Revenue Growth - Property Management revenues increased by approximately $2.8 million, representing an 8.2% growth, primarily due to higher billing rates[11] - Gross profit for the Property Management segment rose by approximately $0.7 million, or 4.8%, despite a decline in permanent placement business[12] - Professional revenues increased by approximately $12.1 million, or 9.2%, with Horn Solutions and Arroyo Consulting contributing a combined total of $28.9 million[15] Expenses and Financial Position - Interest expense, net increased by approximately $3.7 million, primarily due to higher debt balances related to acquisitions and rising interest rates[16] - Selling, general and administrative expenses increased by $2.3 million, with selling expenses accounting for approximately 78% of this increase[13] Cash Flow and Working Capital - Cash provided by operating activities was $15.1 million, compared to a cash usage of $5.6 million in the prior year[20] - The company reported a working capital deficit of $14.6 million as of October 1, 2023, compared to a positive working capital of $48.0 million on January 1, 2023[20] - The company is focused on opening new markets and believes cash generated from operations will meet working capital needs for at least the next twelve months[19] Financing and Borrowing - The Revolving Facility allows borrowing up to $35.0 million, with a term loan commitment of up to $30.0 million, which has been fully funded and repaid[23] Operational Adjustments - The company has implemented a pricing model adjustment to mitigate the impacts of inflation on its operations[30]

Financial Data and Key Metrics Changes - Total revenues for Q2 2023 were reported at $81 million, reflecting a 9% increase year-over-year, with adjusted EBITDA rising almost 39% to $7.5 million, resulting in an adjusted EBITDA margin of 9.3% [8][21][30] - Adjusted earnings per diluted share increased by 8.8% to $0.37, despite an additional $1.4 million in interest expense from recent acquisitions [32][33] - Gross profit margins expanded by 280 basis points to 36.6% compared to the prior year, with the Professional segment gross profit margins growing 340 basis points to 34% [30][31] Business Line Data and Key Metrics Changes - The Professional segment saw a 12.7% increase due to the acquisitions of Horn Solutions and Arroyo Consulting, while the core Professional business experienced year-over-year declines in demand for consulting and staff augmentation [9][16] - The property management segment grew by 3.6% in Q2 compared to the prior year, with a sequential growth of 9.4% from Q1 to Q2 [48][49] Market Data and Key Metrics Changes - Companies are reducing discretionary spending and delaying project timelines, leading to elongated hiring cycles in the contract side [10][16] - The property management division is experiencing regional differences in rental pricing and occupancy rates, with a trend back to normal seasonality on apartment turnovers [44][52] Company Strategy and Development Direction - The company is focused on transforming into a high-value specialized professional consulting company, having divested its lower-margin light industrial business [11][12] - Strategic initiatives for 2023 include rebranding, process improvement, and shared services to enhance operational efficiency and customer engagement [36][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for the remainder of 2023, benefiting from recent acquisitions and strategic investments [13][28] - The company anticipates continued demand for ERP implementations and support, despite economic uncertainties [53] Other Important Information - The Property Management Division received the 2023 National Apartment Association Excellence Award for Supplier Companies of the Year, highlighting the company's commitment to high-value staffing services [54] Q&A Session Summary Question: How did the permanent placement in the quarter track relative to the last quarter or the last 12 months? - Management noted a decline of 20% to 30% in permanent placements due to economic uncertainty, with companies delaying hiring [43] Question: Can you provide more detail on contract delays in the professional segment? - Management confirmed visibility into delayed projects, with clients being cautious but not canceling contracts [64] Question: What are the expansion plans for the real estate segment? - Management highlighted the implementation of new technology for territory mapping to enhance sales focus and efficiency [66] Question: Are there any wage pressures in the segments? - Management indicated that wage inflation pressures have stabilized compared to the previous year [83] Question: Will there be more transaction costs related to acquisitions? - Management expects minimal transaction costs moving forward, with ongoing legal complexities related to the Arroyo acquisition [84]

You can identify these and other forward-looking statements by the use of words such as "aim," "potential," "may," "could," "can," "would," "might," "likely," "will," "expect," "intend," "plan," "predict," "ongoing," "project," "budget," "scheduled," "estimate," "anticipate," "believe," "forecast," "committed," "future" or "continue" or the negative thereof or similar variations. Where You Can Find Other Information The accompanying notes are an integral part of these unaudited consolidated financial statem ...

Financial Data and Key Metrics Changes - Total revenues for the first quarter were $75.3 million, representing a 9.9% increase compared to the prior year quarter [20][72] - Gross profit margins expanded by 140 basis points to 35.6% compared to the prior year quarter [8][72] - Adjusted EBITDA for the first quarter was $4.3 million, up from $3.9 million in the prior year quarter [21] - Adjusted earnings per diluted share decreased to $0.16 from $0.23 in the prior year quarter, primarily due to higher interest expenses related to acquisitions [21][62] Business Line Data and Key Metrics Changes - The Real Estate segment revenue increased by 9.6% compared to the prior year quarter [20] - The Professional segment revenue increased by 10.1%, including incremental revenue from the Horn Solutions acquisition; however, excluding Horn Solutions, the Professional segment was down 5.9% [20][38] - Professional gross profit margin grew by 130 basis points to 32.9%, while Real Estate gross profit margin increased by 150 basis points to 39.9% [8] Market Data and Key Metrics Changes - The customer base remains consistent, with some buying and selling activity among customers; however, growth is seen in newly opened markets [3] - Some markets in the U.S. are rebounding post-COVID, while others are slower to recover [3] Company Strategy and Development Direction - The company is focused on four strategic initiatives for 2023, including M&A growth, rebranding, process improvements, and shared services [2] - The transition to a single brand, BGSF, is expected to enhance brand power and reduce market confusion [2][22] - The company aims to expand its offerings globally and is actively seeking accretive acquisitions to enhance its client base and expertise [63] Management's Comments on Operating Environment and Future Outlook - Management noted longer decision-making times in the selling cycle, impacting the Professional segment, but solid demand for ERP and cloud migration services persists [19] - The company expects revenue seasonality to normalize, with consulting projects ramping up in the second quarter [10] - There are anticipated macro headwinds on the Professional side, but high-value consulting and managed services are expected to remain resilient and grow in 2023 [10] Other Important Information - The company reported a non-cash charge of $22.5 million related to rebranding and intangible asset impairment, negatively impacting net income [61] - Accounts receivable totaled $62.5 million, with a working capital ratio strengthening from 2.7 to 2.9 [62] Q&A Session Summary Question: Can you discuss the gross margin profile of the recent acquisition of Arroyo and any seasonality in their business? - Management indicated that Arroyo's gross margin profile aligns with the rest of the business and that there is no significant seasonality in their project-driven assignments [24] Question: What type of activity has started regarding cross-selling after the Horn acquisition, and how is growth in the Real Estate segment being driven? - Management noted that cross-selling activities are in progress, and growth in the Real Estate segment is coming from both existing and new customers [44] Question: What is the growth potential for the Royal acquisition, and how easy is it to scale that business? - Management expressed optimism about the growth potential for Royal, highlighting strong customer demand and readiness to introduce Royal to the existing client base [46]

On March 21, 2022, the Company sold substantially all of the assets and certain liabilities of InStaff to Sentech Engineering Services, Inc. ("Sentech") for a sale price of approximately $30.3 million cash, subject to customary sales price and working capital adjustments specified in the purchase agreement. The purchase agreement provided for deferred consideration of $2.0 million, which was received by April 3, 2023. The sale resulted in an original pre-tax gain on sale of discontinued operations of $17.3 ...

