Q2 2025 BGSF Inc Earnings Call
Speaker #2: management's prepared remarks, there will be a question and answer session. As a reminder, this conference is being recorded. Now, I will turn the call over to Sandy After Martin, three-part advisors.
Speaker #2: Please go head.
Speaker #3: Good morning. Thank you for joining us today for BGSF's second quarter 2025 earnings conference call. With me on the call are Keith Schroeder, interim co-CEO and CFO, and Kelly Brown, interim co-CEO and president of property management.
Speaker #3: After our prepared remarks, there will be a Q&A session. As noted, today's call is being webcast live. A replay will be available later today and archived on the company's investor relations page at investor.bgsf.com.
Speaker #3: 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 #3: 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 #3: Management statements are made as of today in the company assumes no obligation to update these statements publicly even if new information becomes available in the future.
Speaker #3: 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 release.
Speaker #3: I'll now turn the call over to Keith Schroeder.
Speaker #4: Thank you, Sandy, and thank you all for joining us on today's call. I will start today's call with some opening comments and discussion points.
Speaker #4: Kelly will then cover the property management group performance and discuss strategic initiatives. I will then cover the financial results. After Kelly and I have finished our prepared remarks, we will open the call up for analysts and investor questions.
Speaker #4: First, I will start with an update on the previously announced proposed sale of our professional division to Inspire Solutions. We filed a proxy statement on July 25th, which established a meeting date of September 4th for a special meeting of shareholders to vote on the sale of the professional group.
Speaker #4: That process is moving along as planned. And both companies are preparing for the proposed sale. We will not be taking any questions on the proxy or sales process on this call.
Speaker #4: I would now like to address the question of what the business will look like post the closing of the sale of the professional group.
Speaker #4: Referring to previous SEC filings, we have been providing segment information that reports the profit contribution or what we call contribution to overhead by segment to cover head office G&A expenses.
Speaker #4: With a smaller business post-closing, we will be taking and have taken actions to reduce our head office G&A expense. We have a path to reduce head office G&A expense following the completion of the TSA period to around 10 million dollars annually.
Speaker #4: And our aggressively pursuing that path. The 10 million dollar figure includes roughly 1.5 million dollars of public company costs. We currently estimate the property management's contribution to overhead for 2025 to be in the 11 to 12 million dollar range.
Speaker #4: Looking back on the contribution to overhead provided by the property management group in 2022 and 2023, we were providing over 20 million dollars of contribution to overhead.
Speaker #4: While a revenue has dropped during 2024 and 2025, due to market softness, our gross profit margins have held fairly steady. So top-line growth is the key.
Speaker #4: And as a , Kelly and team are aggressively pursuing various strategic actions to improve top-line from its current run rate, which she will cover shortly.
Speaker #4: Also, Kelly and I are continuing to review other avenues to further reduce SG&A expenses. Under GAAP, we will be reporting the financial performance of the professional group as discontinued operations.
Speaker #4: Thus, leaving the property management group as our sole segment. For clarity, in the MBA section of our form 10-Q, we are breaking out SG&A expenses into two main sections: selling costs for the property management group and G&A for the head office function.
Speaker #4: This will allow you build a model to forecast the future success of the company. Following close, we will be performing under a TSA agreement for up to six months or longer to help Inspire stand up the business in their operating environment.
Speaker #4: This means we will be hanging on to certain expenses longer than we would without the TSA. However, we will be paid for those services which will be reported as a reduction of our G&A expenses.
Speaker #4: As a result, our results may be a bit lumpy during this transition period. With that, Kelly will briefly cover the property management results and our strategic initiatives that are underway.
Speaker #2: Thank you, Keith. And good ning, everyone. Total revenues from continuing operations, which exclusively represent property management, were 23.5 million for the second quarter, down 8.6% from the prior year.
Speaker #2: Sequentially, revenues improved by 12.6% over the first quarter, evidence of a seasonal lift from the higher apartment turnovers, as we typically see based on previous year's performance.
Speaker #2: Last fall, we realigned the sales organization and reduced direct and indirect operating costs for better alignment with revenues. However, we know that we cannot reduce or cut our way to profitability.
