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1 BG Staffing, Inc. Corporate Presentation March 2017 (NYSE:MKT BGSF)
Transcript

1

BG Staffing, Inc.Corporate Presentation

March 2017 (NYSE:MKT BGSF)

2

This presentation contains forward-looking statements regarding the business, operations and prospects of BG Staffing and industry

factors affecting it. These statements are identified by words such as “may,” “will,” “begin,” “look forward,” “expect,” “believe,” “intend,”

“anticipate,” “should,” “potential,” “estimate,” “continue,” “momentum,” and other words referring to events to occur in the future. These

statements reflect BG Staffing’s current view of future events and are based on its assessment of, and are subject to, a variety of risks

and uncertainties beyond its control, including: the availability of workers’ compensation insurance coverage at commercially

reasonable terms; the availability of qualified temporary personnel; compliance with federal and state labor and employment laws and

regulations and changes in such laws and regulations; the ability to compete with new competitors and competitors with superior

marketing and financial resources; management team changes; the favorable resolution of current or future litigation; the ability to

begin to generate sufficient revenue to produce net profits; the impact of outstanding indebtedness on the ability to fund operations or

obtain additional financing; the ability to leverage the benefits of recent acquisitions and successfully integrate newly acquired

operations; adverse changes in the economic conditions of the industries, countries or markets that BG Staffing serves; disturbances in

world financial, credit, and stock markets; unanticipated changes in national and international regulations affecting the company’s

business; a decline in consumer confidence and discretionary spending; the general performance of the U.S. and global economies;

economic disruptions resulting from the European debt crisis; and continued or escalated conflict in the Middle East, each of which

could cause actual results to differ materially from those projected in the forward-looking statements. BG Staffing is under no obligation

to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new

information, future events or otherwise.

This presentation also contains information about BG Staffing’s Adjusted EBITDA, which is not a measure derived in accordance with

GAAP and which exclude components that are important to understanding BG Staffing’s financial performance. The definition of

Adjusted EBITDA is disclosed in BG Staffing’s Forms 10-K and 10-Q filed with the Securities and Exchange Commission. Investors

should recognize that this non-GAAP measure might not be comparable to similarly titled measures of other companies. This measure

should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity

prepared in accordance with accounting principles generally accepted in the United States.

Forward-Looking Statements

3

1 Treasury stock method2 Adjusted TTM EBITDA/Annual Dividend3 Adjusted TTM EBITDA, less TTM: cash taxes, cash interest, cap ex

Source: Public filings, YAHOO Finance, and Bloomberg

Company Key Statistics

Market Statistics

Share Price (as of 3/7/17) $14.10

Shares Out - Primary 8.67m

Shares Out - Diluted1 8.96m

52-Week (Intraday) High $21.75

52-Week (Intraday) Low $11.23

Market Cap. $122m

Financial Highlights

Quarterly Dividend $0.25

Dividend Yield (Annualized) 7.2%

Dividend Cover2 2.6x

Enterprise Value $146m

Debt / Adjusted TTM EBITDA 1.04x

BG Staffing, Inc. is a national provider of temporary staffing services across a diverse set of industries.

4

L. Allen Baker, Jr. Dan Hollenbach Beth Garvey Adam Tibbets

President & CEO CFO COO VP of Administration

Year Joined BGSF 20081 2015 2013 2009

Years of Experience 40+ 35+ 30+ 25+

Prior Experience • EVP & CFO, Impact

Confections

• EVP & CFO, PDS Technical

Services

• Controller, Core Laboratories

• CFO, Cybergy Partners

• Division Director, Robert Half

Management Resources

• CFO, Global Employment

Solutions

• CFO, Imprimis

• Sr. Manager, EY

• CEO, InStaff

• Human Resources, El Chico

Corporation

• Human Resources, Madix Store

Fixtures

• Manager, Technology Projects,

Jones Lang LaSalle

• Systems Manager, Staubach

Company

• IT Director, Impact Confections

• IT Director, PDS Technical Services

• IT Manager, Pay America

¹ Year joined Board of Directors. Mr. Baker became President & CEO in April 2009

Seasoned Leadership Team

5

Strong Growth Profile

Revenue Adjusted EBITDA

($ in millions)

19.2% 20.0% 22.0% 23.7%

Gross Margin %

$151.7

$172.8

$217.5

$253.9

2013 2014 2015 2016

$10.0

$11.6

$17.9

$22.6

2013 2014 2015 2016

Adjusted EBITDA Margin %:

