Thank you for your patience. Welcome to the BG Staffing Second Quarter 2020 Financial Results Conference Call. Please note that all participants are in listen-only mode and this call is being recorded. After the presentation, there will be a chance for questions. I will now pass the call over to Terri MacInnis, Vice President of Investor Relations at Bibicoff + MacInnis, Inc. Please proceed.

Thank you, Operator. It’s been a pleasure to welcome you to the BG Staffing conference call to discuss Q2 and six-month financial and operating results and an update on operations in the COVID-19 environment. With me today on our call is Beth Garvey, President and CEO; and Dan Hollenbach, Chief Financial Officer. A question-and-answer session will follow their prepared remarks. This morning’s news release announcing the company’s financial results is available in the Investor Relations section on BGSF website at bgstaffing.com. Our call today is being webcast live and recorded. A replay will be available later today on the company’s website and will remain available for at least 90 days following the call. Discussions today include forward-looking statements, which are based on certain assumptions made by BGSF based on and are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The company’s actual results could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including those listed in Item 1A of the company’s annual report on Form 10-K and the quarterly reports on Form 10-Q and in the company’s other filings and reports with the Securities and Exchange Commission. All risks and uncertainties are beyond the ability of the company to control, and in many cases, the company cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. These forward-looking statements are made as of the date of this call and BGSF assumes no obligation to update these statements publicly even if new information becomes available in the future. This broadcast is covered by U.S. copyright laws and any use or rebroadcast of all or any portion of this conference call may only be done with the company’s express written permission. During our call, we will discuss some non-GAAP measures, which we use for internal evaluation and to report the results of the business as useful information to management, our Board of Directors and investors of our operating activities and business trends related to our financial condition and results of operations. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered in isolation as a substitute for or superior to financial measures calculated in accordance with GAAP. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see today’s news release posted on the company’s website. It’s now my pleasure to turn the call over to Dan Hollenbach, Chief Financial Officer. Dan?

Thank you, Terri. Good afternoon, everyone, and we appreciate your interest in BGSF. I want to mention that we were scheduled to file our 10-Q this morning but decided to delay to ensure the additional review disclosures regarding impairment and swap accounting were thorough and clear for our readers. We intend to file it tomorrow. I also want to take a moment to acknowledge our remarkable team, who have shown agility, responsiveness, and hard work throughout this challenging time. Thanks to their efforts, we have maintained safety and high service levels while working remotely. The steps we took earlier this year in response to the COVID-19 pandemic have benefited us. Our organic selling costs reduced to 12.4%, and recurring home office costs were down to 16.7% from Q1. We are carefully examining the current situation and are prepared to adjust our business operations as necessary based on guidance from federal, state, and local authorities. While returning capital to shareholders is crucial, ensuring a strong balance sheet is our primary focus. The Board has approved a $0.05 quarterly dividend for Q2. We are encouraged by consistent growth in our business segments week over week. For the last week of June, our overall revenue reached 91% of pre-COVID levels, improving from a low of 71% in mid-April. The Light Industrial sector has recovered to pre-COVID revenue levels, even exceeding those in July. Despite the virus surging in different regions, we are not experiencing significant geographic pressures on our business. For our Q2 results, revenues for 2020 were $62.6 million, a 15.2% decline from Q2 '19, while gross profit was $16.9 million, down 19%. The overall revenue decline was primarily due to a 52% drop in Real Estate, but this was partially offset by $9.8 million from our recent acquisitions. Our gross profit margin of 27% was a decrease from 28.2% in '19, affected by the significant drop in permanent placements and the Real Estate decline. We reported a net loss of $5.4 million after tax due to impairment of certain intangible assets in our finance and accounting division. The net loss for Q2 '20 stood at $4.8 million, or minus $0.47 per diluted share, compared to net income of $3.8 million, or $0.37 per diluted share, in '19. It's important to note that net income before the impairment impact was $600,000. Our effective tax rate was 25.9%, compared to 22.8% last year. Adjusted EBITDA fell to $3.3 million from $6.9 million last year. Adjusted EPS also decreased to $0.16 from $0.44 in the prior year. Our SG&A expenses were flat compared to '19, mainly due to a $2.6 million reduction in legacy organic costs, offset by increases related to our acquisitions and IT roadmap initiatives. For the year-to-date, revenues reached $136.7 million, down 4.2% from '19, while gross profit was $37.2 million, a decrease of 5.4%. The decline in revenue was fueled by a 27% drop in Real Estate, partially offset by $16.7 million from acquisitions. Our gross profit percentage of 27.2% saw a slight dip from '19, impacted by a 24% decline in permanent placements. We reported a net loss for the year-to-date of $3.3 million, or minus $0.32 per diluted share, compared with net income of $6.3 million, or $0.61 per diluted share, in '19. Our effective tax rate was 22.8% for both periods, and net income before impairment impact was $2.1 million. Adjusted EBITDA was $8.5 million, down from $12 million in '19, and adjusted earnings per share fell to $0.51 from $0.76 in '19. Our SG&A expenses this year increased by $2.7 million, mainly due to acquisitions and IT initiatives, although we saw a $3 million decrease in legacy organic costs. Despite delaying new IT initiatives, we continue to invest in existing critical projects. Cash generated from operations rose by $5.9 million over '19, largely due to improved receivable collections despite lower sales. Day sales outstanding at the end of June was 51 days, slightly up from 50 days in March. I'm pleased to report that our balance sheet remains robust, with public senior debt just under $40 million and $24.6 million available under our revolver. Our debt to pro forma adjusted trailing 12-month EBITDA at the end of Q2 was 1.72. Additionally, we entered into a three-year fixed-rate swap on a notional amount of $25 million of our debt in early June. This concludes my financial review. Before I pass the call to Beth, I want to welcome our two newest board members. Our CEO, Beth Garvey, and Cynthia Marshall, the CEO of the Dallas Mavericks, have joined the Board. Supporting diversity and inclusion is crucial for our Board, and these appointments are significant for governance and corporate culture. I also want to congratulate Beth on being named a finalist in the EY Entrepreneur of the Year 2020 Award for the Southwest region. This is a prestigious program for entrepreneurs, and we are proud of you, Beth, and look forward to the contributions you and Cynthia will make to the BGSF Board. Now, I will hand the call over to Beth.

