GEE (JOB) 16 May 242024 Q2 Earnings call transcript

Hello, and welcome to the GEE Group Fiscal 2024 Second Quarter and first half ended March 31, 2024, Earnings and Update Webcast Conference Call. I'm Derek Dewan, Chairman and Chief Executive Officer of GEE Group. I 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.

you to XXXX you half XXXX second XX, and pleasure for Group's ended fiscal our for XXXX, fiscal outlook foreseeable the quarter provide year is and share of future. GEE with results March the the It remainder our the with and first

the and are will our our about uncertainties and future call. assume other risks to These represent Some I no be uncertainties results under and made the press forward-looking, statements below earnings make comments release We forward-looking caption that Kim and and including from may other Regarding statements on considered Forward-looking judgments future of today's risks and captions differ our what current Statements. may These Cautionary subject SEC statements, our filings and Statement Form predictions, holds the Forward-looking and estimates, safe are expectations most actual Statements statements. forward-looking obligation performance. and XX-K Wednesday's described harbor update in recent to under XX-Q, materially

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

including financial presented are amounts or approximations, accordingly. growth of related percentages are items related this amounts, and purposes margins, amounts presentation call metrics, and of based and trend Our for rates, rounded items, rounded, upon and all

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

have of and and of uncertainty, personnel. half, We market volatility and stemming as macroeconomic so hiring in they from labor have far the fiscal faced very mainly the affected XXXX contingent first and difficult full-time conditions use challenging instability, labor businesses particularly ongoing

a of industry of permanent and past, contract for employment. XXXX, to the and calendar both post-COVID-XX labor the was reported peers following employees part demand middle which we our XXXX XXXX, in environment As robust much to bounce of a soften in began hiring in and attributable in us the calendar

projects layoffs and negatively expansion orders in requiring the corporate far XXXX. have hiring additional with been impact activities in some labor with implemented conditions IT a half have calendar hold of to so These Many conjunction continued job put on first freeze.

the and for Consolidated half profit first second half and revenues $XX.X the fiscal fiscal quarter, fiscal $XX.X margin fiscal XXXX respectively million for and XX.X% million for XXXX. million the of and quarter for million $XX gross XXXX. first were second $X.X XXXX were and XX.X% Gross of the

of second XXXX. $X quarter XXXX $XXX,XXX was fiscal loss for or $XXX,XXX reported fiscal the Consolidated fiscal or for net the $X.XX loss negative quarter per share first $X.X and non-GAAP for the first half adjusted XXXX at negative per fiscal half the for of EBITDA a second $X.XX -- the of net for first We of million a share diluted and diluted million XXXX.

quarter the The half of part the and pullback direct a calendar post-COVID into The record in quarter prior projects were far results. at to hire XXXX side in continued best in driven fiscal hiring half first in recovery, fiscal time. bounce for particular, lower the the many ever special XXXX XXXX upward demand although which in which half services first placement that first began and middle high by placement XXXX's hire on and compared direct contributed and for so solid, when included has services, results, demand XXXX to of results contract second resulting an lower second

tight situation, their or and to Employers our of nearly employees observers in down on industry hiring turnover are the Stay. labeled good, peers are personnel to similar as Performance universally we facing holding is full-time all have industry challenges current replacement and among also the down our Big accordingly. reliable

to in continue across work projects contractor expansion, even from clients and resulting contract including postpone retention manufacturing itself facilities assignments. is finance systems and and many nearly normal the special and software down side, orders areas, outstanding, fewer in though remains upgrades, production all are in our client our implementation The accounting IT On news verticals. that this good levels

filings. we to some reports industry in see improvement have Additionally, are indicators in press leading group signs of and in their the we companies trends been peer tracking. These mentioned and staffing other of have been releases by beginning recent the positive public covering

subside. whether remains meaningfully to And us the faced however, be staffing as overall expected challenges the it's may at It sustainable. by unclear industry this when in juncture, to exactly U.S.