Speaker #2: So we have and are, investing in tools and technologies to change the trajectory of our sales trends going back 18 months or longer. As mentioned on past earnings calls, our industry has been under tremendous pressure from higher interest rates, higher than expected insurance rate premiums, and an overall malaise in the industry because customers have a weight and see attitude about spending cash or staffing at typical levels.
Speaker #2: Today, I want to address strategic initiatives that we are currently rolling out to grow revenue. Work more effectively and efficiently and focus on areas within our control.
Speaker #2: As we have discussed in the past, we continue to implement and expand our sales territory mapping initiatives and our proprietary training platforms. Which are competitive advantage for our business.
Speaker #2: We also continue work on adding exclusive and semi-exclusive property management service agreements. This work continues in earnest, but I also want share new initiatives that we have invested in for property management.
Speaker #2: We are now building on the strength of our existing technological infrastructure. We are implementing two AI-powered platforms this quarter that will drive speed and efficiency in two of our most critical functions, sales and recruiting.
Speaker #2: Our investments in AI are more than tech upgrades. They are about meeting our ustomers where they are. And providing the experience they expect from a modern, innovative workforce partner like BGSF.
Speaker #2: With the challenges that 've experienced on the macro level within the industry, delivering talent quickly, and expedited communication in response to client needs remain the priority.
Speaker #2: And these enhancements will keep us at the forefront in both of those areas. We expect to go live on these technologies by mid-Q4. The team and I are very excited about these tools and are confident that they will support and drive incremental top-line revenue and generate good returns from our investments.
Speaker #2: We also plan to continue to evaluate costs to re-baseline carefully against our projected revenues. We have received positive feedback and excitement both among the internal team as well as from external sources for the phase we are approaching as an organization.
Speaker #2: We anticipate this expressed excitement to continue as we strategize our post-closing structure and planning for the future of property management. With that, I will turn the call back to Keith.
Speaker #4: Thank you, Kelly. As Kelly mentioned, the second quarter revenues were 23.5 million dollars. Down 8.6% compared to the 25.7 million dollars in the year ago, quarter.
Speaker #4: We are seeing evidence of improvements as revenues per billing day continue to increase during the second quarter, which resulted in a sequential sales lift of 12.6% from the first quarter.
Speaker #4: This is basically in line with the expected seasonality increase. Our gross profit margins in the second quarter were 8.4 million dollars and 35.8%. As compared to 9.6 million dollars and 37.3% in the year ago period.
Speaker #4: On a sequential quarter basis, gross profit margins were down slightly at 40 basis points. I want call out that our results include a 980,000 dollar additional reserve taken in second quarter against our accounts receivable balances.
Speaker #4: After taking over as CFO in March of this year, we took a deep dive into our aged receivables. We have changed our processes and have become more aggressive in pursuing all receivables, both current and aged.
Speaker #4: In evaluating our success rate and collecting the aged receivables over the last four months, we determined an additional reserve of 980,000 dollars was appropriate.
Speaker #4: The additional reserve is for receivables in the property management business. SG&A expenses for the second quarter were 12.6 million. Including the 980,000 dollar previously discussed additional reserve, which compared to 10.7 million in the prior year's quarter.
Speaker #4: Excluding the additional reserve of 980,000 dollars in the current year quarter, and excluding strategic restructuring costs of 1.6 million dollars, and 280,000 dollars in the second quarters of '25 and '24 respectively, SG&A costs were below the year ago quarter by 1.8 million.
Speaker #4: Our second quarter adjusted EBITDA was 1.1 million dollars, or 4.9 percent of revenue. Compared 300,000 dollars, or 1 percent in the year ago quarter.
Speaker #4: We reported a second quarter GAAP loss from continuing operations of 44 cents per diluted share and adjusted earnings per share loss from continuing operations of 18 cents.
Speaker #4: Total adjusted earnings per share for the quarter was a positive 3 cents per share. During the first six months 2025, we generate 3 million dollars in continuing operations cash from operating activities, which is encouraging.
Speaker #4: Our capital expenditures were small at 13,000 dollars. Finally, the team is working very hard to deliver on our strategic initiatives and accomplish the heavy lifting from the spin-off of the professional group.
Speaker #4: Kelly and I are very grateful for the team's hard work and dedication. Kelly and I will update ou each quarter on our progress. And we hope this has been helpful for you today.
Speaker #4: With that, now we would like to open the call for questions. Operator?
