PresentationDerek DewanChairman & CEO Ladies and gentlemen, I am Derek E. Dewan, Chairman of the Board of Directors of GEE Group, Inc. and Chairman of this Annual Meeting. I hereby call this Annual Meeting of Stockholders to order. On behalf of my fellow officers and directors, it is my pleasure to welcome you to this annual meeting. Mr. Kim Thorpe, Chief Financial Officer and Corporate Secretary, is virtually attending this Annual Meeting of Stockholders. Also attending are GEE Group's Board members. We a ...

Financial Data and Key Metrics Changes - Consolidated revenues for Q3 2025 were $24.5 million, down 9.1% from the prior year period, and year-to-date revenues were $73 million, down 10.1% [6][11] - Gross profits for the quarter were $8.7 million with a gross margin of 35.4%, compared to $9.2 million and 34.1% in the prior year quarter [7][12] - The net loss from continuing operations for the quarter was $400,000, or $0.00 per diluted share, while the year-to-date loss was $34 million, or $0.31 per diluted share [7][14] - Non-GAAP adjusted EBITDA was negative $25,000 for the quarter and negative $918,000 year-to-date, showing improvements compared to the prior year [7][15] Business Line Data and Key Metrics Changes - Professional contract staffing services revenues for Q3 were $21.3 million, down 10.1% year-over-year, and year-to-date revenues were $64.3 million, down 10.1% [11] - Direct hire revenues for the quarter were $3.2 million, near breakeven, and year-to-date revenues were $8.7 million, also near breakeven [11] Market Data and Key Metrics Changes - The staffing industry is facing significant challenges due to macroeconomic uncertainties, interest rate volatility, and inflation, leading to a cooling effect on U.S. employment [4][5] - Many clients have paused hiring initiatives and focused on retaining existing employees, resulting in fewer job orders for staffing services [5] Company Strategy and Development Direction - The company is focusing on streamlining core operations, improving productivity, and integrating AI technology into recruiting and sales processes [8][14] - There is a renewed focus on Vendor Management Systems (VMS) and Managed Service Provider (MSP) business models to enhance operational efficiency [8][14] - The company is preparing for a recovery in the labor market and anticipates increased demand from existing customers [9][18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about navigating current challenges and emphasized the importance of revenue growth and cost reduction [9][18] - The company is well-positioned with a strong balance sheet and substantial liquidity, allowing for potential growth and acquisitions in the future [9][16] Other Important Information - The company has paused share repurchases since December 31, 2023, but considers it a potential future strategy [9][18] - The liquidity position remains strong with $18.6 million in cash and no outstanding debt [16] Q&A Session Summary Question: Update on the sale of Triad - The company will update the website regarding the sale of Triad and other current activities [19] Question: Capital allocation strategy - The company is considering both acquisitions and share repurchases, with a focus on restoring positive cash flow before making decisions [21][24] Question: Status of M&A target list - Several potential deals are under consideration, but the company is cautious due to the current stagnant market conditions [22][24] Question: Competitors' performance comparison - Competitors are facing similar challenges, with some emphasizing consulting services to buffer declines in traditional staffing roles [34][36] Question: Impact of AI on staffing demand - AI is seen as both a challenge and an opportunity, with the company focusing on high-demand skill sets while adapting to changes in the labor market [30][42]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) GEE Group reported declining Q3 and YTD FY2025 revenues, improved gross margins, reduced SG&A, a net loss from continuing operations, and maintained strong liquidity Q3 & YTD FY2025 Key Financial Metrics (Continuing Operations) | Metric | Q3 2025 | Q3 2024 | YoY Change | YTD 2025 | YTD 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Consolidated Revenues** | $24.5 million | $27.0 million | -9% | $73.0 million | $80.8 million | -10% | | **Gross Profit** | $8.7 million | $9.2 million | -5% | $25.0 million | $27.0 million | -7% | | **Gross Margin** | 35.4% | 34.1% | +1.3 percentage points | 34.2% | 33.4% | +0.8 percentage points | | **SG&A Expenses** | $9.0 million | $9.8 million | -8% | $26.7 million | $29.5 million | -9% | | **Loss from