Good day, everyone. Welcome to the BGSF, Inc. Fiscal 2025 First Quarter Financial Results Conference Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. 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.

Good morning. Thank you for joining us for BGSF's first quarter 2025 earnings conference call. With me on the call today are Beth Garvey, Chair, President and Chief Executive Officer; and Keith Schroeder, 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.

Thanks, Sandy, and thank you all for joining us today. We've continued our strategic alternative work in the first quarter and believe that the 12 to 18-month timeline we previously communicated remains realistic. This month marks the first 12 months since we communicated the launch of the strategic review. Our restructuring initiatives aimed to recalibrate costs by reducing direct and indirect expenses through headcount reductions and other measures included in this strategic work. We will not be taking questions related to the strategic review today. Total revenues for the first quarter of 2025 were $63.2 million, down 8% from the prior year, comprised Professional down 4.2% and Property Management down 14.9% versus a year ago. Sequentially, Professional segment revenues increased by 5.6% compared to the December quarter, while the Property Management division declined sequentially by 14.1%. During the quarter, business strengthened month-over-month, and this trend continued into April, which is higher than March's revenue. We generated adjusted EBITDA of $2.4 million with an EBITDA margin of 3.8%, and our adjusted EPS was $0.05 per share. For most US businesses, tariffs did not impact first quarter results. However, uncertainties and concerns over the administration's trade policies created headwinds in project hiring and spending. Although we expect clients to remain diligent, we are cautiously optimistic that consulting projects and business spending will continue to move forward. 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, finance, and accounting talent. We are also well-equipped to meet 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 management more closely with the producers, and we believe that this will benefit our results in 2025. 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. We are focusing on team specializations in staffing and consulting, which support improved project efficiencies. Our billed hours for the quarter were up approximately 5%. Margins in Q1 were about 32% in the Professional division, down slightly on a sequential and year-over-year basis. Our permanent placement business got off to a strong start in the first few months of 2025, and we remain optimistic about the business momentum. Additionally, we were officially awarded the Workday Application Management Service partnership, which we expect will expand our support sales in pre- and post-implementation projects. We also launched a developed product with Workday focusing on compliance reporting support for colleges and universities. 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 it is gaining tangible momentum. 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. We implemented key workflows and reorganization initiatives over the last nine months, including the completion of Property Management's salesforce realignment last fall, as well as the expense reductions in the fourth quarter of 2024. 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. 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. Internally, our sales territory initiatives are expanding and our maintenance training platforms are industry-specific. We continue to work on the exclusive and semi-exclusive property management service agreements that have resulted in a 7% improvement over prior years. When property management companies need support, we want to be the preferred vendor, and expanding the number of service agreements is vital. 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 in 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. After Keith walks through the detailed financial results for the quarter, I will return with closing remarks. Keith?

Thank you, Beth and good morning to everyone. First quarter revenues were $63.2 million versus $68.8 million in the year-ago quarter. We are pleased to report that the Professional revenues increased sequentially from the December quarter by 5.6%. Although organic Professional segment sales declined 4.2% compared to the prior year's quarter, this is a significantly improving trend from more recent quarters. Despite the 4.2% decline in revenue on a year-over-year basis, operating income in Professional increased, which is proof of the effectiveness of our cost reduction activities taken in December and again in March and April of this year. 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. We made significant transformations in the sales marketing group in Property Management at the end of last year and early this year and understand that fully executed initiatives take time to show up in financial results. Our gross profit margins in the first quarter were $20.9 million and 33.1% compared to $23.4 million and 34.1% in the year-ago period. 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 30 basis points. SG&A expenses for the first quarter were $18.9 million 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 in December. 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. This improvement is further evidence of the positive effects of the cost cuts on our profitability, as this improvement came in the face of a $1.2 million sequential shortfall in revenue. We reported a first quarter GAAP loss of $0.07 per diluted share and adjusted EPS of $0.05. Starting with the first quarter's results, we are beginning to see improvements in BGSF profitability. 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 for IT investments. As previously discussed in our Form 10-K filing in March of this year, the company was not in compliance with its financial covenants at year-end 2024 and was not expected to be in compliance at the end of our first quarter this year. As a result, we entered into a waiver and second amendment with BGSF lenders on March 12, with a further amendment on May 7. These amendments, among other things, provide time for us to properly structure our capital needs. With that, I would like to turn the call back to Beth.

