BGSF, INC. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Stock Performance Graph The following graph compares, through December 27, 2020, the cumulative total return of the Company’s common stock, a peer group index of certain publicly traded workforce solutions companies, and the Russell 2000. The graph assumes the investment of $100 at the beginning of the period depicted in the chart and reinvestment of all dividends. Note that historic stock price performance is not necessarily indicative of future stock price performance. The following graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. Periodically, we review companies within our peer group and decide if we need to make any changes. The new peer group index represents the cumulative total return of the Company and the following corporations providing field talent or permanent employment workforce solutions: GEE Group, Mastech Digital, Resources Connection, Inc., and Staffing 360 Solutions. The old peer group index represents: GEE Group, Mastech Digital, RCM Technologies, and Staffing 360 Solutions. Market Information and Holders Our common stock commenced listing on the NYSE on November 14, 2019 under the symbol “BGSF,” was listed on the NYSE American from to October 27, 2014 to November 13, 2019 under the symbol “BGSF” and was quoted on the OTC Bulletin Board, or OTCBB, under the symbol “BGSF” from April 30, 2014 to October 27, 2014. Prior to the quotation of our common stock on the OTCBB, there was no public market for our common stock. The table below sets forth information on the range of high and low sales prices for our common stock. 23 Quarter Ended: High Low December 27, 2020 $ 15.36 $ 7.41 September 27, 2020 $ 11.83 $ 7.88 June 28, 2020 $ 14.31 $ 5.69 March 29, 2020 $ 22.38 $ 6.01 December 29, 2019 $ 22.31 $ 18.00 September 29, 2019 $ 20.00 $ 16.00 June 30, 2019 $ 23.99 $ 15.91 March 30, 2019 $ 28.01 $ 19.25 As of January 15, 2021, the last reported sales price for our common stock was $13.64 per share. As of January 15, 2021, there were approximately 3,892 holders of record of our common stock. Dividends The board of directors has declared or paid the following cash dividends during the fiscal years ended 2020, 2019, and 2018: Declared Date Record Date Distribution Date Dividend per Share Amount Paid February 1, 2018 February 12, 2018 February 20, 2018 $0.25 $ 2,189,844 May 10, 2018 May 21, 2018 May 29, 2018 $0.30 2,638,232 July 25, 2018 August 6, 2018 August 13, 2018 $0.30 3,026,709 October 26, 2018 November 5, 2018 November 13, 2018 $0.30 3,067,124 Total $ 10,921,909 February 6, 2019 February 19, 2019 February 26, 2019 $0.30 $ 3,068,847 April 25, 2019 May 6, 2019 May 13, 2019 $0.30 3,068,974 July 31, 2019 August 12, 2019 August 19, 2019 $0.30 3,071,862 October 29, 2019 November 11, 2019 November 18, 2019 $0.30 3,072,659 Total $ 12,282,342 January 30, 2020 February 10, 2020 February 18, 2020 $0.30 $ 3,092,771 May 7, 2020 May 20, 2020 May 27, 2020 $0.05 515,349 August 5, 2020 August 18, 2020 August 25, 2020 $0.05 515,349 November 5, 2020 November 16, 2020 November 23, 2020 $0.10 1,031,679 Total $ 5,155,148 On February 3, 2021, the Company's board of directors declared a cash dividend in the amount of $0.10 per share of common stock to be paid on February 26, 2021 to all shareholders of record as of the close of business on February 18, 2021. Prior to December 19, 2014, we had not paid cash dividends on our common stock. Our ability to pay dividends is restricted under the terms of our credit agreement and may be restricted under other agreements governing our outstanding indebtedness from time to time. Any future determination with respect to the payment of dividends will be at the discretion of our board of directors and will be dependent upon, among other things, our financial condition, results of operations, capital requirements, the terms of our then existing indebtedness, contractual restrictions, future prospects, general economic conditions and other factors considered relevant by our board of directors. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources–Credit Agreements” for a description of the restrictions in our credit agreements on our ability to pay dividends. 