Good morning, everyone. Welcome to the BGSF Inc. Fiscal 2023 Fourth Quarter and Full Year Financial Results Conference Call. All participants will be in a listen-only mode. As a reminder, this conference call is being recorded. Now I'd like to turn the call over to Sandy Martin, Three Part Advisors. Ma'am, please go ahead.

Thank you. Good morning, and welcome to the BGSF 2023 Fourth Quarter and Full Year Earnings Conference Call. With me on the call today are Beth Garvey, Chair, President and Chief Executive Officer; and John Barnett, Chief Financial Officer. After our prepared remarks, there will be a Q&A session. As noted, today's call is being webcast live. A replay will be available later today and archived on the company's Investor Relations page at investor.bgsf.com. Today's discussions 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. 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. 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. During the call, management will also reference certain non-GAAP financial measures, which can be useful in evaluating the company's operations related to the financial condition and results. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered as a substitute. GAAP and non-GAAP measures are reconciled in today's earnings press release. I'll now turn the call over to Beth Garvey. Beth?

Thank you, Sandy, and greetings to everyone on today's call. Fiscal 2023 marked a pivotal year for BGSF characterized by significant achievements and the successful execution of our strategic and transformative plans. We are pleased to report over $20 million in operating cash flow, accompanied by a nearly 5% increase in revenues to $313 million. It's worth noting that the fourth quarter of 2022 included an extra week of operations due to a calendar shift. On a same-day basis, we estimate 7% growth in total 2023 revenue compared to adjusted 2022. In specific segments, Property Management revenues grew by almost 5% on a same-day basis for the year, while professional revenues experienced an 8% increase on a same-day basis. Notably, professional revenue in the second half of 2023 was intentionally lower due to a strategic shift away from lower-margin IT placements. Our 2023 initiatives involved successfully integrating Home Solutions acquired in December of 2022 and acquiring Royal Consulting in April of 2023. These acquisitions provide clients with high-end finance and accounting workforce solutions and robust nearshore and offshore development capabilities. Furthermore, our strength in partnerships with leading technology companies, including Workday, ServiceNow, Microsoft, SAP, Oracle, and Salesforce, has amplified the BGSF brand, fostering new business opportunities. The rebranding to BGSF from various acquired trade names further enhanced our brand recognition in 2023 as well. I'm immensely proud of our team's dedication and hard work, which has been instrumental in advancing our vision. The March CEO Confidence Index polling hitting its highest level since 2021 gives us confidence in the continued growth of U.S. businesses. Our strategic decisions regarding service offerings are well-positioned for growth in 2024 and beyond. Now I'll turn the call over to John.

Thank you, Beth, and good morning, everyone. As Beth mentioned, 2022 was a 53-week fiscal year and 2023 was a 52-week fiscal year. The extra week in 2022 was in the fourth quarter, making the as-reported year-over-year fourth quarter comparison difficult. 2023 total revenue was $313.2 million, up 4.9% on an as-reported basis. On a same-day basis, adjusting 2022 for the extra five days, total revenue was up 7%. For the segments, reported professional revenue for the year was up 6.1% on an as-reported basis and 8% on a same-day basis. The increase was driven by the acquisition of our Royal Consulting and Horn Solutions. As we integrated Horn Solutions in 2023, we lost the ability to cleanly separate our organic or existing business from the Horn Solutions business. For the year, and on a same-day basis, we estimated that our organic professional business declined in the mid-teens in percentage terms. Property Management increased 3.3% on an as-reported basis and 5% on a same-day basis. Gross profit for the year was $112 million, up 8% from the prior year, and gross margins were 35.7%, up 100 basis points from 2022. Recall that our 2023 operating results included a one-time $22.5 million pretax non-cash brand name impairment charge related to the rebranding project. Excluding the nonrecurring impairment charge, transaction fees, and acquisition amortization, our reported loss from continuing operations of $0.95 per share is adjusted to $1.19 earnings per share compared to $1.26 earnings per share in 2022. We increased adjusted EBITDA from continuing operations by 15.9% to $25 million compared to $21.7 million. Our adjusted EBITDA margin grew from 7.3% of revenue in 2022 to 8% in 2023. Turning to the fourth quarter, revenues were $73.6 million compared to $77.3 million in 2022. On a same-day basis, adjusting 2022 for the extra five days, fourth quarter revenue was up 3% versus same-day revenue of $71.4 million in the prior year's quarter. For the segments, on a same-day basis, property management revenue increased an estimated 0.4%, and professional increased by 5%, which included the benefit of acquired revenues. As stated earlier, as the Horn Solutions integration progressed, it became difficult to separate out our organic or existing business. We estimate that organic professional revenue contracted in the high mid-teens on a same-day basis during the fourth quarter. We continue to see pressure in the fourth quarter on staff augmentation, project starts, and permanent placement. However, the opportunity pipeline has grown as we moved through the first quarter, and we are optimistic about 2024. Gross profit margins in the fourth quarter were $25.4 million and 34.6% compared to $27.1 million and 35% in the prior year quarter. The slight decline in margin is attributed to lower permanent placement business, which carries a gross margin of 100%. SG&A expenses for the fourth quarter were $20.2 million and 27.4% of revenue, which was an improvement versus the prior year quarter of $23.2 million and 30% of revenue. Operating income increased $3.2 million from $2.8 million in the prior year quarter, driven by lower SG&A expenses. Fourth quarter adjusted EBITDA was $5.5 million or 7.5% of revenue, compared to $4.3 million or 5.6% of revenue in the prior year quarter. I'm happy to announce that we closed the refinancing of our credit facility this past Tuesday. We have a great group of banks in this syndicate, and we are appreciative of their partnership. We prudently manage our balance sheet, focusing on working capital efficiencies and carefully evaluating our leverage ratio. Funded debt to trailing 12 months pro forma adjusted EBITDA was 2.48 times at year-end. We maintain a disciplined approach to our capital allocation strategy, which includes investments in capital expenditures, organic growth, cash to pay down debt, a quarterly cash dividend with an annualized yield of approximately 6%, and strategic acquisitions. We have no immediate plans for acquisitions in 2024. With that, I would like to turn the call back to Beth.