Speaker #2: 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 #2: We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a few moments while we pull for questions.
Speaker #2: Your first question is coming from Howard Halpern with Taglage Brothers. Please pose your question, your line is live.
Speaker #5: good morning, guys. Good morning. And,
Speaker #4: Good morning.
Speaker #5: I-encouraging results. on, on the top line sequentially. But i-in, and, and sort of you talked about, you know, the noise that's going to occur, but sort of cutting through that noise, as we, you know, end this year and go into 2026, what when you right-size the company, get some, you know, positive growth in revenue, where do you hope or where are you seeking to see adjusted EBITDA as a percentage of sales?
Speaker #5: What would you, what would your hope be that, you would be able to see?
Speaker #4: Well, I, I, I think you just need to, look back a few years because, like I said, you know, in, in the script that, in '22 and '23, there are contributions to overhead was, you know, 20 a plus.
Speaker #4: So, with a, you know, 10 million costs of, of, of overhead, you know, that would give us the EBITDA of around 10. so it's about 10%, let's call it, 8%.
Speaker #4: But, you know, that is not going to, that's not going to occur until we get the top line up from where it is now.
Speaker #4: So it'd be kind of a, you know, slow, not slow, but it would be a steady rise, okay?
Speaker #5: Okay. a-and then in terms of, unlocking the, the top line growth, are you, in the current customer base, are you seeing that there is pent-up demand and they're just waiting to get some sort of nod to unlock that spending?
Speaker #5: Because spending will have to occur at some point. Am I correct on that?
Speaker #2: Yes. Hi, Howard. You're correct to an extent. We, we may experience a, a small amount of pent-up demand, but really what we're eing operators do is just shuffle around within their current portfolio to try to keep their assets, you know, at the level that they need to be.
Speaker #2: So that's where it's great that we have, very solid strategic approach with all of our top clients to keep a really od thumb on the pulse of, you know, how are they managing their portfolios?
Speaker #2: What needs do they have upcoming? How do they icipate Q4 and Q1 looking? so right , we, we're very cautiously optimistic to Keith's point.
Speaker #2: We anticipate it being, you know, a, a, climb back up, but it's really hard to tell just how quickly that'll happen because the economic outlook and not even just specific to property management overall.
Speaker #2: We're just seeing caution, you know, across multiple segments. So, but, but yes, I think that, that just with talking with our clients, it's a mix of managing with their existing teams as best as they can.
Speaker #2: So I would not say that there's going to be, I wouldn't expect an extensive amount of pent-up demand, nothing like we saw back in '22 when we saw that post-COVID spike.
Speaker #2: 's just simply not, not going to ok quite like that this time.
Speaker #5: But you, you might be encouraged for next year if, and it's if, if interest rates start down and if we don't have any major storms, I guess, that would cause, property insurance rates to, go up.
Speaker #5: If, if things remain sort of steady in that, you know, down in one and steady in the other, you think you might see some incremental spending on, on the portfolios of your clients?
Speaker #2: I believe so. I think that's a very safe statement.
Speaker #5: Mm-hmm. Okay. And, and then in terms of, finding new, new customers, how is that process going?
Speaker #2: Well, in multiple ways. In the property management industry, there's constant movement within portfolios, changes in management, changes in owners, you know, we're seeing transactions continue to happen.
Speaker #2: So that's just something that our team, you know, with some of the, both the technology and then some of the data investments that we've made, we're le to keep up with what a lot of that movement looks like.
Speaker #2: So that's just where our industry involvement is beneficial because we're able to be in discussions to be aware of where that movement's happening and therefore try capture share, as it does.
Speaker #5: Okay. A-and, and I guess it's for Keith, in terms of the strategic, you know, spending that's gone on, i-is that level going start to come down, by the, by the fourth quarter from current levels?
Speaker #4: you're talking about the cost for the deal, cost?
Speaker #5: Yeah.
Speaker #4: Right.
Speaker #5: The strategic.
Speaker #4: Yeah.
Speaker #5: Deal, I ess.
Speaker #4: Yeah. Yeah. Exactly. Yeah. Yeah. So, Q2 was, obviously a big spend. We'll see, fair amount still in Q3, but, you know, post-close that, that should basically be gone.
Speaker #5: Okay. Okay. And so, so then that would be the only really one time not one time or just unusually high spending, going forward in Q3 and then trending down in Q4.
