BGSF Inc.

03/30/2026 | Press release | Distributed by Public on 03/30/2026 15:45

Annual Report for Fiscal Year Ending December 28, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations from continuing operations, our expectations regarding the future performance of our business and the other non-historical statements in the discussion and analysis are forward-looking statements. See "Forward-Looking Statements" in this Annual Report on Form 10-K. These forward-looking statements are subject to risks, uncertainties and other factors including those described in "Item 1A. Risk Factors" of this Annual Report on Form 10-K. Our actual results of operations may differ materially from those contained in any forward-looking statements. You should read the following discussion together with our audited consolidated financial statements and related notes thereto and other financial information included in this Annual Report on Form 10-K. Financial information provided is based on the results of our continuing operations. Please refer to "Note 4 - Discontinued Operations" in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.
Our historical financial information may not be indicative of our future performance.
Company Overview
We provide workforce solutions through the Property Management (apartment communities and commercial buildings) segment that operates primarily within the United States of America ("U.S."). With the acquisitions of BG Personnel, LP and B G Staff Services Inc., we laid the foundation for our entrance into the Property Management ("PM") staffing industry. Through a series of acquisitions, we diversified into the professional services markets, which included consulting and staffing solutions for both information technology and finance and accounting as well as managed solutions services, which included both workforce solutions and fixed fee arrangements. We have continuing operations in one industry segment, Property Management, and have discontinued operations the Light Industrial and Professional segments.
On May 8, 2024, the Company announced that our Board had initiated a process to evaluate potential strategic alternatives and engaged financial advisors in an endeavor to maximize shareholder value ("Strategic alternatives review"). During December 2024, the Company announced a cost restructuring plan as part of the strategic review process. On June 14, 2025, the Company entered into an Equity Purchase Agreement with INSPYR Solutions Intermediate, LLC, pursuant to which the Company sold substantially all of the outstanding equity and net assets pertaining to the Professional segment ("BGSF Professional") on September 8, 2025. The BGSF Professional financial results for periods prior to the sale have been reflected as discontinued operations in the Unaudited Consolidated Financial Statements, see "Note 4 - Discontinued Operations."
The Property Management segment provides office and maintenance talent in 44 states and D.C., to property management companies responsible for the apartment communities' and commercial buildings' day-to-day operations.
The Company normally experiences seasonal fluctuations. The quarterly operating results are affected by the number of billing days in a quarter, as well as the seasonality of client partners' business. Demand for the Property Management workforce solutions has typically increased in the second quarter and is highest during the third quarter of the year due to the increased turns in multifamily units during the summer months when schools are not in session. Overall first quarter demand can be affected by adverse weather conditions in the winter months.
Results of Operations
The following tables summarize key components of our results from continuing operations for the periods indicated, both in dollars and as a percentage of revenues, and have been derived from our consolidated financial statements.
Fiscal Years Ended
December 28,
2025 		December 29,
2024 		December 31,
2023
(dollars in thousands)
Revenues $ 93,310 $ 104,402 $ 125,077
Cost of services 59,977 66,033 75,292
Gross profit 33,333 38,369 49,785
Selling, general, and administrative expenses 41,136 42,902 45,402
Contingent consideration adjustment (450) - -
Depreciation and amortization 1,550 1,334 1,313
Operating (loss) income (8,903) (5,867) 3,070
Interest expense, net (4,511) (4,921) (5,976)
Loss before income taxes from continuing operations (13,414) (10,788) (2,906)
Income tax benefit from continuing operations 1,881 2,084 831
Net loss from continuing operations $ (11,533) $ (8,704) $ (2,075)
Fiscal Years Ended
December 28,
2025 		December 29,
2024 		December 31,
2023
Revenues 100.0 % 100.0 % 100.0 %
Cost of services 64.3 63.2 60.2
Gross profit 35.7 36.8 39.8
Selling, general, and administrative expenses 44.1 41.1 36.3
Contingent consideration adjustment (0.5) - -
Depreciation and amortization 1.7 1.3 1.0
Operating (loss) income (9.6) (5.6) 2.5
Interest expense, net (4.8) (4.7) (4.8)
Loss before income taxes from continuing operations (14.4) (10.3) (2.3)
Income tax benefit from continuing operations 2.1 2.0 0.7
Net loss from continuing operations (12.3) % (8.3) % (1.6) %
Fifty-two Week Fiscal Year Ended December 28, 2025 (Fiscal 2025) Compared with Fifty-two Week Fiscal Year Ended December 29, 2024 (Fiscal 2024)
Revenues:
Fiscal Years Ended
December 28,
2025 		December 29,
2024
(dollars in thousands)
Revenues $ 93,310 $ 104,402
Gross profit $ 33,333 $ 38,369
Gross profit percentage 35.7 % 36.8 %
Revenues:Revenues decreased approximately $11.1 million (10.6%). The decrease was primarily due to a 12.1% reduction in billed hours, which was driven by a combination of lower demand from cost pressures on property owners and property management companies and increased competition in certain markets with partial offsets by higher permanent placement business, average bill rate, and multi-family property owners.
