BGSF, Inc. 2026 Q2 Earnings Call

Thank you, Sandy, thank you all for joining us today in our call. The second quarter of 2026 represented our first reporting period as a standalone company following the conclusion of the TSA with INSPYR at the end of March. We used this transition as an opportunity to further streamline our front and back-office operations, realign our organization as needed, and establish a cost structure better aligned with our standalone property staffing business. During the second quarter, we incurred $385,000 in non-recurring strategic restructuring costs, which were included in our quarterly results. We also completed our initiative to simplify our support structure during the quarter, strengthening our focus on operational discipline, efficiency, and accountability. At the same time, we are executing initiatives designed to accelerate revenue growth and expand our long-term opportunities. We continue to assess our general and administrative cost structure and identify opportunities to enhance operational efficiency.

We continue to estimate ongoing G&A expenses of approximately $12 million, excuse me, including approximately $2 million in public company costs. We will continue to identify and action cost reduction efforts in our administrative costs beyond those already identified. Building on recommendations from an external organizational and incentive compensation study, we began implementing targeted actions late in the first quarter and completed those actions during the second quarter. As a result, the full benefits of these initiatives will be reflected starting in our third quarter results. With that, I'll turn the call over to Kelly to walk through the strategic initiatives currently underway.

Thank you, Keith, and good morning, everyone. We have seen optimism around rent growth and reduced concessions in pockets of the country, higher interest rates and elevated operating costs continue to pressure property owners' cash flow. Many customers remain focused on cost control and reduced discretionary spending on temporary staffing. This cautious spending environment has led to lower than expected demand for BGSF workforce solutions, resulting in revenue being below expectations. Keith will discuss these market conditions and their financial impact in greater detail later in the call. Operationally, we continued to make meaningful progress across several key performance initiatives during the quarter. Our focus on optimizing fill rates is producing encouraging results, supported by enhanced recruiting processes, expedited candidate matching, and greater efficiency across our delivery teams.

We also continue to strengthen our onboarding process, reducing friction for both clients and candidates while accelerating the time from offer acceptance to successful placement. These improvements are helping us deliver better overall experience and drive stronger workforce outcomes. We remain focused on expanding our PropTech offering. After a successful six-month ramp-up of the program over the first half of the year, we expect this business to successfully build its revenue stream and contribute approximately 1%-2% of revenue in 2027. Still in the early stages of development, we are encouraged by client interest and ongoing execution efforts, and we believe PropTech represents an attractive long-term growth opportunity that complements our broader workforce solutions platform. We executed very successful engagements at both the National Apartment Association and BOMA International conferences during the quarter.

These events provided valuable opportunities to strengthen customer relationships, engage with prospective clients, and expand our sales pipeline. We are optimistic about the quality of the leads generated and believe these efforts position us well to support revenue growth in the second half of the year. We are also excited to announce that Tara Gerberich, VP of our strategic account program, one of our own, was awarded the National Supplier of the Year at the National Apartment Association's Excellence Awards. This is the highest individual recognition that is awarded to a supplier by NAA on an annual basis, and we are proud and excited for Tara's well-earned recognition at this conference. I will turn the call back to Keith to cover our second quarter financial results.

Thank you, Kelly. As a reminder, our comments today refer to continuing operations unless otherwise noted. Our second quarter revenue was $22.3 million, 5.1% down from the prior year, primarily due to lower billed hours driven by reduced customer demand as property owners and property management companies continue to manage cost pressures, as well as increased competition in select markets. Market conditions remained challenging during the quarter as higher interest rates, elevated operating expenses, and continued pressure on property-level cash flows contributed to cautious spending decisions across our customer base. While demand was soft during the quarter, recent staffing industry analyst commentary and Randstad's results point to improving conditions across the staffing industry, which may support a gradual recovery over the remainder of the year. Gross profit for the second quarter was $7.9 million, slightly down from the $8.4 million achieved in the prior year period.

Our gross margin was 35.5%, slightly lower than prior year's 35.8%. We believe our gross margin for the year will remain in the 36% range. SG&A expenses were $8.9 million for the quarter, compared to $12.6 million a year ago, a 29% reduction. This quarter included $385,000 of strategic review costs, compared to $1.6 million in the prior year period. Adjusted EBITDA for the second quarter was a loss of $298,000, an improvement compared to the $1.2 million loss in the prior year period. As our revenue strengthened during the seasonally stronger Q3 time period, the additional gross profit will positively affect our EBITDA, along with the previously discussed cost reduction actions we implemented during the quarter.

On a GAAP basis for Q2, we reported net loss from continuing operations of $0.08 per diluted share, compared to a net loss of $0.41 per diluted share in the prior year. Adjusted EPS loss was a loss of $0.02 per share from both continuing operations and on a consolidated basis. We exited the quarter maintaining a strong cash and cash equivalent position of $18.2 million, which includes short-term investments. Our cash flow from operations was slightly negative $160,000, driven by working capital requirements, including a seasonal revenue uplift of $1.4 million. We also repurchased 56,256 shares of common stock at an average price of $5.20 per share, which total approximately $293,000 for the quarter. As of June 28, 2026, we have approximately $2.3 million available for repurchases. We expect full year 2026 revenue to remain relatively consistent with 2025 levels.

As Kelly outlined, we continue to execute against our strategic priorities, including driving operational excellence through recruiting and onboarding enhancements, expanding our PropTech offerings, strengthening customer relationship and sales pipeline development through industry engagement, and reinforcing our leadership position within property management. Kelly and I want to thank our employees for their dedication and resilience during this time. We look forward to updating investors on our progress each quarter. Please reach out after this call if you would like to schedule a meeting. With that, we would now like to open the call for questions.