the operator. Operator.
Speaker Change: Certainly, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time.
Speaker Change: We ask that while posing your question, you please pick up your handset of listening on a speaker phone to provide optimum sound quality.
Speaker Change: Please hold just a few moments while we pull for any questions.
William Dezellem, George Melas, Jeffrey Martin,
William Dezellem, George Melas, Jeffrey Martin,
Speaker Change: Your first question is coming from Jeff Martin with Roth Capital Partners. Please pose your question, your line is live.
Speaker Change: Thank you. Good morning, Beth and Keith. Beth, could we start with the new logos? That's an impressive figure up 60% year-over-year, maybe put some context around that in terms of average deal size and maybe give us a sense of when those projects will are on the calendar to commence.
William Dezellem, George Melas, Jeffrey Martin,
William Dezellem, George Melas, Jeffrey Martin,
Speaker Change: Sure. We several of the contracts of Rehiver signed in March and so I don't have that data as to how much was associated with each one of them but I can get it and we can circle back.
Speaker Change: Okay, and then with respect to existing clients, are you seeing a lot of discussions in terms
Speaker Change: What happens once the tariff uncertainty, you know, becomes more clear. Do you get a sense that there's potential for pent up demand as we come, you know, out the back end of this and but imagine you don't have a ton of visibility, but just wanted to throw that out there for comment.
Yeah, I don't I
Speaker Change: I do believe that there is pin-up demand in both segments, right? So I think that everybody's just very cautious right now and as the chair of conversations continue.
Speaker Change: Most of our customers are just telling us that we're on a wait and see kind of mode. But there's still conversations that are happening, so I don't feel like once that gets settled, I do feel like we'll start to have some things moving along because the conversations are actually happening.
Unknown Executive, Beth Garvey, John Barnett
Speaker Change: Great. Good to hear. So did you give us an update on the technology platform? I know that that's been several years in the making and you know, it's been...
Speaker Change: Rolling out various pieces of that over the past couple of quarters as they're still, you know, go lives to occur here in the future or is that fully rolled out at this point?
Speaker Change: Everything's fully rolled out. What we do right now is that we have two-week sprints where we go in and we implement certain things that help be efficiency gains.
Speaker Change: Several million dollars in just having like web push where we have applicants that can come into the portals and get pushed out. So we we're seeing really good results from just making sure that the technology's working in the way we wanted it to work and then continue its improvements because we did.
Speaker Change: So we should be able to start to do just by using our internal team to continue that enhancement for the efficient efficiency gains. Okay, and then with with the expense reductions you put in place last year is that fully fastered into the full benefit factored into the first quarter.
Speaker Change: Further benefit from those actions taken and then are there any further expense reductions on the horizon. So first question. The answer to that is about 65% to 70% was essentially back into the first quarter second quarter will see 100%, Okay and far as let's see last question, we improve our cost.
Speaker Change: It's whether it's implementing new I T things, where we can basically get people into our system and out in the field a faster or just taking out costs. So those that sort of work goes on continually.
Beth Garvey: Okay, Great and then Beth could you give us an update on the competitive dynamic within property management has it been much change there and has have you made recent progress with securing those preferred partner type agreements is this a long run way to go there.
Beth Garvey: The competitive environment is staying the same I mean, there's no change in in that it's you know competition's not necessarily a bad thing you just gotta adjust to it and our team's done a really amazing job to be able to to pivot and know what to do and how to overcome it's all about speed and quality an.
Beth Garvey: Ambos factors and then as far as the strategic agreements that we have they continue to sign them. They they're all in the works and it's an ongoing effort and I think they they closed one this week that was a pretty substantial one so.
Speaker Change: That they're doing on that eight minutes. If you had to take if you had to take a forward view on property management in terms of a return to year over year, maybe stability in terms of comparisons yeah do you care to pinpoint Aro.
Speaker Change: To get us back to the physician that we're of the growth trajectory that we were on and we are seeing positive signs in that happening right now.
Speaker Change: Your next question is coming from Michael Taglich with Taglich Brothers. Please post your question. Your line is live good morning, Keith and good morning Beth.
Michael Taglich: I was looking for first of all a comment.
Michael Taglich: Are you comfortable at this point, we're about a third way into the year with the street estimates for in light of where the results were in the first quarter and continuing to second.
Michael Taglich: Yeah estimates for the first quarter on the revenue line, we beat him on net income and the E. P S and to be Frank I haven't really looked at the estimates are for Q2 I'm sure. They may change. Some after this call so I need to take.
Michael Taglich: 51, then okay bet. This is for you a bit away from the macro which no one knows in light in light of what you're seeing halfway into Q2.
Speaker Change: Are you what would be the agitatives most applicable to how you believe you're tracking versus your plan.
Speaker Change: I think we're tracking where we thought we were gonna be so I think that that's a positive move on on our part I think the both divisions have got some momentum in the right direction. It's we're just being cautious about it but I'm not fee of it.