So in we cautiously as release, our earnings indicated do optimistic remain press in our outlook.

DC it to M&A recent completion Directors Advisory. a of alternatives I the like than turn important announced month by developments. I on of over to other its committee our Less review we strategic company's banking of ago, the investment with firm, in touch would of the undertaken Kim, the Board assistance conjunction Before some with

with targets key We and with for have our financing, M&A producers stage. markets through and plans to execute we and acquisitions. already committees Without armed budgets socializing cash making revenue new and which potential this now, begun revving sales and and formulating and training at Advisory's with grow to mergers up into our available M&A organically initiatives which are both the underway going targets, also excess both and well several considerable adding and in investments DC include revisiting now recommendations, on prudent details

having Group of X.X X% shares We stock paused December at just or purchased on of XX, the over beginning program. million the of outstanding XXXX, shares GEE our share repurchases

conditions repurchases how much should be gain to we clarity For And for now, until on our when cash more reserve. until then, in Board the may of our being, and time it judicious improve. market Management excess share agree held that is least at discontinue

bona it excess will when our allocation implement of fide be and Share repurchases a always and alternative a of use capital our strategy capital if and prudent. part

long-term course in of action fide growth value. bona our not overall However, and the value of enterprise a it by to is context maximize increase shareholder strategy, itself

our in a spots bright when too existing early other It still down occur. predict is upward will to some outlook. cycle definitive in our turn there's Also,

to recent growth. positive investments are from we results accelerate However, seeing our some

in our hold take up Price orders professional in and spread are April. beginning were verticals to and job improvements

Our monthly revenues the higher billing and revenues for for of in the entire month revenues average day are March coming XXXX both than per April and the quarter.

come We positive continued begins We a largest most client also the have to to for retention current client continued the to improve. things excellent notably our cycle. among good cycle retention, achieve throughout be clients to as sign view

that to quickly as restore assure again, I downturn want and our through as to the sole is growth everyone, manage once to focus possible.

and in prepared well of sheet and cash with do are the form borrowing liquidity capacity We have a balance strong to both. substantial

this near continue and to also book small it is so slightly down We recent trading and of a here. grow, is especially based levels at room evidence since while especially, the stock undervalued that only assert float Also, release, value. that our level. our is undervalued at from tangible portion price below earnings trading actually even low stock has and our Further last upon has substantial been very to

wish get prior over of a day thank success. are And wonderful, They to finally, before to and work our company's and our turn the in hard our They employees I our important ensure dedicated every Kim, driver to clients I key factor once that future best extremely achievements associates. very the it services. again most

the and turn Financial elaborate second Vice our over I'll this who Kim will call Officer, year-to-date Chief fiscal quarter to on Kim? Thorpe, At our XXXX and President Senior further time, results.

Thank morning. and you, Derek, good

fiscal million periods $XX March $XX.X and Derek mentioned, XX% and XX, periods. XXXX down XXXX X- were respectively, the X-month As same consolidated ended the and XX% revenues with for million, compared

contract quarter. fiscal quarter Professional as fiscal services XXXX Industrial and million, for second revenues XX% staffing the down were XXXX the to compared second $XX.X

revenue, services $XX.X industrial contract of million, million half quarter-over-quarter. XXXX. total first XX% the fiscal services XX% Professional for fiscal revenue revenues XX% all contract down compared contract were staffing to which represents half of of the and revenue and XX% decreased of or $X.X Professional as services first XXXX

of XX% as $XX.X all services represented half XX% fiscal and million again, with professional XX% total and XXXX. fiscal revenues decreased revenue first services half XXXX, compared of first the again, or of contract of the contract revenue In

of XX% services or contract Industrial and contract industrial fiscal of decreased revenue compared decreased first first contract as services or revenues of $X.X half all XXXX's X% fiscal revenue million of X% XXXX total services XX% revenue, the represented of which services half. In all $XXX,XXX total revenue represents XX% X% and quarter-over-quarter. contract revenue and with

