BGSF Go-to-Market Re-branding Project for All Business Units Well Underway

BGSF, Inc. ((BGSF), a leading national provider of consulting, managed services, and workforce solutions, today reported financial results for its first quarter ended April 2, 2023.

Q1 2023 Highlights from Continuing Operations:

Revenues were $75.3 million, up 9.9% from 2022.
Gross profit was $26.8 million, up 14.3% from 2022. Gross profit percent increased 140 basis points to 35.6% in 2023.
Operating income (loss) includes a non-cash charge of $22.5 million ($16.9 million after-tax or $1.58 per diluted share) related to the impairment of trade name intangible assets from the re-branding to BGSF for all entities. Therefore, the other trade names have no value.
Net loss from continuing operations was $(16.5) million, or $(1.54) per diluted share.
Adjusted EBITDA¹ from continuing operations was $4.3 million up from $3.9 million in 2022.
Adjusted EPS¹from continuing operations was $0.16 in 2023 compared to $0.23 in 2022, primarily due to increased debt, associated with the Horn Solutions acquisition, and higher interest rates.

Beth A. Garvey, Chair, President and CEO, said, "First quarter results were within our expectations for both Professional and Real Estate. Our Professional segment benefited from incremental revenues from our Horn Solutions acquisition, and we are encouraged by expanded cross-selling opportunities. Our recent strategic acquisition of Arroyo Consulting will strengthen our go-to-market cross-selling efforts providing our clients a cost effective alternative offering nearshore and offshore IT resources.

"We remain cautiously optimistic and feel our specialized offerings in both segments will put us in a position to manage the current uncertain economic times, and allow us better resiliency. Our rebranding efforts support the strength of our brand and allow us to approach the market as one voice with a stronger and broader BGSF platform."

Conference Call

BGSF will discuss its first fiscal quarter 2023 financial results during a conference call and webcast at 9:00 a.m. ET on May 11, 2023. Interested participants may dial 1-833-470-1428 (U.S. Toll Free) or 1-404-975-4839 (U.S. Callers) and provide access code 382695. A replay of the call will be available until May 18, 2023. To access the replay, please dial 1-929-458-6194 (U.S. Callers), 1-866-813-9403 (U.S. Toll Free), or +44 204-525-0658 (all other locations) and enter access code 467420. The live webcast and archived replay are accessible at the investor relations section of the Company's website at www.bgsf.com.

About BGSF

BGSF provides consulting, managed services, and professional workforce solutions to a variety of industries through its various divisions in IT, Cyber, Finance & Accounting, Managed Services, and Real Estate (apartment communities and commercial buildings). BGSF has integrated several regional and national brands achieving scalable growth. The Company was ranked by Staffing Industry Analysts as the 94th largest U.S. staffing company and the 49th largest IT staffing firm in 2022. The Company's disciplined acquisition philosophy, which builds value through both financial growth and the retention of unique and dedicated talent within BGSF's family of companies, has resulted in a seasoned management team with strong tenure and the ability to offer exceptional service to our field talent and client partners while building value for investors. For more information on the Company and its services, please visit its website at www.bgsf.com.

Forward-Looking Statements

The forward-looking statements in this press release are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements regarding our future financial performance and the expectations and objectives of our board or management. The Company's actual results could differ materially from those indicated by the forward-looking statements because of various other risks and uncertainties, including those listed in Item 1A of the Company's Annual Report on Form 10-K and in the Company's other filings and reports with the Securities and Exchange Commission. All of the 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. When used in this press release, the words "allows," "believes," "plans," "expects," "estimates," "should," "would," "may," "might," "forward," "will," "intends," "continue," "outlook," "temporarily," "progressing," "prospects," and "anticipates" and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements. Except as required by law, the Company is not obligated to publicly release any revisions to these forward-looking statements to reflect the events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

BGSF, Inc.

GAAP Financial Measures

The following tables have been derived from our unaudited consolidated financial statements and summarize key components of our statements of operations for the periods indicated, as well as a reconciliation of revenue and operating (loss) income from continuing operations by reportable segment to consolidated results for the periods indicated.

Results of Operations

	Thirteen Weeks Ended
	April 2, 2023			March 27, 2022
	(dollars in thousands)
Revenues	$	75,316		$	68,542
Cost of services		48,532			45,111
Gross profit		26,784			23,431
Selling, general and administrative expenses		23,212			19,717
Impairment losses		22,545			—
Depreciation and amortization		1,757			899
Operating (loss) income		(20,730	)		2,815
Interest expense, net		(1,200	)		(273	)
(Loss) income from continuing operations before income taxes		(21,930	)		2,542
Income tax benefit (expense) from continuing operations		5,464			(534	)
(Loss) income from continuing operations		(16,466	)		2,008
Income from discontinued operations:
Income		—			1,235
Gain on sale		—			17,273
Income tax expense		—			(4,716	)
Net (loss) income	$	(16,466	)	$	15,800