Speaker #5: Then there's nothing else? No other unusual type of spending that we'll see in see other than maybe some of the lumpiness, like you said, with the once it closes, the, the s the agreement to stay, you know, to still work with the Inspire?
Speaker #4: Yes, that should be it.
Speaker #5: Okay. A-and, are, are there any other you know, for the home office, any other ways that you're oking at to, reduce a spending beyond, you know, are there any opportunities, I guess, reduce, reduce the spending further than what, what, you know, might be normalized?
Speaker #4: there are and we are looking at those all the time. And we're working on those now. you ow, the big spend, one of the big spends in that area is software costs.
Speaker #4: It's where they can really hard look at that. You know, what sort of tech platform do we need? And so, that would be one spot where we could, in our planning, bring costs down.
Speaker #5: Okay. A-and I guess o-one last question. It, you know, post-close, are you going to, are you going to just use, the, the cash on hand for, you ow, for normal activities or are you going to seek, maybe a, a, a small, you know, w revolving credit line or, or something like that or, or will the balance sheet be basically totally clean of debt?
Speaker #4: so it, it, it would will be clean of debt. So we, we do plan at close to pay off all of our outstanding debt.
Speaker #4: We'll probably set up a new line or w-with a, yeah, we will set up a new line, a small revolver that we would not plan to use in case, you know, y-you know, and, and then, the other cash would just sit there for a while.
Speaker #4: And while the board decides what to do, with that cash. You know, what's the best way? You know, maximize value. To our shareholders.
Speaker #5: Okay. Well, I, I wish you luck. And, I think, I think the property management segment has, a lot of opportunities. So good luck to both of you.
Speaker #2: Thank you.
Speaker #4: Thank you, Howard.
Speaker #2: Your next question is coming from Bill DeSalam with Titan Capital. Please pose your question. Your line is live.
Speaker #6: thank ou. Kelly, I'd like to follow up on one of the, comments you made relative to a question that, that the prior questioner had asked.
Speaker #2: Mm-hmm.
Speaker #6: And
Speaker #6: you mentioned that your customers are shuffling, projects and, and that you don't think there's a great deal of pent-up demand. But if, if I guess when I hear that, it's, shuffling generally, means trying to delay spending and delayed spending, would equate pent-up demand.
Speaker #2: Mm-hmm.
Speaker #6: So we,
Speaker #6: w-would you help, help us understand how, e-either what ou were trying to communicate or what maybe is wrong with, the logic that I just shared?
Speaker #2: Certainly. Yeah. Thank you for question. And whenever I mentioned shuffling, really, I'm referencing the, the employees that they are utilizing to maintain and manage their portfolios.
Speaker #2: You know, in the last couple of years, we've seen a trend where certain aspects of how the portfolio is operated has had room for centralization.
Speaker #2: So, for instance, you know, a role on-site that may have been responsible for some of the accounting areas of the property, you know, some things like that.
Speaker #2: So, you know, we're seeing some technology trends in how people are being used within the portfolios, but then also when it comes to maintenance, that was really more specifically where when I ioned shuffling, you know, if you ok across a portfolio in a certain location, they may just be able to utilize the employees that they have in place in addition to our services.
Speaker #2: but just the utilization of our services might be at a slightly lesser level for the sake of saving on spend if they can use their current workforce at multiple sites to maintain the communities.
Speaker #2: Does that clarify my statement a little ?
Speaker #6: It does. It's a, it's a lot more of the shuffling of who's doing the work rather than what work is being done.
Speaker #2: That's exactly right. And so, you
Speaker #6: Exactly.
Speaker #2: ow, to my earlier comment, that's to say that there may not be some things that they are postponing or doing at a lesser level, but I think that's just very hard to predict right now.
Speaker #2: because based on the feedback that we're etting from clients, they really are just trying to, to my point earlier, use the people that they have to keep up as best as they can on the properties, while being mindful of the bottom line and live some of the heightened costs that they've experienced the last couple of years.
Speaker #6: Yes. And probably the, natural outcome would be that there is some delay in project activity that's taking place or maintenance, but it's not to your point, the logjam maybe that we saw coming out of COVID.
Speaker #2: Yes. I think that's accurate.
