BGSF(US:BGSF)2023-05-11 17:25Financial 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]