Speaker Change: That we're moving in the right direction, Okay, great alright. Thanks.
Speaker Change: Your next question is coming from Bill Desellum with Titan Capital. Please post your question. Your line is live. Thank you I have a group of questions first of all would you reconcile kind of what you are seeing or sharing relative to.
Speaker Change: Chat your customers have versus the new logos being up 60% those seem to be in a bit of contrast with each other.
Speaker Change: It depends on the sector Bill. So there's you know some of our manufacturing companies are the ones that are in the the wait and see area and some of our other customers that we have we do a lot in education. So some of that those are.
Speaker Change: Right direction, so it's kind of a mix and business. So it is a mixed bag on which area is holding in which area is moving.
Speaker Change: [noise], Thank you and and then looking at the professional services fourth quarter. The the headline was that the billing days were down 5% excuse me the Oh the.
Speaker Change: We're down 5%, but this quarter you build hours are up 5% that seems like there is a shift that took place between the quarters and my mixing.
Speaker Change: Mixy nuances here or was there actually a shift that took place.
Speaker Change: Talking about a shift within professional.
Speaker Change: Yes, So professional segment revenues declined in the in the fourth quarter, but they increased here in the in the first quarter.
Speaker Change: Yeah. They they did increase in the first quarter.
Speaker Change: Hang on a second let me pull up the numbers make sure exactly what you're looking at here.
Speaker Change: How about that.
Speaker Change: Yeah, we did see nice growth so that the growth of Q1 is versus Q4 of last year. Okay.
Speaker Change: So that is the comparison when talking about the current order we are still.
Speaker Change: Down some from the Q1 of last year, Okay, but we are up on a sequential basis and the trends continue to look strong.
Speaker Change: In both sectors into the current month, well now's the prior month, but say April look good.
Speaker Change: In both sides of business.
Speaker Change: And Keith is that's the normal seasonal trend then that I'm getting confused here with is is it not Q Q1 is normally up versus Q4.
Speaker Change: Two one in professional and Q2.
Speaker Change: There's some uptick but it's not huge it's P M, where it starts to grow and from a so and we look at what is our actual growth on a quarter over quarter basis versus what we call the seasonal growth expectation nanim.
Speaker Change: Like Rosie that growth for the last three months. So I don't not only are we seeing growth on a quarter over a month over a month basis, we are seeing it come in above what we expect in seasonality.
Speaker Change: Does that make sense.
Speaker Change: I think so but were you talking professional services or were you talking.
Speaker Change: Property property is much more seasonal than professional.
Speaker Change: Okay. So I'm sorry, let me make sure I get these dissected then correctly so relative to the property business you are seeing revenues increase slightly faster than the normal seasonal rebound are you at.
Speaker Change: The sales effort or is that simply the the market improving.
Speaker Change: Think it's a combination of things Bill I think that it's the restructure with the team last year and putting more focus on the the manager's being closer to their people and driving those results as well as the strategic agreements we have.
Speaker Change: In addition to the territory map territory cities that we went in and and Territorized, because we had the sales force technology.
Speaker Change: Okay. That's that's helpful and then relative to the professional services.
Speaker Change: That was up in Q1 versus Q4 and that does or does not is or is not part of of seasonality I guess, what I'm trying to get my head wrapped around here is is there a green shoot with that.
Speaker Change: Come to expect in Q1 versus Q4.
Speaker Change: We didn't have as many n's in Q1 as we typically have seen in prior years and so that was a good thing and I think that that helped us come into the quarter stronger.
Speaker Change: [noise] and best that would primarily be due to just timing or these projects that get extended because.
Speaker Change: It's year end Bill, it's like a lot of our customers will have their their budgets reset and so that we usually see some adjustments because of budgets being reset at the end of the year.
Speaker Change: Alright. Thank you and then one additional question coming out of a recession what is the historic behavior in the rebound and I recognize that businesses in general increase their spending but do you hear.
Speaker Change: Historically in a recession our industry is the first to go down and the first to come back up and but I will say that that's not we're not seeing that that happening right now it's kind of a weird environment for our industry, but I do think that.
Speaker Change: 15 months of really everybody mean pretty cautious about what how they wanted to move forward and I at some point because of where we play in our specialties. There are areas where people are going to want to go ahead and pursue with changing out their E. R. P systems are going forward. So I think that just our business.
Speaker Change: And that when people start having a little more confidence so I feel good about where we're going on that and then from a property management perspective. If you look at things you know people can only hold their updates on their properties for certain amount of time, so they're starting to see some.
Speaker Change: Health management companies move in a direction, where they want to spend more money, which is good for us.
Thank you both thank you bill.
Speaker Change: Thank you that does conclude the end of our QA session I would now like to turn the floor back over to Beth Garvey for closing remarks.
Speaker Change: Thanks again for joining us for our second first quarter review. So we look forward to talking to you in August thanks.
Speaker Change: Thank you everyone. This does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.