Continuing Ops** | $(0.4) million | $(18.1) million | N/A | $(34.0) million | $(20.5) million | N/A | | **Adjusted EBITDA** | $(25) thousand | $(329) thousand | N/A | $(918) thousand | $(1.0) million | N/A | - The decrease in consolidated revenues was primarily attributed to volatile macroeconomic conditions, high interest rates, and client caution, leading to elongated hiring cycles and fewer job orders; artificial intelligence (AI) replacing certain tasks contributed to a lesser extent[4](index=4&type=chunk) - Gross margins improved year-over-year for both the three and nine-month periods, mainly due to a higher mix of direct hire placement revenues, which have a **100% gross margin**[4](index=4&type=chunk) - The Industrial Staffing Services segment was sold during the quarter and its results are reclassified as discontinued operations, with the sale resulting in a net gain of **$133 thousand**[1](index=1&type=chunk)[5](index=5&type=chunk) Balance Sheet and Liquidity as of June 30, 2025 | Metric | Value | | :--- | :--- | | Cash Balances | $18.6 million | | ABL Credit Facility Availability | $6.6 million (undrawn) | | Net Working Capital | $24.1 million | | Current Ratio | 4.2 | | Long-Term Debt | Zero | | Shareholders' Equity | $50.4 million | | Net Book Value per Share | $0.46 | | Net Tangible Book Value per Share | $0.23 | [Management Commentary and Business Outlook](index=2&type=section&id=Management%20Commentary%20and%20Business%20Outlook) Management focuses on adapting the business plan with new revenue opportunities, AI tools, and expense reduction, expecting gradual demand improvement - CEO Derek E. Dewan stated the company is adjusting its business plan to navigate the challenging environment by targeting new revenue, using AI to boost efficiency, and cutting expenses[10](index=10&type=chunk) - The company has implemented and incorporated AI into its strategic plan to enhance recruiting and sales, and to support clients' own AI implementation needs[10](index=10&type=chunk) - The demand environment for the remainder of 2025 is expected to be volatile but gradually improve; the company plans to increase market share through several initiatives[12](index=12&type=chunk) - Aggressive AI-assisted sales process - Increased use of offshore recruiting to maximize fill rates - Expansion into value-added services like HR consulting, IT statement of work (SOW) projects, and resource process outsourcing (RPO) - On January 3, 2025, the company acquired Hornet Staffing, Inc. to enhance its ability to compete for business from Fortune 1000 companies, leveraging Hornet's expertise with MSPs and VMSs and its offshore recruiting team[11](index=11&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) The company uses non-GAAP measures like Adjusted EBITDA and free cash flow for performance evaluation, with detailed GAAP reconciliations provided - The company uses non-GAAP measures like adjusted net loss, EBITDA, adjusted EBITDA, and free cash flow for internal evaluation of operating performance, financial planning, and other management purposes[15](index=15&type=chunk) Reconciliation of Net Loss to Non-GAAP Adjusted EBITDA (in thousands) | Description | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss from continuing operations | $(401) | $(18,105) | $(34,041) | $(20,541) | | Non-cash goodwill impairment | - | $14,201 | $22,000 | $14,201 | | **Non-GAAP EBITDA** | **$(270)** | **$(524)** | **$(1,728)** | **$(2,533)** | | **Non-GAAP Adjusted EBITDA** | **$(25)** | **$(329)** | **$(918)** | **$(1,028)** | Reconciliation to Non-GAAP Free Cash Flow (in thousands) | Description | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,884) | $(1,117) | | Acquisition of property and equipment | $(16) | $(58) | | **Non-GAAP free cash flow** | **$(1,900)** | **$(1,175)** | [Financial Statements](index=5&type=section&id=Financial%20Statements) This section presents GEE Group's unaudited consolidated financial statements, including Q3 and YTD FY2025 statements of operations and balance sheets [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) GEE Group's net revenues decreased for the nine months ended June 30, 2025, resulting in a significant loss from continuing operations due to a goodwill impairment Consolidated Statements of Operations Highlights (in thousands) | Account | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net Revenues** | **$24,523** | **$27,048** | **$73,043** | **$80,774** | | Contract staffing services | $21,301 | $23,761 | $64,310 | $71,977 | | Direct hire placement services | $3,222 | $3,287 | $8,733 | $8,797 | | **Gross Profit** | **$8,681** | **$9,229** | **$24,967** | **$26,958** | | Goodwill