Thank you, John. As we reflect on 2023, we recognized the challenges posed by tough double-digit sales comps from 2022, coupled with economic uncertainty. Despite these challenges, our commitment to short-term and long-term strategic initiatives supporting our teams and streamlining operations has positioned us for success in 2024 and beyond. Looking ahead to 2024, we plan to leverage our proprietary territory mapping tool for better sales force deployment and property management and continue upscaling talent through our virtual training partnerships. On the professional side, our partnerships with leading technologies and our recent appointment as a direct Workday service partner elevates us to new heights. We are also seeing momentum growing in the Managed Solutions and cross-selling of our nearshore and offshore IT services. Our strategic repositioning, including higher value consulting, management solutions, and a unique property management platform, sets us up for long-term success and shareholder value creation. I'm extremely proud of the progress and execution on building blocks for our future growth and profitability, and our team's dedication and nimble approach position us well for the opportunities that lie ahead. I look forward to what we can achieve at BGSF in the future. Before we open the line for questions, I wanted to mention that we will be at the ROTH Investor Conference next week and hope to see many of you there. With that said, I will turn it over to the operator for questions.

Our first question today comes from Jeff Martin from Roth MKM. Please go ahead with your question.

Thanks. Good morning, Beth and John. Beth, I was hoping you could give us a little more insight on the Professional segment. You mentioned the uptick in the CEO survey, the first time in two years or so that you've seen that level. Are you seeing that trickle through to the pipeline of business in Professional?

We definitely are. So there's a lot of optimism going on right now at BGSF; the professional group is buzzing right now. It's all good.

Great. With the Royal acquisition likely approaching its one-year mark, how is the progress on near-shoring and off-shoring? I know the initial response was very positive; are you witnessing that trend continuing, and if so, could you share some examples of what you've observed?

Well, it took us a while to really figure out their capabilities down there. They have such a robust suite of products that they can offer, so it took us a while to pick out everything they can do. We're mostly excited about the way they can build different tools. We have a connector tool that we're working with that connects some ERP systems. Not all the time do you have tools that connect ERP systems to a pricing tool, right? So we're able to start building some AI products that help connect those things. We've also got a team working on AI products for some of our other customers. The more we recognize what they do and talk to our customers about their needs, the more potential we uncover. Louis Sanchez, who runs that group, has done an amazing job engaging our customers about their pain points and how we can help them. So it's exciting to see all that play out.

And then on the Workday partnership, maybe you could elaborate on what that means for BGSF?

In the past, we were treated like a third party. We were approved to do more, but we weren't direct. Now we have visibility as a preferred implementer and can go direct to clients without waiting for someone else to refer us.

Great. And then I know strategically, BGSF has made strides toward more technologically advanced solutions. Can you talk about the progression that you've made over the past year and a half since you've added some acquisitions to enhance the technology aspect of the offering?

I think we've made significant strides. It's a great question, Jeff. In looking at our business and acquisitions, we realized that customers have a journey. They need to choose their software, implement it, and then customize it. Our goal is to cover the entire process. We've found we have talented teams capable of high-margin work, while lower-margin business requires more personnel to maintain. We decided it was strategically wise to shift our focus toward high-margin services where we can effectively address our customers' needs, and we've been successful in doing so.