quarter fiscal XXXX revenues Direct half of XXXX. $X.X from down first revenues fiscal for down and million as for second for fiscal fiscal with the million, compared of quarter first the were XXXX the XX% $X.X half XX% XXXX second XXXX, were

from personnel in qualified resulted our referred orders effects job in direct revenues led by for job temporary professional of hire virtually economic and labor to to labor in particular, and have that virtually The in in all conditions for Recruiting to the for declines in -- the decline temporary and Industrial Derek contract all fill business. revenues orders division, verticals. decreases our clients

the permanent has overall declines our Stay, observers the chronicled industry widely throughout led Big staffing it's The for has as to demand called, by and been hires. in

fiscal Gross profit quarter Gross for as fiscal $XX.X of of down XXXX gross first million, XXXX's half down profit XX% the was fiscal compared profit. as compared the for was with second XX% half $X.X million, first XXXX's with second quarter XXXX.

profit second revenue, quarters, XX% and margin gross hire The XXX% respectively. margins the are and attributable the and margin revenue. to gross in for XX.X% has total to XXXX were decline which differences direct overall of gross percentages Our in gross fiscal XXXX mainly the

for XX.X% points. XXXX fiscal Our the an with margin professional the XX quarter for contract of second was gross second XX.X% fiscal services compared quarter, XXXX basis improvement

first of was a with The XX.X% basis XXXX, services compared of gross the XX.X% XXXX contract for XX for decline first points. professional of half half as the fiscal slight for fiscal margin

points. margin quarter, was Our the the compared was for XXX for fiscal XXXX XX.X% quarter industrial decline of XXXX services with a contract gross second basis fiscal XX.X%, which

industrial In our XXXX, markets. in and lower margins high however, remain job continue to profit our qualified orders, addition face of competition fewer we increased as relatively far challenges competitors. business, overall those candidates with sourcing our including and current so margin well compared gross as those recruiting Despite gross with as to in

half as half XX% Selling, the XXXX $XX million, quarter, general XX% quarter. quarter expenses first compared $XX.X first with fiscal and XXXX. for the million, administrative expenses, SG&A fiscal down the of compared XXXX for the down with fiscal second SG&A were second were

XX.X% fiscal software quarter, quarter. XXXX's relative to SG&A costs, core ongoing our for expenses for subscriptions revenues the including compared quarter, of the with certain for in mainly attributable relative in is revenue operations. second in half systems particular, revenues and to became increase in personnel-related XXXX's second expenses cost, tracking sourcing are fiscal occupancy XX.X% applicant to not associated were expenses, The SG&A the nonrecurring use quarter with lesser to lower higher which others, and our business extent, and proportionately and the a producers fixed

Management will has SG&A, a business to the in do that effort growth revenue continue made and handle not a we'll as reduce improves. concerted environment to so manner

In selectively addition, to new initiatives enhance our revenue-producing to increased and in and we job obtain key add and markets sales in market new resources orders order clients, to have launched train new begun personnel share.

management team investments experienced these and made cyclical in as of ones conditions anticipation through Our the managing such eventual in experiencing are recovery. is being the now we're

$XXX,XXX million for We diluted a of $X income that second reported down positive per share share $X.XX net of net $X.X $X.XX quarter compared fiscal XXXX quarter. for a to XXXX as loss million second fiscal a is share, or or

was the for negative million the compared loss down 'XX income or million $X.X as share half per $X.X $X.X XXXX. Our fiscal first first or diluted with per half share, $X.XX of million positive of fiscal for of diluted net net a $X.XX

fiscal adjusted fiscal $X.X non-GAAP for which measure quarter. is $XXX,XXX, compared approximately second down net a income $XXX,XXX loss, quarter XXXX's as positive net XXXX's with Adjusted of financial was second million for

