GEE Group Inc.

Welcome to the GEE third quarter earnings in 2022 update webcast conference call. I'm Derek Dewan, Chairman and Chief Executive Officer of the company. Kim Thorpe, our Senior Vice President and Chief Financial Officer will also join the call. I'll be hosting today's call and we will be addressing the quarter and our outlook for the remainder of 2022. Thanks a lot for joining today. It's our pleasure to share with you our results for the fiscal 2022 third quarter ended June 30th, 2022 and provide you with our outlook for the final quarter of our fiscal year 2022 year end and also the outlook for the foreseeable future. Some comments Kim and I will make today may be considered forward looking, including predictions and estimates about our future performance. These represent our current judgments of what the future holds and are subject to risks and uncertainties that actual results may differ materially for forward-looking statements. These risks and uncertainties are described in Monday's earnings press release and our most recent Form 10-Q and other SEC filings under the captions, Cautionary Statement Regarding Forward-Looking Statements and Forward-Looking Statements Safe Harbor. We assume no obligation to update the statements made on today's call. During this presentation, we will also talk about some non-GAAP financial measures. Reconciliations and explanations of these measures are included in the earnings press release. Our presentation of financial amounts and related amounts, including growth rates, margins, and trends are rounded or based upon rounded amounts. For purposes of this call, and all amounts and percentages and related items presented are approximations accordingly. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, www.geegroup.com. With that business behind us, I'm very happy to report that we once again achieved outstanding results, beginning with net income of $2.6 million, or $0.02 per diluted share for the third quarter of our 2022 fiscal year and for the nine-month periods ended June 30, 2022, net income of $20.4 million or $0.18 per diluted share. Consolidated revenues for the three and nine-month periods ended June 30, 2022, were $41.1 million and $123.6 million, up 8% and 15% respectively, over the comparable fiscal 2021 periods. And gross profits and gross margins were 16.5 million and 46.6 million and 40.1% and 37.7% respectively. Our non-GAAP adjusted EBITDA for the 22 fiscal third quarter was 4.1 million, up 1 million, or 34% over the comparable prior fiscal year quarter and represents a 10% margin to revenue. Non-GAAP adjusted EBITDA for the nine month periods ended June 30th, 2022 was 11.5 million up 2.8 million or 32% compared to the nine month periods ended June 30th, 2021. Before I turn it over to Kim, I want to say again how very proud I am of our dedicated and talented people. They work extremely hard every day to ensure that our clients get the very best service. This is one of, if not the most important key to our success. At this time, I'll turn the call over to our CFO, Kim Thorpe, who will further elaborate on our results for the 2022 fiscal third quarter. Kim.

