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 January 1, 2023, the cumulative total return of the Company’s common stock, a peer group index of certain publicly traded workforce solutions companies, and the Russell 3000. 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 peer group index represents the cumulative total return of BGSF and similar corporations providing field talent or permanent employment workforce solutions. Our peer group includes: GEE Group, Mastech Digital, Resources Connection, Inc., 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 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 contains the market range of high and low prices for our common stock. 22 Quarter Ended: High Low January 1, 2023 $ 15.49 $ 10.30 September 25, 2022 $ 13.33 $ 11.88 June 26, 2022 $ 13.62 $ 11.65 March 27, 2022 $ 15.10 $ 12.80 December 26, 2021 $ 15.65 $ 11.61 September 26, 2021 $ 13.99 $ 11.55 June 27, 2021 $ 14.77 $ 11.45 March 28, 2021 $ 16.91 $ 12.24 As of February 13, 2023, our common stock closing price was $15.69 per share. As of February 13, 2023, there were approximately 3,402 holders of record of our common stock. Dividends The board of directors has declared and we have paid the following cash dividends during the fiscal years ended 2022, 2021, and 2020: Declared Date Record Date Distribution Date Dividend per Share Amount Paid 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 February 8, 2021 February 18, 2021 February 26, 2021 $0.10 $ 1,033,597 May 6, 2021 May 17, 2021 May 24, 2021 $0.10 1,034,334 August 5, 2021 August 16, 2021 August 23, 2021 $0.12 1,248,183 November 3, 2021 November 15, 2021 November 22, 2021 $0.12 1,251,025 Total $ 4,567,139 February 3, 2022 February 14, 2022 February 22, 2022 $0.15 $ 1,564,649 April 27, 2022 May 17, 2022 May 24, 2022 $0.15 1,572,332 August 3, 2022 August 15, 2022 August 22, 2022 $0.15 1,574,992 November 2, 2022 November 14, 2022 November 21, 2022 $0.15 1,577,709 Total $ 6,289,682 On February 13, 2023, the Company's board of directors declared a cash dividend in the amount of $0.15 per share of common stock to be paid on March 2, 2023 to all shareholders of record as of the close of business on February 23, 2023. 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, including whether to declare a dividend, and, if so, the amount thereof, 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. 23 Equity Compensation Plans The following equity compensation plan information is provided as of January 1, 2023: 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 883,699 $15.81 129,268 2020 Employee Stock Purchase Plan — $0.00 158,718 Total 883,699 $15.81 287,986 A description of the equity compensation plan is incorporated by reference to Note 16 in the Notes to Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K. Recent Sales of Unregistered Securities In December 2022, we issued 254,455 shares of common stock in a private placement for a value of $3.4 million, and a convertible two-year promissory note of $4.4 million with an annual interest rate of 6% that is convertible into common shares at any time after one year at a conversion price of $17.12 per share at the closing of the Horn Solutions acquisition. The foregoing issuance of securities was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. Share Repurchases During 2022, there were no stock repurchases. During 2021, we repurchased 610 shares of the Company's common stock at a cost of $8,442 and a weighted average price of $13.84 upon the vesting of restricted stock to satisfy statutory minimum tax withholding requirements. 24 Item 6. Selected Financial Data The following tables set forth our summary consolidated historical financial data from continuing operations. 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 2022, 2021, and 2020 and the balance sheet data as of January 1, 2023 and December 26, 2021 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 2019 and 2018 and the balance sheet data as of December 27, 2020, December 29, 2019, and December 31, 2018 set forth below were derived from our audited financial statements not included in this Annual Report on Form 10-K. Fiscal Years Ended January 1, 2023 December 26, 2021 December 27, 2020 December 29, 2019 December 31, 2018 (dollars in thousands, except per share data) Statement of Operations Data: Revenues $ 298,422 $ 239,027 $ 207,125 $ 219,764 $ 206,174 Gross profit $ 103,548 $ 80,941 $ 