GEE (JOB) 17 May 232023 Q2 Earnings call transcript

Hello, and welcome to the GEE Group Fiscal 2023 Second Quarter ended March 31, 2023 Earnings and Update Webcast Conference Call. I'm Derek Dewan, Chairman and Chief Executive Officer of GEE Group. And will be hosting today's call, joining me as a Co-Presenter is Kim Thorpe, our Senior Vice President and Chief Financial Officer. Thank you for joining us today.

It's our pleasure to share with you GEE Group's results for the 2023 fiscal second quarter ended March 31, 2023, provide you with our outlook for the remainder of the 2023 fiscal year in the foreseeable future.

I’ll expectations may our and and including considered future Kim estimates, predictions, other comments make be today forward-looking, performance. Some statements about holds risks our are from results our represent current of materially the These statements. judgments may differ subject uncertainties and future to forward-looking that actual what and

captions below filings uncertainties XX-Q, no statement and forward-looking our harbor. cautionary recent the Form statements under earnings Safe and risks and safe call. statements under Monday's release These Harbor and obligation made press SEC other XX-K the are described statements statements forward-looking caption and in update regarding today's to most on forward-looking assume We

address presentation, and in the today financial During also about talk earnings measures. press we release. explanations some non-GAAP Reconciliations the non-GAAP will are the of included will we measures

Our and financial trend around items, it rates, amounts. growth based amounts metrics including margins upon rounded and are presentation of related

all are and this For percentages related amounts, of presented items call purposes accordingly. and approximations

today's in our prepared For our Center are www.geegroup.com. the call remarks your website, of Investor convenience, for available

achieved again second consolidated once with beginning million. very of XXXX in the $XX.X quarter revenues good fiscal results We

Our XX%, profit respectively. million, consolidated $XX.X and and gross margin gross were

adjusted achieved $X.XX for quarter XXXX the for $X.X million. XXXX second $XXX,XXX was fiscal our We Our fiscal per non-GAAP consolidated consolidated of EBITDA income share, net second or diluted quarter.

for were As COVID-XX-related of Kim demand will placement a normal work. project hire above well results to margin, year’s the due higher higher prior quarter explain recurring significant expected direct further, services second non- much than fiscal amount and

the quarter growth our still of XXXX particularly account second second taking quarter the performance in quarter, in terms was and With quarter. fiscal combined contract the the double last the fiscal present into outstanding, second favorably, businesses IT in digit fiscal second year’s current professional achieved compares in discreet opportunities XXXX

we most outstanding clients [technical get XXXX, our important turn to thank fiscal difficulty] our the key best and work XXXX, the They in to our we what far I fiscal every insure are to wonderful extremely performance GEE the day so success. hard will be Kim, say, I to continue service. driver you, They of Group over achieved want dedicated that it future to Company’s Before our in people. very and for in

this quarter further over our results. turn I’ll At time, XXXX to fiscal Kim the second CFO, who on call Kim. Thorpe, our elaborate will

quarter million. and lower, or $XX.X Thank morning. was $XXX,XXX, Once for consolidated fiscal is the million, you, good again, compared revenue X% the XXXX $XX.X second revenue which of XXXX second with Derek, fiscal quarter

Derek as direct average professional as fiscal quarter second contract as in projects our revenue, revenue COVID-XX above responders. XXXX related However, from mentioned, included performance hire generated our services COVID-XX well in placement

the fiscal approximately half $X.X in services of services $XXX,XXX March second during first XXXX, in revenues six-month services Professional alone three-month contract quarter XXXX revenues the over contract remaining, certain XXXX, and ended ended periods COVID-XX which or the increased million, non-recurring $X.X professional during and effects contract the first the generated related quarter the fiscal Excluding fiscal or $X.X million million, of second XX, and projects respectively. comparable March and half, X%, X%, revenue respectively. professional XXXX, XX,

non-recurring which revenue. effects XXXX of second industrial consolidated XXXX Professional $X.X fiscal contract all quarter with for of higher, staffing second were or services the million, contract X%, of revenue, Professional revenues and contract XX% and contract X% the revenue. effects compared services fiscal $XX.X $XXX,XXX, as million, or projects revenue excluding again before services revenue, quarter the represents or is COVID-XX-related XX% quarter-over-quarter, which increased staffing