Financial Data and Key Metrics Changes - The company reported record revenues of $298 million for 2022, a 24.8% increase over 2021, with adjusted EBITDA and adjusted EPS up 45% and 47% respectively compared to the prior year [13][19] - Fourth quarter revenues increased by 14.2% to $77.3 million, with property management growing by 16.6% and professional services increasing by 8.9% on an organic basis [18][19] - The effective tax rate for Q4 was 33% for 2022, compared to 24.3% in the previous year [19][51] Business Line Data and Key Metrics Changes - Property management revenues grew by 31.6% year-over-year, while professional services increased by 19.7% organically [19] - Professional wage rates increased by 17%, and property management wage rates increased by 10% quarter-over-quarter [18] - Permanent placement revenues were up 13.5% year-over-year [19] Market Data and Key Metrics Changes - The company operates in 64 active markets in real estate and is targeting six new markets for the upcoming year [38] - The managed services division, bolstered by the acquisition of Horn Solutions, doubled in size, contributing $1.4 million in revenue for December [19][24] Company Strategy and Development Direction - The company plans to rebrand all businesses under the BGSF name by the end of Q2 2023 to enhance market presence and cross-selling opportunities [52][47] - A focus on IT modernization and strategic acquisitions is expected to drive growth and improve margins, with a specific emphasis on high-value consulting and managed services [15][36] - The company aims to leverage technology for territory mapping and market expansion in the real estate segment [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth prospects in both real estate and professional consulting, citing pent-up demand in multifamily and a return to work in commercial sectors [57][58] - The company anticipates a strong year in 2023, supported by low unemployment rates and a focus on finding and training talent [58] - Management acknowledged challenges in Q4 due to increased SG&A expenses but remains confident in the long-term benefits of recent investments [50][91] Other Important Information - The company is transitioning to a new CFO, John Barnett, with Dan Hollenbach assisting in the transition [14][17] - The acquisition of Horn Solutions is seen as a strategic fit that enhances the company's consulting capabilities and market reach [24][70] Q&A Session Summary Question: How many offices did you end the year in, and what is the pace of openings anticipated? - The company has 64 active markets in real estate and is targeting six new markets next year [38] Question: Is the $4 million increase in SG&A going to be the new baseline going forward? - The $23 million figure may serve as a new baseline, but it includes some one-time transaction fees and catch-up expenses [39] Question: What are the cross-sell opportunities with Horn? - The teams are excited about the Horn acquisition, with immediate cross-selling initiatives already underway [42] Question: Is there still pent-up demand in the market? - There is still pent-up demand, particularly as companies return to the office [71][103] Question: How should we think about EBITDA margins in 2023? - Management expects to leverage investments made in 2022 to improve EBITDA margins moving forward [72]

[Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section outlines the inherent risks and uncertainties associated with forward-looking statements, which could cause actual results to differ materially from expectations - Forward-looking statements are based on current expectations and involve a number of risks and uncertainties that could cause actual results to differ materially[8](index=8&type=chunk) - Key risk factors include the availability of qualified field talent, compliance with labor laws, competition, impact of outstanding indebtedness, ability to integrate acquisitions, economic conditions, and inflationary pressures[8](index=8&type=chunk) [Where You Can Find Other Information](index=3&type=section&id=Where%20You%20Can%20Find%20Other%20Information) Information regarding SEC filings, including annual and quarterly reports, is available on the company's and the SEC's websites - SEC filings (Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K) are available for download, free of charge, on the company's website (www.bgsf.com) and the SEC's website (www.sec.gov)[10](index=10&type=chunk) [PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents the company's unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes, along with management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations and comprehensive income, statements of changes in stockholders' equity, statements of cash flows, and detailed notes to these financial statements for BGSF, Inc. and its subsidiaries [Unaudited Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) | Metric | Sep 25, 2022 ($) | Dec 26, 2021 ($) | Change ($) | Change (%) | | :--------------------------- | :--------------- | :--------------- | :----------- | :--------- | | Total Assets | 149,264,141 | 148,293,966 | 970,175 | 0.65% | | Total Current Assets | 70,812,657 | 60,170,249 | 10,642,408 | 17.69% | | Cash and Cash Equivalents | — | 112,104 | (112,104) | -100.00% | | Accounts Receivable, net | 64,349,769 | 48,132,896 | 16,216,873 | 33.69% | | Total Current Liabilities | 23,786,163 | 28,383,700 | (4,597,537) | -16.20% | | Line of Credit | 27,004,467 | 12,587,591 | 14,416,876 | 114.53% | | Total Stockholders' Equity | 96,893,684 | 76,592,184 | 20,301,500 | 26.51% | [Unaudited Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) | Metric (Thirteen Weeks) | Sep 25, 2022 ($) | Sep 26, 2021 ($) | Change ($) | Change (%) | | :---------------------------------- | :--------------- | :--------------- | :----------- | :--------- | | Revenues | 78,507,873 | 64,184,810 | 14,323,063 | 22.32% | | Gross Profit | 27,999,845 | 22,046,886 | 5,952,959 | 27.00% | | Operating Income | 6,468,522 | 5,031,625 | 1,436,897 | 28.56% | | Net Income | 4,652,473 | 4,643,609 | 8,864 | 0.19% | | Basic EPS | 0.44 | 0.45 | (0.01) | -2.22% | | Diluted EPS | 0.44 | 0.45 | (0.01) | -2.22% | | Cash Dividends Declared per Share | 0.15 | 0.12 | 0.03 | 25.00% | | Metric (Thirty-nine Weeks) | Sep 25, 2022 ($) | Sep 26, 2021 ($) | Change ($) | Change (%) | | :---------------------------------- | :--------------- | :--------------- | :----------- | :--------- | | Revenues | 221,139,315 | 171,332,726 | 49,806,589 | 29.07% | | Gross Profit | 76,490,069 | 57,509,078 | 18,980,991 | 32.99% | | Operating Income | 13,523,346 | 8,414,825 | 5,108,521 | 60.71% | | Net Income | 23,628,670 | 8,798,244 | 14,830,426 | 