Thank you, Dan. Good afternoon, everyone. I hope you and your families are healthy and safe. As Dan mentioned, our top priorities since the start of the COVID-19 pandemic have been the health and safety of our teams, as well as providing support to our clients who are facing these challenging circumstances. I also want to welcome our new Board member, Cynt Marshall. We are a workforce solutions provider, helping 28,000 people find jobs each year, and I believe Cynt’s extensive experience from her 36-year career at AT&T, including her final role as Senior VP of Human Resources and Chief Diversity Officer, will significantly strengthen BGSF’s foundation for the future. I’m grateful to have such an accomplished woman and leader join our team. Throughout this economic disruption over the past few months, I commend our team and our clients for their resilience. The business community has shown great dedication in supporting one another and sharing valuable insights, which has made us all better leaders. Our team has stayed attuned to the evolving community and business landscape, positioning us well to deliver new services and create relevant content through webinars, social media education, and outreach. It is still too early to accurately assess the impact of the disruptions on the labor market and business operations, so we must maintain close communication with our team members and clients while managing this ever-changing situation. Most of our teams have adapted to remote work, allowing us to virtually collaborate on several initiatives in Q2 that will support our growth moving forward. As you may recall, we launched the IT roadmap, with many initiatives going live in Q2, and I would like to highlight a few. We launched a new ERP system in July, implemented a Power BI tool for improved reporting and metrics, and established a new client contract management system for faster and compliant execution of business contracts. We also completed the integration of our recent acquisitions, launched an automated timecard solution for our Real Estate division, developed a back-to-office COVID playbook, and set up a diversity, equity, and inclusion committee. Managing 89 branch offices and 12 on-site locations across 44 states and the District of Columbia presents its own challenges. Dan has already shared the numbers, so I want to provide overall observations about our business divisions, each of which has been affected to varying degrees. Our Professional division, which created a strategic account team last year, has seen positive results from these efforts. This team collaborates across all BGSF brands, generating solutions and cross-sell opportunities, accounting for 33% of Professional division revenues and contributing significantly to our overall revenue and gross profit. The Finance & Accounting segment has maintained the temporary sales boost we mentioned in Q1, aided by a client involved in the SBA loan process, and has recently expanded to support clients awarded a USDA contract for a digital records management system. Additionally, the strategic accounts team's efforts have created new roles in Finance & Accounting at companies that previously only viewed us as an IT solutions provider. The IT segment remains strong, particularly in ERP and CPM initiatives, with an uptick in orders for ServiceNow, cloud migration, and cybersecurity, largely due to the webinars and white papers launched during the quarter. We now have an active sales pipeline in Professional and are cautiously optimistic for a strong year, despite the uncertainties posed by the COVID-19 environment. Although most clients in the Light Industrial division were considered essential, we experienced limited orders early in the quarter due to COVID-19. Since June, sales activity has increased, with many clients returning to or exceeding pre-COVID levels. Given the tight labor market, I’m pleased to report that this division has now achieved pre-COVID revenue levels, surpassing them in July as Dan pointed out. Conversely, our Real Estate division has felt the most impact from the pandemic, with multifamily communities adjusting to non-emergency maintenance and offering virtual leasing options. BG Talent experienced an immediate decline as many companies transitioned to remote work. In response, the team introduced new services, including concierge offerings and social distancing monitors for public areas like pools and gyms. They also consolidated management teams, postponed office expansions, and held back on new internal orders. In mid-June, we started to see an uptick in orders, leading to successful sales and recruiting initiatives that continue to this day. However, the Real Estate division has not recovered as quickly as hoped in Q2, influenced by factors such as COVID-19 surges, government restrictions, rent abatements, eviction moratoriums, and reduced movement, along with financial constraints on complexes for capital expenditures. Overall, across all divisions, we are witnessing positive sequential movement and are hopeful we have reached the low point. While we await an economic rebound, BGSF is committed to safeguarding our financial stability and being ready to seize opportunities as business transitions to the new normal. Our focus remains on current business needs as we actively explore future prospects to enter new markets and consider M&A opportunities. I will now turn it over to Anna for the question-and-answer session.