Speaker #6: Oh, okay. That's helpful. And then, in the, in the press release and your opening remarks, you referenced AI-powered, sales and recruiting tools.
Speaker #2: Mm-hmm.
Speaker #6: maybe I wasn't paying ention as well as I should have in the opening remarks or maybe there's more that you can dive into in terms what you're hoping to accomplish with the, with those tools once you once you institute them and how those tools are different from what you're currently doing today.
Speaker #6: Would you walk through those, please?
Speaker #2: Certainly. You know, looking at how AI is being used, obviously, it varies widely and depending on, you ow, how, how an operation's being, being ran.
Speaker #2: But in, for us specifically, we see an opportunity based on the need to quickly respond to client needs, to quickly pick up on client needs, you know, whenever they do have a ed and they want to spend, they expect it quickly.
Speaker #2: so that's the sales piece being able to utilize AI to pick up on, you know, just buying signs, buying activity, and just provide a, a quicker, you know, response whenever we see that need indicated.
Speaker #2: On the recruiting side, it's really to help candidates get a response quickly when applying for jobs to help them get an instant response. so that they know that, "Hey, BG does have a, a need that I may be able to fulfill." So it helps the, y-you know, the people part of things get quicker.
Speaker #2: You know, if you're relying your people to respond to applicants and you see a bottleneck happening, that's where you might have an opportunity to plug in some AI tools to help that candidate get a icker response.
Speaker #2: So it's things like that that we're looking at, just to help, like I said, overall theme is the speed with which we can transact and the speed with which we can help connect people to jobs.
Speaker #2: It is the primary priority there.
Speaker #6: That's, that-that's really helpful. Thank you. And.
Speaker #2: Of e.
Speaker #6: and, and then, looking at the your segment reporting, you had corporate G&A of 6.2 million, which is really separate from the property segment. It's really truly, like, I think, Keith, you had referenced in the opening remarks, corporate G&A.
Speaker #6: The operating loss.
Speaker #2: Mm-hmm.
Speaker #6: For the property division, including that corporate G&A, was 4.4 million. So with it make sure I'm understanding this correctly. Without the corporate burden, the property business would have made 1.8 million this quarter.
Speaker #4: yes. That's correct.
Speaker #6: Great. And then, essentially, in response to the prior questioner's, questioning your, you're looking to increase revenue. Increase, say, EBITDA margin. And therefore, that number would increase even further as you, as you build the business.
Speaker #4: That is correct.
Speaker #6: Great. Thank you both.
Speaker #4: Yeah.
Speaker #2: Thank you.
Speaker #4: Thank ou.
Speaker #2: Once again, if you do have any questions or follow-up questions, please press star one on your phone at time. Your next question is coming from George Millis with MKH Management.
Speaker #2: Please pose your question. Your line is live.
Speaker #7: Great. Thank you. good ning. I'm.
Speaker #4: Good morning.
Speaker #7: Good morning. Quick question. And I don't know if you can tell us that, Keith, but what do you expect to be the cash on hand once the transaction is completed and you've paid down the debt?
Speaker #4: Oh, sure. so, post, you know, post, post-close with the cash coming in from the sale, escorts fees, less all, all of our outstanding debt, we should have around 45 million.
Speaker #4: O-on hand.
Speaker #7: Okay. So 45 million. So that's roughly $4 per share.
Speaker #4: Yeah. Or 4, 40 or something like that, but yeah. Somewhere in that range.
Speaker #7: Oh, 4 million. Okay. Okay. Very good. Kelly, during the quarter, and during the months of, of July what were the trends in terms of year-over-year revenue, change?
Speaker #7: For the quarter, it was minus 8.6. But how did that, the how did that, progress in, you know, April, May, and June? And maybe if you can tell us in July.
Speaker #2: Mm-hmm. April, May, and June, you know, it's particularly through June, we did see a positive trend, when it comes to the year-over-year gap. and so, you know, oking into Q3 and beyond, clearly, as I mentioned arlier, just with some of the economic uncertainty that we continue to hear and, see, you know, in the market, you know, we anticipate being able to continue to increase that, I-I'm not able to obviously share July, figures just yet.
Speaker #2: However, in June, we definitely saw, a positive trend. For the quarter.
Speaker #7: Okay. So that sort of means that April and May will probably down double-digit and then you said June was positive. Did I understand that correctly?