Gross Profit: Gross profit decreased approximately $5.1 million (13.1%) which is in line with revenues with a partial offset by higher permanent placement business that have no cost of service.
Selling, General, and Administrative Expenses:Selling, general and administrative ("SGA") expenses decreased $1.8 million (4.1%) primarily due to reduced compensation costs on less headcount offset by an increase in strategic alternatives review. The components of SGA expense are detailed in the following table:
Fiscal Years Ended
December 28,
2025 		December 29,
2024
Amount % of Revenue Amount % of Revenue $
Change 		%
Change
(dollars in thousands)
Selling $ 22,961 24.6 % $ 24,631 23.6 % $ (1,670) (6.8) %
General and administrative:
Compensation and related 8,290 8.9 9,394 9.0 (1,104) (11.8) %
Software 2,875 3.1 2,862 2.7 13 0.5 %
Liability insurance 1,149 1.2 999 1.0 150 15.0 %
Professional fees 1,938 2.1 1,899 1.8 39 2.1 %
Share-based compensation 1,006 1.1 908 0.9 98 10.8 %
Strategic alternatives review 2,519 2.7 962 0.9 1,557 161.9 %
Other 398 0.4 1,247 1.2 (849) (68.1) %
Total $ 41,136 44.1 % $ 42,902 41.1 % $ (1,766) (4.1) %
Contingent consideration adjustment: As a result of the certain business developments in Fiscal 2025, the Company recognized a $0.5 million contingent consideration adjustment related to the sale of BGSF Professional, see "Note 4 - Discontinued Operations."
Depreciation and Amortization:Depreciation and amortization charges increased approximately $0.2 million (16.2%) primarily due to higher amortization of intangible assets for computer software depreciation.
Interest Expense, net:Interest expense, net decreased $0.4 million (8.3%) primarily from paying the balance on the amended and restated credit agreement with BMO, using the proceeds from the sale of BGSF Professional, which was partially offset by the write off of amortization of debt issuance costs from the BMO May 2025 Waiver and Amendment.
Income Tax Benefit:Income tax benefit decreased $0.2 million (9.7%) primarily due to an increased net loss before taxes and a lower effective tax rate in Fiscal 2025, which was partially offset by a $1.5 million valuation allowance recorded during Fiscal 2025 against certain net deferred tax assets generated in the sale of BGSF Professional and lower state tax expense.
Fifty-two Week Fiscal Year Ended December 29, 2024 (Fiscal 2024) Compared with Fifty-three Week Fiscal Year Ended December 31, 2023 (Fiscal 2023)
Revenues:
Fiscal Years Ended
December 29,
2024 		December 31,
2023
(dollars in thousands)
Revenues $ 104,402 $ 125,077
Gross profit $ 38,369 $ 49,785
Gross profit percentage 36.8 % 39.8 %
Revenues:Revenues decreased approximately $20.7 million (16.5%). The decrease was primarily due to a reduction in billed hours, which was driven by a combination of increased competition in certain markets and lower demand from cost pressures at the property management companies.
