Good day, and welcome to the BGSF, Inc. Fiscal Year Fourth Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. We are opening questions only for analysts today. To ask questions, you may press star then one on your touch-tone phone. Please note this event is being recorded. I would now like to turn the conference over to Ms. Sandy Martin with Three Part Advisors. Go ahead, ma'am.

Good morning. Thank you for joining us for today's BGSF fourth quarter and full year 2024 earnings conference call. With me on the call today are Beth Garvey, Chair, President, and Chief Executive Officer, and Keith Schroeder, newly appointed 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 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. 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's 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. 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. I'll now turn the call over to Beth Garvey.

Thank you, Sandy, and good morning, everyone. I appreciate you joining us today. I'd like to begin by addressing our CFO transition. Yesterday, we announced the appointment of Keith Schroeder as our new Chief Financial Officer. We are thrilled to welcome Keith to the BGSF team. A transformational leader with extensive public company experience, bringing strategic operational and financial expertise that will strengthen our finance and accounting functions. I also want to express my deep appreciation for John Barnett, and his contributions to BGSF during a pivotal and transformative period in our company's history. On behalf of our leadership team and the board, I thank John for his dedication and wish him the very best in his future endeavors. Additionally, I'm proud to share that BGSF has once again been recognized as one of the best places for working parents, marking our fifth consecutive year of receiving this award. Moving on to restructuring our strategic updates. As you recall in December, we announced a significant restructuring plan aimed at reducing costs, improving operational performance, and positioning BGSF for profitable growth. We anticipate cash savings of approximately $7 million to $9 million in 2025 from these initiatives, which included headcount reductions and streamlined indirect costs. Furthermore, by shifting our IT middleware maintenance and development to lower-cost nearshore support with Arroyo, we expect to save an additional $800,000 annually in capital and cash expenditures. Both of our business segments also underwent an organizational restructure, which we believe will enhance communication, improve operational consistency, and drive efficiency gains, ultimately supporting long-term growth. Regarding our strategic alternative process, our timeline remains unchanged. We continue to expect this to be a 12 to 18-month process from the initial announcement in May of 2024. While we are making progress, we recognize the economic and political uncertainties have created a more cautious environment. We remain committed to providing updates when we have definitive developments to share. Before Keith provides financial results, I'd like to highlight key trends in our business segments. In the Professional segment, our monthly IT contract revenue normalized for billing days reached its lowest point in June of 2024. However, since then, revenue has stabilized or grown sequentially with positive trends continuing into January and February of 2025. Fourth quarter revenues were down 3% sequentially reflecting normal holiday seasonality. However, adjusted for billing days, Q4 was approximately 2% sequentially. Encouragingly, we added 15 new logos in Q4 and saw a 30% increase in signed master service agreements compared to Q4 of 2023. Increased customer engagement and scope meaning suggest a growing opportunity pipeline reinforcing our confidence in a positive trajectory. In the Property Management segment, we took decisive action to align direct and indirect operating costs with revenue, improving overall efficiency. The broader multifamily housing sector remains challenged by rising operating expenses and credit challenges. However, we are optimistic about improvement in revenue trends starting mid-2025. Our territory mapping initiative in key markets drove a 23% increase in revenue and remains a top priority for expansion in 2025. We continue to see year-over-year growth for our exclusive and semi-exclusive preferred vendor agreements positioning BGSF as a go-to partner for our property management clients. Now I'll turn the call over to Keith to walk us through the financial results.

Thank you, Beth. Good morning, everyone. I'm honored to join BGSF and look forward to meeting many of you as we engage with investors in the coming months. Now turning to our fourth quarter performance, our fourth quarter revenue was $64.4 million compared to $73.6 million in Q4 of 2023, reflecting a decline in both segments. Our Professional segment revenue declines narrowed to 8.7% year-over-year and 3% sequentially. On a billing day adjusted basis, our Professional revenue grew 2% sequentially. The Property Management segment absorbed significant restructuring changes which, while challenging, have now aligned the business with forecasted revenue levels. Property Management revenue experienced normal seasonality increase in Q3. As we moved into Q4, we experienced a larger than normal seasonality decline. We attribute this decline in part due to actions we took to stop servicing certain credit risk and disruption as we executed the restructuring initiative. Now turning to our profitability and margins, our gross profit was $21.5 million in Q4 with a margin of 33.3% as compared to 34.6% in the prior year. This is largely due to increased competition and economic pressures in property management. SG&A expenses were $20.8 million compared to $22.0 million in Q3 and $20.2 million in Q4 of 2023. Our adjusted EBITDA was $1.4 million or 2.2% of revenue versus $3.4 million or 4.8% in Q3. On a net income basis, we report a GAAP loss of $0.10 per diluted share and an adjusted loss of $0.06 per diluted share which includes a $1.4 million gain resulting from a reduction in the expected Arroyo earn-out. Our priority remains enhancing profitability in 2025. With that, I'll hand it back to Beth for closing remarks.