Speaker #2: In, in arison to April and May, we closed.
Speaker #4: Yeah. It was positive. It was kind of
Speaker #7: Mm-hmm.
Speaker #4: flat-ish. June was up quite a bit.
Speaker #2: Mm-hmm.
Speaker #4: July is, you know, you know, oking good. we would expect based upon past years, you know, seasonality lift in the quarter of around 9% versus Q2, but we have to see what, what the rest of the other quarter does.
Speaker #7: Okay. Keith, can you repeat that? What you saw for April, May, and June, I did not, I was not able to catch it.
Speaker #4: Okay. April was, a good increase. May was, was somewhat flattish. June was a very strong increase. July is an increase over June. and the last part was that what would based upon years past, that the, h, the, the amount of lift just because of the season, we would expect for Q3, versus Q2.
Speaker #4: Is about 9%. But we have to see how the, you ow, h-how the overall quarter unfolds.
Speaker #7: Okay. So let me just quickly do my math and try to translate that into a year-over-year number. Bear with me. So we still have a pretty meaningful decline year-over-year, right?
Speaker #7: In the third quarter.
Speaker #4: We would still be behind prior year. Unless we get a big lift, in share gain, okay? But, the key is we have to keep gaining on it, right?
Speaker #4: And that's what we're focusing on. That's the reason we have invested in new tools that are coming online. So we can, gain share.
Speaker #7: Okay. Very good. Kelly, I think I, if I recall, the, the, the revenue is, is primarily around leasing and maintenance.
Speaker #2: Mm-hmm.
Speaker #7: And can you sort of tell us a little maybe if there is some where there is the strength, where there is weakness, and, you know, if we look at versus '24 or maybe even against versus '22, which of those two parts of the business has you ow, how, how have they performed?
Speaker #2: Well, we don't necessarily have that level of detail, available here on the call. However, as mentioned before, it's ally been an overall softening in the industry the last 18 months due to the heightened costs that operators are facing, in a in a big way in the insurance and interest areas.
Speaker #7: Okay. It was on birthdays.
Speaker #4: And that's just something we, we haven't ever, broken apart, in, in, in, in the information that we, that we put out to the public.
Speaker #4: So, it's just nothing, let me get in, into this morning.
Speaker #7: Okay. Very good. Fair ough. A-and just to, to, to just to repeat what you said, Keith, and make sure I understood it correctly. You expect that post-close, and post-transaction services, the, the G&A would be roughly 10 million dollars.
Speaker #7: And that includes one and a half million dollars of public company expenses.
Speaker #4: That is correct.
Speaker #7: That's okay. And so if we adjust the, if we adjust the, the, the current results for the, for, for, for, for the, the additional reserve that you took on the, on the, on the AR, we have a contribution to overhead sort of for the first half that's roughly, a little bit north of 5.
Speaker #4: For the first half of, of this year?
Speaker #7: The first half of, h, yeah.
Speaker #4: Yeah. I think you need to ok forward, not backwards. Okay?
Speaker #7: Okay. Okay. Very good. Thanks for your time.
Speaker #2: Thanks, Bill.
Speaker #4: Thank you.
Speaker #2: Your next question is coming from Steve Cole with Mangrove. Please pose your question. Your line is live.
Speaker #8: Yeah. Good morning, guys. And thank you for having the call. again, let me, let me open up with a couple of ings. looking at exclusive versus non-exclusive agreements with the property management companies, can ou address where we are with that and how much of our business comes from those arrangements?
Speaker #2: Certainly. Yeah. When, when we say exclusive versus, semi-exclusive, you know, we see among our lients and sometimes it's dependent upon, the size of their portfolios.
Speaker #2: Sometimes it's dependent upon where they are in their business and what their needs are. our strategic team has done great job, speaking our client partners and, and working with them on, agreements where we can really cater the way that we deliver our services to their needs.
Speaker #2: So there's, there's an appetite for that where it kind of simplifies the approach with the client to say, "Hey, you know, we've, we've got, 've got one partner.
Speaker #2: We know exactly how BGSF delivers. we, you know, a great relationship with the employees." So there's definitely been a healthy appetite for, you ow, i-in that area.
Speaker #2: Overall, the strategic portfolio, you ow, clearly, year-over-year, that's, h, that, that, that's going to fluctuate a little bit. But we anticipate entire strategic portfolio to comprise roughly between 11 and 15 percent of the overall revenue of business.