Gross Profit: Gross profit decreased approximately $11.4 million (22.9%). The decrease was primarily due to to a reduction in revenue, which was driven by a combination of increased competition in certain markets, lower demand from cost pressures at the property management companies and lower permanent placement business, which has no cost of service.
Selling, General, and Administrative Expenses:SGA expenses decreased $2.5 million (5.5%) versus prior year, primarily due to expense reduction and cost control efforts in response to the decline in revenues. The components of SGA expense are detailed in the following table:
Fiscal Years Ended
December 29,
2024 		December 31,
2023
Amount % of Revenue Amount % of Revenue $
Change 		%
Change
(dollars in thousands)
Selling $ 24,631 23.6 % $ 26,427 21.1 % $ (1,796) (6.8) %
General and administrative:
Compensation and related 9,394 9.0 10,215 8.2 (821) (8.0) %
Software 2,862 2.7 2,720 2.2 142 5.2 %
Liability insurance 999 1.0 980 0.8 19 1.9 %
Professional fees 1,899 1.8 2,066 1.7 (167) (8.1) %
Share-based compensation 908 0.9 957 0.8 (49) (5.1) %
Strategic alternatives review 962 0.9 - - 962 - %
Other 1,247 1.2 2,037 1.6 (790) (38.8) %
Total $ 42,902 41.1 % $ 45,402 36.4 % $ (2,500) (5.5) %
Depreciation and Amortization:Depreciation and amortization charges were flat due to the increase in software amortization that was partially offset by the decrease in computer equipment.
Interest Expense, net: Interest expense, net decreased $1.1 million (17.7%) primarily due to reduced accretion in Fiscal 2024 on contingent consideration associated with Arroyo Consulting and the lower average balance on the Revolving Facility, which was partially offset by the increase in debt issuance costs.
Income Tax Benefit:Income tax benefit increased $1.3 million (150.8%) primarily due to a lower taxable loss in Fiscal 2023.
Liquidity and Capital Resources
Our working capital requirements are primarily driven by field talent payments, tax payments, and client partner accounts receivable receipts. Since receipts from client partners lag payments to field talent, working capital requirements increase substantially in periods of growth.
Our primary sources of liquidity were cash generated from operations and borrowings under our amended and restated credit agreement with BMO, that provided for a revolving credit facility (the "Revolving Facility"). On September 8, 2025, we paid the balance on the existing Term Loan and Revolving Facility using the proceeds from the sale of BGSF Professional. We do not currently have access to a revolving credit facility. On September 30, 2025, we paid a $2.00 per share special cash dividend. Our primary uses of cash are payments to field talent, team members, related payroll liabilities, operating expenses, capital expenditures, cash interest, cash taxes, contingent consideration, and debt payments. We believe that the cash generated from operations will be sufficient to meet our normal working capital needs for at least the next twelve months, including investments made, and expenses incurred, in connection with opening new markets throughout the next year. Our ability to continue to fund these items may be affected by general economic, competitive and other factors, many of which are outside of our control. If our future cash flow from operations and other capital resources are insufficient to fund our liquidity needs, we may be forced to obtain new debt or equity capital.
While we believe we have sufficient liquidity and capital resources to meet our current operating requirements and expansion plans, we may elect to pursue additional growth opportunities within the next year that could require new debt or equity financing. If we are unable to secure new financing at favorable terms in order to pursue such additional growth opportunities, our ability to pursue such opportunities could be materially and adversely affected.
A summary of our working capital, operating, investing, and financing activities are shown in the following table:
Fiscal Years Ended
December 28,
2025 		December 29,
2024 		December 31,
2023
(dollars in thousands)
Working capital from continuing operations(1)
$ 29,116 $ 6,897 $ (38,156)
Net cash (used in) provided by continuing operations:
Operating activities $ 117 $ 19,385 $ 12,922
Investing activities 91,390 (1,217) (2,152)
Financing activities (72,521) (18,136) (10,770)
Cash and cash equivalents, beginning of year 32 - -
Net change in cash and cash equivalents, continuing operations $ 19,018 $ 32 $ -
(1)The 2023 working capital amount includes the movement of the balances from long-term to current liabilities related to the amended credit agreement with BMO Harris Bank, N.A. ("BMO") which would have matured on July 16, 2024.