168.56% | | Basic EPS | 2.26 | 0.85 | 1.41 | 165.88% | | Diluted EPS | 2.25 | 0.85 | 1.40 | 164.71% | | Cash Dividends Declared per Share | 0.45 | 0.32 | 0.13 | 40.63% | - Net income for the thirty-nine week period ended September 25, 2022, significantly increased by **$14.8 million (168.56%)** primarily due to a **$17.3 million gain** on the sale of discontinued operations[18](index=18&type=chunk) [Unaudited Consolidated Statement of Changes in Stockholders' Equity](index=7&type=section&id=Unaudited%20Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity) | Metric (Thirty-nine Weeks) | Sep 25, 2022 ($) | Dec 26, 2021 ($) | Change ($) | Change (%) | | :---------------------------------- | :--------------- | :--------------- | :----------- | :--------- | | Total Stockholders' Equity (start) | 76,592,184 | 65,457,752 | 11,134,432 | 17.01% | | Net Income | 23,628,670 | 8,798,244 | 14,830,426 | 168.56% | | Share-based Compensation | 864,903 | 841,587 | 23,316 | 2.77% | | Cash Dividend Declared | (4,711,973) | (3,316,114) | (1,395,859) | 42.10% | | Total Stockholders' Equity (end) | 96,893,684 | 72,030,726 | 24,862,958 | 34.52% | [Unaudited Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric (Thirty-nine Weeks) | Sep 25, 2022 ($) | Sep 26, 2021 ($) | Change ($) | Change (%) | | :-------------------------------------------------------- | :--------------- | :--------------- | :------------ | :--------- | | Net Cash (Used in) Provided by Operating Activities | (7,830,829) | 2,354,870 | (10,185,699) | -432.54% | | Net Cash Provided by (Used in) Investing Activities | 25,607,043 | (5,341,231) | 30,948,274 | 579.42% | | Net Cash (Used in) Provided by Financing Activities | (17,888,318) | 2,986,361 | (20,874,679) | -698.94% | | Net Change in Cash and Cash Equivalents | (112,104) | — | (112,104) | -100.00% | - Net cash used in continuing operating activities increased by **$2.8 million** to **$5.6 million** in Fiscal 2022, primarily due to higher accounts receivable and payments of deferred employer FICA for the CARES Act[180](index=180&type=chunk) - Investing activities provided **$25.6 million** in cash in Fiscal 2022, mainly from the **$30.3 million sale of InStaff**, offsetting **$4.7 million** in capital expenditures[182](index=182&type=chunk) - Financing activities used **$17.9 million** in Fiscal 2022, driven by **$26.9 million** in Term Loan paydowns and **$4.7 million** in cash dividends, partially offset by **$14.3 million** in Revolving Facility borrowings[184](index=184&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) [NOTE 1 - NATURE OF OPERATIONS](index=11&type=section&id=NOTE%201%20-%20NATURE%20OF%20OPERATIONS) - BGSF, Inc. provides workforce solutions across IT, Cyber, Finance & Accounting, and Real Estate segments, primarily within the United States[30](index=30&type=chunk)[33](index=33&type=chunk) - On March 21, 2022, the company completed the sale of its Light Industrial segment (InStaff), with its financial results now reflected as discontinued operations[31](index=31&type=chunk)[32](index=32&type=chunk) - The Real Estate segment experiences seasonal fluctuations, with demand historically increasing in **Q2** and peaking in **Q3** due to increased multifamily unit turns[36](index=36&type=chunk) - The current inflationary environment and related interest rate impacts may negatively affect the company's business by reducing demand for workforce solutions, increasing early terminations, or diminishing projects[37](index=37&type=chunk) [NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The company's fiscal year is **52/53 weeks**, with periods ending **September 25, 2022**, and **December 26, 2021**[41](index=41&type=chunk) - Significant estimates affecting financial statements include allowances for credit losses, goodwill, intangible assets, lease liability, contingent consideration obligations, and income taxes[42](index=42&type=chunk) - No single client partner accounted for more than **10%** of accounts receivable or revenue from continuing operations[44](index=44&type=chunk) | Geographic Revenue Concentration (Continuing Operations) | Sep 25, 2022 | Sep 26, 2021 | | :------------------------------------------------------- | :----------- | :----------- | | Tennessee | 11% | 12% | | Texas | 23% | 23% | | Allowance for Credit Losses (Continuing Operations) | Sep 25, 2022 ($) | Sep 26, 2021 ($) | | :-------------------------------------------------- | :--------------- | :--------------- | | Beginning balance | 448,622 | 521,001 | | Provision for credit losses, net | 215,958 | 246,048 | | Amounts written off, net | (215,958) | (217,130) | | Ending balance | 448,622 | 521,001 | | Income Tax Expense (Continuing Operations) | Thirteen Weeks Sep 25, 2022 | Thirteen Weeks Sep 26, 2021 | Thirty-nine Weeks Sep 25, 2022 | Thirty-nine Weeks Sep 26, 2021 | | :----------------------------------------- | :-------------------------- | :-------------------------- | :----------------------------- | :----------------------------- | | Effective Tax Rate | 23.6% | 19.4% | 24.5% | 17.9% | - The company adopted **ASU 2020-04** and **ASU 2021-01 (Reference Rate Reform)** in the third quarter of Fiscal 2022, which did not have a material impact on the consolidated financial statements[82](index=82&type=chunk) [NOTE 3 - ACQUISITIONS](index=17&type=section&id=NOTE%203%20-%20ACQUISITIONS) - On February 8, 2021, the company acquired substantially all assets and assumed certain liabilities of Momentum Solutionz for **$3.8 million cash**, with contingent consideration of up to **$2.2 million**[83](index=83&type=chunk) - The Momentum acquisition, assigned to the Professional segment, strengthens the company's operations in IT consultants and technology professionals, particularly for ERP systems[84](index=84&type=chunk) - As of September 25, 2022, **$1.1 million** of the contingent consideration for Momentum has been paid[83](index=83&type=chunk) [NOTE 4 - DISCONTINUED OPERATIONS](index=19&type=section&id=NOTE%204%20-%20DISCONTINUED%20OPERATIONS) - On March 21, 2022, the company sold its Light Industrial segment (InStaff) for approximately **$30.3 million cash**, resulting in a **$17.3 million gain on sale**[90](index=90&type=chunk) - InStaff's financial results for periods prior to the sale have been reflected as discontinued operations in the Consolidated Statements of Operations and Comprehensive Income and Consolidated Statements of Cash Flows[91](index=91&type=chunk) | InStaff Financials (Thirty-nine Weeks) | Sep 25, 2022 ($) | Sep 26, 2021 ($) | | :------------------------------------- | :--------------- | :--------------- | | Revenue | 16,465 | 53,122 | | Gross Profit | 2,321 | 7,755 | | Income from discontinued operations | 1,235 | 3,331 | | InStaff Assets & Liabilities (Dec 26, 2021) | Amount ($) | | :------------------------------------------ | :----------- | | Total assets classified as discontinued | 14,411,380 | | Total liabilities classified as discontinued| 1,452,451 | [NOTE 5 - LEASES](index=20&type=section&id=NOTE%205%20-%20LEASES) - The weighted average remaining lease term for operating leases was **2.1 years** and the weighted average discount rate was **5.0%** as of September 25, 2022[95](index=95&type=chunk) | Undiscounted Annual Future Minimum Lease Payments | Sep 25, 2022 ($) | | :------------------------------------------------ | :--------------- | | 2022 | 495,580 | | 2023 | 1,554,046 | | 2024 | 1,019,244 | | 2025 | 270,793 | | Total Lease Payments | 3,339,663 | | Present Value of Lease Liabilities | 3,173,152 | [NOTE 6 - INTANGIBLE ASSETS](index=20&type=section&id=NOTE%206%20-%20INTANGIBLE%20ASSETS) - Intangible assets with finite useful lives are amortized over their estimated useful lives, ranging from **three to ten years**[58](index=58&type=chunk) - No impairment indicators were identified for intangible assets or goodwill during Fiscal 2022 or Fiscal 2021[60](index=60&type=chunk)[62](index=62&type=chunk) | Amortization Expense (Thirty-nine Weeks) | Sep 25, 2022 ($) | Sep 26, 2021 ($) | | :--------------------------------------- | :--------------- | :--------------- | | Acquisition intangibles | 1,642,550 | 1,820,350 | | Computer software | 860,510 | 531,140 | | Total Amortization Expense | 2,503,060 | 2,351,500 | | Total Expense (incl. SGA) | 2,619,523 | 2,407,960 | [NOTE 7 - ACCRUED PAYROLL AND EXPENSES, OTHER LONG-TERM LIABILITIES, AND CONTINGENT CONSIDERATION](index=21&type=section&id=NOTE%207%20-%20ACCRUED%20PAYROLL%20AND%20EXPENSES%2C%20OTHER%20LONG-TERM%20LIABILITIES%2C%20AND%20CONTINGENT%20CONSIDERATION) | Accrued Payroll and Expenses (Continuing Operations) | Sep 25, 2022 ($) | Dec 26, 2021 ($) | | :--------------------------------------------------- | :--------------- | :--------------- | | Field talent payroll | 7,347,128 | 6,042,340 | | Accrued bonuses and commissions | 4,518,828 | 4,522,720 | | Other | 3,252,050 | 4,277,930 | | Total Accrued Payroll and Expenses | 16,557,575 | 16,153,920 | - Other current liabilities include **$3.5 million** of deferred employer FICA from the CARES Act, with the remaining half due by **December 31, 2022**[100](index=100&type=chunk) - Estimated future contingent consideration payments from continuing operations are **$1.1 million**, due in less than one year as of September 25, 2022[101](index=101&type=chunk) [NOTE 8 - DEBT](index=21&type=section&id=NOTE%208%20-%20DEBT) - The Credit Agreement, maturing **July 16, 2024**, provides for a Revolving Facility (temporarily increased to **$60 million**) and a Term Loan[102](index=102&type=chunk)[103](index=103&type=chunk) - As of September 25, 2022, **$27.1 million** was outstanding on the revolving facilities, with the interest rate component changed from LIBOR to SOFR on **August 18, 2022**[103](index=103&type=chunk)[108](index=108&type=chunk) - The company was in compliance with all debt covenants (maximum Leverage Ratio and minimum Fixed Charge Coverage Ratio) as of September 25, 2022[104](index=104&type=chunk) - The existing Term Loan balance was paid down on **March 21, 2022**, using proceeds from the sale of InStaff, which also cancelled a **$25.0 million** interest rate swap agreement[105](index=105&type=chunk)[111](index=111&type=chunk) [NOTE 9 - FAIR VALUE MEASUREMENTS](index=22&type=section&id=NOTE%209%20-%20FAIR%20VALUE%20MEASUREMENTS) - The fair value hierarchy categorizes inputs into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[113](index=113&type=chunk) | Financial Instrument | Fair Value Hierarchy | Sep 25, 2022 ($) | Dec 26, 2021 ($) | | :---------------------------- | :------------------- | :--------------- | :--------------- | | Interest rate swap | Level 2 | — | 58,331 | | Contingent consideration, net | Level 3 | 1,059,606 | 2,063,500 | - Changes in **Level 3** fair value measurements for contingent consideration primarily relate to **$1.1 million** in payments on the Momentum acquisition[115](index=115&type=chunk) [NOTE 10 - CONTINGENCIES](index=23&type=section&id=NOTE%2010%20-%20CONTINGENCIES) - The company establishes a liability for legal proceedings and claims when it is probable that a liability has been incurred and the amount can be reasonably estimated[116](index=116&type=chunk) - The company maintains various insurance policies (e.g., workers' compensation, general liability, professional liability) and indemnification agreements for its directors and officers[117](index=117&type=chunk) [NOTE 11 – EQUITY](index=24&type=section&id=NOTE%2011%20%E2%80%93%20EQUITY) - Authorized capital stock consists of **19,500,000 shares** of common stock (**$0.01 par value**) and **500,000 shares** of undesignated preferred stock (**$0.01 par value**)[120](index=120&type=chunk) - In Fiscal 2022, the company issued **25,749 restricted common shares** to team members and non-team member directors under the **2013 Long-Term Incentive Plan**, subject to a **three-year service condition**[121](index=121&type=chunk) [NOTE 12 – SHARE-BASED COMPENSATION](index=24&type=section&id=NOTE%2012%20%E2%80%93%20SHARE-BASED%20COMPENSATION) | Share-Based Compensation (Continuing Operations) | Thirty-nine Weeks Sep 25, 2022 ($) | Thirty-nine Weeks Sep 26, 2021 ($) | | :----------------------------------------------- | :--------------------------------- | :--------------------------------- | | Stock Options Expense | 600,000 | 500,000 | | Restricted Stock Expense | 300,000 | 400,000 | - Unamortized share-based compensation expense for stock options amounted to **$1.1 million** as of September 25, 2022, expected to be recognized over the next **3.0 years**[122](index=122&type=chunk) - Unamortized share-based compensation expense for restricted stock amounted to **$0.6 million** as of September 25, 2022, expected to be recognized over the next **2.0 years**[125](index=125&type=chunk) | Stock Options Activity (Sep 25, 2022) | Number of Shares | Weighted Average Exercise Price ($) | | :------------------------------------ | :--------------- | :---------------------------------- | | Outstanding at Dec 26, 2021 | 695,329 | 16.91 | | Granted | 164,000 | 12.87 | | Exercised | (1,000) | 9.72 | | Forfeited / Canceled | (36,650) | 17.65 | | Outstanding at Sep 25, 2022 | 821,679 | 16.08 | [NOTE 13 - TEAM MEMBER BENEFIT PLAN](index=25&type=section&id=NOTE%2013%20-%20TEAM%20MEMBER%20BENEFIT%20PLAN) - The company provides a **401(k) Plan** and matches participants' contributions **100%** up to the first **3%** and **50%** of the next **2%** of