XXXX for down of loss $X.X XXXX. as was adjusted million, million the adjusted half first for the million positive $X.X net compared Our of first with $X.X net income fiscal half of

quarter, second $X.X was for compared XXXX's negative million million $X.X million, quarter fiscal positive. $X.X the which fiscal second a EBITDA, million was non-GAAP is as $X.X for down which with XXXX's measure

a down million $X.X as EBITDA fiscal for half positive with XXXX million million for the the was compared half $X.X first negative XXXX. of first of $X.X fiscal

a was million quarter. EBITDA second with XXXX. as $XXX,XXX, is the for half million also fiscal XXXX's second XXXX's fiscal was as $X.X million for compared negative million the Adjusted measure, of negative adjusted EBITDA $XXX,XXX, to for down the our $X.X which fiscal financial $X.X the XXXX quarter down first of positive first And compared half EBITDA, for $X.X non-GAAP a

XXXX. half latter We and flow, up of X.X:X, ratio as the free is current non-GAAP non-GAAP the September -- of was a second XXXX, fiscal cash XX, XXXX's positive activities as March March from for reported ended Our of which financial XX, $XXX,XXX about working operating from capital which of is cash XX, X.X:X XXXX. measure flow

position credit remains facility and undrawn outstanding debt. an and we liquidity Our have no strong, very ABL

per net as book book per value Our $X.XX XXXX. of March share value XX, respectively, net were tangible and share $X.XX, and

first In in near-term conditions conclusion, fiscal our our while our cautiously remain our in and disappointed quarter sorry, do in results half, are obviously I'm optimistic -- we outlook XXXX's in outlook can second -- environment we past. staffing have done a so in and we more generate consistently favorable long-term under conducive have the and for demonstrated economic that earnings industry substantial the more and

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

Derek. Now over I'll turn it to back

March another bank Thank economic million preparing At inevitable staffing our credit had business and availability industry-specific managing we $XX.X in impacting $X.X aggressively Despite cash company our facility. XX, are you, ABL an services, the demand for recovery. under million for XXXX, headwinds challenges and in Kim. its and

not to release As eventual growth again are be an plans but both we our sooner my restore by aggressively in remarks, to and growth for also driven opening and earnings I initiatives. to mentioned organic press recovery, M&A prepare other and moving in only

to evaluating of benefit maximize the We to will returns. Group's shareholders, including work uses shareholder continue capital for of consistently our strategic GEE hard

their want dedication. say special again a I questions, for hard our all to your to take to of you people thank pause professionalism, we work wonderful Before and

I ask queue would back your for If you Kim the and questions. questions. just additional answer with follow-up as Now be time, to rejoin happy we'll Please needed. question one a to there's and come

formal to point, And at Thank remarks, you. move Q&A. concludes our that we'll and this

first please? the So Kim, take will question, you

Derek. Sure,

bit are you are our is The that group company as appear the weaker size that larger a considerably do clients. a know first a public say, of down peers we answer question recession. My of but lower have core other the we little at, why that results worse be than our on market believe results is show peers a losing let's based and companies, I our to are of of end to enterprises than small larger reason do deep is share? Your symbolic data, contingent because medium larger results and

do clients, -- clients retention, orders also have have we good Derek we among especially As mentioned, but down. had our and larger at smaller our are

terms we're same. profits moving good size. else of we're the So in not not are -- necessarily direction. are some in because we're in our same our -- our peers. orders of our the fact, everything weaker and margins of than trends say being we is -- are our I And overall, would it that the and But considerably

message as do to you want a $X.XX Are concerned take question. one book Another when share well? shareholders. you prospective that is bad to discontinuing sending value your that is repurchases Kim,

Sure.

concerned in -- alternative the repurchases share reasons. not share with is for now about our the our do as discounted repurchases we're fiduciary we performed recent of few share and One as steps all And long-term the way goals, about repurchases, for why with provide for -- way individual and forward duty feel individual forward they capital of we're are company. our the forever a understand and our we strongly the completely -- but invest study stock are I investors the in to we that we We and is some themselves of strategic are concert believe in haven't our The of stewardship repurchases. a taking growth not back, because buying share shareholders. all we basis

will return yes, The repurchases. to not -- bad it's that capital send believe alternative I strongly for hope message. share improve than So have that that very we it's shareholder sending a more supposed uses message even is we

thoughts So that. my on those are

Thank you, Kim.