impairment charge | $0 | $14,201 | $22,000 | $14,201 | | **Loss from Operations** | **$(544)** | **$(20,717)** | **$(24,537)** | **$(24,303)** | | **Loss from Continuing Operations** | **$(401)** | **$(18,105)** | **$(34,041)** | **$(20,541)** | | **Consolidated Net Loss** | **$(423)** | **$(19,286)** | **$(34,234)** | **$(21,849)** | | **Diluted EPS (Continuing Ops)** | **$(0.00)** | **$(0.17)** | **$(0.31)** | **$(0.19)** | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, GEE Group's total assets decreased to $60.6 million, primarily due to reduced goodwill, while maintaining strong cash and shareholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Current Assets** | | | | Cash | $18,622 | $20,735 | | Accounts receivable, net | $11,752 | $12,751 | | Total current assets | $31,678 | $35,401 | | **Non-Current Assets** | | | | Goodwill | $24,762 | $46,008 | | **Total Assets** | **$60,564** | **$95,902** | | **Current Liabilities** | | | | Total current liabilities | $7,566 | $9,322 | | **Total Liabilities** | **$10,169** | **$11,691** | | **Total Shareholders' Equity** | **$50,395** | **$84,211** | | **Total Liabilities & Equity** | **$60,564** | **$95,902** | [Corporate Information](index=2&type=section&id=Corporate%20Information) GEE Group Inc. provides specialized staffing solutions and will host an investor webcast to discuss results, with standard forward-looking statement disclaimers - GEE Group provides professional staffing services in information technology, engineering, finance, accounting, and healthcare through brands like Access Data Consulting, Agile Resources, Omni-One, Paladin Consulting, Scribe Solutions, and various SNI brands[30](index=30&type=chunk) - The company will host an investor webcast and conference call on Thursday, August 14, 2025, at 11 a.m. EDT to discuss the fiscal 2025 third quarter and YTD results[8](index=8&type=chunk) - The press release contains forward-looking statements subject to risks and uncertainties, and readers are advised to consult the company's SEC filings for a more detailed understanding of these risk factors[31](index=31&type=chunk)[32](index=32&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201%2E%20Financial%20Statements%20%28unaudited%29) The unaudited condensed consolidated financial statements for the period ended June 30, 2025, show a decrease in total assets to $60.6 million from $95.9 million at September 30, 2024, primarily due to a significant goodwill impairment, with a consolidated net loss of $0.4 million for Q3 2025, an improvement from a $19.3 million loss in Q3 2024, but a $34.2 million net loss for the nine months ended June 30, 2025, driven by a $22.0 million goodwill impairment and a $9.7 million income tax expense related to a valuation allowance on deferred tax assets, alongside key events including the acquisition of Hornet Staffing, Inc. in January 2025 and the sale of the Industrial Segment in June 2025, now treated as a discontinued operation [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | September 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash | $18,622 | $20,735 | $(2,113) | | Goodwill | $24,762 | $46,008 | $(21,246) | | Total Assets | $60,564 | $95,902 | $(35,338) | | Total Liabilities | $10,169 | $11,691 | $(1,522) | | Total Shareholders' Equity | $50,395 | $84,211 | $(33,816) | - Total assets decreased significantly, primarily driven by a reduction in goodwill from **$46.0 million** to **$24.8 million**[9](index=9&type=chunk)[10](index=10&type=chunk) - Shareholders' equity also saw a substantial decline, largely due to an increase in the accumulated deficit from net losses[9](index=9&type=chunk)[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Summary (in thousands) | Metric | Q3 2025 | Q3 2024 | 9 Months 2025 | 9 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $24,523 | $27,048 | $73,043 | $80,774 | | Gross Profit | $8,681 | $9,229 | $24,967 | $26,958 | | Goodwill Impairment | $0 | $14,201 | $22,000 | $14,201 | | Loss from Operations | $(544) | $(20,717) | $(24,537) | $(24,303) | | Consolidated Net Loss | $(423) | $(19,286) | $(34,234) | $(21,849) | | Diluted Loss Per Share | $(0.00) | $(0.18) | $(0.31) | $(0.20) | - Net revenues declined by **9.3% YoY** for the third quarter and **9.6%** for the nine-month period[12](index=12&type=chunk) - The significant improvement in Q3 2025 net loss compared to Q3 2024 is due to the absence of large goodwill and intangible asset impairment charges that were recorded in the prior-year period[12](index=12&type=chunk) - However, a **$22.0 million** goodwill impairment charge was recorded in the nine months ended June 30, 