GEE Group Inc.

Hello and welcome to the GEE Group fiscal 2024 first quarter ended December 31st, 2023 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. It is our pleasure to share with you GE Group's results for the fiscal 24 first quarter ended December 31, 2023, and provide you with our outlook for the remainder of the 2024 fiscal year and the foreseeable future. Some comments Kim and I will make may be considered forward-looking, including predictions, estimates, expectations, and other statements about our future performance. These represent our current judgment of what the future holds and are subject to risks and uncertainties that actual results may differ materially from our forward-looking statements. These risks and uncertainties are described below under the caption, forward-looking statements, safe harbor. And in Tuesday's earnings press release and Our most recently formed 10Q, 10K, 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 statements made on today's call. During this presentation, we will also talk about some non-GAAP financial measures, reconciliations and explanations of the non-GAAP measures, we will address today are included in the earnings press release. A presentation of financial amounts and related items, including growth rates, margins, and trend metrics, are based upon rounded amounts. The purposes of this call and all amounts and percentages and the 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. We face significant difficulties in the fiscal 2024 first quarter ended December 31st, 2023, mainly stemming from economic and labor market instability and uncertainty. Economic and market conditions for us and our industry began to worsen earlier in calendar 2023 following a COVID-19 bounce in 2022, and it worsened even more in the second half of calendar 2023, leading to the significant decline in results from the comparable fiscal 2023 first quarter ended December 31, 2022. Consolidated revenues were 30.6 million for the fiscal 2024 first quarter, Gross profit and gross margin were 9.7 million and 31.8% respectively for the fiscal 2024 first quarter. Consolidated non-GAAP adjusted EBITDA was minus 200,000 and we reported a net loss of 1.6 million or one cent per diluted share for the fiscal 2024 first quarter. The prior fiscal 2023 first quarter results We're above normal, led by record high demand for direct higher placement services in 2022, driven by the post-COVID recovery bounce at that time. The pullback in demand for direct higher placement services in particular contributed to the significant shortfall in the fiscal 2024 first quarter results relative to those of the first quarter of fiscal 2023. Our performance still compares and tracks consistently with our industry peers as we are all facing similar challenges. The challenges being faced by the US staffing industry as a whole, including us, are expected to continue through at least the first half of calendar 2024. Before I turn it over to Kim, I would like to touch base on some recent achievements. We concluded our share repurchase program on December 31st, 2023, under which we purchased 6.1 million shares of Job Common Stock, just over 5% of our outstanding shares at the beginning of the program. In December 2023, our M&A Committee of the Board of Directors engaged the investment banking firm DC Advisory to assist the company with the review of strategic alternatives, which includes capital allocation strategies, mergers, acquisitions, and others, including future share repurchases. We expect to receive DC Advisory's initial findings to be presented to the M&A committee as soon as this week or next. I want to assure everyone that our sole focus now and into the immediate future is to manage through this downturn with the objective of minimizing its negative impact on our businesses and preparing for an eventual recovery. We have hardened our balance sheet with substantial liquidity in the form of cash and borrowing capacity and are very well prepared to successfully navigate our present poor economic conditions. We also continue to believe that our stock is undervalued and has substantial room to grow. And finally, before I turn it over to Kim, I want to thank our wonderful dedicated employees and associates. They work extremely hard every day to ensure that our clients get the very best service. They are a key factor in our achievements and the most important driver of our company's future success. At this time, I'll turn the call over to our Senior Vice President and Chief Financial Officer, Kim Thorpe, who will further elaborate on our fiscal 2024 first quarter results. Kim?