consolidated half. fiscal contract to direct professional services up IT revenue, of and revenue is professional hire XXXX XXXX XX% XX% represented contract growth XX% and all of quarter-over-quarter highest in specialty. first services contract growth services was and is contract grown in The first represented March IT revenue has quarter. bright XXXX the revenue, services services our of our spot the priority half XX% contract which IT over revenue our fiscal in grew

our contract the The in professional result increases services staffing the in services of demand workforce quarter-over-quarter U.S. meet revenues, our contract and post-COVID-XX economy and the IT professional to environments. ability our increasing demand and in are particular, and staffing sector, in adapt new

that, fiscal our two of also each actions said XXXX. professionals lay-offs recent by IT jobs IT IT last that more candidates for larger positive in increasing and, indicators, suggests demand. employment to quarter, to are while Rising indicators the recent fill services, demand remainder I As outstanding downsizing of means recent report contrast employers, significant available for corporate

placement Direct the with was million. second $X.X fiscal of quarter compared XXXX for second XXXX million, quarter hire revenue revenue $X.X fiscal

highest placement our hire indicated high for record a services March quarter for ever hire placement our As us XXXX in for release, direct again our services XXXX set a was direct fiscal quarter record year March revenue. as and

for hire direct revenue million. was Our the half of first XXXX $XX.X placement

not and fiscal Although production all direct we headwinds, pleased for and, as potential placement level with of this we hire placement XXXX. revenue despite potential aware the of, our remainder are performance, direct optimistic as remain robust the are cautiously overall we hire XXXX of about macroeconomic environment

ended of were second quarter total million March revenue XXXX. and revenues X% services staffing for Industrial fiscal XX, XXXX $X.X represented

unemployment in our continued experience funds available workers the challenges We the to Ohio of causes in tends and light which COVID-XX to presence to industrial continue them we employment. markets, relief which to not seek program to some growth attribute

light they to in is workers found and or reduce some balance staffing of We this to fill of their believe benefits motivates This, their may laborers for income high. has seek to in Recent jobs. order competition moderate which firms to it tends lose streams staffing to favor Ohio if hours in contingent work in in temporary salary preserving particular our income among temporary Ohio. subsidized too turn, workers inflation light benefits industrial also increase led in that increase us in to their our industrial business wages for

as We recruiting as well are to programs sales where actively price to industrial inflation. new increases, restore the our implementing candidates of introducing and mitigate business, growth and impact attract possible, in

fiscal for profit compared second quarter $XX.X in was of fiscal profit with quarter. million XXXX $XX.X XXXX gross Gross the second million,

and attributable which the margins Our XX% and fiscal gross were XX.X% XXXX direct gross XXXX margin respectively. lower gross overall has and margin. for in mainly profit gross second placement declines hire again quarters, are The XXX% business, to

Company in in recent quarter lower over margins, up with contractor gross compared profit gross On this compression. counter-inflationary the our increases compression response margin has spreads have and rates in our contract also address current our The increases high to some Despite peer within associated remain recent inflation quarter businesses. bill resulted pay professional are in stepped services order mark-ups, in spread group. with and and margins side,

ended decreased Selling, and the towards quarter. basis. implemented second XXXX by impacts second compared X%, of $XXX,XXX, XX, revenues cost approximately savings XX% for potential expenses In of March of XXXX, annual general of operating The quarter routine XXXX cost identifying including compared with and monitors SG&A second XXXX on million. with reductions reductions a second inflation estimated fiscal the fiscal for certain February late view $X.X with a or the taking costs with Company were administrative and quarter March XXXX Company in quarter, advantage the expenses, SG&A, fiscal of XX% XXXX. of

counter-inflationary and of forward. our expect a increases and mentioned the going bill include spreads ratios margins to rates that addition, ago, implementation in improve In I targeted cost which we the expense reductions measures, mark-ups, minute and other help