Operating Activities
Cash provided by operating activities consists of net loss adjusted for non-cash items, including depreciation and amortization, share-based compensation expense, interest expense, and provision for credit losses. The primary drivers of cash inflows and outflows are accounts receivable, transition services payable, other current assets, and accrued payroll and expenses.
During Fiscal 2025, net cash provided by continuing operating activities was $0.1 million, a decrease of $19.3 million compared with $19.4 million net cash provided by continuing operating activities for Fiscal 2024. This decrease is primarily attributable to decreased receipts on accounts receivable, increased payments on accrued payroll and expenses, increased payments on transition services payable, the recording of an escrow receivable related to the sale of BGSF Professional, and decreased payments on other current assets.
During Fiscal 2024, net cash provided by continuing operating activities was $19.4 million, an increase of $6.5 million compared with $12.9 million net cash provided by continuing operating activities for Fiscal 2023. This increase is primarily attributable to increased receipts on accounts receivable and decreased payments on accrued payroll and expenses.
During Fiscal 2023, net cash provided by continuing operating activities was $12.9 million, an increase of $16.2 million compared with $3.3 million net cash used in continuing operating activities for Fiscal 2022. This increase is primarily attributable to receipts on accounts receivable, payments on accrued payroll and expenses, and payments of deferred employer FICA for the CARES Act in other current liabilities in Fiscal 2022.
Investing Activities
Cash provided by investing activities consists primarily of cash received for business sold and capital expenditures.
In Fiscal 2025, cash provided by investing activities from continuing operations consists primarily of net proceeds from the sale of BGSF Professional of approximately for $91.4 million, which was partially offset by minimal capital expenditures.
In Fiscal 2024, we made capital expenditures of $1.2 million from continuing operations mainly related to continued IT improvements.
In Fiscal 2023, we made capital expenditures of $2.1 million from continuing operations mainly related to continued IT improvements and for software and computer equipment purchased in the ordinary course of business.
Financing Activities
Cash flows from financing activities consisted principally of borrowings and repayments under our credit agreement, special cash dividends, repurchases of our common stock, and contingent consideration paid.
For Fiscal 2025, we paid off our credit agreement of $42.9 million and the convertible unsecured promissory note of $4.4 million. We paid $1.4 million of contingent consideration related to Arroyo Consulting, we paid $22.4 million in cash dividends on our common stock, and repurchased $1.5 million of our common stock.
For Fiscal 2024, we reduced our credit agreement by $15.9 million, we disbursed $1.6 million in cash dividends on our common stock, and we paid $1.3 million in debt issuance costs.
For Fiscal 2023, we disbursed $6.5 million in cash dividends on our common stock and we reduced our Credit Agreement by $4.7 million.
Credit Agreements
On September 8, 2025, we paid the balance on the existing Term Loan and Revolving Facility using the proceeds from the sale of BGSF Professional.
On July 16, 2019, we entered into a Credit Agreement. We entered into four amendments from August 18, 2022 through May 19, 2023, which changed the interest rate component from LIBOR ("London Interbank Offered Rate") to the Secured Overnight Financing Rate ("SOFR"), exercised the option to borrow $40 million, required 2.5% of the original principal balance of the new term loan, permitted a foreign entity acquisition, modified the distributions terms, and increased a revolving credit facility by $6.0 million.
On March 12, 2024, the Credit Agreement was amended and restated (the "Restated Agreement"), which provided for a Revolving Facility which permitted us to borrow funds in an aggregate amount up to $40 million. The Restated Agreement also provided for a term loan commitment, which permitted us to borrow funds from time to time (the "Term Loan"). In July 2024, we exercised the option to borrow on a delayed draw term loan of $4.3 million related to payments on the Arroyo Consulting Acquisition's working capital "true up", hold backs, and year one contingent consideration. On November 6, 2024, we entered into the First Amendment to Restated Agreement, which reduced the availability on the Revolving Facility an aggregate amount up to $20 million.