Thank you, Derek, and good morning. As Derek mentioned, revenues for the fiscal 2024 first quarter were $30.6 million, down 26% as compared to the fiscal 2023 first quarter revenue of $41.4 million. Results for the fiscal 2024 first quarter declined in comparison to those of fiscal 2023's first quarter, due mainly to the significant worsening economic conditions. We also achieved record performance in the 2022 calendar year, including the fiscal 2023 first quarter into December 31, 2022, driven by some what some in our industry, as Derek mentioned a minute ago, was a post-COVID-19 bounce in employment recovery trends. This gave way to returning concerns about uncertainties surrounding the economy that have negatively impacted labor markets throughout 2023 and worsened in the later portion of calendar 2023, leading to further decreases in orders and placements for our businesses through the first quarter of 2024. Professional and industrial contract staffing services revenues for fiscal 2024's first quarter were $27.6 million, down 22% as compared to the fiscal 2023 first quarter. Professional contract services revenue, which represents 91% of all contract services revenue and 82% of total revenue, decreased $6.7 million, or 21%, quarter over quarter. Industrial contract services revenue, which represents 9% of all contract services revenue and 8% of all revenue, decreased $1.1 million, or 31%, quarter over quarter. Again, the economic and labor market factors previously discussed contributed to a decline in orders from our clients as well as temporary labor to fill those orders, leading to the decrease in contract revenues. Direct hire revenues for the fiscal 2024 first quarter were $3.1 million, down 47%, as compared with fiscal 2023 first quarter direct hire revenues. As Derek and I mentioned earlier, the fiscal 2023 first quarter ended December 31, 2022, was part of and at the end of a record high calendar year for the direct higher placements. Furthermore, direct higher placements versus temporary placements are usually the first to be negatively impacted in an economic downturn such as that experience since 2022's post-COVID-19 bounce to the resurgence of economic and labor uncertainties in 2023. Gross profit for the fiscal 2024 first quarter was $9.7 million, down 32% as compared to the fiscal 2023 first quarter gross profit of $14.4 million. Our overall gross margins were 31.8% and 35% for the fiscal 2024 and 2023 first quarters, respectively. These decreases in gross profit and gross margin are mainly attributable to the decline in direct hire business for the fiscal 2024 first quarter. I'm sorry, are mainly attributable to the decline in direct hire business, which has 100% gross margin. Our professional contract services gross margin was 25% for the fiscal 2024 first quarter compared to 25.4% for the fiscal 2023 first quarter. a decline of only 40 basis points. Our light industrial services gross margin was 16% for the fiscal 2024 first quarter, compared with 15.5% for the fiscal 2023 first quarter, which was an increase of 50 basis points. Despite lower quarter-over-quarter overall gross profit and gross margins, our current margins remain relatively high as compared with those of our competitors. Selling general and administrative expenses, SG&A, for fiscal 2024 first quarter were $10.6 million, down 17% as compared with the fiscal 2023 first quarter. SG&A expenses were 34.6% of revenues for this fiscal 2024 first quarter compared with 31.1% of the fiscal 2023 first quarter. The increase in SG&A relative to revenue is primarily attributable to fixed costs, including personnel-related expenses, occupancy costs, software subscriptions for applicant sourcing and tracking, and others, which increase proportionally relative to lower revenues, and to a lesser extent, certain other non-recurring expenses associated with core business operations. We reported a net loss for the fiscal 2024 first quarter of $1.6 million or a negative one cent per diluted share down $2.3 million compared with the net income of $700,000 or one cent per diluted share for fiscal 2023's first quarter. Adjusted net loss, which is a non-GAAP financial measure for fiscal 2024's first quarter was a negative $900,000 or a negative one cent per diluted share, down $2 million as compared to $1.1 million, or one cent per diluted share for fiscal 2023 first quarter. Our reported net losses for the fiscal 2024 first quarter, again, are mainly the result of the decreases in revenue and gross profit and gross margin on lower direct higher placements business previously discussed. Adjusted EBITDA, which is a non-GAAP financial measure for fiscal 2024's first quarter, was a negative $200,000, down $2.2 million as compared with $2 million for the fiscal 2023 first quarter. Our current, our working capital ratio as of December 31, 2023, was 4.2 to 1 of 60 basis points from 3.6 to 1 as of September 30, 2023, We reported negative cash flow from operating activities of $900,000 for the fiscal 2024 first quarter into December 31, 2023. Our liquidity position remains very strong, and we have no outstanding debt. Our net book value per share and net tangible book value per share were 93 cents and 33 cents, respectively, as of December 31, 2023. To conclude, we're obviously disappointed with our fiscal 2024 first quarter results. However, we remain and we remain cautious in our outlook for the remainder of fiscal 2024 considering current economic and labor market uncertainties. Importantly, however, we do remain optimistic for the long term and have demonstrated we can produce earnings consistently under better economic conditions. Before I turn it back over to Derek, Please note that the reconciliation of G Group's non-GAAP financial measures discussed today with their GAAP counterparts can be found in supplemental schedules included in our earnings release.

Now I'll turn the call back over to Derek.