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Chief Executive Officer — Keith R. Schroeder
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Keith R. Schroeder: Thank you, Sandy, and thank you all for joining us on today's call. As expected, BGSF, Inc.'s transition services agreement with Inspire successfully concluded on March 31, thus beginning in the quarter we are now operating as a standalone company. This represents a meaningful inflection point for the business, enabling our leadership team and employees to dedicate their full attention to managing a best-in-class property staffing company and executing our 2026 strategic growth initiatives. Operating independently simplifies the organization's support structure and strengthens our ability to drive operational discipline, efficiency, and accountability. During the quarter, we made solid progress through three key directives that remain central to our strategy.
First, we are leveraging insights from an independent consulting firm to support incremental top-line revenue. Kelly will provide an update on several encouraging developments following my remarks. Second, we have resized our general and administrative cost structure to align with our standalone property staffing business and we will continue to look for opportunities to optimize our cost structure. We continue to estimate ongoing G&A costs at approximately $12 million annually, including roughly $2 million in public company costs, reflecting a more appropriate and sustainable cost base. Third, informed by an external organizational and incentive compensation study, we took targeted actions late in the first quarter to reduce selling costs.
While the timing limited the near-term impact, we expect the full benefit of these actions to be realized beginning in the third quarter of this year. On an annualized basis, these initiatives are anticipated to generate approximately $1 million in cash cost savings. These actions reinforce our focus on execution, margin improvement, and progress towards sustained profitability. With that, I will turn it over to Kelly to walk through the strategic initiatives currently underway.
Kelly Brown: Thank you, Keith, and good morning, everyone. We are proud to share that BGSF, Inc. was recognized as one of the 2026 Best Places for Working Parents by the Staffing Industry Analysts organization, or SIA. This recognition reflects our ongoing commitment to supporting working families through flexible, people-first policies that strengthen engagement and retention across the communities that we serve. We were also recognized by SIA as one of the top 100 largest staffing firms in the U.S. Operationally, we completed the BGSF, Inc. rebrand in the first quarter, a pivotal step in sharpening our market positioning and building a more scalable, technology-enabled, digital lead generation platform.
By clarifying our brand positioning and strengthening our digital marketing foundation, we are seeing improved SEO performance, a larger and more efficient funnel, and deeper client engagement. We are also encouraged by the early results of our technology investments. Today, we are operating both recruiting and sales AI capabilities, and we believe we have established a balanced model that combines advanced technology with human expertise as the market continues to evolve. These capabilities are improving efficiency and accelerating speed to fill for our clients, while enhancing the candidate experience as well. Our AI-enabled recruiting tools have already streamlined interviews for more than 7,500 candidates, strengthening compliance and security while expediting critical steps such as identity verification.
The result is a materially faster time to fill with higher-qualified candidates. On the sales side, our AI sales assistant platform has successfully converted inquiries into new clients, and our relationship teams then step in to arrange and schedule delivery. Taken together, these initiatives reinforce our focus on delivering better outcomes for clients and candidates. We believe this continued focus on the end user will continue to position BGSF, Inc. as a differentiated workforce solutions partner. As a part of our organic growth strategy, we launched our PropTech consulting services through our strategic partnership with Yardi. While still early, the ramp has been encouraging.
We have begun building a consulting pipeline for PropTech services, secured initial engagements, and expanded our Yardi consultant network. This opportunity is being driven by increasing complexity in implementation and integrations, the demand for our expertise in evaluation and simplification of existing tech stacks, and continued consolidation of management portfolios within the property management industry. PropTech presents a complementary adjacent market to our core staffing business and further strengthens our differentiated position across multifamily and commercial property management. If execution continues as planned, we believe PropTech could represent approximately 1% to 2% of our total revenue this year. Overall, we are making steady progress advancing our operating model and strengthening our competitive differentiation.
As our AI capabilities continue to evolve, we expect further efficiency gains across recruiting, sales, and service delivery. Our initiatives are beginning to gain momentum, positioning the business for top-line growth and improved financial performance, which Keith will discuss shortly. As previously mentioned last quarter, we also look forward to participating in the two leading rental housing and commercial real estate industry events in June, hosted by the National Apartment Association, as well as BOMA International, which will be valuable platforms for in-person customer engagement and lead generation. With that, I will turn the call back to Keith to cover our first quarter financial results.