XXXX $X.XX share, per quarter million, with fiscal share, in share, income quarter. million, compared second $XXX,XXX, $X.XX of net is for second measure, $X.XX which diluted share, or diluted Adjusted fiscal achieved non-GAAP or fiscal $XXX,XXX, $X.X XXXX or diluted per or per the per XXXX for a for diluted quarter. XXXX income, We $X.XX quarter second fiscal to compared of net $X.X as second the was

Adjusted is which was a XXXX quarter. measure, for second the quarter for EBITDA, $X.X fiscal compared $X.X second the fiscal as XXXX million with million non-GAAP

was working million, included X.X final ended of at to cash which this quarter XXXX. of or the were FICA X, points cash deferred deferred the of following increased taxes operating the million year, XX, Act March XX, were X, in of [ph]. was installment effects that CARES $X.X financial ratio the $X.X up December capital XX, September basis first from and flow XXXX, current healthy million, six-months the fiscal in X.X under performance for Our both second at XXXX bonuses XX to activities fiscal and XXXX record which of $X.X in XXXX paid March from a Free

position we liquidity Our strong, outstanding no debt. have is

was nicely book $X.XX, XX, $X.XX Our per and since March XX, XXXX. September book per share XXXX, was value value up both share our tangible net at

$XX the our limitations, authorized, strategy, of share Directors of a to can, Company part certain the open in near would subject and of capital program, repurchase a Finally, as repurchase earnings related stock blackout the up of market to in December common million Board whereby following our to has allocation between XX, XXXX. around and the period release. now commence term release expect conclusion shares of the our repurchase this We

consideration the our To lingering fiscal uncertainty conclude, overall for in we XXXX, the with positive outlook regarding appropriate remain economy. for

in note counterparts, Before measures financial to our found in it can of today GAAP I turn release. that with be Derek, reconciliations included please their schedules back over non-GAAP discussed our earnings supplemental

turn the to over call And so with I’ll that, back Derek. now,

a quarter second our seventh flow future. positive since XXXX we quarter and Having momentum Thank higher de-leveraging cash seven last free you, The consecutive to well margins quarters, build strong performance marked Company. record, operating the for as achieved Kim. the consistently as fiscal of the continue track positive for

As growth XXXX, we XXXX $XX Despite today beyond $XX.X in improve. availability Group’s year and deliver fiscal macroeconomic ABL debt continue with events, profitable believe under to future GEE can million headwinds in value. expand the and prospects unforeseen solid facility. and bank we no its increase of results Company continue and shareholder in to and over March for cash million XX, had

you our Before have dedication. to all again thank the your not we hard accomplished wonderful we all want to and their a professionalism, pause work to things say we today. for could have them, shared people special questions, good take Without I

Now, Thank questions. come If you I ask follow-up, there’s Kim one time, questions. you. have Please further we’ll and rejoin with answer a happy any if to to be would you. back and the queue question

you -- Okay, Derek, our on? we are have

Yes.

announced was plan to I question. common trying of 'XX repurchase million a this year? That's through We XX, aggregate questions. XX $XX similar a question. First stock

open these bought commence we we earnings reported. up buyback The not But have first, will stock program purchase because are a market report our plan do numbers we not in -- we share because transactions. which for after the digested, have any yet, to shares And is been blackout period. want

But it. we the we'll latter absolutely And plan be is probably previously. of in week an pursuing we part the So are And described not this program. it's the end judicious execute as all. begin how we'll

we're Fortunately, able to significant cash. generate

continuing we keeping allocation it. plan our on So place capital forward in and with program

that question you'd results? on up Kim, cuts? also the to SG&A If impact like came comment on the our was that, several quarters Another next and

number. that pay, the Yes. some number as Thank some their really was of minimum predominant was their probably cuts commitments. current performers on go, cost of reduction including And XX% actual The the margins as calculated was not of acceleration were commission. Yes. of force, source you, far of comprised is meeting the which the the Derek. XX% based number in basically cases a in And who an

of EBITDA the to on we're cautiously during the rest the looking margins our we is, all of that's expected of about on going course, impact a about year. to margin all optimistic year, depend course we're and volume in economy X% environment. have this the -- And fiscal the The at increase

a And forward, EBITDA going X% the year, planned, should cuts. on about as move high us up margin margin somewhere we near that cost X% bring end. and it term the EBITDA margin this goes somewhere X% everything would on and in X% believe would assuming our X% between provide between the the However, increase which in X%, based then