Thank you, Derek, and good morning. As Derek mentioned, revenues for the three and nine-month periods ended June 30, 2022 were $41.1 million and $123.6 million of 8% and 15% respectively over the comparable fiscal 2021 period. Contract services, excuse me, contract staffing services contributed $33.1 million and $103.5 million or 80% and 84% of revenues respectively. And direct placement services contributed $8 million and $20.1 million or 20% and 16% of revenues respectively for the three and nine month periods ended June 30, 2022. Contract staffing services revenues increased by 0.6 million or $600,000 and $8.7 million or 2% and 9% for the three- and nine-month periods into June 30, 2022, respectively. These increases were mainly attributable to increased demand in our professional contract services markets as the negative effects of COVID-19 lessen and the U.S. economy and workforce continue on recovery paths toward pre-COVID-19 conditions. Direct hire placement revenues for the three and nine months into June 30, 2022 were $8 million and $20.1 million, up 45% and 60%, respectively, over the comparable fiscal 2021 periods. Direct hire revenues for Q3 2022 set a new high for us, and the first nine months of fiscal 2022 already have surpassed the entire 2021 fiscal year. Total revenues from our professional staffing services segment, which includes contract staffing and direct hire placement services, were $37 million and $111.6 million and represented 90% of total revenue for both periods, respectively, into June 30, 2022. Professional staffing services segment revenues were up 8% and 18% from the comparable fiscal 2021 periods, respectively. Our IT services in markets at Agile Resources, Access Data Consulting, Palahniuk Consulting, and SNIT accounted for 48% of our professional services business segment revenues for the nine months into June 30, 2022, and were up 27% year-over-year. The other professional services and markets, finance, accounting, administrative and office, engineering, healthcare, and others, accounted for the remaining 52% of professional services business revenues for the nine months into June 30, 2022, and were up 14% year-over-year. Industrial staffing services revenues were $4.1 million and $11.9 million for the three and nine-month periods into June 30, 2022, respectively, compared to $3.8 million and $12.9 million for the three and nine-month periods into June 30, 2021. We continue to experience some pandemic-related conditions associated with the Delta and Omicron variant, in our Ohio markets in earlier quarters of the fiscal year, including school and business closings and interruptions, which were reminiscent in some respects of the early COVID-19 pandemic. Consolidated gross profits and margins were $16.5 million, or 40.1%, and $46.6 million, or 37.7%. for the three and nine-month periods into June 30, 2022, both up substantially from comparable fiscal 2021 periods. Our consolidated gross margins for the last five consecutive quarters have been above 36%. The overall improvement in the company's combined gross profit margin is largely due to the substantial increase in our direct higher placements which have 100% gross margins. Selling general and administrative expenses, or SG&A, for the three- and nine-month periods into June 30, 2022, increased $1.7 million and $7.7 million, respectively. SG&A expenses were 31.3% and 30.3% of revenues for the three- and nine-month periods into June 30, 2022, respectively, compared to 29.2% in 2017 for the three and nine-month periods ended June 30, 2021. In addition to overall growth of the business, resulting in additional incentive compensation and bonuses, the increases in SG&A expenses and ratios were affected by $800,000 in charges associated with two former positions that were eliminated, $300,000 during the three-month period ended June 30, 2021, and $500,000 during an earlier quarter of fiscal 2022. In addition, a $400,000 increase in a bad debt expense allowance associated with one of the company's industrial services customers and the $1 million charge for the settlement of a legal matter added to our SG&A in earlier quarters of fiscal 2022. As Derek mentioned in his remarks, marks we achieved net income for the three and nine-month periods ended June 30, 2022, of 20, I'm sorry, of $2.6 million, or 2 cents per diluted share, and $20.4 million, or 18 cents per diluted share. As compared with net losses of 937,000, or negative 1 cent per diluted share, and negative $3 million, or negative 7 cents per diluted share, for the three and nine-month periods into June 30, 2021. Non-GAAP adjusted net income and diluted EPS, excluding the effects of non-operating and or non-recurring items, as outlined in the earnings press release, were $3.1 million, or $0.03 per diluted share, and $8.1 million, or $0.07 per diluted share, respectively, for the three and nine-month periods into June 30, 2022. Adjusted EBITDA, which is a non-GAAP financial measure, was $4.1 million for the 2022 fiscal third quarter, up $1 million or 34% over the comparable prior fiscal year quarter. Non-GAAP adjusted EBITDA for the nine-month period ended June 30, 2022, was $11.5 million, up $2.8 million or 32% compared to the nine-month period ended June 30, 2021. As we've commented in prior quarters, assuming the spread, persistence, and severity of COVID-19 continue to lessen, we believe these types of positive results are sustainable. A reconciliation of G Group's GAAP net income to the company's non-GAAP adjusted EBITDA and reconciliations of other non-GAAP measures with their GAAP counterparts discussed today can be found in supplemental schedules in our earnings press release. To conclude, our current and working capital ratio at June 30, 2022 was 3 to 1. Consolidated accounts receivable net of allowances for doubtful accounts at the end of the 2022 fiscal third quarter were $21.2 million. And our day sales outstanding performance metric, or DSO, was approximately 42 days. We reported positive cash flow from operating activities of $3.4 million for the 2022 fiscal third quarter and $7.8 million year-to-date and non-GAAP free cash flow of $3.4 million and $7.6 million, respectively. Our cash flow from operations and free cash flow for the nine months into June 30, 2022 were reduced in part by payment of the first of two equal installments of deferred FICA obligations allowed under the CARES Act of approximately $1.8 million in December 2021 and the payment of $1 million in settlement of an old and isolated legal matter made in April of 2022. Our liquidity position is strong. And we have no outstanding debt. Our net book value per share was 89 cents per share at June 30, 2022. And our net tangible book value per share was 25 cents.

Now I'll turn it back over to Derek. Thank you, Kim.