Thank you.

Thank you.

Our first question comes from Jeff Martin of Roth Capital Partners. Please proceed.

Hi. This is Sarra Schuster calling in on behalf of Jeff. Beth, congratulations on the Board appointment and being named to the SIA 2020 staffing 100 list and for being a finalist in the EY Entrepreneur of the Year 2020 Award for the Southwest Region. That’s a lot of accomplishments.

Thanks.

Congratulations.

Thank you so much.

With the recent acquisition of EdgeRock and L.J. Kushner, could you provide a sense of how those businesses are performing?

Absolutely. EdgeRock, we still believe are very good acquisitions for us. EdgeRock Technologies has really maintained where they were. We didn’t really see a dip in what they were doing. They had projects that didn’t end when COVID hit. They have had a dynamic sales team that has lots of things in the pipeline, so they remain strong. L.J. Kushner took a bigger hit. A lot of his contacts were in the New York region and so some of the orders that he was working on and his Routine Search business were put on hold. So he has now started to see activity rebound on that and we feel good about where he’s going to fall in August and September for the rest of the year.

Thank you. Could you please characterize each of the three segments in terms of the monthly progression from April through July and have you experienced restarts and new pauses with these segments?

Yeah. So I will give you the progression. As mentioned earlier, we are tracking revenues against the first 3 weeks of March. So what I am going to give you is a percent for April, May, June, and July of each of our three segments in order. So our Light Industrial segment in April was 74%, went to 80% to 95% to 105% in July, our Real Estate 46% in April to 48% to 72%, to 86% in July, and our Professional was 89% in April, 90%, 91%, so it went up a hair in July to 86%, pretty consistent in the result.

Thank you. Let’s see, to the extent that you are seeing client orders come back, have you faced challenges in workers’ motivation to return to work in the environment where unemployment benefits have kind of been a disincentive to return to work?

We have observed some impact, primarily in the Real Estate and Light Industrial sectors. It hasn’t significantly affected the Professional brands. However, we are facing challenges due to the extra unemployment benefits currently being provided. As a result, companies are having to think creatively. I believe they are raising pay rates, with some customers increasing wages by $2, $3, or $4 an hour to address this issue; but this is mainly seen in those divisions.

Okay. Got it. Thank you on that.

Okay.

Thank you. You historically have had very high client retention of over 90%. How much of that has shifted in the current environment and what is your outlook on how client retention could permanently shift as a result of this recession?

Yeah. Absolutely. Yeah. So as of June, our Light Industrial had a 96% retention and our Professional Group had an 85% retention. We don’t track Real Estate because of the nature of the 8,000 customers that we serve in every community in America and those numbers are consistent with prior periods. Other than one of our offices, we are not seeing the decline in retention, so…

Okay. And…

And we don’t expect those percentages to change because of this, sorry for that.

Okay. Got it. Thank you. And then, lastly, could you provide detail on what factors triggered the impairment of intangible assets in the period?

Yeah. So we do this test every quarter. It’s normally just a qualitative test, and in the past, we have been able because of either where we were historically or where we were forecasting or where we were from a client retention standpoint able to support the intangible values. At the end of June, it became apparent from the last 18 months in our Finance & Accounting Group and based on the retention factors for our Smart acquisitions that the numbers needed to be tested. And given the forecasted over the next six months to 18 months on those two divisions, we calculated it based on various fair value factors and determined the write-off from that. So Smart…

Okay. Got it.

Since we acquired Smart four years ago, we have aimed to shift the company's focus towards a more upscale market, which has resulted in significant changes in our client base. Initially, they had a 90% retention rate, and we anticipated that this client base would remain stable for some time. However, as we have restructured the business, we are now targeting a different clientele that offers higher gross margins and a more favorable business environment.

Well, thank you for that explanation. Thank you very much.

Thank you.

This concludes the question-and-answer session. I would like to turn the conference back over to Ms. Garvey for any closing remarks.

Thank you, Anna. And thanks to all of you for joining our call today. I will close with the thought that our people and our business are resilient and we are leaning on the valuable experience earned by navigating through prior downturns and we remain grateful for the lessons learned that guide us today. We appreciate your continued support of BGSF and we look forward to updating you in the near future. Have a great day.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.