On March 13, 2025, we entered into a Waiver and Second Amendment to Restated Agreement in which the lenders unanimously waived noncompliance with the covenants as of December 29, 2024 and March 30, 2025 and a new definition of
Applicable Margin, a reduction of the swing line sublimit to zero, and limiting the aggregate revolving credit borrowings to $8.0 million. On May 7, 2025, we entered into a Waiver and Amendment in which the lenders unanimously waived noncompliance on the requirement of least $2.0 million in cash equity contributions by extending the deadline and adding the option of subordinated debt. On August 4, 2025, we entered into a Waiver and Amendment in which the lenders unanimously waived noncompliance with the foregoing covenants as of June 29, 2025 and that provided that we would finalize and close the sale BGSF Professional no later than September 30, 2025.
We were required to repay the Term Loan in quarterly principal installments equal to 2.5% of the aggregate principal balance. We paid an unused commitment fee on the daily average unused amount of Revolving Facility. Our obligations were secured by a first priority security interest in substantially all our tangible and intangible property. We obtained the waivers described above for the non compliance with the foregoing financial covenants and certain affirmative covenants as of the quarters ended December 29, 2024, March 30, 2025, and June 29, 2025.
Contractual Obligations
The following table summarizes our cash contractual obligations as of December 28, 2025.
Payments due by period
Total Less than 1
year 		1-3 years 3-5 years
(dollars in thousands)
Note payable $ 449 $ 449 $ - $ -
Operating lease obligations 786 450 216 120
Contractual cash obligations $ 1,235 $ 899 $ 216 $ 120
Off-Balance Sheet Arrangements
Letter of Credit
In conjunction with a previous acquisition, we entered into a standby letter of credit arrangement, which expired, for purposes of protecting a lessor against default on lease payments. As of December 29, 2024, we had a maximum financial exposure from this standby letter of credit totaling $0.1 million and no liability had been recorded, all of which was considered usage against our Revolving Facility. On September 8, 2025, we assigned the related lease in the sale of BGSF Professional.
Critical Accounting Policies and Estimates
We have identified the policies listed below as critical to our business and the understanding of our results of operations. For a detailed discussion of the application of these and other accounting policies, see Note 2 in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.
Revenue Recognition
We derive our revenues from continuing operations by providing workforce solutions and placement services. Revenues are recognized when promised solutions are delivered to client partners, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. We recognize revenue through the following types of services: workforce solutions and contingent placements.
Intangible Assets
We hold intangible assets with finite lives. Intangible assets with finite useful lives are amortized over their respective estimated useful lives, ranging from three to ten years, based on a pattern in which the economic benefit of the respective intangible asset is realized. We develop and implement software modifications to our information technology infrastructure with direct internal payroll costs and external costs capitalized. Minor upgrades and enhancements to software systems are are expensed in the period incurred as software maintenance and training costs.
Goodwill
Goodwill represents the difference between the enterprise value or consideration exchanged less the fair value of all recognized net asset fair values including identifiable intangible asset values in a business combination. We review goodwill for impairment annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.
Income Taxes
The current provision for income taxes represents estimated amounts payable or refundable on tax returns filed or to be filed for the year. We recognizes any penalties when necessary as part of selling, general and administrative expenses. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts are classified net as noncurrent in the consolidated balance sheets. Deferred tax assets are also recognized for net operating loss and tax credit carryovers. When appropriate, we will record a valuation allowance against net deferred tax assets to offset future tax benefits that may not be realized. We follow the guidance of Accounting Standards Codification ("ASC") Topic 740, Accounting for Uncertainty in Income Taxes.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements and their potential effect on our results of operations and financial condition, refer to Note 2 in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We are exposed to certain market risks from transactions we enter into in the normal course of business. Our primary market risk exposure relates to interest rate risk and inflation risks. Through the current period, we have been able to moderate the negative impacts of an inflationary market by adjusting our pricing model.
Interest Rates
At December 28, 2025, we had paid the balance on the existing credit agreement led by BMO using the proceeds from the sale of BGSF Professional. See "Note 11 - Debt" in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K. An increase in interest rates would have no impact on our annual interest expense.
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