BG Staffing is a significant provider of temporary staffing services in the U.S. across a diverse set of industries. It was selected by Staffing Industry Analysts (in three of the past four years) as one of the fastest growing companies in a large and growing industry. The Company currently pays a $0.25 quarterly dividend (a 7.2% yield as of 11/30/16).
Temporary Staffing is a significant sector within the Staffing Industry. Temp Staffing is both a large ($121 billion) & growing (5%) industry, according to 2016 industry statistics. In 2007, when BG Staffing was purchased by a private equity group, it had the basic ingredients upon which a much larger and profitable business could be built. By 2009, with the Company underperforming, the investor group brought in 17-year industry veteran L. Allen Baker, Jr. as the new CEO, and refinanced the Company.
With a dynamic and highly experienced executive now guiding the Company, BG Staffing has consistently executed on what is thus far a successful five-year growth & diversification profile. BG Staffing is delivering on its business model --and views both organic growth (15+%) and accretive acquisitions as equally important contributors to the continued success of the Company. BG continues to actively diversify its temporary staffing offerings - both in terms of skill sets and geography served.
Baker had previously built, grown and successfully sold a temporary staffing company, before embarking on a seven- year period making accretive acquisitions for a company in another industry – before again successfully selling that business. In 2009 he sought to return to temp staffing and build his second successful staffing company.
His business plan, like many good business plans, was simple…all it needed was great execution. The plan was to take the existing business -- which provided Temporary Staffing in only one market segment and only one geographic area -- and to grow not only that segment (“Commercial”), but to expand both the skill sets offered by the Company, and also its geographic footprint. One of the criteria for choosing skill sets was to select those which have higher gross margins than the Commercial segment.
Over the next five years, in addition to achieving significant organic growth, Baker made seven accretive acquisitions and successfully integrated them - resulting in a new BG Staffing. The new BGSF generated $193 million in revenue in the LTM and recorded $15 million in adjusted EBITDA. The Company presently operates in 19 states and provides Temporary Staffing in three distinct segments. And…it pays a $0.25 quarterly dividend.
Baker points out that the skill set and geographic diversification strategy not only provides a growth opportunity, at the same time that diversification also has defensive benefits. If one area of the country is experiencing financial difficulties or contraction, another section may be growing. The same applies to skill set offerings and availability of temporary workers.
When the expansion program was initiated, “Commercial” workers were the only temporary staffers provided. This category of business generates a relatively low gross profit margin. The “Professional” and the “Multifamily” segments, while delivering skill set and geographic diversification, also generated significantly higher gross margins.
Owners of large apartment complexes have a need for temporary workers. When an apartment complex is built, the units need to be rented and require several leasing agents/staff. Once the complex is mostly rented, there might be a continuing need for only one rental agent. Also, in the summertime, there is often is often a need for a number of temporary staffers to deal with air conditioning problems or other maintenance issues. BG Staffing supplies temporary personnel including: managers, assistant managers, rental agents, maintenance staff, supervisors, HVAC, grounds keepers and painters.
Having entered the Multifamily segment in 2010 with one office in Texas, the Company believes that it is now the single largest supplier of Multifamily temporary workers in the country. This segment has grown to now have 21 offices in 12 states. Through Q3 Multifamily generated approx. $32 million in revenue (21% of revenues with 35.3% gross profit margins).
While the Professional segment of temporary workers is fairly broad, BG Staffing currently provides staffing in two professional areas, Finance & Accounting, and Information Technology (IT).
In the Finance & Accounting area, BGSF provides controllers, accountants - from clerks to managers. It also provides temporary staffers in purchasing, HR and administration. The strong growth in the temporary Finance & Accounting field is expected to continue. The clients in this area may be described as small to medium to Fortune 500 companies.
The Information Technology (IT) subsection of the Professional segment has also been a sector in which BGSF has seen strong growth. National accounts are served by ‘Have Skills –Will Travel’ professionals with skill sets including SAP, Workday and Oracle Gold Partner.
This Professional segment services the entire country from five offices in five states. Through Q3 the Professional segment generated approx. $56.7 million in revenue (37.6% of revenues with 23% gross profit margins).
Supplying temporary workers in the Commercial Segment was the Company’s first line of business in 2009. BGSF places fork lift operators, production workers and pickers & packers to its Commercial clients. It also provides clients with light assembly and light manufacturing workers as well as general laborers.
While one of the goals was to diversify both BGSF’s geographic footprint and the skill sets provided, Baker still saw value in growing the commercial segment. And grow they did. Commercial staffing has grown from two locations in two states, generating $32.2 million revenue in 2010 to $62.3 million revenue through Q3.
Formula For Success – “Keep Doing What We’ve Been Doing”
Having enjoyed five extremely successful years, the questions posed to Baker is, “What do you see for the next two or three years? What can you change or improve on to make things better?”
Baker replies, “For the foreseeable future, I don’t see major changes in the economy or impact on the growth of the Temporary Staffing industry. I think the general economy will continue to show weak to moderate growth. The Staffing Industry Analysts forecasts that our industry will grow by 5% next year.”
Continues Baker, “You ask what we can change to improve our results and I say ‘If it’s not broke, don’t fix it.’ Having said that, we are constantly working to organically grow and improve our operations. We focus every day on making our operations more efficient. Our plan is to continue to do so.
“We will continue to look for acquisitions that 1) are accretive (gross margins above 22%), 2) which grow & diversify our business geographically or by skill sets offered…or both, 3) where we can add and retain skilled and experienced management, and 4) fit within our corporate culture.”
Even with its five-year record of successes in building its business, BG Staffing presently flies below the radar of the financial community. The principle reason for this is that the instead of taking the traditional IPO path to become a publicly traded company, in November 2013 BGSF went public by way of the Jobs Act (by filing the necessary financial information and paperwork with the SEC). BGSF did not have the benefit of an IPO - wherein typically an underwriter introduces the Company to the financial community.
BG Staffing is making progress to overcome this lack of exposure issue and believes that the recent research report and Buy recommendation published by a highly regarded analyst is part of that solution.
For more information about BG Staffing, Inc., please visit: www.BGStaffing.com
The company paid consideration to SNN or its affiliates for this article.
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