GEE Group Inc

Management Comments

Derek E. Dewan, Chairman and Chief Executive Officer of GEE Group, commented, “We are in the midst of a very difficult macroeconomic environment that has severely impacted client demand for the use of contingent labor and permanent hires. These conditions have negatively impacted the number of job orders received and the number 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 outlook is mixed as to when these conditions may be expected to definitively subside. However, we are seeing some positive leading indicators in the current quarter and are hopeful for continuing improvement of the demand environment. Revenues and orders for the month of April were up as was our metric for revenue per billing day. Although revenues and orders have been significantly down so far in 2024, we have nonetheless continued to maintain very good client retention, which was at 90% and above with regard to our largest accounts, during March and April 2024, as compared with the same months in 2023. And like many, we remain cautiously optimistic for an upward turn in the current economy and labor conditions sometime in the near future. In the meantime, we are taking aggressive actions to prudently manage our businesses and judiciously add talent internally so that we are fully prepared for the eventual recovery. At the same time, we remain prepared to move aggressively to take more costs out should present conditions instead continue or worsen in the near-term. Underpinning all our efforts are our people, who are the best in the business at identifying, recruiting and placing the optimal talent to meet our clients' unique and ever-evolving needs, even through economic challenges.”

Mr. Dewan added, “Less than a month ago, we announced the completion of a review of strategic alternatives with the assistance of the investment banking firm, DC Advisory. We are following through with and implementing DC Advisory’s recommendations, which include making prudent investments in both organic and M&A growth. With the Company’s excess cash and available financing, we have been adding and training new professional producers and revving up GEE Group’s sales initiatives; and working on moving forward with our M&A target list and socializing with several targets at this stage.

We paused the Company’s share repurchases on December 31, 2023, having purchased 6.1 million shares of common stock, or just over 5% of our outstanding shares at the beginning of the program. For now, our Board and management have determined that it is prudent to discontinue share repurchases, at least until we gain more clarity on when the market conditions for the staffing industry will improve. Share repurchases will always be considered as a part of our capital allocation strategy and as a bona fide alternative use of our excess capital, if and when prudent. However, in the context of our overall growth strategy and goals it is not, by itself, a long-term growth strategy. Evaluation of alternative uses of GEE Group's capital is an on-going priority and process and decisions always will be made with the objectives being optimizing growth in shareholder value and maximizing shareholder returns.”