BGSF Q3 2026 Earnings Call Transcript

BGSF (NYSE:BGSF) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

BGSF Incorporated implemented organizational realignments resulting in $1.6 million in annual cost reductions, effective October 2026, with $100,000 in severance costs incurred.

Third-quarter revenue decreased by 6.6% to $25.1 million due to lower demand; however, gross margin slightly improved to 36.1% from 35.9% in the prior year.

The company is advancing strategic initiatives, such as optimizing recruiting processes and expanding AI-enabled sourcing, despite uneven market recovery and pressures from elevated interest rates and costs.

PropTech practice continues to expand, contributing to revenue growth and is projected to account for 1-2% of revenue in 2027.

Management highlighted ongoing stock buyback activities and cost control measures, positioning the company for long-term success despite current challenges.

Full Transcript

Franz (Operator)

Good morning everyone. Welcome to BGSF Incorporated third quarter fiscal 2026 earnings conference call. I am Franz and I’ll be the operator assisting you today. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.

Thank you. As a reminder, this conference call is being recorded. Now I will turn the call over to Latoya Johnson, Director of SEC Reporting from BGSF. Please go ahead.

Latoya Johnson (Director of SEC Reporting)

Good morning. Thank you for joining us today for our company’s third quarter 2026 earnings conference call. On the call with me are Kelly Brown, Co-CEO and President, and Keith Schroeder, Co-CEO and CFO. 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 our company’s Investor Relations page at investors.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 our 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 EBITDA and EPS. Reconciliations to the nearest GAAP measure are available at the end of our earnings release. I’ll now turn the call over to Keith Schroeder.

Keith R Schroeder (Chief Financial Officer)

Thank you, Latoya, and thank you all for joining us on today’s call. During the third quarter, we completed a comprehensive review of our organizational structure to ensure alignment with the current scale and needs of the business. As a result, we implemented targeted organizational realignments at the end of September to simplify and flatten the organization, enhance collaboration between sales and delivery teams, strengthen accountability and support efficient execution across the business.

These changes build on our broader efforts to streamline support functions and maintain operational discipline while continuing to invest in initiatives intended to drive revenue growth and expand long-term opportunities. These actions will result in approximately $1.6 million of annual cost reductions effective in fiscal October 2026. The Company will incur approximately $100,000 of severance costs related to these changes. We will recognize the majority of these benefits in Q4 of 2026 and the full effect in Q1 of 2027. Cost improvement is an ongoing initiative at BG Staffing and we continue to examine and explore all opportunities in our selling, general and administrative expenses.

With that, I’ll turn the call over to Kelly to walk through the strategic initiatives currently underway.

Kelly E. Brown (Co-Chief Executive Officer)

Thank you, Keith, and good morning everyone. Although multifamily fundamentals continue to improve, with apartment demand outpacing new supply, occupancy trends strengthening and rent growth gaining momentum in many markets, the recovery remains uneven. Positive forward indicators suggest continued stabilization across the sector. However, elevated interest rates and operating costs continue to pressure property owners’ cash flow. As a result, many customers remain focused on cost control and also remain cautious with discretionary spending, including temporary staffing.

This continued spending discipline has contributed to lower-than-expected demand for BGSF’s workforce solutions, resulting in revenue below expectations. Keith will discuss these market conditions and their financial impact in greater detail later in the call. Operationally, we continue to advance several strategic initiatives during the quarter in response to the continued market pressures that we are facing, with the goal of improving our execution across the business. Investments in recruiting processes, candidate engagement and delivery workflows will optimize our employees’ ability to deliver talent, with speed and quality at the forefront of our operating model. We also expanded our use of AI-enabled sourcing and engagement capabilities, allowing us to connect with qualified candidates more quickly, streamline administrative activities and accelerate hiring outcomes.

