GEE Group Inc

Previous wording

The Company markets its services using the trade names General Employment Enterprises, Omni One, Ashley Ellis, Agile Resources, Scribe Solutions Inc., Access Data Consulting Corporation, Paladin Consulting Inc., SNI Companies (including Staffing Now, Accounting Now, and Certes), Triad Personnel Services and Triad Staffing. As of December 31, 2023, we operated from locations in eleven (11) states, including twenty-six (26) branch offices in downtown or suburban areas of major U.S. cities and four (4) additional U.S. locations utilizing local staff members working remotely. We have offices or serve markets remotely, as follows; (i) one office in each of Connecticut, Illinois, Minnesota, and New Jersey, and one remote local market presence in Virginia; (ii) two offices each in Georgia and Massachusetts; (iii) three offices in Colorado; (iv) two offices and two additional local market presences in Texas; (v) six offices and one additional local market presence in Florida; and (vi) seven offices in Ohio.

Current wording

The Company markets its services using the trade names General Employment Enterprises, Omni One, Ashley Ellis, Agile Resources, Scribe Solutions Inc., Access Data Consulting Corporation, Paladin Consulting Inc., SNI Companies (including Staffing Now, Accounting Now, and Certes), Triad Personnel Services and Triad Staffing. As of March 31, 2024, we operated from locations in eleven (11) states, including twenty-five (25) branch offices in downtown or suburban areas of major U.S. cities and three (3) additional U.S. locations utilizing local staff members working remotely. We have offices or serve markets remotely, as follows; (i) one office in each of Connecticut, Georgia, Illinois, Minnesota, and New Jersey, and one remote local market presence in Virginia; (ii) two offices in Massachusetts; (iii) three offices in Colorado; (iv) two offices and one additional local market presence in Texas; (v) six offices and one additional local market presence in Florida; and (vi) seven offices in Ohio.

Previous wording

Results for the first fiscal quarter ended December 31, 2023 declined from those of the comparable first fiscal quarter of 2023, ended December 31, 2022, primarily as the result of economic and labor market uncertainties and instability experienced throughout 2023. These conditions have negatively impacted the number of orders and candidates available to fill orders for placements across our businesses. Likewise, the U.S. Staffing Industry, as a whole, has experienced declines in overall performance at the industry level and the industry outlook is for these conditions to continue during at least the first half of calendar year 2024. We also expect our future near-term results to be similarly impacted, in which case our results for the full fiscal year ending September 30, 2024, also may be expected to be lower than those reported for our most recent fiscal year ended September 30, 2023, accordingly.

Current wording

Results for the second quarter and first half of fiscal 2024, ended March 31, 2024, have declined from those of the comparable second quarter and first half of fiscal 2023, primarily as the result of negative economic and labor market conditions that began in 2023 and have continued into 2024. These conditions have negatively impacted the number of job orders received and the numbers of qualified candidates available to fill orders for placements across all of our lines of business. Likewise, the U.S. Staffing Industry, as a whole, has experienced declines in overall volume and financial performance and the industry outlook is mixed as to when these conditions may be expected to definitively subside.

Previous wording

Contract staffing services contributed $27,576 or approximately 90% of consolidated revenue and direct hire placement services contributed $3,055, or approximately 10%, of consolidated revenue for the three months ended December 31, 2023. This compares to contract staffing services revenue of $35,401, or approximately 86%, of consolidated revenue and direct hire placement revenue of $5,747, or approximately 14%, of consolidated revenue for the three months ended December 31, 2022.

Current wording

Contract staffing services contributed $25,595 or approximately 91% of consolidated revenue and direct hire placement services contributed $2,455, or approximately 9%, of consolidated revenue for the three months ended March 31, 2024. This compares to contract staffing services revenue of $33,976, or approximately 87%, of consolidated revenue and direct hire placement revenue of $4,883, or approximately 13%, of consolidated revenue for the three months ended March 31, 2023.

Previous wording

Economic weakness and uncertainties, including persistent inflation and the possibility of recession, continued to negatively impact the Company’s results through the three months ended December 31, 2023. Professional contract staffing services revenues decreased $6,701, or 21%, as compared to the three months ended December 31, 2022. Industrial staffing services for the quarter decreased by $1,124, or 31%, mainly due to decreases in orders from clients and competition for orders and temporary labor to fill orders, accordingly.