on symbol with to -- TSR, premium question at called the TSRI, do XX% I next that, But happens want traded an of be acquired staffing ticker in company the Inc., a under NASDAQ company, the yesterday is to IT regard the the to its to a name So which acquisitions. over agreed trading TSRI, be call on mention price.

we and group our margins, around really peer gross know to well, TSRI's XX%. XX.X%

in itself Our gross Also, XX.X% from is were without of XX% perm that's highs and the margins this our down mid gross margin quarter, influence and by of upper XX%. usual XXs. contract our to the

So very that's the are group. undervalued announcement point of of an an from just undervalued out. indication wanted entire trading one to our yesterday, from that made at appealing But I to metric a deal. all-cash the how performance was that standpoint. company look just standpoint, prices it's And

at appealing the think are answer that what's with health if in and We existing is in look medical a appealing. have before the care for to And our question do we fits that and important The in acquisitions suitable or We're be verticals. I me component IT business dealing a I accounting staffing find have sure, to niche and that would absolutely, yes. verticals finance you. is one of scribes. niche nicely,

it for other of pay range used multiples we Xx, depending an various might type from so transaction? X or things, to acquisitions? consideration type not multiples bring other there rates, the factors, for M&A down among what synergies to use is would the upon margins The are and stock of growth And business multiple forth. whether in we And and the

would use contemplate Group? GEE were stock valued. that GEE We of stock highly would using Clearly, Group we only

you that our use if some a that a it's premium, at We wouldn't to may got times. recent be it apply like would on if to example, levels grow For if at value particularly equity price, company. that their someone the premium equity XX% to deal, seen with our in stock our use clearly just we've peer attractive acquired a XX% depressed

question is low the of some a improvement in in December, March in revenue. terms signs report Another December better January we but call, was than saw of

also the is side March typically valleys the quarter contract direct a quarter hire March quarter or of in The the and lot our lowest and There's the staffing peaks in year. side. fiscal on

do trend our Kim, lines. However, comment And look trends. on we you at can

because and Officer, on have Kim? with his also like comment Alex top Chief and share after hear I'd to like of We Operating trending, on our commentary too, you and Street. the the I'd has call Kim, comment been to Stuckey, the you he it

Yes.

First And of revenues all, improvement up. better question now detailed May now April April far part let January we're in average is January, is we the March. is thought me question. than December. are April but April so on than March very quarter is saying through lower the than March. of better saw is better The we and the than is promising. looking

that's So comment? you to the want answer do Alex, to that.

go Sure. across the than all and we feel result our past. we believe seen To is different little in that. shoots in like flow of and the on And deeper and our We further produce a all verticals placements. going to across substantially in bottom. order We brands a see hit of that have little green a the summer we've

we all brands hit verticals when across we has order shoots feel like bottom the green in been hit. and And all the see like bottom, flow. I asked You said, we

positive very about feel coming we summer. the So

Thank you, Alex.

the there Is Another rationalized? this industry at How time? this you business more in see getting overcapacity do is question is being competitive.

has What recessionary the the verticals solidly the in than growth the been along the can when been the of the of are exceeds job economic dips the at aspects they finding look the now in, happening. few a I've for more because orders the in of for fill. way. industry, environment those in companies is demand things we're you we're robust at have growing, supply nature technology with of economy its turn, demand that the example, if aren't upward and rate periods rates, usually right or confident staffing people lower since and When 'XXs, industry

tightly companies, we'll is cost but for There's structure anticipate get we an the we're there don't very companies we been there's relative we'll in if what when to the revenue believe again our make And We and it's there. industry. compared of a industry. lot miniscule the soon, And have. that tracking of the the get still have sure market look overcapacity. at entire We larger that you it to to consolidation they share appropriate totality the staffing believe all other

recovery? the orders each heard things indicators up. are industry are we What are verticals across the at. for You those Those of look some coming job today, in, of the

Is demand question. another to plan the look being there costs in Here's a with U.S. offshore to recruiting low? save

been as enhance recruiting several would are forward Adding cost. looking a likely done component group his recruiting And move that leader option has to an companies. that, our our offshore agree and successfully with IT capability that's to lower by viable into we and a that, at

So the answer is yes.

million. Total what it hand $XX.X of as in was March That's cash was XX.

