BGSF(BGSF) - 2022 Q3 - Quarterly Report

Filing Information General Information This section provides basic identifying information for the quarterly report, including registrant details, jurisdiction, principal offices, SEC compliance, and common stock trading symbol and shares outstanding - Registrant: BGSF, INC., incorporated in Delaware, with principal executive offices at 5850 Granite Parkway, Suite 730, Plano, Texas 75024[2] - The company is an Accelerated Filer and not a shell company[2][3] Common Stock Information | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock | BGSF | NYSE | | Shares Outstanding (as of Nov 3, 2021) | 10,403,869 | Forward-Looking Statements This section outlines the nature of forward-looking statements, detailing inherent risks and uncertainties that could cause actual results to differ materially from projections, including various operational and economic factors - Forward-looking statements relate to expectations for future events, financial performance, growth targets, market trends, and benefits of mergers/acquisitions[6] - Statements are based on current information and involve risks and uncertainties, meaning actual results may differ materially[8] - Key risk factors include availability of field talent, compliance with labor laws, competition, management changes, litigation, indebtedness, ability to integrate acquisitions, impact of COVID-19, adverse economic conditions, and market disturbances[8] Where You Can Find Other Information This section directs readers to the company's website (www.bgsf.com) and the SEC's website (www.sec.gov) for access to its public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K - Company's website (www.bgsf.com) provides free downloads of SEC filings[10] - SEC filings are also available on the SEC's website (www.sec.gov)[10](index=10&type=chunk) PART I—FINANCIAL INFORMATION Item 1. Financial Statements This item presents the unaudited consolidated financial statements of BGSF, Inc. and its subsidiaries, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with integral notes Unaudited Consolidated Balance Sheets Consolidated Balance Sheet Highlights | ASSETS/LIABILITIES/EQUITY | September 26, 2021 | December 27, 2020 | | :-------------------------- | :----------------- | :------------------ | | Total current assets | $55,913,756 | $43,648,766 | | Total assets | $144,100,656 | $130,278,268 |\n| Total current liabilities | $26,633,782 | $18,264,244 | | Total liabilities | $72,069,930 | $64,820,516 | | Total stockholders' equity | $72,030,726 | $65,457,752 | - Total assets increased by $13.8 million (10.6%) from December 27, 2020, to September 26, 2021[13] - Total liabilities increased by $7.2 million (11.2%) and total stockholders' equity increased by $6.6 million (10.0%) over the same period[13] Unaudited Consolidated Statements of Operations and Comprehensive Income Consolidated Statements of Operations Highlights (Thirteen Weeks Ended) | Metric | Sep 26, 2021 | Sep 27, 2020 | | :---------------------- | :----------- | :----------- | | Revenues | $82,352,022 | $71,518,691 | | Gross profit | $24,666,872 | $19,711,926 | | Operating income | $6,195,740 | $3,648,068 | | Net income | $4,643,609 | $2,565,563 | | Basic EPS | $0.45 | $0.25 | | Diluted EPS | $0.45 | $0.25 | Consolidated Statements of Operations Highlights (Thirty-nine Weeks Ended) | Metric | Sep 26, 2021 | Sep 27, 2020 | | :---------------------- | :----------- | :----------- |\n| Revenues | $224,455,249 | $208,192,454 |\n| Gross profit | $65,264,417 | $56,892,800 |\n| Operating income | $11,745,389 | $220,698 |\n| Net income (loss) | $8,798,244 | $(764,840) |\n| Basic EPS | $0.85 | $(0.07) |\n| Diluted EPS | $0.85 | $(0.07) | - For the thirteen weeks ended September 26, 2021, revenues increased by 15.1% and net income increased by 81.0% year-over-year[14] - For the thirty-nine weeks ended September 26, 2021, revenues increased by 7.8% and the company swung from a net loss to a net income year-over-year[14] Unaudited Consolidated Statement of Changes in Stockholders' Equity Stockholders' Equity Changes (Thirty-nine Weeks Ended) | Metric | Sep 26, 2021 | Sep 27, 2020 | | :----------------------------------- | :----------- | :----------- | | Stockholders' equity, beginning of period | $65,457,752 | $68,456,990 | | Net income (loss) | $8,798,244 | $(764,840) | | Cash dividend declared | $(3,316,114) | $(3,092,771) |\n| Share-based compensation | $885,715 | $630,557 | | Stockholders' equity, end of period | $72,030,726 | $64,034,756 | - Total stockholders' equity increased from $65.46 million at December 27, 2020, to $72.03 million at September 26, 2021[19] - Cash dividends declared per common share were $0.32 for the thirty-nine weeks ended September 26, 2021, compared to $0.40 for the same period in 2020[14] Unaudited Consolidated Statements of Cash Flows Consolidated Cash Flow Highlights (Thirty-nine Weeks Ended) | Activity | Sep 26, 2021 | Sep 27, 2020 | | :------------------------------------- | :----------- | :----------- | | Net cash provided by operating activities | $2,354,870 | $18,288,054 | | Net cash used in investing activities | $(5,341,231) | $(23,617,868)|\n| Net cash provided by financing activities | $2,986,361 | $5,329,814 | - Net cash provided by operating activities significantly decreased by $15.9 million in Fiscal 2021 compared to Fiscal 2020, primarily due to increased accounts receivable and payments on accrued payroll[22][184] - Net cash used in investing activities decreased by $18.3 million, mainly due to lower cash paid for business acquisitions in Fiscal 2021 ($3.8M for Momentum) compared to Fiscal 2020 ($21.7M for EdgeRock)[22][186] - Net cash provided by financing activities decreased by $2.3 million, driven by changes in line of credit borrowings/payments and dividend payments[22][188] Notes to Unaudited Consolidated Financial Statements NOTE 1 - NATURE OF OPERATIONS - BGSF, Inc. is a national provider of workforce solutions operating in three segments: Real Estate, Professional, and Light Industrial[23][24] - Real Estate segment provides office and maintenance talent to apartment communities and commercial buildings in 34 states and D.C. (BG Multifamily, BG Talent)[25] - Professional segment provides IT, finance, accounting, legal, and HR talent nationwide (IT Consulting, IT Infrastructure & Development, Finance and Accounting divisions)[26] - Light Industrial segment provides flexible workforce to manufacturing, distribution, logistics, and call centers in 7 states (InStaff)[27] - The company experiences seasonal fluctuations, with Real Estate demand peaking in Q3 and Light Industrial in Q4. COVID-19 has significantly impacted normal seasonal demand and operations[28][29] NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Consolidated financial statements are prepared in accordance with GAAP, reflecting normal recurring adjustments[30] - Key management estimates include allowances for credit losses, goodwill, intangible assets, lease liability, contingent consideration, and income taxes, with increased uncertainty due to COVID-19[34][35] - No single client partner accounted for more than 10% of accounts receivable or revenue for the thirty-nine week periods ended September 26, 2021, and September 27, 2020[39] Geographic Revenue Concentration (Fiscal 2021 vs. Fiscal 2020) | State | Thirty-nine Weeks Ended Sep 26, 2021 | Thirty-nine Weeks Ended Sep 27, 2020 | | :-------- | :----------------------------------- | :----------------------------------- | | Tennessee | 11 % | 14 % | | Texas | 28 % | 23 % | - Allowance for credit losses increased from $492,087 (Dec 27, 2020) to $521,001 (Sep 26, 2021) for the thirty-nine week period[42] - The company capitalizes direct costs for internal-use software and reviews long-lived assets for impairment, with no impairments in Fiscal 2021 or 2020[45][46] - Revenue is recognized on a gross basis as a principal when services are delivered, based on the right to invoice for workforce solutions or when contingencies are resolved for placements[58][59][60] - Effective tax rates were 19.4% (13 weeks) and 17.9% (39 weeks) for Fiscal 2021, primarily due to state taxes and Work Opportunity Tax Credit[68] - The company is evaluating the impact of ASU 2020-04 and ASU 2021-01 (Reference Rate Reform) but does not expect a material impact[73] NOTE 3 - ACQUISITIONS - On February 3, 2020, BGSF acquired 100% of EdgeRock Technology Holdings, Inc. for $21.7 million cash, strengthening its Professional segment in specialized IT consultants and expanding geographic operations[74][75] - EdgeRock contributed $9.2 million in revenue and $0.5 million in operating income for the thirteen weeks ended Sep 27, 2020, and $25.4 million in revenue and $1.1 million in operating income for the thirty-nine weeks ended Sep 27, 2020[76] - On February 8, 2021, BGSF acquired substantially all assets of Momentum Solutionz for $3.8 million cash, plus contingent