compensation[126](index=126&type=chunk) - Company contributions from continuing operations to the **401(k) Plan** were **$1.2 million** for the thirty-nine week period ended September 25, 2022[126](index=126&type=chunk) [NOTE 14 - BUSINESS SEGMENTS](index=25&type=section&id=NOTE%2014%20-%20BUSINESS%20SEGMENTS) | Revenue by Segment (Thirteen Weeks) | Sep 25, 2022 ($) | Sep 26, 2021 ($) | Change ($) | Change (%) | | :---------------------------------- | :--------------- | :--------------- | :---------- | :--------- | | Real Estate | 33,240,955 | 24,788,784 | 8,452,171 | 34.10% | | Professional | 45,266,918 | 39,396,026 | 5,870,892 | 14.90% | | Total | 78,507,873 | 64,184,810 | 14,323,063 | 22.32% | | Operating Income by Segment (Thirteen Weeks) | Sep 25, 2022 ($) | Sep 26, 2021 ($) | Change ($) | Change (%) | | :------------------------------------------- | :--------------- | :--------------- | :---------- | :--------- | | Real Estate | 6,147,887 | 4,369,878 | 1,778,009 | 40.69% | | Professional | 5,171,686 | 3,399,330 | 1,772,356 | 52.14% | | Total | 6,468,522 | 5,031,625 | 1,436,897 | 28.56% | | Revenue by Segment (Thirty-nine Weeks) | Sep 25, 2022 ($) | Sep 26, 2021 ($) | Change ($) | Change (%) | | :------------------------------------- | :--------------- | :--------------- | :---------- | :--------- | | Real Estate | 89,136,818 | 64,613,630 | 24,523,188 | 38.00% | | Professional | 132,002,497 | 106,719,090 | 25,283,407 | 23.70% | | Total | 221,139,315 | 171,332,720 | 49,806,595 | 29.07% | | Operating Income by Segment (Thirty-nine Weeks) | Sep 25, 2022 ($) | Sep 26, 2021 ($) | Change ($) | Change (%) | | :---------------------------------------------- | :--------------- | :--------------- | :---------- | :--------- | | Real Estate | 15,000,048 | 9,795,540 | 5,204,508 | 53.13% | | Professional | 12,458,120 | 7,476,680 | 4,981,440 | 66.63% | | Total | 13,523,346 | 8,414,820 | 5,108,526 | 60.71% | | Total Assets by Segment (Sep 25, 2022) | Amount ($) | | :------------------------------------- | :----------- | | Real Estate | 29,102,070 | | Professional | 97,665,361 | | Home office | 22,496,710 | | Discontinued operations (Dec 26, 2021) | 14,411,380 | | Total | 149,264,141 | [NOTE 15 - SUBSEQUENT EVENT](index=26&type=section&id=NOTE%2015%20-%20SUBSEQUENT%20EVENT) - On **November 2, 2022**, the board of directors declared a cash dividend of **$0.15 per common share**, payable on **November 21, 2022**[132](index=132&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, discussing key performance drivers, segment-specific trends, liquidity, capital resources, and critical accounting policies. It highlights the impact of the InStaff sale and ongoing economic conditions [Overview](index=27&type=section&id=Overview) This overview introduces BGSF as a national provider of workforce solutions, highlighting the strategic divestiture of its Light Industrial segment and recent adjustments to its Revolving Facility - BGSF is a leading national provider of professional workforce solutions in IT, Cyber, Finance & Accounting, and Real Estate segments, operating across **46 states and D.C.**[136](index=136&type=chunk) - The company completed the strategic sale of its Light Industrial segment (InStaff) on **March 21, 2022**, for approximately **$30.3 million**, with an additional **$2 million** deferred consideration[137](index=137&type=chunk) - The InStaff sale represents a strategic shift in the business, with its results presented as discontinued operations[138](index=138&type=chunk) - The Revolving Facility was temporarily increased to **$60 million** on **August 18, 2022**, and the interest rate component changed from LIBOR to SOFR[142](index=142&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) This section provides a summary of the company's financial performance for the thirteen and thirty-nine week fiscal periods, detailing key revenue, gross profit, operating income, and net income figures | Metric (Thirteen Weeks) | Sep 25, 2022 ($K) | Sep 26, 2021 ($K) | Change ($K) | Change (%) | | :---------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Revenues | 78,508 | 64,185 | 14,323 | 22.32% | | Gross Profit | 28,000 | 22,047 | 5,953 | 27.00% | | Operating Income | 6,468 | 5,032 | 1,436 | 28.54% | | Net Income | 4,652 | 4,644 | 8 | 0.17% | | Metric (Thirty-nine Weeks) | Sep 25, 2022 ($K) | Sep 26, 2021 ($K) | Change ($K) | Change (%) | | :---------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Revenues | 221,139 | 171,333 | 49,806 | 29.07% | | Gross Profit | 76,490 | 57,509 | 18,981 | 32.99% | | Operating Income | 13,523 | 8,415 | 5,108 | 60.70% | | Net Income | 23,629 | 8,798 | 14,831 | 168.57% | [Thirteen Week Fiscal Period Ended September 25, 2022 Compared with September 26, 2021](index=29&type=section&id=Thirteen%20Week%20Fiscal%20Period%20Ended%20September%2025%2C%202022%20Compared%20with%20September%2026%2C%202021) | Segment Revenue (Thirteen Weeks) | Sep 25, 2022 ($K) | Sep 26, 2021 ($K) | Change ($K) | Change (%) | | :------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Real Estate | 33,241 | 24,789 | 8,452 | 34.1% | | Professional | 45,267 | 39,396 | 5,871 | 14.9% | - Real Estate revenue increased by **34.1%** due to a **19.2% increase** in billed hours and a **12.5% increase** in average bill rate[147](index=147&type=chunk) - Professional revenue increased by **14.9%**, primarily due to a **$5.1 million increase** in IT division revenues and a **22.8% increase** in average bill rate, offset by a **6.4% decrease** in billed hours[148](index=148&type=chunk) | Gross Profit Percentage (Thirteen Weeks) | Sep 25, 2022 | Sep 26, 2021 | | :--------------------------------------- | :----------- | :----------- | | Real Estate | 40.8% | 38.4% | | Professional | 31.9% | 31.8% | | Company Gross Profit | 35.7% | 34.3% | | SGA Expenses (Thirteen Weeks) | Sep 25, 2022 ($K) | Sep 26, 2021 ($K) | Change ($K) | Change (%) | | :---------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Total SGA Expenses | 20,386 | 17,054 | 3,332 | 19.5% | | SGA as % of Revenue | 26.0% | 26.6% | (0.6)% | | - Interest expense, net decreased primarily due to the pay down of the existing Term Loan balance, partially offset by a higher average balance on the Revolving Facility[154](index=154&type=chunk) - Income tax expense increased by approximately **$0.5 million (61.3%)** primarily due to increased net income before taxes and a higher effective tax rate in Fiscal 2022[155](index=155&type=chunk) [Thirty-nine Week Fiscal Period Ended September 25, 2022 Compared with September 26, 2021](index=30&type=section&id=Thirty-nine%20Week%20Fiscal%20Period%20Ended%20September%2025%2C%202022%20Compared%20with%20September%2026%2C%202021) | Segment Revenue (Thirty-nine