And correct. that Yes, range now. in it's

gross margin your do What you industry than average professional higher contract services? on attribute

Alex, you the on division you're since professional why as cover that of well? top don't

earlier, MSP companies. than able type group a mid-market very higher customers Kim larger of slightly and much agreements which As we much, are pay in the and and VMS noted have a to that spread are the willing range, distinct

that attributable our that have gross higher our and because margin higher believe that's the customer I of strength. So we marketing of and type to strategy

Thank you.

to and top Another producers. of question turnover retention relates

We have been very successful producers. retaining top in

additional producers particularly had We producers. with with top top producers -- annual tenure try on care high, trip tenure or And excellent very of potentially and to is from we them. award take average feedback top our really sales our we across our experience. have hired our with board, the people aggressively Our just

and on staff. our keep to to doing the will continue right we're well do pretty valuable we So things retention,

happen. answer they're concerned That a will cheap stock about at The no. not said Someone valuation. using is

back buying Next question. returns Do provide you see in your investments than stock? M&A more that

team. value. to that DC the and enhance to and concurred that's our optimal analysis at studied Management That this by and shareholder was Directors We Advisory way Board of most made time, it available done

in As equation felt growth Kim fact, we to that's and appropriate but said, add capital time, at there. could, getting do if was believe would the and the both of the strategy, that M&A weren't at possibility. And are allocation stock our get will that it buybacks a still and side we the we time, organic there we answer, in the same initiate

Have you seen signs customers' to of ability pay? your distress in

receivable the run XX, our on correct? Alex, side, DSOs about days XX

are Receivables we -- any very have the correct. range. That's our at particular had success terms. level have mid-XX good holding to in We've asking customers the consistent they an of same and inability for with our pay don't having receivables, nor signs extended

Another peers question be from private the Are so, they're been acquired. to premium is they've offering? equity? these what's receiving If or offers

I merge, bought public the And IT price it's to to say that that or opportunities get of XX% a typically to was to say to think trading as premium called the company. that staffing a have to premiums, companies I good are otherwise. safe yesterday, Well, said explore I one,

consider the always So time, all -- sense which shareholder a standpoint, makes significant. is opportunities. But must And we from it get we value that. yes, if

this and we're growth for shareholder long-term However, company value. building enhancing

of see as accelerate do our stockholders our X equity significant are the to like shareholder All and value we'd really in you, base. company, us

in. And for to shareholder at companies appropriate maximum The always will we best value. get yes, is So continue course, operate opportunities whatever will come do good the companies right time of if offers.

this trading only a a premium at back level, brings prices range. depressed reasonable you XX% to even at However,

from we and very, really will that get And well. of period to that time where we new with very of standpoint. us been shareholders to we are shareholder confident some value appreciate have as for all you those we a nonetheless, So be need

get to growth the other and going earnings with the we to We that are want allocation shareholder influence strategies coupled where hard forward. get engine help capital be, as and to believe value, it working move we back acquisition very to very, growth we will

shareholder a our So but someone that one an it and communicate we filing, a today. We XXG was call very other about had long-term concludes shareholder existing XXG with filing. a question, regularly. asked And who

So there no was surprises there.

no, there's answer the So that to surprises. is no

solid shareholders, very and -- one X%. some we are appreciate majority our right shareholders a your have of of hard percentage we're now working we has directors, with But about owns investment, to who company our solid who and deliver. very And the we including

And Thanks Thanks. again coming call today. that for concludes our on.