Importantly, these tools enhance our recruiters’ effectiveness while preserving the high-touch service model that differentiates our business, enabling our teams to focus more of their time on client relationships, candidate success and revenue-generating activities. In addition, ongoing enhancements to our onboarding process continue to reduce friction for candidates while shortening the time from offer acceptance to placement. Our PropTech practice continued to expand and gained momentum during the third quarter, delivering revenue growth as client adoption increased. Building on the successful launch and ramp-up earlier in the year, we added new engagements, expanded our consulting pipeline and further developed our network of specialized consultants. Demand for implementation, integration and advisory services remains strong as property management organizations seek support in navigating increasingly complex technology ecosystems.

While still a relatively small contributor to overall revenue, PropTech is demonstrating the potential we envisioned at launch and remains on track to contribute approximately 1% to 2% of revenue in 2027. We continue to view PropTech as a valuable adjacent market growth opportunity that strengthens our broader workforce solutions platform and deepens our relationships across the property management industry. Now I will turn the call back to Keith to cover our third quarter financial results.

Keith R Schroeder (Chief Financial Officer)

Thank you, Kelly, and as a reminder, our comments today refer to continuing operations unless otherwise noted. Third quarter revenue was $25.1 million, a decrease of 6.6% from the prior year period, primarily due to lower billed hours driven by reduced customer demand as property owners and property management companies continue to manage cost pressures, as well as increased competition in select markets. Market conditions remained challenging during the quarter as higher interest rates, elevated operating expenses and continued pressure on property-level cash flows contributed to cautious spending decisions across our customer base.

While demand remained soft during the quarter, recent commentary from staffing industry analysts and results reported by Randstad suggest conditions across the staffing industry are showing signs of improvement, with improving trends in certain markets and geographies. Although the pace of the recovery remains uneven, we are encouraged by these early indicators. Our gross profit for the third quarter was $9.1 million, slightly down from the $9.7 million achieved in the prior year period. Our gross margin was 36.1%, slightly improved over prior year’s 35.9%. We believe our gross margin for the year will remain in the 36% range. SG&A expenses were $8.7 million for the quarter, compared to $10.2 million a year ago, a 14.7% reduction. This quarter included $175,000 of strategic review and restructuring costs, compared to $482,000 in the prior year period.

Adjusted EBITDA was $858,000 for the third quarter compared to approximately $1 million in the prior year period. Our 2026 Q4 EBITDA will be positively affected by the previously discussed cost reduction activities. On a GAAP basis for Q3, we reported net income from continuing operations of $0.01 per diluted share compared to a net loss of $0.28 per diluted share in the prior year. Adjusted EPS was $0.09 per share from continuing operations and $0.11 per share on a consolidated basis. We exited the quarter maintaining a strong cash and cash equivalents position of $17.9 million, which includes short-term investments. Our cash flow from operations was negative $540,000, driven by working capital requirements, including a seasonal revenue uplift of $2.8 million.

We also repurchased 32,189 shares of common stock at an average price of $5.36 per share, totaling approximately $169,000 for the quarter. As of September 27, 2026, we have purchased 610,507 shares of common stock under our stock buyback plan, and we have approximately $2 million available for repurchases. As Kelly outlined, we continue to execute against our strategic priorities, including enhancing recruiting, candidate engagement and onboarding processes to drive operational excellence; expanding our PropTech offerings; leveraging AI-enabled tools to improve speed and efficiency while maintaining our high-touch service model; strengthening customer relationships and sales pipeline development through industry engagement; and reinforcing our leadership position within the property management industry.

Kelly and I want to thank our employees for their continued dedication, adaptability and commitment to delivering exceptional service. Their efforts in advancing our strategic initiatives, embracing new technologies and supporting our clients have been instrumental in positioning the business for long-term success. 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 call.

With that, now we’d like to open the call for questions.

Franz (Operator)

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And your first question comes from the line of Bill Deselem from Taytun Capital.

Please go ahead.

Bill Deselem (Analyst)

Thank you. Keith, I was delayed getting on the start of the call and missed your initial comments, but it sounds like there’s a restructuring that you are doing. Would you please repeat just the headline version of those opening comments, please?