6.6% 6.7% 8.2% 8.9%

Source: Annual Report on Form 10-K for fiscal 2016

Fiscal Years Ended December

6

SIA Industry Rankings

– Ranked #56 –

Largest Staffing Firms in the USin Staffing Industry Analysts

2016 Report

– Ranked #71 –

Fastest Growing Staffing Firms in the USin Staffing Industry Analysts

2016 Report

– 2017 Staffing 100 –

Allen Baker named as one of the North American Staffing 100 by

Staffing Industry Analysts

7

2010 2013

October 2014

Listed on NYSE MKT

February 2015

Acquired Donovan &

Watkins for $12.0 million

2007

October 2007

Acquired by Taglich

Private Equity

(undisclosed price)

201520122011 2014

May 2010

Acquired BG Personnel

for $3.0 million

December 2010

Acquired JNA Staffing

(undisclosed price)

November 2011

Acquired Extrinsic for $9.9

million

December 2012

Acquired American

Partners for $13.2 million

May 2013

Acquired InStaff Holdings for

$10.0 million

August 2016

New COO

September 2015

Acquired Vision Technology

Services for $20.8 million

Significant Events

2016

June 2016

Paid off high

interest debt

8

Segment Brands % of Revenues1 Gross Profit %1 % of Gross Profit $’s 1

Multifamily(apartments)

22.8% 37.2% 35.9%

Professional 42.2% 24.0% 42.8%

Commercial 35.0% 14.4% 21.3%

Three Segments

1 Fiscal Year 2016

9

Growing Higher Margin Segments

2013 2016

Commercial47.2%

Professional37.1%

Multifamily15.7%

Commercial35.0%

Professional42.2%

Multifamily22.8%

% of Total Revenue

10

Primary Skills Offered Multifamily Revenue

Office: (Approx.1/3 of multifamily revenue)

Manager

Assistant Manager

Leasing Agent

Bilingual Leasing Agent

Maintenance: (Approx. 2/3 of multifamily revenue)

Supervisor

Lead (HVAC)

Assistant

Make Ready

Groundskeeper

Porter

Multifamily Operating Income

Multifamily (Apartments)

($ in 000’s)

$43,197

$57,995

2015 2016

$6,021

$8,782

2015 2016

11

Colorado (1)Kansas (1)

New MexicoArizona (1)

California

Oklahoma (1)

Texas (6)

Missouri (1)

Louisiana

Mississippi

AlabamaGeorgia (1)

Florida (4)

South

Carolina (3)

North Carolina (3)Tennessee (2)

Kentucky Virginia (1)

West

Virginia

Michigan

Ohio

Indiana (1)

Illinois (1)

Iowa

Wisconsin

Minnesota (1)

Arkansas

Nebraska

Wyoming

South Dakota

North DakotaMontana

Utah

Idaho

Nevada (1)

Oregon

Washington

Pennsylvania (1)

New York

Maine

New Jersey

Rhode Island

Connecticut

Massachusetts (1)

Vermont

New Hampshire

Delaware

Maryland (1)

Multifamily (Apartments)

Office growth 2016

New• Baltimore

• Boston

• Kansas City

• St. Louis

• Minneapolis

• Columbus

• Indianapolis

7

Splits• Ft. Worth (Dallas)

• N. Houston (Houston)

• Greenville (Charlotte)

• Greensboro (Raleigh)

4

12

Finance & Accounting

Controllers, Accountants &

Clerks to Managers

Information Technology

SAP

Workday

Hyperion

Peoplesoft

Application Development

Web, Mobile, Client Server, Cloud,

Legacy Mainframe

System & Network Services

Network Optimization, Engineering,

Administration, Desktop Support,

Help Desk

Professional

1 Vision Technology and Donovan & Watkins acquisitions consummated in 2015

$86,712

$107,037

2015 2016

$5,998

$6,386

2015 2016

($ in 000’s)

$10,355

$12,112

2015 2016

Professional Operating Income before Amortization

Primary Skills Offered Professional Revenue1

Professional Operating Income

13

ColoradoKansas

New MexicoArizona

California

Oklahoma

Texas (2)