24 Equity Compensation Plans The following equity compensation plan information is provided as of December 27, 2020: Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Equity Compensation Plans Approved by Security Holders 2013 Long-Term Incentive Plan 692,279 $16.63 396,460 2020 Employee Stock Purchase Plan — $0.00 250,000 Total 692,279 $16.63 646,460 A description of the equity compensation plan is incorporated by reference to Note 14 in the Notes to Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K. Recent Sales of Unregistered Securities There were no unregistered securities during the fiscal year ended 2020. Share Repurchases During 2020, we repurchased 231 shares of the Company's common stock at a cost of $2,132 and a weighted average price of $9.23 upon the vesting of restricted stock to satisfy statutory minimum tax withholding requirements. Item 6. Selected Financial Data. The following tables set forth our summary consolidated historical financial data. You should read the information set forth below in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated historical financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. The statement of operations data for the fiscal years ended 2020, 2019, and 2018 and the balance sheet data as of December 27, 2020 and December 29, 2019 set forth below are derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The statement of operations data for the fiscal years ended 2017 and 2016 and the balance sheet data as of December 30, 2018, December 31, 2017, and December 25, 2016 set forth below were derived from our audited financial statements not included in this Annual Report on Form 10-K. 25 Fiscal Years Ended December 27, 2020 December 29, 2019 December 30, 2018 December 31, 2017 December 25, 2016 (dollars in thousands, except per share data) Statement of Operations Data: Revenues $ 277,891 $ 294,314 $ 286,863 $ 272,600 $ 253,852 Gross profit $ 76,220 $ 80,681 $ 76,595 $ 68,402 $ 60,073 Selling, general and administrative expenses $ 60,558 $ 56,199 $ 51,066 $ 44,576 $ 37,971 Gain on contingent consideration $ (76) $ — $ (3,775) $ (226) $ (167) Impairment losses $ 7,240 $ — $ — $ — $ — Depreciation and amortization $ 4,960 $ 4,820 $ 5,044 $ 6,292 $ 6,733 Operating income $ 3,538 $ 19,662 $ 24,260 $ 17,760 $ 15,536 Loss on extinguishment of debt $ — $ 541 $ — $ — $ 404 Interest expense, net $ 1,584 $ 1,569 $ 2,850 $ 3,253 $ 3,962 Income before income taxes $ 1,954 $ 17,552 $ 21,410 $ 14,507 $ 11,170 Income tax expense $ 513 $ 4,305 $ 3,860 $ 8,659 (1) $ 4,288 Net income $ 1,441 $ 13,247 $ 17,550 $ 5,848 $ 6,882 Net Income Per Share: Net income per share – basic $ 0.14 $ 1.29 $ 1.83 $ 0.67 $ 0.85 Net income per share – diluted $ 0.14 $ 1.28 $ 1.79 $ 0.65 $ 0.82 Weighted average shares outstanding – basic 10,312 10,239 9,577 8,734 8,108 Weighted average shares outstanding – diluted 10,338 10,351 9,808 9,038 8,400 Other Financial Data: Adjusted EBITDA (2) $ 18,689 $ 26,590 $ 27,106 $ 24,737 $ 22,643 Same Day EBITDA (2) $ 18,689 $ 26,590 $ 27,106 $ 24,216 $ 22,643 Cash dividends declared per common share $ 0.50 $ 1.20 $ 1.15 $ 1.00 $ 1.00 Balance Sheet Data: Working capital $ 25,385 $ 27,030 $ 20,555 $ 16,320 $ 19,185 Total assets $ 130,278 $ 115,586 $ 100,269 $ 104,633 $ 81,214 Total outstanding borrowings, net $ 34,634 $ 27,494 $ 20,089 $ 44,123 $ 23,618 Total other long-term liabilities $ 14,547 $ 6,303 $ 622 $ 2,629 $ 1,858 Stockholders’ equity $ 65,458 $ 68,457 $ 65,702 $ 39,135 $ 40,488 (1) Includes a $3.3 million re-measurement of the net deferred tax assets as a result of the TCJA. (2) We present Adjusted EBITDA and Same Day EBITDA (defined below), measures that are not in accordance with accounting principles generally accepted in the United States of America (“non-GAAP”), in this Annual Report on Form 10-K to provide investors with a supplemental measure of our operating performance. We believe that Adjusted EBITDA and Same Day EBITDA are useful performance measures and are used by us to facilitate comparisons of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under accounting principles generally accepted in the United States of America (“GAAP”) can provide alone. Our board and management also use Adjusted EBITDA and Same Day EBITDA as some of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in 26 determining achievement of certain compensation programs and plans for our management. In addition, the financial covenants in our credit agreement are based on EBITDA as defined in the credit agreement. We define “Adjusted EBITDA” as