you. thank Kim, Okay,

acquisitions. Another potential question acquisitions around or revolved

capital well, performing would stated and extent the that if previously, augment point cash, have our be have we appropriate but allocation the the acquisitions, of only company accretive strategy As we earnings? strategic with to we'll is is to price availability and

where So that we're synergies in the can multiples And line be accomplished so with have to and trading. forth. with be

particularly program on integrate time, be are less execute However, acquisitions able forth. the risky, a strategic to also that easier appropriate buyback and we're at opportunistic, some tuck-ins to so fortunately,

-- we do hires rest what was, question the the the for Now, our placement? year, outlook perm what's of

after you then fill like comment, I'd to and I'll that. in

quarter. net seeing during Okay. through this the our Right trends Again, they're optimistic continue quarter, now, and perm cautiously last that that placement. we're now

to which expect $XX with believe placements was our what million. are higher and million permanent report before I We pandemic, we, that $XX between with years on the par

XX.X the you heat better here done simply analyze get that. can could the there. and to-date So to economy a if conservative, little we've does Derek? it that be assume than That's to up,

me Okay. And fortunately, add year, demand terms direct throughout The more that it. in on And And it. placement. XXXX or post we placement of the hire a permanent this this. a of version the was capitalized normalized let bounce. we an industry aberration And COVID expect for was

we picked help the make are up our continuing in to up and do However, differential placements businesses successfully for fortunately, will the which perm. contract

deals Kim, question. again, question, Next with the buyback

one going spend at able Or fortunately, continue I pretty should that that, that to time? question significant. are to flow the you say But cover good. And your quickly? cash all And I our money program. we're how is was,

we'll in But you our execution. had be think good think, we know, judicious value. stocks I the

are So a pursuing definitely program. we

Again, up question. be affecting cuts SG&A immediately? your will they quickly, Next earnings

reflected They starting to already are be there.

what Let's got. we see else

the repetitive. pretty are Again, Okay. questions much

speakers] done [multiple that Yes, were fully they the executed. cuts in March, were

Okay.

So…

we're boards be cost, Then it for I’ll technology still to other cut play otherwise. costs, and it ways be that, job costs, looking

other to out pushing working. so So lease extent working that the remote costs and with those because opportunities thing we virtual can. we're and seeing forth we're renewals of Same and

results. bumpy our than ahead able it anybody we capital we deliver be spend no in our will we money. execute be strategy. how we'll road crystal sure, will And we'll but better very our for see ball to a appears, else's, judicious So also but economically allocation is And good

anything have point? add you do at Kim, to this

No.

in questions number plans? company seems would with a concern, say. some of there's just was there's public got I'm I And company you're your well. I to everything it company about put delisted. now, million the $XX think and about what The we're acquisitions. through right looking And you XXXX, questions phone that, Alex, When this everybody the founders, that together and me covered the let just remind on here Derek was are that some but a it acquisitions. -- through like of be

-- fact, revenues rate. our a past up going we're annual every birthday, strategy. We're compound to us, are where our is just a -- Xx, annual here in And growth XXX% the execute -- multifaceted eighth in have compound profit on our we

continue we're there'll to But As acquisitions that be Derek buybacks. said, some stock look for also going sense. makes to

Blackout periods counsel. through that. set are us to add -- our me Let by also through

trading we gets program unusual However, related blackouts, those But will digested. be to normalized let earnings, pops blackout we the we other here. expect any plan that Earnings executing know, if fairly But periods. if up. or blackouts. we'll on the people don't periods, And than do, soon

judicious So And I of this the say sure. week latter be approach. for will we in part the

thing auction other tender The did came touch that offer? you up, at a

execute felt all be in we this But prudent of status we forth, at that to because terms immediately of might We open our the so felt an our and advisors optimal was was Board our it it strategy, and to and point. spending the cash economy do the not felt thing sure did. felt market

So deliberations rest that allocation. always regarding our and assured are are considered those capital

I pretty everything covers think today. that much

If and you that'll joining up, let conclude have us, call. know. our follow Thanks us just for