Missouri

Louisiana

Mississippi

Alabama Georgia

Florida

South

Carolina

North Carolina (1)Tennessee

Kentucky Virginia

West

Virginia

Michigan

OhioIndianaIllinois

Iowa

Wisconsin

Minnesota

Arkansas

Nebraska

Wyoming

South Dakota

North DakotaMontana

Utah

Idaho

Nevada

Oregon

Washington

Pennsylvania

New York

Maine

New Jersey

Rhode Island (1)

Connecticut

Massachusetts

Vermont

New Hampshire

Delaware

Maryland (1)

Professional

14

Primary Skills Offered Commercial Revenue

Logistics/Warehouse

Call Center Operations

Forklift Drivers

Pickers/Packers

Production Workers

Light Assembly

Light Manufacturing

General Labor Commercial Operating Income

Commercial

($ in 000’s)

$87,625

$88,820

2015 2016

$5,387

$5,717

2015 2016

15

ColoradoKansas

New MexicoArizona

California

Oklahoma

Texas (11)

Missouri

Louisiana

Mississippi (2)

Alabama Georgia

Florida

South

Carolina

North CarolinaTennessee *

Kentucky Virginia

West

Virginia

Michigan

OhioIndiana

Illinois (1)

Iowa

Wisconsin (1)

Minnesota

Arkansas

Nebraska

Wyoming

South Dakota

North DakotaMontana

Utah

Idaho

Nevada

Oregon

Washington

Pennsylvania

New York

Maine

New Jersey

Rhode Island

Connecticut

Massachusetts

Vermont

New Hampshire

Delaware

Maryland

Commercial

* Managed out of MS office

16

Build Value / Grow Revenue / Grow Margins

Continue to diversify revenue and grow higher margin segments

Industry – skill sets offered

Geography

Continue to maintain centralized back office

Target costs between 2.0 – 2.5% of revenue

Continue to generate profitable revenue growth

Organically

Acquisitions

Strategy

17

Selectively pursue U.S. acquisitions accretive to value and to earnings -

based on the following:

Gross margins at least equal to our consolidated gross margin % (currently 23.7%)

EBITDA of less than $5 million

New skill set offerings

New geographic regions

Cross-selling opportunities

Staff/personnel culture fit

Acquisition Criteria

18

Board of Directors anticipates maintaining its quarterly dividend program and

company management is optimistic about its future growth and increased cash flow.