earnings before interest expense, income taxes, depreciation and amortization expense, impairment losses, transaction fees and other non-capital information technology project (“IT roadmap”) and certain non-cash expenses such as share-based compensation expense. Omitting interest, taxes and the other items provides a financial measure that facilitates comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness and tax structures that other companies have are different from ours, we omit these amounts to facilitate investors’ ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of property and intangible assets. We also believe that investors, analysts and other interested parties view our ability to generate Adjusted EBITDA as an important measure of our operating performance and that of other companies in our industry. Adjusted EBITDA should not be considered as an alternative to net income for the periods indicated as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. We define “Same Day EBITDA” as Adjusted EBITDA on a fifty-two week fiscal year basis. Omitting the additional revenue days in a fifty-three week fiscal year ended provides a financial measure that facilitates comparisons of our results of operations with those of our fifty-two week fiscal year and comparisons of our results with those companies having same number of days. Same Day EBITDA should not be considered as an alternative to net income for the periods indicated as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA or Same Day EBITDA differently than we do, limiting their usefulness as comparative measures. The use of Adjusted EBITDA and Same Day EBITDA have limitations as analytical tools, and you should not consider these performance measures in isolation from, or as an alternative to, GAAP measures such as net income. Adjusted EBITDA and Same Day EBITDA are not measures of liquidity under GAAP or otherwise, and are not alternatives to cash flow from continuing operating activities. Our presentation of Adjusted EBITDA and Same Day EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from that term or by unusual or non-recurring items. The limitations of Adjusted EBITDA and Same Day EBITDA include: (i) they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) they do not reflect changes in, or cash requirements for, our working capital needs; (iii) they do not reflect income tax payments we may be required to make; and (iv) they do not reflect the cash requirements necessary to service interest or principal payments associated with indebtedness. To properly and prudently evaluate our business, we encourage you to review our consolidated financial statements included elsewhere in this Annual Report on Form 10-K and the reconciliation to Adjusted EBITDA and Same Day EBITDA from net income, the most directly comparable financial measure presented in accordance with GAAP, set forth in the following table. All of the items included in the reconciliation from net income to Adjusted EBITDA are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect operating performance. In the case of the other items that management does not consider in assessing our on-going operating performance, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact may not reflect ongoing operating performance. 27 Fiscal Years Ended December 27, 2020 December 29, 2019 December 30, 2018 December 31, 2017 December 25, 2016 (dollars in thousands) Net income $ 1,441 $ 13,247 $ 17,550 $ 5,848 $ 6,882 Interest expense, net 1,584 1,569 2,850 3,253 3,962 Income tax expense 513 4,305 3,860 8,659 (1) 4,288 Loss on extinguishment of debt — 541 — — 404 Operating income 3,538 19,662 24,260 17,760 15,536 Depreciation and amortization 4,960 4,820 5,044 6,292 6,733 Gain on contingent consideration (76) — (3,775) (226) (167) Impairment losses 7,240 (2) — — — — Share-based compensation 849 953 1,069 447 314 Transaction fees 615 434 508 464 227 IT roadmap 1,563 721 — — — Adjusted EBITDA 18,689 26,590 27,106 24,737 22,643 Same day adjustment — — — (521) — Same day EBITDA $ 18,689 $ 26,590 $ 27,106 $ 24,216 $ 22,643 (1) Includes a $3.3 million re-measurement of the net deferred tax assets as a result of the TCJA. (2) In the professional segment, we recognized a $3.7 million trade name impairment loss and a $3.5 million client partner list impairment loss during the thirteen week period ended June 28, 2020. 28