GEE : Conference Call Transcript Q3 2023

GEE Group Inc. (NYSE American: JOB) Fiscal Third Quarter Ended June 30, 2023

Earnings and Update Webcast Conference Call: Prepared Remarks

Tuesday, August 15, 2023, 11:00 AM EDT

Audience Event Link:

https://event.webcasts.com/starthere.jsp?ei=1627834&tp_key=f8239883c1

Company Participants

Derek Dewan - Chairman and Chief Executive Officer

Kim Thorpe - Senior Vice President and Chief Financial Officer

Intro - Derek Dewan

Hello, and welcome to the GEE Group fiscal 2023 third quarter ended June 30, 2023 earnings and update webcast conference call. I'm Derek Dewan, Chairman and Chief Executive Officer of GEE Group, and 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.

Derek Dewan

It is our pleasure to share with you GEE Group's results for the 2023 fiscal third quarter ended June 30, 2023, and provide you with our outlook for the remainder of the 2023 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 judgments 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 Monday's earnings press release and our most recent Form 10-Q,10-K 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.

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GEE Group Inc. (NYSE American: JOB) Fiscal Third Quarter Ended June 30, 2023

Earnings and Update Webcast Conference Call: Prepared Remarks

Tuesday, August 15, 2023, 11:00 AM EDT

Audience Event Link:

https://event.webcasts.com/starthere.jsp?ei=1627834&tp_key=f8239883c1

During this presentation, we also will talk about some non-GAAP financial measures. Reconciliations and explanations of the non-GAAP financial 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 and 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.

We once again achieved very good results in the fiscal 2023 third quarter beginning with consolidated revenues of $38.2 million. Our consolidated gross profit and gross margin were $13.7 million, and 35.8%, respectively. Our consolidated non-GAAP adjusted EBITDA for the fiscal 2023 third quarter was $2.1 million. We achieved consolidated net income of $7.9 million or $0.07 per diluted share, for our fiscal 2023 third quarter. As Kim will explain further, the prior fiscal year's third quarter and year to date results were well above normal due to record high demand for direct hire placement services, which is why we did not beat last year's numbers. Fiscal 2023's performance so far still compares favorably taking into account the operating environment, and particularly, in terms of the significant growth we achieved in our combined professional IT contract businesses and brands.

Before I turn it over to Kim, I would like to share some important achievements and milestones during the quarter. First, the June 2023 quarter was our eighth consecutive quarter of profitability and free cash generation since we completed our restructuring and deleveraging initiatives in June 2021. Our operating performance and financial results have been on par with and better in some

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GEE Group Inc. (NYSE American: JOB) Fiscal Third Quarter Ended June 30, 2023

Earnings and Update Webcast Conference Call: Prepared Remarks

Tuesday, August 15, 2023, 11:00 AM EDT

Audience Event Link:

https://event.webcasts.com/starthere.jsp?ei=1627834&tp_key=f8239883c1

respects, that our larger industry peers, led by significant growth in our IT brands and positions us well for future growth and further increasing shareholder value. Our performance through the June 2023 quarter also allowed us to recognize a deferred tax benefit of $6.8 million. This event alone added approximately $0.06 to this quarter's earnings per share. Kim will cover this very positive development in a few moments.

We implemented our $20 million share repurchase program in late-April 2023, which now comprises a key component of our capital allocation plans. As of June 30, 2023, we had repurchased 870 thousand of our common shares and, to date, we have repurchased nearly 1.5 million JOB shares. At current prices, we intend to continue share repurchases and also are working on enhancements to the repurchase program.

I want to assure everyone that we fully recognize our stock is presently undervalued and has substantial room to grow. As a matter of fact, most publicly traded staffing firms, are trading well below market indices and their 52-week highs due to environmental concerns and, therefore, we believe our entire industry group, including JOB, has tremendous upside potential. Measuring forward from the time we announced the funding of our follow-on offering on April 19, 2021, GEE Group stock has outperformed most of its public staffing industry peers, including several of the largest players.

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GEE Group Inc. (NYSE American: JOB) Fiscal Third Quarter Ended June 30, 2023

Earnings and Update Webcast Conference Call: Prepared Remarks

Tuesday, August 15, 2023, 11:00 AM EDT

Audience Event Link:

https://event.webcasts.com/starthere.jsp?ei=1627834&tp_key=f8239883c1

Finally, before I turn it over to Kim, I want to once again thank our wonderful dedicated people. They work extremely hard every day to ensure that our clients get the very best service. They are the key factor in the outstanding performance GEE Group achieved in fiscal 2022, and so far in fiscal 2023, and will continue to be the most important driver of our Company's future success.

At this time, I'll turn the call over to our CFO, Kim Thorpe, who will further elaborate on our fiscal 2023 third quarter results. Kim.

Kim Thorpe

Thank you, Derek, and good morning. Our consolidated revenues for the three and nine-months ended June 30, 2023 were $38.2 million and $118.2 million, which were lower overall, in comparison with the comparable fiscal 2022 periods. The lower fiscal 2023 revenues were mainly attributable to 2022's record high performance in direct hire placement revenues. Despite this and the headwinds we've faced so far in fiscal 2023, there are some notable positive results, including substantive growth in our professional contract services businesses, led by our IT brands. Our financial performance so far in fiscal 2023 also is on par and better in several respects, with that of other publicly traded staffing companies and we remain reasonably optimistic about performance for the remainder of the fiscal year.

Professional and industrial contract staffing services revenues for fiscal 2023's third quarter were $33.0 million, which is near level, as compared to fiscal 2022's third quarter contract staffing services revenue. Professional contract services revenue, our largest contract services segment, represents 90% of all contract services revenue, and 78% of consolidated revenue, and increased

$0.8 million, or 3%, quarter over quarter. The bright spots in this comparison were that our

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GEE Group Inc. (NYSE American: JOB) Fiscal Third Quarter Ended June 30, 2023

Earnings and Update Webcast Conference Call: Prepared Remarks

Tuesday, August 15, 2023, 11:00 AM EDT

Audience Event Link:

https://event.webcasts.com/starthere.jsp?ei=1627834&tp_key=f8239883c1

professional FA&O (finance, accounting and office) and IT contract services revenues both grew in the quarter, with IT revenues achieving 9% growth year to date. IT contract services has now grown to 59% of all professional services contract revenue and IT direct hire and contract services revenue combined represented 49% of consolidated revenue.

Direct hire placement revenue for the fiscal 2023 third quarter was $5.2 million, compared with the fiscal 2022 third quarter revenue of $8.0 million. As Derek and I mentioned earlier, fiscal 2022 was a record high year for direct hire placement services and, in fact, our June 2022 quarter set the record as our highest June quarter ever for direct hire placement services. Our direct hire placement revenue for nine-month period ended June 30, 2023 was $15.8 million.

Industrial staffing services revenues were $3.2 million and represented 8% of total revenue for fiscal 2023's third quarter ended June 30, 2023. We continue to experience growth challenges in our light industrial markets, which we attribute, in part, to the lingering presence of some COVID- 19 holdover relief programs available to workers in Ohio. We believe these programs tend to cause our light industrial temporary workers to moderate or reduce their work hours in order to balance income streams in favor of preserving government subsidized benefits which they may lose if their earned income is too high. Recent inflation also has led us to increase hourly wages and benefits for contingent workers in our light industrial business in Ohio. These conditions also increase competition among staffing firms in Ohio for laborers to fill temporary staffing job orders. We are actively introducing new sales and recruiting programs to help attract and retain candidates and restore growth in our industrial business. We also have implemented price increases in Ohio,

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