Keith R. Schroeder: Thank you, Kelly. As a reminder, our comments today refer to continuing operations unless otherwise noted. First quarter revenue was $20.9 million. While revenue was flat year over year, this was a positive change compared to the prior two fiscal years. Further, we believe severe nationwide weather and widespread power outages in late January and February affected results during the quarter. Our gross profit for the first quarter was $7.4 million, slightly down from the $7.6 million achieved in the prior-year period. Our gross margin was 35.5%, down from 36.2% last year. We believe our gross margin for the full year will trend closer to 36%.
SG&A expenses were $8.8 million for the quarter compared to $9.0 million a year ago. This quarter includes $483,000 of strategic review costs compared to $21,000 in the prior-year period. In addition, income from discontinued operations included a $918,000 gain from the final settlement of net working capital from the sale of the Professional Division, which is a cash inflow to our financial results. Adjusted EBITDA for the first quarter was a loss of $541,000, an improvement compared to the $1.0 million loss in the prior-year period. As our revenue strengthens during seasonally stronger Q2 and Q3 time periods, the additional gross profit will positively affect our EBITDA, as will the previously discussed cost-reduction actions we implemented during the quarter.
On a GAAP basis, we reported a net loss from continuing operations of $0.13 per diluted share compared to an adjusted EPS loss from continuing operations of $0.70 per share. Consolidated adjusted EPS for the quarter was a positive $0.10 per share. We exited the quarter with a strong, debt-free balance sheet and remain committed to disciplined capital management and cost control. Our cash flows from operations in the first quarter were essentially flat in a seasonally low revenue quarter. We also repurchased 170,862 shares of common stock at an average price of $5.11 per share, which totaled approximately $873,000 for the quarter.
We continue to expect full-year 2026 revenue to grow in the low- to mid-single-digit range compared to 2025. As Kelly outlined, our teams are focused on executing our property management staffing strategy, advancing our growth initiatives, and building momentum across the business. Completing the divestiture required a significant effort across the organization, and Kelly and I want to thank our employees for their commitment and perseverance throughout the process. From an investor engagement perspective, we will present at the East Coast IDEAS Conference on June 11, participating in a live presentation and one-on-one meetings. We look forward to updating investors on our progress each quarter. Please reach out after this call if you would like to schedule a follow-up meeting.
We will now open the call for questions.
Operator: Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble the roster. The first question will come from Michael Taglich with Taglich Brothers. Please go ahead.
Michael Taglich: Hi, guys. Thanks for taking the call. Just a quick question on stock buyback. Have you been able to buy any blocks of stock, especially recently, or no?
Keith R. Schroeder: We are in a 10b5-1 plan, so we really do not know that. The broker is in charge of that, but I do not think so.
Michael Taglich: Okay. All right. Thank you.
Operator: Please standby as we poll for questions. The next question will come from George Melas-Kyriazi with MK Edge Management. Please go ahead.
George Melas-Kyriazi: Thank you. Thanks for taking my question. Could you give us a sense of how you see the market? It seems like the market was a bit tight and in a downturn for a couple of years. How do you see that evolving? What did you see so far in 2026, and what are your expectations for the rest of the year from a market perspective? And as a second question, from a tech perspective, the company has invested quite a bit in tech in the last three to five years.
It is an evolving, never-ending process, but how comfortable are you right now with your current tech, in particular to recruit your staff and meet the needs of your customers?
Kelly Brown: Certainly. Good morning. It has been an interesting couple of years. We have had to really work with our clients as they navigated heightened insurance costs and stubborn interest rates. That does impact how they operate for various reasons, and I think some of that pressure continues. However, we have also seen a lot of adjustment to knowing what these costs are and the impact they can have. While we have seen some loosening in certain pockets, we expect conditions to remain relatively static for a little bit longer.
That said, there has been significant adjustment in operational strategies and where staffing fits into that, which positively affects our customers' ability to leverage services such as ours on an ongoing basis. On your technology question, we are very comfortable with the technology we have for recruiting. We are able to leverage AI in various ways to improve response times to our candidates. Now that we are past the TSA, we continue to review every piece of technology we use: is it the right technology for our business as a standalone company, and where can we optimize costs? We are comfortable with our recruiting technology today, and we will continue to evaluate as we operate as a standalone company. Absolutely.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Kelly Brown for any closing remarks.
Kelly Brown: Thank you for your time today. We appreciate your interest in BGSF, Inc. and look forward to providing an update on our second quarter in a few months. Have a great day.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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BGSF (BGSF) Q1 2026 Earnings Call Transcript was originally published by The Motley Fool