Current wording

Economic weakness and uncertainties, including persistent inflation and the possibility of recession, continued to negatively impact the Company’s results through the three months ended March 31, 2024. Professional contract staffing services revenues decreased $7,617, or 25%, as compared to the three months ended March 31, 2023. Industrial staffing services for the quarter decreased by $764, or 24%, mainly due to decreases in orders from clients and competition for orders and temporary labor to fill orders, accordingly.

Previous wording

Direct hire placement revenue for the three months ended December 31, 2023 decreased by $2,692, or approximately 47%, over the three months ended December 31, 2022. Direct hire opportunities tend to be highly cyclical and demand dependent, tending to rise during economic recovery and decline during downturns. Demand for the Company’s direct hire services was higher in the first quarter of fiscal 2023, following record highs in fiscal 2022, driven by post-COVID employment recovery trends at that time, and is down for the three months ended December 31, 2023 due to challenging economic conditions. Management believes that the contract and direct hire services performance challenges experienced by the Company since 2022 are also being experienced in the broader U.S. staffing industry.

Current wording

Direct hire placement revenue for the three months ended March 31, 2024 decreased by $2,428, or approximately 50%, over the three months ended March 31, 2023. Direct hire opportunities tend to be highly cyclical and demand dependent, tending to rise during economic recovery and decline during downturns. Demand for the Company’s direct hire services was higher in the first quarter of fiscal 2023, following record highs in fiscal 2022, driven by post-COVID employment recovery trends at that time, and is down for the three months ended March 31, 2024 due to challenging economic conditions.

Previous wording

Cost of contract services includes wages and related payroll taxes and employee benefits of the Company's contract services employees, and certain other contract employee-related costs, while working on contract assignments. Cost of contract services for the three months ended December 31, 2023 decreased by approximately 22% to $20,895 compared to $26,757 for the three months ended December 31, 2022. The $5,862 overall decrease in cost of contract services is consistent with the decrease in revenues as discussed above.

Current wording

Cost of contract services includes wages and related payroll taxes and employee benefits of the Company's contract services employees, and certain other contract employee-related costs, while working on contract assignments. Cost of contract services for the three months ended March 31, 2024 decreased by approximately 25% to $19,283 compared to $25,643 for the three months ended March 31, 2023. The $6,360 overall decrease in cost of contract services is consistent with the decrease in revenues as discussed above.

Previous wording

The Company’s combined gross profit margin, including direct hire placement services (recorded at 100% gross margin) for the three-month period ended December 31, 2023 was approximately 31.8% as compared with approximately 35.0% for the three-month period ended December 31, 2022.

Current wording

The Company’s combined gross profit margin, including direct hire placement services (recorded at 100% gross margin) for the three-month periods ended March 31, 2024 and 2023 were approximately 31.3% and 34.0%, respectively.

Previous wording

The Company’s SG&A for the three months ended December 31, 2023 decreased by $2,202 as compared to the three months ended December 31, 2022. SG&A for the three months ended December 31, 2023, as a percentage of revenues, was approximately 34.6% compared to approximately 31.1% for the three months ended December 31, 2022. The increase in SG&A expenses as a percentage of revenues during the three-month period ended December 31, 2023, was primarily attributable to the declines in revenues in relation to the level of fixed SG&A expenses, including fixed personnel-related expenses, occupancy costs, job boards and applicant tracking systems, and to the presence of certain non-cash and/or non-operational and other expenses described below.

Current wording

The Company’s SG&A for the three-month period ended March 31, 2024 decreased by $1,699 as compared to the three-month period ended March 31, 2023. SG&A for the three-month period ended March 31, 2024, as a percentage of revenues, were approximately 35.7% compared to approximately 30.1% for the three-month period ended March 31, 2023. The increase in SG&A expenses as a percentage of revenues during the three-month period ended March 31, 2024, was primarily attributable to the declines in revenues in relation to the level of fixed SG&A expenses, including fixed personnel-related expenses, occupancy costs, job boards and applicant tracking systems, and to the presence of certain non-cash and/or non-operational and other expenses described below.

Previous wording

Amortization expense was $720 for both three-month periods ended December 31, 2023 and 2022. Depreciation expense was $84 and $101 for the three months ended December 31, 2023, and 2022, respectively.

Current wording

Amortization expense was $719 for both three-month periods ended March 31, 2024 and 2023. Depreciation expense was $77 and $98 for the three months ended March 31, 2024, and 2023, respectively.

Previous wording

The income (loss) from operations was $(1,674) and $762 for the three months ended December 31, 2023 and 2022, respectively. This decrease is consistent with the decrease in revenues and gross margins, especially in direct hire placements, as discussed above.