Keith R Schroeder (Chief Financial Officer)

Absolutely. Yeah. So we did a restructuring. We took a look at our organization basically during Q3 and then, effective with the first week of our fiscal October, we took actions where we reduced, on an annualized basis, $1.6 million worth of cost. So we’ll see most of that in Q4 because it didn’t happen, you know, right at the first of the month. Plus we’ll have some offsets on severance of about 100 grand. So it’s $1.6 million on an annualized basis.

Bill Deselem (Analyst)

Great, that’s helpful. And then the headcount that was taken out, where within the organization did they fall, and how did you achieve the efficiency so that you could remove those heads? Because I think you all have been pretty lean, you know, up to this point.

Kelly E. Brown (Co-Chief Executive Officer)

Yeah, hey Bill, it’s Kelly. Good morning. We did, we took a really hard look at mostly around the operational team structure. So the reductions were in the selling expense category. And so we were able to look at how the delivery team is—well, two things. One, looking at how the delivery team is able to field and fulfill the request, leveraging a lot of the tools that we’ve spoken about on previous calls. So that was definitely one aspect of things.

But then secondly, we try to stay very mindful and sharp on the historical seasonality of our business. So acting ahead of that also to try to make sure that the organization is optimized as much as possible going into what has historically been our lower-volume time of year. So just trying to make quick and responsible decisions in that regard as well.

Bill Deselem (Analyst)

That’s really helpful, thank you. And then, when we look at the overall business, you know, you’ve referenced that there’s some signs that staffing is improving and multifamily is improving, and yet it’s uneven. How would you characterize pricing that you’re experiencing with your customer base?

Kelly E. Brown (Co-Chief Executive Officer)

You know, exactly your point. It is variable throughout the country with regards to where we’re seeing higher levels of optimism than others. So whenever it comes to pricing, we do try to walk that line between, of course, we want to stay competitive to be able to win the business. However, we also need to be mindful of what our customers are able and willing to pay, but also what will enable us to pay the field talent what we need to be able to pay to capture the level of field talent that our customers expect.

So it’s not necessarily a very targeted answer for you, but it is variable, literally market by market. We do have teams that, I think as you know from previous discussions, service different areas of the country specifically. So we’re able to, because of that structure, look at the localized trends and then make sure that we are pricing accordingly.

Bill Deselem (Analyst)

And so would you say that the overall trend, Kelly, has been up, down, flat when you net it all out?

Kelly E. Brown (Co-Chief Executive Officer)

As far as how we’re structuring our pricing, I would say we’ve been able to stay relatively flat. And I say that because of just statistically the margins that we’ve been able to hold. So, yes, I would say flat would be the best answer there on a broad scale.

Bill Deselem (Analyst)

Okay, that’s helpful, thank you. And then a couple of other—oh, gosh. Well, I guess your size, it just seems as though you are under scale. And so I guess there are two questions tied to that. Number one, that over 40% of your market value is in cash. How are you thinking about that? And maybe that relates to your stock buyback program. Would love to hear your thoughts and insights on that.

Keith R Schroeder (Chief Financial Officer)

Sure, yeah. So we have about $2 million left to spend, so we will continue that. We have not, with the board, talked about what we will do when that is all spent. You know, our volume’s low, so we’re not able to buy a large chunk of shares. But we are buying all the shares that we can at this time. So again, we will continue that program, and then at some point in the future, we’ll be talking with the board about what’s the next steps.

Bill Deselem (Analyst)

Great, that’s helpful. And then just relative to the size, I don’t think that I understand the industry makeup as well as I would like to in terms of how fragmented the industry is. If there are firms, whether they be private equity or otherwise, that are looking to consolidate the industry, would you just talk through the dynamics that you see in your industry at this point relative to those factors?

Kelly E. Brown (Co-Chief Executive Officer)

Well, with regards to the talent that we hire—so I’m going to talk about that in two different facets, Bill. So first let’s talk about the talent that we hire. The talent that we hire and leverage for the customer base I would not necessarily call fragmented. We are seeing crossover in various other industries that can leverage that same skill set. When it comes to the skilled trade talent that we hire, specifically among both the multifamily as well as the commercial areas of the business, that demand for skilled trade talent certainly does flow over and out into other industries such as construction or home maintenance, you know, HVAC.