Thank you, Keith. As I mentioned last quarter, we launched an advanced lead generation engine in Q3, generating $2 million in revenue in just six months for our property management team. Encouraged by its success, we expanded this initiative to our finance and accounting teams last month where we are already seeing positive early results. Additionally, we recently restructured our technology and digital marketing teams launching an operational excellence team focused on streamlining workflows and service delivery, identifying gaps and opportunities, and leveraging AI to improve productivity and eliminate repetitive tasks. This initiative reflects our data-driven approach to business process optimization ensuring discipline and execution of repeatable high-impact processes. Simply put, we are applying our own best practices and consulting expertise to drive operational excellence within BGSF. Looking ahead, we are laser-focused on revenue growth and profitability improvement, which will enhance cash flow and shareholder value. Our restructuring plans have positioned us for greater financial efficiency, while our investments in technology, partnerships, and people continue to drive long-term value creation. We've built strong relationships with industry leaders across IT, with our SAP, Workday, Oracle, ServiceNow, and Microsoft partnerships, and property management large commercial and residential leasing companies. Additionally, our managed solutions, nearshore/offshore engineering, and AI capabilities give us a competitive edge in an evolving market. I want to thank our team members, our board, and our investors for their continued dedication and belief in our strategy. Now let's open the call for questions. As a reminder, we have no new updates on the strategic alternative process, and we kindly ask you to refrain from questions on that topic.

Thank you. We will now begin the question and answer session. If you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Howard Halpern with Taglich Partners. Please go ahead, sir.

Good morning, guys. Nice to talk to you, Keith. Good morning. So in terms of the restructuring and streamlining, what type of cadence could we expect in terms of seeing that on the SG&A line as we go through the upcoming quarters?

The majority of those cuts, Howard, took place in December. And so they will start showing up in Q1. The majority of that was in people. So you'll see in the results for Q1 some of those reductions. Some of the other reductions will take place throughout the year as we eliminate contracts that we were not going to renew, and they start to fall off.

Okay. And how is the process, I guess, going with relocating, you know, some of what you've done going to your Arroyo operations? And how is that process going, and how are you seeing that?

Well, we're super proud of the ability that the Arroyo team has. And as we move, we start to identify things that we can move to the team down there, we will continue to try to streamline costs that are in both our home office efforts and our IT efforts to be able to utilize the team down there.

Okay. And now you talked about I guess you're still seeing some of the headwinds in property management. What do you hope to see in the second half that will turn those headwinds into tailwinds?

Well, as you know, we're very active in the National Apartment Association, and there have been many, many conversations that Kelly Brown has had amongst the peers that she deals with there, and they are all hopeful for the second half of the year.

Okay. And in the professional services, what kind of feedback are you getting from your clients on what you're offering, the Arroyo, and are you seeing more activity? You talked about, I guess, fifteen new logos. Are you making progress with new logos as the quarters unfold?

We are. There's several new logos coming in. There's a lot of activity in the pipeline. Our teams are having more scope meetings than they've had probably in the last eighteen months, which is a good sign as we continue to power forward through the year. I think that there's some optimism that came out of the election, and then there's been a slight pause on that optimism as we discussed. For the most part, I think there's a cautious optimism out there.

Okay. Okay, guys. Keep up the good and the hard work that you have to get done in this industry. Thank you.

Thanks, Howard. Thank you, Howard.

Next question will come from Jeff Martin with Roth Capital. Please go ahead.

Hey, guys. I was wondering if you could characterize on the professional side, you know, the budget allocation among the clients. I know a lot of companies have shifted to CapEx towards AI-related projects. Wondering if that can benefit you going forward or if that's been a headwind that you should have to overcome.

You know, AI is one of those tricky things. So and I think the great thing about where we are right now is our acquisition of the Arroyo team. They have those capabilities, and so we are having many conversations with clients in regards to AI tools that we can offer. And I think that it's interesting to see how our clients come to us with their problems, and then when we get engaged with the Arroyo team, how they can come through and actually solve those problems, and it's all through AI technology. And that's we're just, I think, dipping our toe in what the capabilities are at this point, but what we're seeing early is very, very exciting.

Great. And then it looks like in 2025, you expect the full run rate of $7 million to $9 million annual savings to be captured. I understand it now. The majority of that work was done in Q4, but to be a little more specific, could you progress throughout 2025?

Jeff, you are really cutting out. So if I understood your question, it's when are we going to see the full effect of the cuts that we made? Was that the question?

It is. I apologize. I got rid of my headset. Is this better?

That's better. Perfect. Thank you.

Well, again, the majority of the cost savings was in people. And those took place in December. So you'll see those in Q1 for sure. And then the other changes really were kind of in cost structure for changing of commission plans. And those took place in February and in March. So you'll see the full effect of commission plans going into Q2.

Okay. And just curious, out of those cuts in personnel, could you help us understand how many of those were revenue-driving? Are we going to see some revenue impact related to that in the first half of the year? And what strategically can you do to, you know, grow your way back out of that?

A lot of the cuts were back office. They were home office folks. We did have some restructuring when both divisions did their restructure. We got rid of kind of a mid-man manager level out in the field. And that restructure was a little disruptive on the property management side because, you know, we have markets that are a salesperson. So that salesperson has the relationships in the market. So when we changed some of those and took our mid-level folks and pushed them down into a selling role, back out in the field, they had to reestablish those relationships. So we'd see a little disruption in that. And I think they have leveled out. We saw that early in December and in early January, but I think that is all leveled out right now. And then Professional has been really kind of managing the underperformers all along. And so it was less disruptive for the professional team.

Okay. Great. And then on the property management side, how much of your footprint is, you know, utilizing the territory mapping today? Is it 100% or is it, you know, a lower percentage? And if that's the case, what's the timeline for reaching 100% on the territory mapping?

We've launched Houston, which is where we had the growth that I mentioned earlier, and then Atlanta has launched as well. We are in the process of launching Dallas. So we've started to hire that team here in Dallas Fort Worth. And I believe there are a few other markets that we'll go after this year, but then those will be in June.

Excellent. That's it for me. Thank you.

Thanks, Jeff. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Ms. Beth Garvey for any closing remarks. Please go ahead, ma'am.

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

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.