66,040 $ 69,826 $ 64,520 Selling, general and administrative expenses $ 83,211 $ 65,115 $ 55,244 $ 50,222 $ 44,787 Gain on contingent consideration $ — $ (2,403) $ (76) $ — $ (3,775) Impairment losses $ — $ — $ 7,240 $ — $ — Depreciation and amortization $ 4,054 $ 3,698 $ 4,861 $ 4,718 $ 4,833 Operating income (loss) $ 16,283 $ 14,531 $ (1,229) $ 14,886 $ 18,675 Loss on extinguishment of debt $ — $ — $ — $ 541 $ — Interest expense, net $ 1,363 $ 1,433 $ 1,584 $ 1,569 $ 2,850 Income (loss) from continuing operations before income taxes $ 14,920 $ 13,098 $ (2,813) $ 12,776 $ 15,825 Income tax expense (benefit) from continuing operations $ 3,659 $ 2,640 $ (741) $ 3,135 $ 2,855 Income (loss) from continuing operations $ 11,261 $ 10,458 $ (2,072) $ 9,641 $ 12,970 Income from discontinued operations, net of tax $ 14,100 $ 3,651 $ 3,513 $ 3,606 $ 4,579 Net income $ 25,361 $ 14,109 $ 1,441 $ 13,247 $ 17,549 Basic income (loss) per share: Continuing operations $ 1.08 $ 1.01 $ (0.20) $ 0.94 $ 1.35 Income from discontinued operations: Income 0.12 0.44 0.46 0.46 0.58 Gain on Sale 1.69 — — — — Income tax expense (0.46) (0.09) (0.12) (0.11) (0.10) Net income per share – basic $ 2.43 $ 1.36 $ 0.14 $ 1.29 $ 1.83 Diluted income (loss) per share: Continuing operations $ 1.07 $ 1.00 $ (0.20) $ 0.93 $ 1.32 Income from discontinued operations: Income 0.12 0.44 0.46 0.46 0.57 Gain on Sale 1.69 — — — — Income tax expense (0.46) (0.09) (0.12) (0.11) (0.10) Net income per share – diluted $ 2.42 $ 1.35 $ 0.14 $ 1.28 $ 1.79 25 Weighted average shares outstanding – basic 10,427 10,367 10,312 10,239 9,577 Weighted average shares outstanding – diluted 10,473 10,417 10,338 10,351 9,808 Other Financial Data: Adjusted EBITDA from continuing operations (1) $ 21,693 $ 14,970 $ 12,197 $ 21,609 $ 21,256 Cash dividends declared per common share $ 0.60 $ 0.44 $ 0.50 $ 1.20 $ 1.15 Balance Sheet Data from Continuing Operations: Working capital $ 47,955 $ 25,851 $ 17,960 $ 20,532 $ 13,079 Total assets $ 194,673 $ 148,294 $ 130,278 $ 100,378 $ 84,316 Total outstanding borrowings, net $ 66,670 $ 39,450 $ 34,634 $ 27,494 $ 20,089 Total other long-term liabilities $ 3,059 $ 7,240 $ 14,224 $ 6,068 $ 654 Stockholders’ equity $ 100,737 $ 76,592 $ 65,458 $ 68,457 $ 65,702 (1) We present Adjusted EBITDA (defined below), a measure 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 is a useful performance measures and is used by us to facilitate a comparison 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 as one 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 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 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. The use of Adjusted EBITDA has limitations as analytical tool, and you should not consider this performance measure in isolation from, or as an alternative to, GAAP measures such as net income. Adjusted EBITDA is not a measure of liquidity under GAAP or otherwise, and is not an alternative to cash flow from continuing operating activities. Our presentation of Adjusted 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 include: (i) it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) it does not reflect changes in, or cash requirements for, our working capital needs; (iii) it does not reflect income tax payments we may be required to make; and (iv) it does not reflect the cash requirements necessary to service interest or principal payments associated with indebtedness. 26 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 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. Fiscal Years Ended January 1, 2023 December 26, 2021 December 27, 2020 December 29, 2019 December 31, 2018 (dollars in thousands) Net income (loss) from continuing operations $ 11,261 $ 10,458 $ (2,072) $ 9,641 $ 12,970 Income tax expense (benefit) from continuing operations (1) 3,659 2,640 (741) 3,135 2,855 Interest expense, net 1,363 1,433 1,584 1,569 2,850 Loss on extinguishment of debt — — — 541 — Operating income (loss) 16,283 14,531 (1,229) 14,886 18,675 Depreciation and amortization 4,054 3,698 4,861 4,718 4,833 Gain on contingent consideration — (2,403) (76) — (3,775) Impairment losses (2) — — 7,240 — — CARES Act credit — (2,084) — — — Share-based compensation 1,085 1,058 786 850 1,015 Transaction fees 271 170 615 434 508 Adjusted EBITDA from continuing operations 21,693 14,970 12,197 20,888 21,256 (1) 2020 Included 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. 27