BGSF (NYSE:BGSF) reported lower third-quarter revenue as property owners and managers curtailed spending on temporary staffing, and said an organizational restructuring is expected to reduce annual costs by approximately $1.6 million.
Revenue from continuing operations fell 6.6% from a year earlier to $25.1 million, primarily because of lower billed hours, Co-CEO and CFO Keith Schroeder said. He attributed the decline to reduced customer demand and increased competition in select markets.
Co-CEO and President Kelly Brown said apartment demand, occupancy trends and rent growth were improving in many markets, but the recovery remained uneven. Elevated interest rates and operating costs continued to pressure property owners’ cash flow, contributing to demand for BGSF’s workforce solutions that was below expectations, she said.
Restructuring Targets Selling Costs
BGSF reviewed its organizational structure during the third quarter and implemented changes at the end of September to simplify the business and improve coordination between sales and delivery teams, Schroeder said. The company expects about $100,000 in severance costs related to the changes.
Schroeder said selling costs are expected to fall by approximately $300,000 in the fourth quarter compared with the third quarter, with the full savings reaching about $400,000 per quarter in the first quarter of 2027. The company expects to realize $1.6 million in annualized cost reductions.
Brown said the reductions were concentrated in selling expenses and followed a review of the operational team structure. BGSF considered how its delivery teams could use existing tools to fulfill requests and acted ahead of what has historically been a lower-volume period for the business, she said.
Margins Edge Higher as Expenses Decline
Third-quarter gross profit fell to $9.1 million from $9.7 million a year earlier, while gross margin improved to 36.1% from 35.9%. Schroeder said the company expects its gross margin for the year to remain in the 36% range.
Selling, general and administrative expenses declined 14.7% to $8.7 million from $10.2 million. The quarter included $175,000 in strategic review and restructuring costs, compared with $482,000 a year earlier. Schroeder said the latest quarter’s amount consisted primarily of restructuring and severance costs.
Adjusted EBITDA was $858,000, down from approximately $1 million in the prior-year quarter. On a GAAP basis, BGSF reported income from continuing operations of $0.01 per diluted share, compared with a loss of $0.28 per diluted share a year earlier. Adjusted earnings were $0.09 per share from continuing operations and $0.11 per share on a consolidated basis.
The company ended the quarter with $17.9 million in cash and cash equivalents, including short-term investments. Operating cash flow was negative $540,000, which Schroeder attributed to working-capital requirements, including a $2.8 million seasonal revenue uplift.
PropTech Expansion and Buybacks
Brown said BGSF’s PropTech practice grew revenue during the quarter as client adoption increased. The company added engagements, expanded its consulting pipeline and developed its network of specialized consultants, she said. Although the practice remains a relatively small contributor, management expects it to account for approximately 1% to 2% of revenue in 2027.
BGSF also expanded its use of AI-enabled sourcing and engagement tools to help recruiters find candidates faster and reduce administrative work, Brown said. In response to an analyst’s question, she characterized overall pricing as relatively flat, although conditions vary by market.
The company repurchased 32,189 shares during the quarter for approximately $169,000. As of September 27, approximately $2.1 million remained available under its buyback plan. Schroeder said BGSF would continue repurchasing shares but that low trading volume limited how many it could buy; the board had not yet discussed what to do after the remaining authorization is spent.
About BGSF (NYSE:BGSF)
BGSF Inc is a workforce solutions and professional services company that provides staffing, consulting and managed services to businesses across several industries. The company helps clients address temporary, contract, direct-hire and project-based workforce needs through specialized personnel and service offerings.
BGSF operates through professional staffing and property management services. Its professional services include information technology staffing and consulting, finance and accounting staffing, and other workforce solutions.
