Release Date: May 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GEE Group Inc (JOB, Financial) has maintained excellent client retention despite a downturn, which is a positive indicator for future business recovery.
- The company is seeing signs of improvement in leading indicators and job orders, suggesting potential recovery in the staffing industry.
- GEE Group Inc (JOB) has a strong balance sheet with substantial liquidity, including $21.2 million in cash and an undrawn ABL credit facility, positioning it well for future growth and stability.
- The company is actively managing its business to prepare for an inevitable recovery, including making strategic investments in new revenue producers and ramping up sales initiatives.
- GEE Group Inc (JOB) has completed a strategic review and is implementing recommendations to grow organically and through mergers and acquisitions, supported by excess cash and potential financing.
Negative Points
- GEE Group Inc (JOB) reported a net loss of $1 million for the fiscal 2024 second quarter and a net loss of $2.6 million for the first half of fiscal 2024, indicating financial struggles.
- Revenues and gross profit have significantly declined, with a 28% decrease in consolidated revenues for the second quarter compared to the previous year.
- The demand for GEE Group Inc (JOB)'s staffing services has softened, particularly affecting job orders for temporary and direct hire personnel.
- The company faces challenges in recruiting qualified temporary labor, especially in the industrial division, leading to decreased contract revenues.
- Despite efforts to manage costs, selling, general, and administrative expenses (SG&A) have increased relative to revenue, reflecting higher fixed costs against lower revenue.
Q & A Highlights
Q: Why do you appear to be losing market share? Your results are considerably weaker than peers and are symbolic of a deep recession.
A: Kim Thorpe, CFO & SVP of GEE Group, explained that the company's client base primarily consists of small and medium-sized enterprises, which have been more significantly impacted by current market conditions. Despite this, the company has maintained good client retention, especially among larger clients, and the order trends are moving in the same direction as their peers, suggesting that the situation is not as dire as it may appear compared to larger companies.
Q: Are you concerned that discontinuing share repurchases when your book value is $0.92 is sending a bad message to prospective shareholders?
A: Kim Thorpe addressed concerns about the cessation of share repurchases, stating that the company is focusing on alternative capital uses that could potentially yield higher returns for shareholders. He emphasized that this strategy aligns with the company's long-term growth goals and is not indicative of a lack of confidence in the company’s stock value.
Q: What types of acquisitions are appealing to GEE Group, and what multiples might you pay for these acquisitions?
A: Derek Dewan, CEO of GEE Group, expressed interest in acquisitions, particularly in existing verticals like healthcare, IT, and accounting. He mentioned that acquisition multiples could range from five to eight times, depending on the business type and potential synergies. Dewan also noted that the company would consider using stock for acquisitions if it was highly valued.
Q: Have you seen signs of improvement in job orders and revenue trends recently?
A: Kim Thorpe and Alex Stuckey, COO of GEE Group, both noted improvements in April's revenue compared to March and the first quarter. They reported positive trends across all verticals and brands, suggesting a recovery might be underway. Stuckey mentioned that the company believes it has reached the bottom of the downturn and is seeing "green shoots" indicating potential growth.
Q: Is the business getting more competitive, and is there overcapacity in the industry?
A: Derek Dewan discussed the competitive nature of the industry, acknowledging that while there is significant competition, the demand for staffing services typically exceeds supply when economic conditions are favorable. He does not believe there is an overcapacity in the industry, citing ongoing consolidation and the relatively small market share held by larger companies.
Q: Are there any plans to look offshore to save on recruiting costs in the US?
A: The company is exploring the addition of an offshore component to enhance recruiting capabilities at a lower cost. This strategy is being considered as a viable option to maintain competitive pricing and service quality in the face of lower domestic demand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