Specifically, you know, more and more in the headlines around data centers and what it takes to build and maintain those. So certainly the talent that we hire definitely is in demand in many other industries aside from our own. When it comes to the customer base, the customer base that we sell to is definitely very narrow—I would say probably more fragmented than the talent that we hire—because we do stay very specific to servicing multifamily management companies and multifamily property owners.

It is a very specific population that we sell to, you know, and that is one reason why we have been, you know, pretty excited about what we’re seeing among the PropTech group because that enables us to—it’s one example of how we can leverage the current customer base that we’ve built historically among the multifamily and commercial staffing areas, and we’re now able to expand that conversation into more of a technology conversation. So we like the reputation and the sort of stickiness, I’m going to say, with the customer base that we’ve been able to build.

So now we can look at, okay, we’ve built a reputation among that customer base. How can we now expand on that conversation and what other sort of problems can we solve, so to speak, for that same customer base? I hope that answer was helpful.

Bill Deselem (Analyst)

That is. And then relative to the fragmentation of competitors and if there are firms that are trying to consolidate the industry, insights there would be helpful. And then also, in conjunction with that, would you talk through the value that you would bring to other organizations if someone were to try to do a larger roll-up, if you will?

Keith R Schroeder (Chief Financial Officer)

Yeah, so, long question there, Bill. But anyway, there are a lot of competitors out there. It is very fragmented. There are three larger competitors, of which we are one. Correct. There is no one at this point that we are aware of that is trying to consolidate this group. But as far as the value we would bring—strategics that would buy each other—there’s obviously a lot of fixed cost, right? There’s cost to people, and the IT costs, the software costs, you know, are high.

So there would be some real leverage there if you would have two strategics combined.

Bill Deselem (Analyst)

Great, thank you. And nice move on cutting cost ahead of seasonality.

Keith R Schroeder (Chief Financial Officer)

Thank you, Bill.

Kelly E. Brown (Co-Chief Executive Officer)

Thank you, Bill.

Franz (Operator)

And your next question comes from Michael Taglitz from Aegis Capital. Please go ahead.

Michael Taglitz (Analyst)

Good morning everybody. Quick question—I have two questions. Number one, I saw about 175 grand spent on your strategic review. Could you be a little more specific about what you spent that money on in the quarter?

Keith R Schroeder (Chief Financial Officer)

Yeah, that was pretty much all restructuring costs. There were some folks that we let go, so those severance costs and things like that—that is really pretty much all that went through that line in Q3.

Michael Taglitz (Analyst)

Okay. And the follow-up to that is how much lower will your costs be in Q4 versus Q3? What will savings be?

Keith R Schroeder (Chief Financial Officer)

Okay, selling costs will be down—selling costs, which is, you know, one of the items that we report on—that will be down about $300,000 in Q4 versus Q3. You get to Q1, the full $400,000 per quarter will come out. So there is some severance costs. So it’s a $400,000 a quarter savings. Okay. But there are some costs associated with this, you know, start of it. Does that help?

Michael Taglitz (Analyst)

Just for clarity—okay, so you’re going to save 300 grand in Q4 and then 400 grand in Q1. Is that the right—is that what you mean?

Keith R Schroeder (Chief Financial Officer)

That is correct.

Michael Taglitz (Analyst)

Okay. All right. So $1.2 million annualized—I’m sorry, $1.6 next year,

Keith R Schroeder (Chief Financial Officer)

A million six. Yep.

Michael Taglitz (Analyst)

Yeah. Okay. Good. All right. Thank you.

Keith R Schroeder (Chief Financial Officer)

Thank you, Michael.

Franz (Operator)

There are no further questions at this time. I would now like to turn the call back over to Kelly Brown for closing remarks. Please go ahead.

Kelly E. Brown (Co-Chief Executive Officer)

Thank you for your time today. We appreciate your interest in BGSF and look forward to providing an update on our fourth quarter in a few months. Have a great day.

Franz (Operator)

Thank you all.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.