Weeks) | Sep 25, 2022 ($K) | Sep 26, 2021 ($K) | Change ($K) | Change (%) | | :---------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Real Estate | 89,137 | 64,614 | 24,523 | 38.0% | | Professional | 132,002 | 106,719 | 25,283 | 23.7% | - Real Estate revenue increased by **38.0%** due to a **23.8% increase** in billed hours and an **11.4% increase** in average bill rate[155](index=155&type=chunk) - Professional revenue increased by **23.7%**, primarily due to a **$19.6 million increase** in IT revenues, an **11.9% increase** in billed hours, and a **10.5% increase** in average bill rate[157](index=157&type=chunk) | Gross Profit Percentage (Thirty-nine Weeks) | Sep 25, 2022 | Sep 26, 2021 | | :------------------------------------------ | :----------- | :----------- | | Real Estate | 39.4% | 37.5% | | Professional | 31.4% | 31.2% | | Company Gross Profit | 34.6% | 33.6% | | SGA Expenses (Thirty-nine Weeks) | Sep 25, 2022 ($K) | Sep 26, 2021 ($K) | Change ($K) | Change (%) | | :------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Total SGA Expenses | 60,001 | 48,626 | 11,375 | 23.4% | | SGA as % of Revenue | 27.1% | 28.4% | (1.3)% | | - Interest expense, net decreased by approximately **$0.3 million (30.0%)** primarily due to the pay down of the existing Term Loan balance, partially offset by a higher average balance on the Revolving Facility[165](index=165&type=chunk) - Income tax expense increased by approximately **$1.6 million (120.3%)** primarily due to increased net income before taxes and a higher effective tax rate in Fiscal 2022, with cash paid for taxes increasing by **$4.3 million** due to the InStaff sale[166](index=166&type=chunk) [Use of Non-GAAP Financial Measures](index=33&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) This section explains the company's use of Adjusted EBITDA as a non-GAAP financial measure to supplement GAAP performance indicators and aid in management's operational assessment - Adjusted EBITDA is a non-GAAP measure used to provide a supplemental view of operating performance, facilitate period-to-period comparisons, and aid management in planning and compensation evaluation[168](index=168&type=chunk) - Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization expense, intangible impairment losses, transaction fees, and certain non-cash expenses (e.g., gain on contingent consideration, share-based compensation)[169](index=169&type=chunk) - Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation from, or as an alternative to, GAAP measures such as net income or cash flow from continuing operating activities[170](index=170&type=chunk) | Adjusted EBITDA (Continuing Operations) | Thirteen Weeks Sep 25, 2022 ($K) | Thirteen Weeks Sep 26, 2021 ($K) | Thirty-nine Weeks Sep 25, 2022 ($K) | Thirty-nine Weeks Sep 26, 2021 ($K) | Trailing Twelve Months Sep 25, 2022 ($K) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------------- | | Adjusted EBITDA | 8,031 | 5,400 | 17,360 | 9,880 | 22,450 | | Adjusted EBITDA % of Revenue | 10.2% | 8.4% | 7.9% | 5.8% | 7.8% | [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the company's liquidity sources, working capital requirements, and cash flow activities from operating, investing, and financing, including the impact of the InStaff sale and debt management - Primary sources of liquidity are cash generated from operations and borrowings under the Revolving Facility[175](index=175&type=chunk) - Working capital requirements are primarily driven by field talent payments, tax payments, and client partner accounts receivable receipts, increasing substantially in periods of growth[174](index=174&type=chunk) | Cash Flow Summary (Thirty-nine Weeks) | Sep 25, 2022 ($K) | Sep 26, 2021 ($K) | | :-------------------------------------------------------- | :---------------- | :---------------- | | Net cash provided by (used in) continuing operating activities | (5,557) | (2,720) | | Net cash provided by (used in) continuing investing activities | 25,633 | (5,307) | | Net cash provided by (used in) continuing financing activities | (17,888) | 2,986 | - Net cash used in continuing operating activities was **$5.6 million** in Fiscal 2022, an increase of **$2.8 million** compared to Fiscal 2021, primarily due to higher accounts receivable and payments of deferred employer FICA[180](index=180&type=chunk) - Investing activities provided **$25.6 million** in Fiscal 2022, mainly from the **$30.3 million sale of InStaff**, offsetting **$4.7 million** in capital expenditures[182](index=182&type=chunk) - Financing activities used **$17.9 million** in Fiscal 2022, including **$26.9 million** in Term Loan paydowns and **$4.7 million** in cash dividends, partially offset by **$14.4 million** in Revolving Facility borrowings[184](index=184&type=chunk) - The Revolving Facility was temporarily increased to **$60 million** on **August 18, 2022**, as a precautionary measure during a company-wide system implementation[187](index=187&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines the significant accounting policies and estimates that require management judgment, emphasizing potential impacts from economic uncertainties on financial statements - The preparation of consolidated financial statements in accordance with GAAP requires management to make assumptions and estimates, particularly for allowances for credit losses, goodwill, intangible assets, lease liability, contingent consideration, and income taxes[191](index=191&type=chunk) - Economic uncertainty, inflation, and interest rate impacts may necessitate future changes to accounting policy judgments and estimates, which could result in meaningful impacts to financial statements[195](index=195&type=chunk)[196](index=196&type=chunk) [Revenue Recognition](index=37&type=section&id=Revenue%20Recognition) This section describes the company's policies for recognizing revenue from workforce solutions, contingent placements, and retained searches, including the criteria for acting as a principal - Revenues are recognized when promised workforce solutions are delivered to client partners, in an amount that reflects the consideration the company expects to be entitled to[197](index=197&type=chunk) - The company records revenue on a gross basis as a principal, bearing the risk of identifying and hiring qualified field talent, setting prices and duties, and for services not fully paid by client partners[198](index=198&type=chunk) - Revenue types include workforce solution revenues (field talent), contingent placement revenues (contingency resolved), and retained search placement revenues (contractual amount for services completed)[199](index=199&type=chunk)[200](index=200&type=chunk) - Allowances are established