consideration up to $2.2 million, further strengthening its Professional segment in IT consulting and managed workforce solutions for ERP systems[78][80] - Momentum contributed $1.1 million in revenue and $0.3 million in operating income for the thirteen weeks ended Sep 26, 2021, and $2.3 million in revenue and $0.5 million in operating income for the thirty-nine weeks ended Sep 26, 2021[81] Momentum Acquisition Preliminary Allocation (Feb 8, 2021) | Asset/Liability | Amount | | :-------------------------- | :---------- | | Accounts receivable | $345,121 | | Intangible assets | $3,347,970 | | Goodwill | $2,078,613 | | Liabilities assumed | $(73,708) | | Total net assets acquired | $5,706,723 | | Cash consideration | $3,780,000 | | Fair value of contingent consideration | $1,926,723 | - Pro forma revenues for the thirty-nine weeks ended Sep 26, 2021, including both acquisitions, would have been $224.69 million, with net income of $8.84 million[84] NOTE 4 - LEASES - The company leases all office space through operating leases expiring through 2025[47] - Weighted average remaining lease term was 2.9 years at Sep 26, 2021, with a weighted average discount rate of 4.9%[87] Operating Lease Cash Flows and Costs (Thirty-nine Weeks Ended) | Metric | Sep 26, 2021 | Sep 27, 2020 | | :---------------------- | :----------- | :----------- | | Cash paid for operating leases | $1,739,688 | $1,612,201 | | Operating lease costs | $1,565,289 | $1,536,718 | | Short-term lease costs | $108,514 | $308,543 | Undiscounted Annual Future Minimum Lease Payments (Sep 26, 2021) | Period | Amount | | :----------------- | :---------- | | Less than one year | $585,140 | | One to two years | $2,215,650 | | Two to three years | $1,660,910 | | Three to four years| $1,038,580 | | Four to five years | $311,370 | | Total lease payments | $5,811,670 | | Present value of lease liabilities | $5,426,800 | NOTE 5 - INTANGIBLE ASSETS - Intangible assets are stated net of accumulated amortization of $50.9 million at Sep 26, 2021, up from $48.5 million at Dec 27, 2020[90] - During the thirty-nine weeks ended Sep 26, 2021, software assets of $0.1 million were added, and $1.1 million was reclassified from property and equipment for IT improvement[90] Amortization Expense (Thirty-nine Weeks Ended) | Category | Sep 26, 2021 | Sep 27, 2020 | | :---------------------- | :----------- | :----------- | | Client partner lists | $1,655,250 | $3,009,370 | | Covenant not to compete | $165,105 | $202,470 | | Acquisition intangibles | $1,820,355 | $3,211,840 | | Computer software | $531,147 | $264,560 | | Total amortization expense | $2,351,502 | $3,476,410 | - Total amortization expense decreased by $1.1 million for the thirty-nine weeks ended Sep 26, 2021, compared to the same period in 2020[91] NOTE 6 - ACCRUED PAYROLL AND EXPENSES, OTHER LONG-TERM LIABILITIES, AND CONTINGENT CONSIDERATION Accrued Payroll and Expenses (as of) | Category | Sep 26, 2021 | Dec 27, 2020 | | :------------------------ | :----------- | :----------- | | Field talent payroll | $6,844,894 | $5,574,440 | | Field talent payroll related | $1,645,870 | $1,036,130 | | Accrued bonuses and commissions | $2,984,227 | $1,884,870 | | Other | $4,040,686 | $2,952,950 | | Total accrued payroll and expenses | $15,515,677 | $11,448,400 | - Total accrued payroll and expenses increased by $4.07 million from December 27, 2020, to September 26, 2021[92] - Other current liabilities include $3.5 million of deferred employer FICA under the CARES Act, with payments due by December 31, 2021, and December 31, 2022[92] Future Estimated Contingent Consideration Payments (Sep 26, 2021) | Due in | Estimated Cash Payment | Discount | Net | | :----------------- | :--------------------- | :--------- | :---------- | | Less than one year | $1,110,000 | $(57,250) | $1,052,750 | | One to two years | $1,110,000 | $(140,943) | $969,050 | | Total | $2,220,000 | $(198,193) | $2,021,800 | NOTE 7 - DEBT - The company has a Credit Agreement (maturing July 16, 2024) with BMO, providing a $35 million revolving credit facility and a $30 million term loan[95] - The company was in compliance with all debt covenants (maximum Leverage Ratio and minimum Fixed Charge Coverage Ratio) as of September 26, 2021[96] - On February 8, 2021, $3.8 million was borrowed on the Revolving Facility for the Momentum acquisition[96] Line of Credit Outstanding (as of) | Metric | Sep 26, 2021 | Dec 27, 2020 | | :-------- | :----------- | :----------- | | Outstanding | $13,642,949 | $5,977,342 | | Average daily balance (13 weeks) | $12,300,000 | $9,200,000 | | Average daily balance (39 weeks) | $9,200,000 | $13,800,000 | Long-Term Debt Outstanding (as of) | Metric | Sep 26, 2021 | Dec 27, 2020 | | :-------- | :----------- | :----------- | | Total | $27,425,000 | $28,925,000 | - In April 2020, the company entered into a $25.0 million pay-fixed/receive-floating interest rate swap agreement, effective June 3, 2020, as a cash flow hedge on the Term Loan, terminating June 1, 2023[101] NOTE 8 - FAIR VALUE MEASUREMENTS - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[103] Financial Assets and Liabilities Measured at Fair Value (as of) | Item | Financial Statement Classification | Fair Value Hierarchy | Sep 26, 2021 | Dec 27, 2020 | | :------------------------ | :--------------------------------- | :------------------- | :----------- | :----------- | | Interest rate swap | Other long-term liabilities | Level 2 | $54,613 | $122,870 | | Contingent consideration, net | Current and long-term contingent consideration | Level 3 | $2,021,807 | $2,287,920 | - Changes in Level 3 fair value measurements for contingent consideration include $1.9 million from the Momentum acquisition, $0.2 million in accretion, and remaining gains in earnings[105] NOTE 9 - CONTINGENCIES - The company is involved in legal matters and proceedings in the normal course of business, establishing liabilities when probable and estimable[106] - The company maintains various insurance policies (workers' compensation, general liability, professional liability, etc.) and indemnifies directors and officers[107] - COVID-19 continues to adversely impact business, operations, and financial condition due to economic and labor market disruptions[108] NOTE 10 – EQUITY - 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)[109] - Net restricted common stock of 23,172 shares was issued to non-employee directors in Fiscal 2021 under the 2013 Long-Term Incentive Plan, with a three-year service condition[110] NOTE 11 – SHARE-BASED COMPENSATION - Share-based compensation expense for stock options was $0.5 million (39 weeks ended Sep 26, 2021) and $0.4 million (39 weeks ended Sep 27, 2020)[111] - Unamortized share-based compensation expense for stock options was $0.9 million as of Sep 26, 2021, expected to be recognized over 2.7 years[111] Stock Option Activity (Sep 26, 2021) | Metric | Number of Shares | Weighted Average Exercise Price Per Share | | :------------------------- | :--------------- | :---------------------------------------- | | Options outstanding at Dec 27, 2020 | 652,655 | $17.63 | | Granted | 116,374 | $11.57 | | Exercised | (1,000) | $9.72 | | Forfeited / Canceled | (20,150) | $17.56 | | Options outstanding at Sep 26, 2021 | 747,879 | $16.70 | - Share-based compensation expense for restricted stock awards was $0.4 million (39 weeks ended Sep 26, 2021) and $0.2 million (39 weeks ended Sep 27, 2020)[114] - Unamortized share-based compensation expense for restricted stock was $0.6 million as of Sep 26, 2021, expected to be recognized over 2.6 years[114] Restricted Stock Activity (Sep 26, 2021) | Metric | Number of Shares | Weighted Average Grant Date Fair Value | | :------------------------- | :--------------- | :------------------------------------- | | Restricted stock outstanding at Dec 27, 2020 | 25,218 | $16.0 | | Issued | 58,172 | $11.9 | | Vested | (26,048) | $17.5 | | Restricted stock outstanding at Sep 26, 2021 | 57,342 | $11.2 | - All 25,862 warrants outstanding at December 27, 2020, were forfeited by September 26, 2021, resulting in no unamortized compensation expense[117] - Under the 2020 Employee Stock Purchase Plan (ESPP), 14,758 shares of common stock were issued for the thirty-nine week period ended September 26, 2021[119] NOTE 12 - TEAM MEMBER BENEFIT PLAN - The company provides a 401(k) Plan, matching 100% up to the first 3% and 50% of the next 2% of participant contributions[120] - Company contributions to the 401(k) Plan were $1.2 million for the thirty-nine weeks ended Sep 26, 2021, up from $1.0 million for the same period in 2020[120] NOTE 13 - BUSINESS SEGMENTS - The company operates in three segments: Real Estate, Professional, and Light Industrial[121] Revenue by Segment (Thirty-nine Weeks Ended) | Segment | Sep 26, 2021 | Sep 27, 2020 | | :--------------- | :----------- | :----------- | | Real Estate | $64,613,631 | $50,964,760 | | Professional | $106,719,095 | $107,035,080 |\n| Light Industrial | $53,122,523 | $50,192,600 | | Total | $224,455,249 | $208,192,450 | Operating Income by Segment (Thirty-nine Weeks Ended) | Segment | Sep 26, 2021 | Sep 27, 2020 | | :--------------- | :----------- | :----------- | | Real Estate | $9,795,540 | $7,159,430 | | Professional (without impairment) | $7,476,688 | $5,232,300 | | Professional (impairment losses) | — | $(7,239,510) |\n| Light Industrial | $3,330,564 | $3,240,340 | | Total Operating Income | $11,745,389 | $220,690 | - Real Estate revenue increased by 26.8% and operating income increased by 36.8% for the thirty-nine weeks ended Sep 26, 2021, compared to the prior year[122][124] - Professional segment revenue slightly decreased by 0.3% but operating income significantly improved due to the absence of impairment losses seen in 2020[122][124] - Light Industrial revenue increased by 5.8% and operating income increased by 2.8% for the thirty-nine weeks ended Sep 26, 2021[122][124] NOTE 14 - SUBSEQUENT EVENTS - On November 3, 2021, the board declared a cash dividend of $0.12 per share, payable on November 22, 2021, to shareholders of record as of November 15, 2021[128] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and results, highlighting performance drivers, segment trends, acquisition and COVID-19 impacts, liquidity, Adjusted EBITDA reconciliation, and critical accounting policies Overview - BGSF is a national provider of professional workforce solutions, operating in Real Estate, Professional, and Light Industrial segments across 42 states and D.C., plus 11 on-site locations[131] - The company has completed several acquisitions, including EdgeRock (2020) and Momentum (2021), to strengthen its Professional segment[131] - Business experiences seasonal fluctuations: Real Estate demand peaks in Q3, Light Industrial in Q4. Q1 demand can be affected by weather and payroll tax resets[135] Impact of COVID-19 - COVID-19 continues to impact consolidated operating results, candidate/field talent supply chain, and client partner demand across all segments[136] - Social distancing, changing operational status of client partners, and general business uncertainty are expected to continue affecting demand[136] - Real Estate segment was strongly affected by COVID-19 in 2020 and early 2021, partly due to eviction moratoriums[139] - Management continues to monitor the situation and may alter business operations as required by authorities or for the best interests of stakeholders[140] Results of Operations Thirteen Week Fiscal Period Ended September 26, 2021 Compared with September 27, 2020 Key Financials (Thirteen Weeks Ended) | Metric | Sep 26, 2021 | Sep 27, 2020 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | :--------- | | Revenues | $82,352,000 | $71,519,000 | $10,833,000| 15.1% | | Cost of services | $57,685,000 | $51,807,000 | $5,878,000 | 11.3% | | Gross profit | $24,667,000 | $19,712,000 | $4,955,000 | 25.1% | | Selling, general & administrative expenses | $18,489,000 | $14,869,000 | $3,620,000 | 24.3% | | Operating income | $6,195,000 | $3,648,000 | $2,547,000 | 69.8% | | Net income | $4,644,000 | $2,566,000 | $2,078,000 | 81.0% | - Real Estate revenues increased by $5.6 million (29.4%) due to a 16.0% increase in billed hours and a 10.7% increase in average bill rate[144] - Professional revenues increased by $5.4 million (15.7%), driven by a 21.2% increase in billed hours, $0.5 million from permanent placements, and $1.1 million from the Momentum acquisition, partially offset by a 6.3% decrease in average bill rate[145] - Light Industrial revenues slightly decreased by $0.1 million (0.8%) due to an 11.1% decrease in billed hours, offset by an 11.5% increase in average bill rate[146] - Overall gross profit increased by $5.0 million (25.1%), with gross profit margin improving from 27.6% to 30.0%, primarily due to higher contributions from the Professional and Real Estate segments[148] - Selling, general and administrative expenses increased by $3.6 million (24.3%), mainly due to higher compensation and $0.1 million from the Momentum acquisition[152] - The company recognized a $1.2 million gain on contingent consideration related to the 2019 LJK acquisition[152] Thirty-nine Week Fiscal Period Ended September 26, 2021 Compared with September 27, 2020 Key Financials (Thirty-nine Weeks Ended) | Metric | Sep 26, 2021 | Sep 27, 2020 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | :--------- | | Revenues | $224,455,000 | $208,192,000 | $16,263,000| 7.8% | | Cost of services | $159,191,000 | $151,299,000 | $7,892,000 | 5.2% | | Gross profit | $65,264,000 | $56,893,000 | $8,371,000 | 14.7% | | Selling, general & administrative expenses | $52,981,000 | $45,379,000 | $7,602,000 | 16.8% | | Operating income | $11,745,000 | $221,000 | $11,524,000| 5214.5% | | Net income (loss) | $8,798,000 | $(760,000) | $9,558,000 | N/A | - Real Estate revenues increased by $13.6 million (26.8%) due to a 15.0% increase in billed hours and a 10.1% increase in average bill rate[155] - Professional revenues slightly decreased by $0.3 million (0.3%), despite an $8.3 million contribution from the EdgeRock acquisition (full 39 weeks in 2021 vs. 34 weeks in 2020), $1.3 million from permanent placements, and $2.3 million from the Momentum acquisition. This was offset by a decrease in billed hours and average bill rate[156] - Light Industrial revenues increased by $2.9 million (5.8%) primarily due to a 9.2% increase in average bill rate, partially offset by a 3.1% decrease in billed hours[157] - Overall gross profit increased by $8.4 million (14.7%), with gross profit margin improving from 27.3% to 29.1%, driven by higher contributions from the Professional and Real Estate segments[160] - Selling, general and administrative expenses increased by $7.6 million (16.8%), mainly due to higher compensation, $1.5 million from EdgeRock, and $0.4 million from Momentum[165] - The company recognized a $2.4 million gain on contingent consideration related to the 2019 LJK acquisition[166] - Depreciation and amortization decreased by $1.2 million (28.8%), primarily due to the Professional segment and a decrease related to 2020 impairment losses[167] - In Fiscal 2020, the Professional segment recognized a $3.7 million trade name impairment loss and a $3.5 million client partner list impairment loss[168] - Interest expense, net, decreased by $0.2 million (17.6%) due to a lower average balance on the Revolving Facility, lower rates, and increased interest income[169] - Income tax expense increased by $2.2 million (838.8%) due to higher pre-tax income in 2021, offset by a lower effective rate and higher Work Opportunity Tax Credit[170] Use of Non-GAAP Financial Measures - Adjusted EBITDA is presented as a supplemental non-GAAP measure to evaluate operating performance, facilitate period-to-period comparisons, and for internal planning and compensation programs[171] - Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization expense, intangible impairment losses, transaction fees, non-capital IT project costs, gain on contingent consideration, and share-based compensation expense[172] - Adjusted EBITDA for the thirty-nine weeks ended Sep 26, 2021, was $14.63 million, up from $14.04 million in the prior year[176] - Adjusted EBITDA for the trailing twelve months ended Sep 26, 2021, was $19.28 million[176] - Limitations of Adjusted EBITDA include not reflecting cash expenditures, working capital changes, income tax payments, or debt service requirements[173] Liquidity and Capital Resources - Primary liquidity sources are cash from operations and borrowings under the $35 million Revolving Facility with BMO, maturing July 16, 2024[178] - Primary uses of cash include field talent/team member payments, payroll liabilities, operating expenses, capital expenditures, interest, taxes, dividends, contingent consideration, and debt payments[178] - Working capital increased from $25.38 million at Dec 27, 2020, to $29.28 million at Sep 26, 2021[182] - Net cash provided by operating activities decreased by $15.9 million to $2.4 million for Fiscal 2021, primarily due to increased accounts receivable and payments on accrued payroll[184] - Net cash used in investing activities decreased to $5.3 million for Fiscal 2021, mainly due to lower acquisition payments ($3.8 million for Momentum vs. $21.7 million for EdgeRock in prior year)[186] - Net cash provided by financing activities was $3.0 million for Fiscal 2021, including $7.7 million borrowed on the Revolving Facility, $3.3 million in cash dividends, and $1.5 million in Term Loan payments[188] Credit Agreements - The Credit Agreement (July 16, 2019, maturing July 16, 2024) includes a $35 million Revolving Facility and a $30 million Term Loan[190] - Obligations are secured by a first priority security interest in substantially all tangible and intangible property[190] - The agreement contains customary affirmative and negative covenants, including limitations