I would also add that we underwent a significant transformation by integrating these two acquisitions. We had some overlapping groups, particularly regarding higher-end finance and accounting expertise that Horn brought onboard. We needed to organize our business effectively, and Eric Peters did a great job aligning our team. We feel confident about our structure, especially given the economic conditions improving and increased optimism we anticipate will lead to higher spending by our customers.

And then one more for me, if I could. On the Property Management side, a segment that's traditionally grown at a very attractive and rapid rate. Do you foresee getting back to, say, double-digit growth in that segment? If you're not seeing it now, what kind of environment are you seeing out there currently?

We've had to adjust in that segment. There's more competition now than we've had before. We need to refine our strategies accordingly. Our territory tool is going to help us target our sales approach better. We are optimistic about our prospects but recognize it's a different environment now than three years ago.

Our next question comes from Howard Halpern from Taglich Brothers. Please go ahead with your question.

Congratulations on the solid results and looking forward to 2024. In terms of property management, how many locations did you end the year with? And what are the prospects for increasing the number of locations or splitting locations in 2024?

I believe we are at 64 locations right now, Howard. With the territory mapping tool, we're looking to optimize our sales force. For example, in Atlanta, we may go from two sales people to six. This targeted approach is essential for our growth. As always, we are looking for opportunities to enter new markets but focusing on optimizing our current territories is key right now.

And in terms of how you're set up for 2024, what are you seeing in terms of your own internal productivity based on all the technology that you've put in place to grow the business?

Yes. I think we continue to evolve our systems. If you look at what we did last year, in addition to organizing our professional side, we also rightsized the organization to enhance efficiency. You see this in our cost structure as we've progressed through the year, notably in our SG&A as a percentage of revenue. We feel we are in good shape today.

And I'll add that we've done well over the past year with economic pressures, which helped us rightsize our team effectively. Currently, we can generate more revenue without increasing our G&A expenses. We're confident about how we've restructured for this year.

And one last one. You talked about the customer side and the outlook there. How are you seeing the talent side and bringing on people to fill the requests of customers?

We have a loyal group of consultants and field talent. We're not facing significant recruitment issues as we maintain strong relationships with our team. We do a great job ensuring that once people work for us, they stay with us, allowing us to redeploy talent effectively.

Our next question comes from Bill Donohue from Teton Capital. Please go ahead with your question.

Great. Thank you. Would you please dive into a bit more detail on that additional competition that you're seeing on the property management side? And how is it manifesting itself, please?

We've always had competition, but it seems more players are entering this niche. When we open a market, competitors follow us closely. It's a testament to our relationship-based business that we can double down on our connections. We've received recognition, like Supplier of the Year with the National Apartment Association, which helps us differentiate ourselves. However, we must adapt our sales strategies to accommodate this increased competition.

When you first purchased Royal, there appeared to be some interesting organic growth opportunities. Could you expand on what you're seeing now, please?

There are many cross-sell opportunities with Royal's team. We are uncovering their capabilities and how we can leverage them. They excel at listening to our customers' pain points and responding effectively, ensuring we connect the right teams to the right clients.

This is one of those areas where we already have existing relationships. We started small and are building our reputation while proving our capabilities to gain more business from our current customers.

That is helpful. And I do want one point of clarification from your opening remarks. Could you elaborate on the ability to tie pricing to an ERP system? Was that Arroyo or another part of the business?

I apologize for any confusion. We have capabilities from our Royal team to connect ERP systems to pricing tools, which has historically been a challenge, and we've made great progress in this area.

Our next question comes from Brian Kinstlinger from Alliance Global Partners. Please go ahead with your question.

Great. Thanks for taking my question. Can you talk about your current appetite for M&A given your recent transactions and solid cash flow trends? Also, can you speak to valuation expectations for private companies and how they may have changed over the last few quarters?

Given the two significant acquisitions we've made and the need to focus on alignment and execution, we are not looking for more acquisitions unless a very good fit arises. This year, our primary focus is on execution and utilizing the strengths of what we have acquired. We see some tailwinds in the economy that we believe will foster growth, and we want to capitalize on that.

Our next question comes from Mike Taglich from Taglich Brothers. Please go ahead with your question.

I hope I didn't miss that. What is the growth range you're expecting for the Property Management business and the tech business this coming year?

In terms of our expectations, I feel good about 2024. We have positive momentum in our professional group. We've had numerous discussions with customers who are beginning to explore new options. My recent travels confirmed a lot of excitement from our customers. I feel confident about our growth potential in both areas.

Ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Beth Garvey for any closing remarks.

Thank you, everyone, for your time today, and we appreciate your continued support. We look forward to updating you with our first quarter results in early May. Have a great day.

Ladies and gentlemen, with that, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.