for placement candidates who do not remain with client partners through the guarantee period (generally **90 days**) based on historical experience[201](index=201&type=chunk) [Recent Accounting Pronouncements](index=38&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 2 for a detailed discussion of recent accounting pronouncements and their potential effects on the consolidated financial statements - For a discussion of recent accounting pronouncements and their potential effect, refer to **Note 2** in the Notes to the Unaudited Consolidated Financial Statements[204](index=204&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks primarily related to interest rates and inflation. Its Revolving Facility has variable interest rates, making it susceptible to future interest rate increases. The company has moderated inflation impacts by adjusting its pricing model - The company's primary market risk exposures relate to interest rate and inflation risks[204](index=204&type=chunk) - The Revolving Facility is priced at variable interest rates, meaning future interest rate increases could adversely impact future earnings and cash flows[205](index=205&type=chunk) - The company has been able to moderate the negative impacts of an inflationary market by adjusting its pricing model[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 25, 2022. No material changes in internal control over financial reporting were identified, despite remote work arrangements. Management acknowledges inherent limitations in control systems - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of **September 25, 2022**[206](index=206&type=chunk) - No material changes in internal control over financial reporting were identified for the fiscal quarter ended **September 25, 2022**, despite most team members working remotely[207](index=207&type=chunk) - Management acknowledges that control systems, no matter how well designed, can provide only reasonable, not absolute, assurance that objectives will be met due to inherent limitations[208](index=208&type=chunk) [PART II—OTHER INFORMATION](index=39&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This part provides additional information including legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, other information, and a list of exhibits [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) There are no changes from the legal proceedings information provided in the Annual Report on Form 10-K for the fiscal year ended December 26, 2021 - No change from the information provided in **ITEM 3. LEGAL PROCEEDINGS** included in the Annual Report on Form 10-K for the fiscal year ended **December 26, 2021**[210](index=210&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) Investors are urged to carefully consider the risks outlined in this Quarterly Report and the Annual Report on Form 10-K for the fiscal year ended December 26, 2021, as these factors could materially and adversely affect the company's operations or financial condition - Investors are urged to carefully consider the risks and other information in this Quarterly Report on Form 10-Q, as well as the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended **December 26, 2021**, as these could materially and adversely affect operations or financial condition[211](index=211&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds to report - None[212](index=212&type=chunk) [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities to report - None[212](index=212&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[212](index=212&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No other information to report - None[212](index=212&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed or furnished with this Quarterly Report on Form 10-Q, including various agreements, corporate documents, and certifications - The section lists exhibits filed or furnished with the Quarterly Report on Form 10-Q, including asset purchase agreements, corporate documents, and certifications[214](index=214&type=chunk) [SIGNATURES](index=41&type=section&id=SIGNATURES) The report is formally signed by the President and Chief Executive Officer and the Chief Financial Officer and Secretary - The report is signed by **Beth Garvey**, President and Chief Executive Officer, and **Dan Hollenbach**, Chief Financial Officer and Secretary, on **November 2, 2022**[216](index=216&type=chunk)[217](index=217&type=chunk)

PART I - FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for Q2 2022 reflect significant changes due to the Light Industrial segment sale, including decreased assets, substantial revenue growth, a $17.3 million gain, and debt elimination [Unaudited Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) As of June 26, 2022, total assets decreased to $136.0 million and total liabilities to $42.7 million, primarily due to discontinued operations and debt paydown, leading to increased stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 26, 2022 | December 26, 2021 | | :--- | :--- | :--- | | **Total current assets** | $56,718 | $60,170 | | **Total assets** | **$135,966** | **$148,294** | | **Total current liabilities** | $23,139 | $28,384 | | **Long-term debt** | $0 | $23,300 | | **Total liabilities** | **$42,682** | **$71,702** | | **Total stockholders' equity** | $93,284 | $76,592 | - Assets and liabilities of discontinued operations, which were **$14.4 million** and **$1.5 million** respectively at the end of 2021, were removed from the balance sheet following the sale of the Light Industrial segment in March 2022[13](index=13&type=chunk)[92](index=92&type=chunk) [Unaudited Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Q2 2022 revenues from continuing operations increased 29.1% to $74.1 million, with 26-week net income reaching $19.0 million, primarily due to a $17.3 million gain on discontinued operations sale Q2 Performance Comparison (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | **Revenues** | $74,089 | $57,398 | | **Gross Profit** | $25,059 | $19,247 | | **Operating Income** | $4,239 | $3,307 | | **Income from Continuing Operations** | $3,184 | $2,596 | | **Net Income** | $3,176 | $3,443 | | **Diluted EPS (Continuing Ops)** | $0.30 | $0.25 | 26-Week Performance Comparison (in thousands, except per share data) | Metric | 26 Weeks 2022 | 26 Weeks 2021 | | :--- | :--- | :--- | | **Revenues** | $142,631 | $107,148 | | **Income from Continuing Operations** | $5,191 | $2,337 | | **Gain on sale of discontinued ops** | $17,266 | $0 | | **Net Income** | $18,976 | $4,155 | | **Diluted EPS (Total)** | $1.82 | $0.40 | - Cash dividends declared per common share increased to **$0.15** in Q2 2022 from **$0.10** in Q2 