on cash dividends, and requires compliance with maximum Leverage Ratio and minimum Fixed Charge Coverage Ratio[191] - A $25.0 million pay-fixed/receive-floating interest rate swap, effective June 3, 2020, acts as a cash flow hedge on the Term Loan, terminating June 1, 2023[192] - On February 8, 2021, $3.8 million was borrowed on the Revolving Facility for the Momentum acquisition[193] Off-Balance Sheet Arrangements - A standby letter of credit arrangement, entered in March 2020 for the EdgeRock acquisition, protects a lessor against lease payment default[194] - As of September 26, 2021, the maximum financial exposure from this letter of credit was $0.1 million, considered usage against the Revolving Facility[194] Critical Accounting Policies and Estimates - Consolidated financial statements are prepared in accordance with GAAP, requiring management to make assumptions and estimates about future events[195] - Management regularly reviews accounting policies, estimates, assumptions, and judgments, acknowledging that actual results may differ materially from estimates[195] - Significant accounting policies are detailed in Note 2 of the financial statements[195] Recent Accounting Pronouncements - Refer to Note 2 in the Notes to the Unaudited Consolidated Financial Statements for a discussion of recent accounting pronouncements and their potential effect[195] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate risk from variable-rate debt, which could negatively impact future earnings and cash flows - The company's primary market risk exposure is interest rate risk[196] - A portion of the Revolving Facility and Term Loan are priced at variable interest rates[196] - Future interest rate increases could adversely impact future earnings and cash flows[196] Item 4. Controls and Procedures The CEO and CFO concluded the company's disclosure controls and procedures were effective as of September 26, 2021, with no material changes in internal control over financial reporting identified, despite inherent limitations - CEO and CFO concluded that disclosure controls and procedures were effective as of September 26, 2021, at a reasonable assurance level[197] - No material changes in internal control over financial reporting were identified for the quarter ended September 26, 2021, despite remote work due to COVID-19[198] - Control systems provide only reasonable, not absolute, assurance and can be subject to errors, fraud, collusion, or management override[199] PART II—OTHER INFORMATION Item 1. Legal Proceedings This section states that there has been no change from the information provided regarding legal proceedings in the company's Annual Report on Form 10-K for the fiscal year ended December 27, 2020 - No change from legal proceedings information in the Annual Report on Form 10-K for fiscal year ended December 27, 2020[201] Item 1A. Risk Factors This section advises readers to carefully consider the risks outlined in this Quarterly Report on Form 10-Q, as well as those disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 27, 2020, as these factors could materially and adversely affect the company's results of operations or financial condition - Readers should consider risks in this 10-Q and the 2020 Form 10-K, as they could materially affect operations or financial condition[202] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - None to report[203] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities to report for the period - None to report[203] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Not applicable[203] Item 5. Other Information This section states that there is no other information to report for the period - None to report[203] Item 6. Exhibits This section lists the exhibits filed or furnished with the Quarterly Report on Form 10-Q, encompassing various agreements, corporate documents, certifications, and financial information - Includes Securities Purchase Agreement for EdgeRock acquisition and Asset Purchase Agreement for Momentum acquisition[205] - Includes certifications from CEO and CFO pursuant to Sarbanes-Oxley Act[205] - Financial information is formatted in Inline XBRL[205] SIGNATURES Signatures This section contains the signatures of the President and Chief Executive Officer and the Chief Financial Officer and Secretary, certifying the report on behalf of BGSF, INC - Report signed by Beth Garvey, President and CEO, and Dan Hollenbach, CFO and Secretary, on November 3, 2021[208][209]