Thank you, Keith. Reviewing our sales performance through April, we remain cautious yet optimistic, recognizing that ongoing business disruptions resulting from trade policy changes could impact many US 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 where possible. This will negatively impact most companies in the US and Canada and likely slow growth for many industries. We will continue to manage our business by staying close to our clients and communicating with them about their plans and pain points. We are committed to our growth initiatives and managing the things we can control. Our trend reports for revenue per billing day continue to improve each month. Although progress is slower than we would like, we are seeing measurable progress. Last Friday, we saw the employers added 177,000 jobs in April, which signals that the labor market remained solid. The jobless rate remained steady at 4.2%, a 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, technology, and best-in-class processes to drive long-term shareholder value. As the broader markets and industries adjust to economic changes and normalize, we are confident that corporate leaders will invest to grow, which will provide a positive environment for BGSF growth with our customer partners. Now I'll turn the call back over to the operator.

Certainly. The floor is now open for questions. Your first question is coming from Jeff Martin with Roth Capital Partners. Please go ahead with your question. Your line is live.

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 commence.

Sure. Several of the contracts we signed in March don't have data on how much was associated with each one, but I can obtain that information and we can follow up on it.

Okay. And then with respect to existing clients, are you seeing a lot of discussions in terms of what happens once the tariff uncertainty becomes clearer? Do you get a sense that there's potential for pent-up demand as we come to the back end of this? And I would imagine you don't have a ton of visibility, but just wanted to throw that out there for comment.

Yeah. I believe that there is pent-up demand in both segments. Right? So, I think that everybody's just very cautious right now. And as the tariff conversations continue, most of our customers are telling us that we're in a wait-and-see kind of mode. But there are still conversations happening. So I feel that once that gets settled, we'll start to have some movement because the conversations are actually happening.

Great. Good to hear. Could you give us an update on the technology platform? I know that that's been several years in the making, and we've been rolling out various pieces of that over the past couple of quarters. Is there still anything that needs to go live here in the future, or is that fully rolled out at this point?

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 with efficiency gains. We've captured several million dollars in having web push where we have applicants that can come into the portals and get pushed out. So, we're seeing really good results from just making sure that the technology is working in the way we wanted it to work, and then continuous improvements because we launched our operational excellence program that is really taking the processes and running them through the technology to make sure we're pulling as much friction out of it as possible to make it work faster. And we've had some really great conversations this week regarding other benefits that we should be able to start to do just by using our internal team to continue that enhancement for the efficiency gains.

Okay. And then with the expense reductions you put in place last year, is that fully factored in, the full benefit factored into the first quarter, or is there 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 baked into the first quarter. Second quarter, we'll see 100%. Okay? And as far as the last question, we are always looking at ways to improve our cost effectiveness, whether it be implementing new IT systems where we can get people into our system and out in the field faster or just taking out costs. That sort of work goes on continually.

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 have you made recent progress with securing those preferred partner-type agreements? Is there still a long runway to go there?

The competitive environment is staying the same. I mean, there's no change in that. Competition is not necessarily a bad thing. You just have to adjust to it. And our team's done a really amazing job to be able to pivot and know what to do and how to overcome. But it's all about speed and quality. The Property Management team does an amazing job regarding both of those factors. As far as the strategic agreements that we have, they continue to sign them. They're all in the works, and it's an ongoing effort. I think they closed one this week that was pretty substantial, so I'm very proud of the work that they're doing on that.

Great. And then, if you had to take a forward view on Property Management in terms of a return to year-over-year stability in terms of comparisons, do you care to pinpoint the timeframe of when that may occur?

We're doing everything that we can to get back to the position of the growth trajectory that we were on. And we are seeing positive signs of that happening right now.

Great. Thanks for taking my questions.

Sure. Thanks, Jeff.

Thank you.

Your next question is coming from Michael Taglich with Taglich Brothers. Please pose your question. Your line is live.

Good morning, Keith. And good morning, Beth.

Good morning.

Good morning.

