BGSF(BGSF) - 2020 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements Presents BG Staffing, Inc.'s unaudited consolidated financial statements for Q1 2019, including balance sheets, income statements, equity changes, cash flows, and detailed notes Unaudited Consolidated Balance Sheets Total assets increased to $102.7 million from $100.3 million at year-end 2018, driven by new right-of-use assets, with total liabilities rising to $37.4 million Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2019 | December 30, 2018 | | :--- | :--- | :--- | | Total current assets | $38,191 | $38,614 | | Total assets | $102,657 | $100,269 | | Total current liabilities | $19,210 | $18,059 | | Total liabilities | $37,408 | $34,567 | | Total stockholders' equity | $65,249 | $65,702 | Unaudited Consolidated Statements of Income Q1 2019 revenues increased 2.9% to $68.8 million, while operating income decreased to $3.6 million and diluted EPS was $0.24 Consolidated Statement of Income (in thousands, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Revenues | $68,776 | $66,855 | | Gross Profit | $18,439 | $17,310 | | Operating Income | $3,587 | $4,035 | | Net Income | $2,496 | $2,466 | | Diluted EPS | $0.24 | $0.27 | - Cash dividends declared per common share increased to $0.30 in Q1 2019 from $0.25 in Q1 2018[14] Unaudited Consolidated Statement of Changes in Stockholders' Equity Stockholders' equity decreased from $65.7 million to $65.2 million in Q1 2019, primarily due to $3.1 million in cash dividends, partially offset by $2.5 million net income - Key activities affecting stockholders' equity in Q1 2019 included $2.5 million net income, $3.1 million cash dividends, and a $0.2 million reduction in retained earnings due to lease accounting changes[17] Unaudited Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $5.4 million in Q1 2019, while financing activities used $5.0 million, mainly for dividends and debt payments Summary of Cash Flows (in thousands) | Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,382 | $3,596 | | Net cash used in investing activities | ($341) | ($154) | | Net cash used in financing activities | ($5,040) | ($3,442) | Notes to Unaudited Consolidated Financial Statements Notes detail operations, accounting policies, and financial items, including three operating segments, adoption of ASU 2016-02, debt facilities, and segment performance - The company operates in three industry segments: Real Estate, Professional (IT, finance, accounting), and Light Industrial (logistics, distribution, call centers)[20][21][22] - Adoption of ASU 2016-02 on December 31, 2018, led to recognition of $4.1 million right-of-use assets and $4.3 million lease liabilities[59] Revenue by Segment (in thousands) | Segment | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Real Estate | $19,176 | $18,034 | | Professional | $30,594 | $31,090 | | Light Industrial | $19,007 | $17,731 | | Total | $68,776 | $66,855 | - On April 25, 2019, the board declared a cash dividend of $0.30 per share, paid on May 13, 2019[91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2019 financial results, including a 2.9% revenue increase to $68.8 million, improved gross profit margin, liquidity, capital resources, and $5.2 million Adjusted EBITDA Results of Operations Total revenues increased 2.9% to $68.8 million, driven by Real Estate and Light Industrial growth, while gross profit margin expanded from 25.9% to 26.8% Segment Revenue Performance (Q1 2019 vs Q1 2018) | Segment | Q1 2019 Revenue (M) | Q1 2018 Revenue (M) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Real Estate | $19.2 | $18.0 | +6.3% | | Professional | $30.6 | $31.1 | -1.6% | | Light Industrial | $19.0 | $17.7 | +7.2% | | Total | $68.8 | $66.9 | +2.9% | - Revenue growth in Real Estate was driven by geographic expansion and a 5.7% increase in average bill rate, while Professional declined by $0.5 million in IT, and Light Industrial grew from increased billed hours and average bill rate[101][102][103] Gross Profit Percentage by Segment | Segment | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Real Estate | 38.5% | 38.2% | | Professional | 27.1% | 25.3% | | Light Industrial | 14.6% | 14.4% | | Company Total | 26.8% | 25.9% | - SG&A expenses increased by $1.6 million (13.7%) due to growth-related costs, increased headcount, commissions, and $0.3 million in share-based compensation[109] Use of Non-GAAP Financial Measures The company uses Adjusted EBITDA, a non-GAAP measure, to evaluate operating performance, reporting $5.2 million for Q1 2019, a decrease from $5.5 million in Q1 2018 Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net income | $2,496 | $2,466 | | Interest expense, net | $353 | $871 | | Income tax expense | $737 | $699 | | Depreciation and amortization | $1,232 | $1,296 | | Share-based compensation | $320 | $67 | | Transaction fees | $21 | $69 | | Adjusted EBITDA | $5,159 | $5,468 | Liquidity and Capital Resources Primary liquidity sources are cash from operations and the revolving credit facility, deemed sufficient for future working capital needs, with $3.1 million in dividends and $1.8 million in debt payments in Q1 2019 - Primary sources of liquidity are cash from operations and borrowings under the Revolving Facility with Texas Capital Bank (TCB)[119] - During Q1 2019, the company used cash for $3.1 million in dividend payments and $1.8 million in principal payments on its Term Loan[127] - The credit agreement with TCB includes a $35.0 million revolving credit facility and a term loan, both maturing in April 2022[128] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk due to variable-rate debt, which could adversely impact future earnings and cash flows - The company's main market risk is interest rate risk due to its variable-rate debt, including the Revolving Facility and Term Loan[135] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2019, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective based on an evaluation as of the end of the reporting period[136] - No material changes in internal control over financial reporting occurred during the fiscal quarter[137] PART II OTHER INFORMATION Item 1. Legal Proceedings No changes in legal proceedings from the information reported in the 2018 Annual Report on Form 10-K - No change from the information provided in the Annual Report on Form 10-K for the fiscal year ended December 30, 2018[141] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the 2018 Annual Report on Form 10-K - No material changes from the risk factors as previously disclosed in the 2018 Form 10-K[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2019, the company issued 423 common shares via cashless exercise of 1,020 warrants, exempt from registration under Section 4(a)(2) - In Q1 2019, the company issued 423 shares of common stock upon the cashless exercise of 1,020 warrants, with the issuance exempt from registration[143] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes standard exhibits such as CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and XBRL interactive data files[146]