Current wording

Income (loss) from operations was $(2,035) and $694 for the three-month periods ended March 31, 2024 and 2023, respectively. This decrease is consistent with the decrease in revenues, especially in direct hire placements, as discussed above.

Previous wording

Interest expense was $71 and $73 for the three months ended December 31, 2023 and 2022, respectively, and is mainly attributable to unused availability and administrative fees on the Company’s CIT Facility.

Current wording

Interest expense was $67 and $73 for the three-month periods ended March 31, 2024 and 2023, respectively, and is mainly attributable to unused availability and administrative fees on the Company’s Facility.

Previous wording

Interest income earned was $190 and $38 for the three-month periods ended December 31, 2023 and 2022, respectively. Interest income is earned on cash balances held in the Company’s two brokerage accounts.

Current wording

Interest income earned was $179 and $95 for the three-month periods ended March 31, 2024 and 2023, respectively. Interest income is earned on cash balances held in the Company’s two brokerage accounts.

Previous wording

The Company did not recognize an income tax benefit for the three months ended December 31, 2023 because the Company is forecasting pre-tax income for the full year so the tax benefit is not expected to be realized during the current year in accordance with the provisions of ASC Topic 740,Income Taxes. The Company recognized income tax expense of $73 for the three months ended December 31, 2022. Our effective tax rate for the three months ended December 31, 2022 is lower than the statutory rate primarily due to the effect of the change in valuation allowance on the net DTA position.

Current wording

The Company recognized income tax (benefit) expense of $(915) and $58 for the three-month periods ended March 31, 2024 and 2023, respectively. Our effective tax rate for the three-month period ended March 31, 2024 is higher than the statutory tax rate primarily due to the effect of federal tax credits and state and local taxes. Our effective tax rate for the three-month period ended March 31, 2023 are lower than the statutory tax rate primarily due to the effect of the change in valuation allowance on the net DTA position as the company maintained a full valuation allowance during that period..

Previous wording

The Company’s net income (loss) was $(1,555) and $654 for the three months ended December 31, 2023 and 2022, respectively. The decrease of $2,209 is primarily the result of the decrease in revenues and gross margins for the three months ended December 31, 2023 compared with the three months ended December 31, 2022, as explained in the preceding paragraphs.

Current wording

The Company’s net income (loss) was $(1,008) and $658 for the three-month periods ended March 31, 2024 and 2023, respectively. The decrease of $1,666 is primarily the result of the decrease in revenues for the three months ended March 31, 2024 compared with the three months ended March 31, 2023, as explained in the preceding paragraphs.

Previous wording

In the professional contract staffing services segment, the gross margin (excluding direct placement services) was approximately 25.0% for three-month period ended December 31, 2023 as compared with approximately 25.4% for the three-month period ended December 31, 2022. The decrease in professional contract staffing services gross margin is impacted by the mix of business and respective spreads, and to a lesser extent, increases in contractor pay and other employment costs associated with the recent rise in inflation resulting in some spread compression.

Current wording

In the professional contract services segment, the gross margin (excluding direct hire placement services) was approximately 25.3% for six-month period ended March 31, 2024 compared to approximately 25.4% for the six-month period ended March 31, 2023. The slight decrease in professional contract staffing services gross margin is due, in part, to increases in contractor pay and other employment costs associated with the recent rise in inflation resulting in some spread compression.

Previous wording

SG&A includes certain non-cash costs and expenses incurred related to acquisition, integration, restructuring and other non-recurring activities, such as certain corporate legal and general expenses associated with capital markets activities, that either are not directly associated with core business operations or have been eliminated on a going forward basis. These costs were $548 and $44 for the three months ended December 31, 2023 and 2022, respectively, and include mainly expenses associated with former closed and consolidated locations, and personnel costs associated with eliminated positions, specifically including a separation agreement that includes severance totaling $300 for the three months ended December 31, 2023.

Current wording

SG&A includes certain non-cash costs and expenses incurred related to acquisition, integration, restructuring and other non-recurring activities, such as certain corporate legal and general expenses associated with capital markets activities, that either are not directly associated with core business operations or have been eliminated on a going forward basis. These costs were $1,001 and $110 for the six-month periods ended March 31, 2024 and 2023, respectively, and include mainly expenses associated with legal proceedings, former closed and consolidated locations, advisory fees, and personnel costs associated with eliminated positions.

Previous wording

As of December 31, 2023, the Company had working capital of $28,123 compared to $30,290 as of September 30, 2023. The decrease in net working capital is mainly attributable to the use of cash to purchase treasury stock and the effects of lower business volume on other components of working capital during the three-months ended December 31, 2023. Cash flows used in operating activities during the three-months ended December 31, 2022 included the second and final installment payment of deferred payroll taxes under the CARES Act from fiscal 2020 of $1,847.