I was looking for first of all, a comment. How are you comfortable at this point? We're about a third of the way into the year with the Street estimates for in light of where the results were in the first quarter and are continuing to the second.

Well, we beat the estimates for the first quarter on the revenue line. We beat them on net income and EPS. To be frank, I haven't really looked at what the estimates are for Q2. I'm sure they may change some after this call, so I need to take a look at that, but I will get back to you on that.

Okay. Beth, this is for you. In light of what you're seeing halfway into Q2, what would be the adjective that best describes how you believe you're tracking versus your plan?

I think we're tracking where we thought we were going to be. That’s a positive move on our part. I think that both divisions have some momentum in the right direction. We're just being cautious about it, but I'm not fearful. I do believe we're moving in the right direction.

Okay. Great. All right, thanks.

Thanks.

Your next question is coming from Bill Dezellem with Tieton Capital. Please pose 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 the wait-and-see mindset that your customers have versus the new logos being up 60%? Those seem to be in a bit of contrast with each other.

It depends on the sector, Bill. Some of our manufacturing companies are the ones in the wait-and-see area. And some of our other customers that we have — we do a lot in education. Some of those are moving in the right direction. So, it's a mixed bag on which area is holding and which is moving.

Thank you. In the professional services sector for the fourth quarter, we saw that billing days were down 5%, and revenues were also down 5%. However, this quarter, your billed hours increased by 5%. It appears there might have been a shift between the quarters. Am I misunderstanding this, or was there an actual shift?

Talking about a shift within Professional? Yes, they did increase in the first quarter. Hang on a second. Let me pull up the numbers. Yeah, we did see nice growth. The growth in Q1 is versus Q4 of last year. So that is the comparison for the current quarter. We are still down some from Q1 of last year. Okay? But we are up on a sequential basis and the trends continue to look strong in both sectors into the current month.

And Keith, that's the normal seasonal trend then that I'm getting confused here with, is it not? Q1 is normally up versus Q4.

Q1 in Professional. In Q2, there's some uptick, but it's not huge. It's PM where it starts to grow. And from a seasonal growth expectation, we've been over that growth for the last three months. We're seeing growth on a month-over-month basis above what we expect seasonality. Does that make sense?

I think so. But were you talking professional services or were you talking…?

About property. Property is much more seasonal than Professional.

Okay. So, I'm sorry, let me make sure I get these dissected correctly. Relative to the Property business, you are seeing revenues increase slightly faster than the normal seasonal rebound. Are you attributing that to your sales effort, or is that simply the market improving?

I 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 managers being closer to their people and driving those results as well as the strategic agreements we have in addition to the territory map we implemented because we had the salesforce technology.

That's helpful. Regarding the professional services, it increased in Q1 compared to Q4, and I'm trying to understand whether this is due to seasonality or if it indicates positive growth. Is this performance what we typically expect in Q1 relative to Q4?

We didn't have as many ends in Q1 as we've typically seen in prior years. That was a good thing, and I think that helped us come into the quarter stronger.

And Beth, that would primarily be due to just timing, or these projects that get extended because…?

It's year-end, Bill. It's like a lot of our customers will have their budgets reset. We usually see some adjustments because of budgets being reset at the end of the year.

All right. 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 customers saying that they want to accelerate spending because part of what you are doing for them is lowering costs and they want to come out stronger? Or is it simply existing projects that get released?

Historically, in a recession, our industry is the first to go down and the first to come back up. But I will say that we're not seeing that happening right now. It's kind of a weird environment for our industry. But I do think that we've had the last 18 months of everybody being pretty cautious about how they wanted to move forward. At some point, because of where we play in our specialties, areas will want to pursue changing out their ERP systems. I think just our mix of business helps us there when people start having a little more confidence. I feel good about where we're going on that. From a Property Management perspective, people can only hold their updates on their properties for a certain amount of time. They are starting to see some rent growth, which will help management companies move in a direction where they want to spend more money, which is good for us.

Thank you both.

Thank you.

Thank you, Bill.

Thank you. That does conclude the end of our Q&A session. I would now like to turn the floor back over to Beth Garvey for closing remarks.

Thanks again for joining us for our first-quarter reviews. We look forward to talking to you in August. Thanks.

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.