Q1 ’15 Q2 ’15 Q3 ’15 Q4 ’15 Q1 ’16 Q2 ’16 Q3 ’16 Q4 ’16

Quarterly

Dividend$ 0.15 $ 0.25 $ 0.25 $ 0.25 $ 0.25 $ 0.25 $ 0.25 $ 0.25

Adjusted

TTM

EBITDA$ 11.6m $ 12.8m $ 15.1m $ 17.9m $ 20.3m $ 22.0m $ 22.1m $ 22.6m

Debt $ 27.6m $ 22.1m $ 24.7m $ 30.6m $ 29.6m $ 17.6m $ 19.0m $ 23.6m

Debt /

Adjusted

TTM

EBITDA

2.38x 1.73x 1.64x 1.71x 1.46x .80x .86x 1.04x

Dividend History

19

Source: Annual Report on Form 10-K for fiscal 2016

Balance SheetDecember 25, 2016 December 27, 2015

Current assets

Cash and cash equivalents $ - $ -

Accounts Receivable, net 33,328,900 32,324,284

Prepaid expenses 950,696 861,146

Other current assets 154,673 134,170

Total current assets 34,434,269 33,319,600

Property and equipment, net 1,910,858 1,489,061

Other assets

Deposits 2,657,517 2,233,410

Deferred income taxes 9,512,455 8,411,792

Intangible assets, net 23,514,376 29,761,035

Goodwill 9,184,659 9,184,659

Total other assets 44,869,007 49,590,896

Total assets $ 81,214,134 $ 84,399,557

Current liabilities

Accrued interest $ 100,868 $ 627,638

Accounts payable 951,672 1,572,195

Accrued payroll and expenses 9,668,475 11,554,868

Accrued workers' compensation 754,556 788,878

Contingent consideration 3,580,561 6,856,121

Other current liabilities - 1,459,838

Income taxes payable 193,264 444,165

Total current liabilities 15,249,396 23,303,703

Line of credit, net 23,618,194 16,041,476

Long-term debt, less current portion, net - 14,607,450

Contingent consideration 1,586,324 4,191,160

Other long-term liabilities 271,766 327,344

Total liabilities 40,725,680 58,471,133

Preferred stock - -

Common stock 86,685 73,880

Additional paid in capital 36,142,688 20,446,948

Retained earnings 4,259,081 5,407,596

Total stockholders' equity 40,488,454 25,928,424

Total liabilities and stockholders' equity $ 81,214,134 $ 84,399,557

20

Income Statement

Source: Annual Report on Form 10-K for fiscal 2016

($ in thousands) Fiscal Year Ended December

2014 2015 2016

Revenues $ 172,811 $ 217,534 $ 253,852

% growth 13.9% 25.9% 16.7%

Cost of Services 138,284 169,627 193,779

Gross Profit 34,527 47,907 60,073

% of revenue 20.0% 22.0% 23.7%

Selling, general and administrative expenses 24,084 30,390 37,804

Depreciation and amortization 4,642 5,544 6,733

Operating Income 5,801 11,973 15,536

% of revenue 3.4% 5.5% 6.1%

Total non-operating expenses 4,856 3,258 4,366

Earnings before income taxes 945 8,715 11,170

Income tax expense (benefit) 1,374 3,368 4,288

Net income (loss) $ (429) $ 5,347 $ 6,882

% of revenue -0.2% 2.5% 2.7%

Net income (loss) per diluted share $ (0.08) $ 0.73 $ 0.82

Adjusted EBITDA Reconciliation:

Net income (loss) $ (429) $ 5,347 $ 6,882

Income tax expense (benefit) 1,374 3,368 4,288

Interest expense, net 2,685 2,996 3,962

Loss on extinguishment of debt 987 439 404

Change in fair value of put option 1,184 (177) -

Depreciation and amortization 4,642 5,544 6,733

Share based compensation 1,193 353 314

Adjusted EBITDA $ 11,636 $ 17,870 $ 22,583

% of revenue 6.7% 8.2% 8.9%

21

Commercial Professional & Specialty

Industrial *

Office/Clerical *

Multifamily *

Finance & Accounting *

Information Technology *

Clinical/Scientific

Education/Library

Engineering/Design

Healthcare

Legal

Marketing/Creative

Staffing Industry Segments

* Current market segments for BGSF

(1) Source: Staffing Industry Analysts: U.S. Staffing Industry Forecast Update September 13, 2016

*Combined these temp staffing segments account for $120 billion in annual sales for FY 2016(1)

22

$118.3$124.9

$133.3$139.0

$144.9

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

2013 2014 2015 2016P 2017P

U.S. Staffing Industry Forecast – Market Size ($B)

Source: Staffing Industry Analysts: U.S. Staffing Industry Forecast Update September 13, 2016

4%7%

6%5%

4%

23

$17.6

$64.3

$51.4

$19.0

$68.3

$51.7

$20.1

$72.3

$52.5

$0.0 $20.0 $40.0 $60.0 $80.0

Place & Search

Professional/Specialty

Commercial

2017P 2016P 2015

2%

2017

Growth

6%

6%

U.S. Staffing Industry Forecast

Source: Staffing Industry Analysts: U.S. Staffing Industry Forecast Update September 13, 2016

($ in billions)

2016

Growth

1%

6%

8%

24

Temp Penetration Rate

•The temporary penetration rate was at 2.04%.

Source: Staffing Industry Analysts: Daily News – Jan 6,2017

Temp Penetration - Long Term

1.98%

1.99%

2.00%

2.01%

2.02%

2.03%

2.04%

2.05%

2.06%

2.07%

Sep-2014

Dec-2014

Mar-2015

Jun-2015

Sep-2015

Dec-2015

Mar-2016

Jun-2016

Sep-2016

Temp Penetration

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

Temp Penetration (Long-Term)

25

Unemployment Rate

General Unemployment Rate 4.72% College Unemployment Rate 2.47%

Source: Staffing Industry Analysts: Daily News – Jan 6,2017

4.00%

4.20%

4.40%

4.60%

4.80%

5.00%

5.20%

5.40%

5.60%

5.80%

Dec-2014

Mar-2015

Jun-2015

Sep-2015

Dec-2015

Mar-2016

Jun-2016

Sep-2016

Dec-2016

Unemployment Rate

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

Dec-2014

Mar-2015

Jun-2015

Sep-2015

Dec-2015

Mar-2016

Jun-2016

Sep-2016

Dec-2016

College Unemployment Rate

26

Investor Relations

Terri MacInnis, VP of IR

Bibicoff + MacInnis, Inc.

818-379-8500

[email protected]


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