Net (loss) income per share - diluted
Net (loss) income from continuing operations	$	(1.54	)	$	0.19
Net income from discontinued operations:
Income		—			0.11
Gain on sale		—			1.66
Income tax expense		—			(0.45	)
Net (loss) income per share - diluted	$	(1.54	)	$	1.51

Business Segments

	Thirteen Weeks Ended
	April 2, 2023					March 27, 2022
	(dollars in thousands)
Revenue:
Real Estate	$	28,405		38	%	$	25,916		38	%
Professional		46,911		62	%		42,626		62	%
Total	$	75,316		100	%	$	68,542		100	%

Gross profit:
Real Estate	$	11,347		42	%	$	9,971		43	%
Professional		15,437		58	%		13,460		57	%
Total	$	26,784		100	%	$	23,431		100	%

Operating (loss) income:
Real Estate	$	4,690				$	4,035
Professional - without impairment losses		2,627					3,470
Professional - impairment losses		(22,545	)				—
Home office		(5,502	)				(4,690	)
Total	$	(20,730	)			$	2,815

The following tables have been derived from our unaudited consolidated financial statements and summarize key components of our balance sheets and statements of cash flows for the periods indicated.

Condensed Balance Sheets

	April 2, 2023		January 1, 2023
Assets	(dollars in thousands)
Current assets	$	72,381	$	76,162
Property and equipment, net		1,249		2,081
Intangible assets, net		23,410		47,552
Goodwill		55,635		55,193
Other		19,206		13,685
Total assets	$	171,881	$	194,673
Liabilities and stockholders' equity
Long-term debt, current portion	$	4,000	$	4,000
Other current		20,986		24,208
Line of credit		21,697		22,302
Long-term debt, less current portion		39,368		40,368
Other long-term		2,672		3,059
Total liabilities		88,723		93,937
Total stockholders' equity		83,158		100,736
Total liabilities and stockholders' equity	$	171,881	$	194,673

Working Capital
	April 2, 2023			January 1, 2023
	(dollars in thousands)
Working capital	$	47,395		$	47,954
Working capital ratio		2.90			2.70

Condensed Statements of Cash Flows
	Thirteen Weeks Ended
	April 2, 2023			March 27, 2022
	(dollars in thousands)
Net cash provided by (used in) continuing operations:
Operating activities	$	3,939		$	(1,060	)
Investing activities		(745	)		28,262
Financing activities		(3,124	)		(27,963	)
Net change cash provided by discontinued operations		—			649
Net change in cash and cash equivalents	$	70		$	(112	)

BGSF, Inc.

Non-GAAP Financial Measures

The financial results of BGSF, Inc. are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the rules of the U.S. Securities and Exchange Commission. To help the readers understand the Company's financial performance, the Company supplements its GAAP financial results with Adjusted EBITDA and Adjusted EPS.

A non-GAAP financial measure is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of a company. Adjusted EBITDA and Adjusted EPS are not measurements of financial performance under GAAP and should not be considered as alternatives to net income, net income per diluted share, operating income, or any other performance measure derived in accordance with GAAP, or as alternatives to cash flow from operating activities or measures of our liquidity. We believe that Adjusted EBITDA and Adjusted EPS are useful performance measures and are used by us to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under GAAP can provide alone. In addition, the financial covenants in our credit agreement are based on EBITDA as defined in the credit agreement.

We define "Adjusted EBITDA" as earnings before interest expense, income taxes, depreciation and amortization expense, transaction fees and certain non-cash expenses such as contingent consideration gains and share-based compensation expense, as well as certain specific events that management does not consider in assessing our on-going operating performance.

Reconciliation of (Loss) Income from Continuing Operations to Adjusted EBITDA

	Thirteen Weeks Ended
	April 2, 2023			March 27, 2022
	(dollars in thousands)
(Loss) income from continuing operations	$	(16,466	)	$	2,008
Income tax (benefit) expense from continuing operations		(5,464	)		534
Interest expense, net		1,200			273
Operating (loss) income		(20,730	)		2,815
Depreciation and amortization		1,757			899
Impairment losses		22,545			—
Share-based compensation		361			211
Transaction fees		319			—
Adjusted EBITDA from continuing operations	$	4,252		$	3,925
Adjusted EBITDA Margin (% of revenue)		5.6	%		5.7	%

We define "Adjusted EPS" as diluted earnings per share eliminating amortization expense of intangible assets from acquisitions, transaction fees, and certain non-cash expenses such as contingent consideration gains, as well as certain specific events that management does not consider in assessing our on-going operating performance, net of the respective income tax effect.

Reconciliation of Adjusted EPS

	Thirteen Weeks Ended
	April 2, 2023			March 27, 2022

Net (loss) income from continuing operations per diluted share	$	(1.54	)	$	0.19
Acquisition amortization		0.13			0.05
Impairment losses		2.10			—
Transaction fees		0.03			—
Income tax expense adjustment		(0.56	)		(0.01	)
Adjusted EPS from continuing operations	$	0.16		$	0.23

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BGSF, Inc. Reports First Quarter 2023 Financial Results