Speaker #8: Okay. So just, I'm sorry, Kelly. So, so, o-o-among those top 10 companies, you're only getting 11 or 15 percent of total revenues. Am I hearing that right?
Speaker #2: No. it varies from client to client. Some of the clients that would be exclusive agreements, if, if they're spending on staffing, they're spending it with us.
Speaker #2: So we would get, we would capture all of that. with some other clients, it's not necessarily an exclusive agreement. So it may be anywhere, you know, it may be 5% of what they spend.
Speaker #2: It may be 50% of what they spend. That varies from client to client.
Speaker #8: Got it. What I'm trying to get at, maybe I didn't ask the question right, is, isn't this an advantage? Let's say BG obviously is one the biggest players in this business.
Speaker #8: So the way that ou can leverage that is obviously becoming one of these exclusive or semi-exclusive. But there can't be more than a handful, right?
Speaker #8: Per? Per the
Speaker #2: Sure.
Speaker #8: client. So the question is, is this a good or bad? I would think this is a ant differentiator, is what I'm trying to get at.
Speaker #2: Yes.
Speaker #8: Versus you
Speaker #8: and, let's say, a local provider, in a market.
Speaker #2: Mm-hmm.
Speaker #8: Versus other nationals. Can is, am I missing that? Or how do you view that, I guess, is the, the what I'm ying to.
Speaker #2: Yeah. I, you know, our, our, our geographic, you know, spread throughout the country is, is definitely an advantage, competitively. you ow, especially whenever you're dealing with a that has a portfolio across the country, you ow, to my point earlier that, that, that makes it very, you know, appealing for them to work with BG.
Speaker #2: Because they know they're going to come to one source for all of their needs. So that's, that's certainly been, been, a strategic advantage that the, that the team is leveraging whenever they're engaging in discussions with companies to gain the agreements for exclusive or semi-exclusive agreements.
Speaker #8: Okay. Thank ou. And, and Keith, just a quick question. so when we look at the size of the business today, and we look at, let's say we go, but your theoretical break-even is, can you talk to your incremental margin pickup above break-even?
Speaker #8: because I presume there's reasonable operating leverage, here. Is that right? Or am I, again, missing that?
Speaker #4: no. You, you, h, you, you are right. So, I would say the best way to look at that, the, the, the, the, the, the margin left for, as sales dollars go up, it's going to be around 35% of that we're just fall straight, straight through.
Speaker #8: Okay. And that would be.
Speaker #4: With sales. With
Speaker #8: I'm sorry.
Speaker #4: sales dollars go up. About
Speaker #8: Yeah.
Speaker #4: 35% of that margin ju should, should, h, essentially fall or 35% of that revenue, excuse me, should fall straight through because the selling costs are relatively fixed.
Speaker #4: you ow, G&A, is, as well. So, building sales will quickly drive a much higher margin. And EBITDA.
Speaker #8: Okay. Great. A-and, and I guess the last question I'm just trying to stand. When you look at that, I know we'd already hopped this a little bit, but the, the, the company cost that the, the G&A cost as we go forward.
Speaker #8: I always thought property management, correct me if 'm wrong, how much, of these folks are actually working from home versus from offices? And how much of, of the total G&A cost is embedded in lease costs to these offices?
Speaker #8: And is that an opportunity we can look at?
Speaker #4: The office costs for, for, for this group is not in, in, in, in G&A. That's what we have broken out now. That's the selling cost, okay?
Speaker #4: Selling through in, includes lots of things. It's obviously selling, recruitment, you know, all those sorts of ings. So that cost, and when, when, when, when you look, look the queue, that is the selling cost.
Speaker #4: The G&A is really, you know, finance and accounting, HR, all that sort of stuff.
Speaker #8: Okay. Great. Thank you guys very much. Appreciate .
Speaker #4: Okay.
Speaker #2: Thank you.
Speaker #4: Thanks.
Speaker #2: There are no further questions in queue at this time. I would now like to turn the floor back over to Kelly Brown for any closing remarks.
Speaker #9: Thank you for your time today. We appreciate your continued support and look forward to updating you on our third quarter results in a few months.
Speaker #9: Have a great day.
Speaker #4: Thanks, everyone.