GEE Group Inc.

Hello and welcome to the GEE Group fiscal 2025 third quarter and year to date ended June 30th, 2025 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 GEE Group's results for the fiscal 2025 third quarter and year-to-date ended June 30th, 2025 results and provide you with our outlook for the remainder of 2025 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 judgments of what the future holds and are subject to risk 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 Statement Safe Harbor, in Wednesday's earnings press release in our most recent form 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. Throughout this presentation, we will refer to the periods being presented as this quarter or the quarter or this year-to-date or the year-to-date, which refers to the three-month or nine-month periods ending June 30, 2025, respectively. Likewise, when we refer to the prior year quarter or prior year-to-date, we are referring to the comparable prior three-month or nine-month periods ended June 30, 2024, respectively. During this presentation, we also will 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. Our presentation of financial amounts and related items, including growth rates, margins, and trend metrics, are rounded or based upon rounded amounts. For purposes of this call, in all amounts, 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. Now onto today's prepared remarks. Beginning in the second half of 2023, throughout 2024, And so far in 2025, we have encountered and continue to face very difficult and challenging conditions in the hiring environment for our staffing services. These have stemmed from various factors, including the overhiring that took place in 21 and 22, in the immediate aftermath of the pandemic, and the macroeconomic uncertainty, interest rate volatility, and inflation that followed. These conditions have produced a near universal cooling effect on U.S. employment, including businesses' use of contingent labor in the hiring of full-time personnel. Since 2023, many client initiatives, such as IT projects and corporate expansion activities requiring additional labor in general, have been put on hold. Instead, many of these businesses we serve have implemented and proceeded with layoffs and hiring freezes, and in many cases have focused on retaining their existing employees rather than adding new employees. Companies and businesses are cautiously assessing the potential for interest rate cuts and changing market conditions to ensure their investments in technology and human capital are strategic and sustainable. Artificial intelligence, or AI, is gaining ground at an accelerated pace, and is further complicating the demand for and use of human resources for certain tasks and is influencing project planning and capital expenditures. Collectively, these conditions have had a chilling effect on our business and resulted in fewer job orders for both contract personnel and direct hire placements. Our financial results for the fiscal 2025 third quarter and year-to-date ended June 30th, 2025 have been impacted by these conditions as well. The company's contract and direct hire placement services are currently provided under its Professional Staffing Services operating division or segment. On June 2, 2025, we entered into an agreement for the sale of certain operating assets of the industrial segment, including those of BMCH Inc., Triad Logistics Inc., and our Triad staffing brand. Results of the industrial segment have been classified as discontinued operations and are excluded from the results of continuing operations reported below, as well as in the unauded consolidated condensed financial statements included in our quarterly report on Form 10Q for this quarter, unless otherwise stated. Consolidated revenues were $24.5 million for the quarter and $73 million year-to-date. Gross profits and gross margins were 8.7 million and 35.4% respectively for the quarter and 25 million and 34.2% respectively year-to-date. Consolidated non-GAAP adjusted EBITDA was negative 25,000 for the quarter and negative 918,000 year-to-date. We reported a net loss from continuing operations of 400,000 or zero cents per diluted share for the quarter and a net loss from continuing operations of 34 million or 31 cents per diluted share year to date. We are aggressively taking actions to adapt to the current business climate and refine our strategic focus, growth plans to improve operating performance and financial results. These include streamlining our core operations, and improving and adjusting our productivity to match our current business volume, which helped us improve our results in terms of non-gap adjusted EBITDA and EBITDA. In addition to our ongoing cost reduction and system and business integration initiatives, we have a renewed focus on VMS and MSP source business, including the use of special recruiting resources and acceleration of the integration and use of AI technology into our recruiting, sales, and other processes. Importantly, we anticipate continuing improvements in our productivity, aiding and restoring meaningful profitability as soon as practically possible. In addition to the aforementioned near-term initiatives, we are working closely with our frontline leaders in the field across all of our verticals to support them as we all continue to aggressively pursue new business as well as opportunities to grow and expand existing client revenues. We are seeing some positive results, particularly in the direct hire placement business. As the volatility and macroeconomic uncertainty currently gripping our economy and labor markets begin to subside, I am very confident we are well positioned to meet the increased demand from existing customers and win significant new business. As you also know, we paused share repurchases on December 31, 2023, having repurchased just over 5% of our outstanding shares as of the beginning of the program. Share repurchases always will be considered as an alternative component of our capital allocation strategy and a bona fide alternative use of excess capital in the future if and when considered prudent. We fully intend to successfully navigate through the challenges outlined previously and are laser focused on revenue growth, expense reduction, and profitability. GEE Group has a strong balance sheet with substantial liquidity in the form of cash and borrowing capacity. The company is well positioned to grow organically and to be acquisitive. We believe that our stock price will improve and that there is a good opportunity for upward movement once we are able to operate again in a more optimal economic environment with improved labor conditions. Before I turn the call over to Kim, I wish to thank our dedicated employees and associates who work extremely hard every day to ensure that our clients get the very best service. They are a key ingredient in driving our company's 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 2025 third quarter and year-to-date results. Kim?