Current wording

As of March 31, 2024, the Company had $21,200 of cash, which was a decrease of $1,271 from $22,471 as of September 30, 2023. As of March 31, 2024, the Company had working capital of $27,439 compared to $30,290 of working capital as of September 30, 2023. The decrease in working capital is mainly attributable to the use of cash to purchase treasury stock and the effects of lower business volume on other components of working capital during the six-months ended March 31, 2024. Cash flows provided by operating activities during the six-months ended March 31, 2023 included the second and final installment payment of deferred payroll taxes under the CARES Act from fiscal 2020 of $1,847.

Previous wording

The primary uses of cash for investing activities were for the acquisition of property and equipment, principally information technology equipment, during the three-month periods ended December 31, 2023 and 2022. Investing activities represent capital expenditures and did not include any major capital expenditures or capital improvements during either of the three-month periods ended December 31, 2023 and 2022.

Current wording

The primary uses of cash for investing activities were for the acquisition of property and equipment, principally information technology equipment, during the six-month periods ended March 31, 2024 and 2023. Investing activities represent capital expenditures and did not include any major capital expenditures or capital improvements during either of the six-month periods ended March 31, 2024 and 2023.

Previous wording

The cash flows used in financing activities were for purchases of treasury stock during the three-months ended December 31, 2023, and payments made on finance leases during the three-month periods ended December 31, 2023 and 2022.

Current wording

The cash flows used in financing activities were for purchases of treasury stock during the six-months ended March 31, 2024, and payments made on finance leases during the six-month periods ended March 31, 2024 and 2023.

Previous wording

The Company had $9,348 in availability for borrowings under its CIT facility as of December 31, 2023. There were no outstanding borrowings on the CIT Facility as of December 31, 2023, or September 30, 2023, except for certain accrued carrying fees and costs, which are included in other current liabilities in the accompanying unaudited condensed consolidated balance sheets.

Current wording

The Company had $8,165 in availability for borrowings under its Facility as of March 31, 2024. There were no outstanding borrowings on the Facility as of March 31, 2024, or September 30, 2023, except for certain accrued carrying fees and costs, which are included in other current liabilities in the accompanying unaudited condensed consolidated balance sheets.

Previous wording

On April 27, 2023, the Company’s Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $20 million of the Company’s currently outstanding shares of common stock. The share repurchase program continued through December 31, 2023. The repurchase program did not obligate the Company to repurchase any number of shares of common stock. The share repurchase program was conducted in accordance with Rules 10b-5 and 10b-18 of the Securities Exchange Act of 1934, as amended. Subject to applicable rules and regulations, shares of common stock were purchased from time to time in the open market transactions and in amounts the Company deemed appropriate, based on factors such as market conditions, legal requirements, and other business considerations. During the three-months ended December 31, 2023, the Company repurchased 2,717 shares of its common stock at a total cost of $1,575. As of December 31, 2023, the Company repurchased 6,128 shares in aggregate (accounting for approximately 5.4% of our issued and outstanding common shares immediately prior to the program).

Current wording

On April 27, 2023, the Company’s Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $20 million of the Company’s currently outstanding shares of common stock. The share repurchase program continued through December 31, 2023. The repurchase program did not obligate the Company to repurchase any number of shares of common stock. The share repurchase program was conducted in accordance with Rules 10b-5 and 10b-18 of the Securities Exchange Act of 1934, as amended. Subject to applicable rules and regulations, shares of common stock were purchased from time to time in the open market transactions and in amounts the Company deemed appropriate, based on factors such as market conditions, legal requirements, and other business considerations. During the six-months ended March 31, 2024, the Company repurchased 2,717 shares of its common stock at a total cost of $1,575. Upon conclusion of the share repurchase program, as of December 31, 2023, the Company repurchased 6,128 shares in aggregate (accounting for approximately 5.4% of our issued and outstanding common shares immediately prior to the program).

Previous wording

All the Company’s office facilities are leased. Minimum lease payments under all the Company’s lease agreements for the twelve-month period commencing after the close of business on December 31, 2023, are approximately $1,541. There are no minimum debt service principal payments due during the twelve-month period commencing after the close of business on December 31, 2023.

Current wording

All the Company’s office facilities are leased. Minimum lease payments under all the Company’s lease agreements for the twelve-month period commencing after the close of business on March 31, 2024, are approximately $1,561.