2021[17](index=17&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) For the first 26 weeks of 2022, cash from continuing operations improved to $1.2 million, investing activities provided $26.8 million from a business sale, and financing used $25.8 million for debt repayment and dividends Cash Flow Summary for 26-Week Periods (in thousands) | Activity | Ended June 26, 2022 | Ended June 27, 2021 | | :--- | :--- | :--- | | **Net cash from continuing operating activities** | $1,217 | $(2,366) | | **Net cash from continuing investing activities** | $26,775 | $(4,856) | | **Net cash from continuing financing activities** | $(25,760) | $3,145 | - The company received **$30.3 million** from the sale of its discontinued operations (InStaff)[23](index=23&type=chunk) - The company made principal payments on long-term debt of **$26.9 million**, effectively paying off its Term Loan[25](index=25&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail the company's two continuing segments after the March 2022 sale of the Light Industrial segment for $30.3 million, yielding a $17.3 million gain used to pay off the Term Loan, with a subsequent dividend declaration - On March 21, 2022, the company sold its Light Industrial segment (InStaff) for approximately **$30.3 million** in cash, plus **$2.0 million** in deferred consideration, resulting in a gain of **$17.3 million**[28](index=28&type=chunk)[89](index=89&type=chunk) - The company operates in two segments: Real Estate (providing office/maintenance talent to properties) and Professional (providing IT, finance, accounting, legal, and HR talent)[31](index=31&type=chunk)[32](index=32&type=chunk) - On March 21, 2022, the company used proceeds from the sale of the Light Industrial segment to pay down the entire balance of its existing Term Loan[103](index=103&type=chunk) - On August 3, 2022, the board declared a cash dividend of **$0.15** per share[131](index=131&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong Q2 2022 performance to growth in Real Estate and Professional segments, with revenues up 29.1% to $74.1 million, highlighting the strategic InStaff segment sale and improved liquidity - The sale of the Light Industrial (InStaff) segment on March 21, 2022, for approximately **$30.3 million** is a key strategic shift, allowing the company to focus on its higher-margin Professional and Real Estate segments[136](index=136&type=chunk)[137](index=137&type=chunk) Adjusted EBITDA from Continuing Operations (in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | **Thirteen Weeks** | $5,403 | $3,212 | | **Twenty-six Weeks** | $9,329 | $4,480 | - The company believes cash from operations and its Revolving Facility are sufficient to meet working capital needs for at least the next twelve months[172](index=172&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Q2 2022 total revenue increased 29.1% to $74.1 million, driven by strong growth in Real Estate and Professional segments, leading to a 30.2% rise in gross profit and improved gross margin Q2 2022 vs Q2 2021 Revenue by Segment (in thousands) | Segment | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Real Estate | $29,980 | $21,212 | 41.3% | | Professional | $44,109 | $36,186 | 21.9% | | **Total** | **$74,089** | **$57,398** | **29.1%** | 26-Week 2022 vs 2021 Revenue by Segment (in thousands) | Segment | 26-Wk 2022 | 26-Wk 2021 | % Change | | :--- | :--- | :--- | :--- | | Real Estate | $55,896 | $39,825 | 40.4% | | Professional | $86,735 | $67,323 | 28.8% | | **Total** | **$142,631** | **$107,148** | **33.1%** | - The increase in Real Estate revenue for Q2 was driven by a **27.6%** increase in billed hours and a **10.7%** increase in average bill rate[146](index=146&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Primary liquidity sources are cash from operations and the Revolving Facility, with InStaff sale proceeds used to pay down the Term Loan, increasing working capital and ensuring sufficient liquidity for the next year - Primary sources of liquidity are cash from operations and a Revolving Facility maturing July 16, 2024[172](index=172&type=chunk) - In Fiscal 2022, the company paid down **$26.9 million** on its Term Loan, paid **$3.1 million** in dividends, and borrowed a net **$4.9 million** on its Revolving Facility[182](index=182&type=chunk) - On March 21, 2022, the company paid down the balance on the existing Term Loan and a portion of the Revolving Facility using proceeds from the sale of the Light Industrial segment[185](index=185&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rates and inflation, with variable-rate debt exposing it to rate increases, though inflationary impacts have been moderated through pricing adjustments - The company's primary market risk exposures are related to interest rate and inflation risks[215](index=215&type=chunk) - Future interest rate increases could adversely impact earnings and cash flows due to variable-rate debt under the Revolving Facility[215](index=215&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 26, 2022, the CEO and CFO concluded that disclosure controls and procedures are effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of the end of the period, the company's disclosure controls and procedures are effective[216](index=216&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[217](index=217&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) No changes in legal proceedings have occurred since the Annual Report on Form 10-K for the fiscal year ended December 26, 2021 - No change from the information provided in the Annual Report on Form 10-K for the fiscal year ended December 26, 2021[220](index=220&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor highlights the potential negative impact of the current inflationary environment and related interest rate increases on demand for workforce solutions and financial performance - A new risk factor was added concerning the current inflationary environment and related interest rate impacts, which may reduce demand for workforce solutions and negatively affect business, financial condition, and results of operations[222](index=222&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 27, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number: 001-36704 BGSF, INC. (exact name of registrant as specified in its charter) Delaware 26-0656684 (State or other jurisdiction of i ...

| --- | --- | |-------|---------------------------------------------------------------------------------------| | | UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 _______________ | | | FORM 10-K | | | _______________ | (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 26, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to BGS ...