Thank you, Derek, and good morning, everyone. As Derek mentioned in his remarks, our former industrial segment results are now excluded from continuing operations and comparisons I will address today. Consolidated revenues again from continuing operations for the quarter and year to date were $24.5 million and $73 million, down 9% and 10% from the comparable prior year periods. Professional contract staffing services revenues for the quarter and year to date were $21.3 million and $64.3 million, down 10% and 11% respectively. from the comparable prior year periods. Direct higher revenues for the quarter and year to date were $3.2 million and $8.7 million, respectively, which were near break-even compared with their comparable prior periods. Our top-line performance for the fiscal third quarter and year to date has continued to be directly impacted by the challenging macroeconomic and labor market conditions facing us and the staffing industry as Derek's commented on a moment ago. Gross profit and gross margin for the quarter and year to date were $8.7 million and 35.4% and $25 million and 34.2% respectively compared to $9.2 million and 34.1% and $27 million and 33.4% respectively from the comparable prior year periods. Our lower gross profit dollars were mainly attributable to lower volumes of our professional contract staffing services revenues. By contrast, the net increases in our gross margins are mainly attributable to the increase in the mix of direct higher placement revenues, which have 100% gross margin relative to total revenue as our direct higher volume remained near break even in the current and prior comparable periods, while professional contract staffing services revenues were lower. Selling general and administrative expenses for the quarter and year to date were $9 million and $26.7 million, down 8% and 9% respectively compared with the prior year periods. Given the realities of our present environment, we continue to reduce costs and focus heavily on streamlining our core operations and on improving productivity. This has helped us improve our results in terms of non-gap adjusted EBITDA and non-gap EBITDA in both the current quarter and year-to-date as compared with the prior comparable periods. In addition to our ongoing cost reduction and integration initiatives, we have also placed a renewed focus on VMS and MSP source business, including use of special recruiting resources and acceleration of the integration and use of AI technology in our recruiting, sales, and other processes. I also want to reemphasize that our plans are intended to restore and enhance profitability as soon as practically possible. Our net loss from continuing operations for the quarter was $400,000 or under a penny a share as compared with a loss of $18.1 million or approximately 17 cents for diluted share for the prior year quarter. Loss from continuing operations year to date was $34 million or $0.31 per diluted share as compared with net loss of $20.5 million or $0.19 per diluted share for the prior year to date. The larger net losses I just mentioned, $18 million, $34 million, $20 million were all impacted by non-cash write-offs of intangibles and goodwill. EBITDA, which is a non-GAAP financial measure for the quarter and year to date, improved to negative $270,000 and negative $1.7 million, respectively, as compared with negative $524,000 and negative $2.5 million for the comparable prior year periods. Adjusted EBITDA, also a non-GAAP financial measure for the quarter and year to date, improved to a negative $25,000 or near break even and a negative 918,000 respectively as compared to negative 329,000 and a negative $1 million for the comparable prior year periods. Due primarily to cost reduction initiatives and our increased gross margin, we were able to improve our EBITDA and adjusted EBITDA results so far this year as compared with the prior comparable periods. Our current or working capital ratios of June 30 was 4.2 to 1. We had negative free cash flow, a non-GAAP financial measure, including cash flows from discontinued operations for the nine months of 1.9 million as compared with negative cash flow of 1.2 million for the prior nine months year to date. Our liquidity position as of June 30, 2025 remained very strong with 18.6 million in cash, an undrawn ABL credit facility with availability of $6.6 million, overall net working capital of 24.1 million and no outstanding debt. Our net book value per share and net tangible book value per share were 46 cents and 23 cents respectively. as of June 30, 2025. In conclusion, as Derek mentioned, we remain cautiously optimistic and are preparing for the long term as well, including making modernization improvements and enhancements led by the integration of AI across all of our businesses. Before I turn it back to Derek, please note that reconciliations of G Group's non-GAAP financial measures discussed today with their GAAP counterparts can be found in the supplemental schedules included in our earnings press release. Now I'll turn the call back over to Derek.

Thank you, Kim. Despite the macroeconomic headwinds and staffing industry challenges impacting the demand for our services, we are aggressively managing and preparing our business to mitigate them and be prepared for an anticipated recovery. What we hope you take away from our earnings press release and our remarks today is that we are focused on growing revenues and streamlining our operations to reduce costs and gaining efficiencies by implementing AI and other technology while preparing for a more conducive and growth-oriented labor market. We will continue to work hard for the benefit of our shareholders including consistently evaluating strategic uses of GEE Group's capital to maximize shareholder returns. Now, Kim and I would be happy to answer your questions. Please ask just one question and rejoin the queue with a follow-up as needed. If there's time, we'll come back to you for additional questions. Thank you. So the first question is regarding updating the website regarding the sale of Triad. And we will do that post-haste and refresh the website with other current activities that we're doing. The second question is capital allocation. And it's essentially talking about acquiring a company versus share repurchases. and the risk associated with both. We are bullish on both activities at the appropriate time. And I think strategically when it comes to share repurchases, I want you to hear from Kim, our CFO, who has a position that we all believe in. Kim?