2025, contributing to the larger net loss for that period[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,884) | $(1,117) | | Net cash used in investing activities | $(272) | $(58) | | Net cash used in financing activities | $(50) | $(1,701) | | Net change in cash | $(2,206) | $(2,876) | | Cash at end of period | $18,622 | $19,595 | - For the nine months ended June 30, 2025, cash used in investing activities included **$968 thousand** for a business acquisition (Hornet Staffing), offset by **$712 thousand** in proceeds from the sale of the Industrial Segment[16](index=16&type=chunk) - Cash used in financing activities in the prior year period was significantly higher due to **$1.6 million** in treasury stock purchases[16](index=16&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - On January 3, 2025, the Company acquired Hornet Staffing, Inc. for a total consideration of **$1.5 million**, consisting of **$1.1 million** in cash and **$0.4 million** in promissory notes[21](index=21&type=chunk)[22](index=22&type=chunk)[25](index=25&type=chunk) - The acquisition added **$0.75 million** in goodwill[21](index=21&type=chunk)[22](index=22&type=chunk)[25](index=25&type=chunk) - The company's Industrial Segment was classified as a discontinued operation and sold on June 2, 2025[27](index=27&type=chunk)[28](index=28&type=chunk) - The sale resulted in a pre-tax net gain of **$133 thousand**[27](index=27&type=chunk)[28](index=28&type=chunk) - An interim goodwill impairment assessment as of March 31, 2025, resulted in a non-cash impairment charge of **$22.0 million** for the Professional Services reporting unit[59](index=59&type=chunk) - Due to recent pre-tax book losses, management determined that the company's net deferred tax assets (DTAs) would not be realized, leading to an additional valuation allowance of **$12.4 million** being recorded during the nine months ended June 30, 2025[85](index=85&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the company's recent performance and net loss to adverse trends in the U.S. labor markets, strategically focusing on integrating AI into its operations, leveraging the recent acquisition of Hornet Staffing to expand into the MSP/VMS market, and improving cost efficiencies, with the divestiture of the Industrial Segment aligning with the long-term strategy to focus on professional staffing verticals, despite revenues from continuing operations declining 9% in Q3 2025 and 10% in the first nine months of fiscal 2025 compared to the prior year, reflecting challenging market conditions, while maintaining professional contract services gross margin and implementing cost reduction measures, with adequate liquidity of **$18.6 million** in cash and **$6.6 million** available under its credit facility as of June 30, 2025 [Overview](index=22&type=section&id=Overview) - GEE Group provides permanent and temporary professional staffing services, specializing in IT, accounting, finance, office, engineering, and medical scribes[94](index=94&type=chunk) - The Industrial Staffing segment was sold on June 2, 2025[94](index=94&type=chunk) - The acquisition of Hornet Staffing in January 2025 is intended to broaden the company's footprint in the professional contract staffing market, particularly with managed service providers (MSP) and vendor management systems (VMS)[95](index=95&type=chunk) - The company's long-term business strategy includes both organic growth (winning new clients, cost reduction) and strategic, accretive acquisitions[98](index=98&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) - The net loss of **$0.4 million** for Q3 2025 is attributed to continued adverse U.S. labor market trends, though it has lessened from prior quarters due to cost reductions and the absence of impairment charges in the current quarter[100](index=100&type=chunk) - The company is integrating Artificial Intelligence (AI) into its business strategy, focusing on placing AI talent and leveraging AI in verticals less likely to be disrupted[101](index=101&type=chunk) - The Hornet acquisition is expected to enhance competitiveness in securing business from large users of contingent labor by leveraging its expertise in MSPs/VMSs and its offshore recruiting model, which can reduce operational expenses[103](index=103&type=chunk)[104](index=104&type=chunk) Revenue Comparison: Q3 2025 vs Q3 2024 (in thousands) | Service Line | Q3 2025 | Q3 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Professional contract services | $21,301 | $23,761 | $(2,460) | -10% | | Direct hire placement services | $3,222 | $3,287 | $(65) | -2% | | **Consolidated net revenues** | **$24,523** | **$27,048** | **$(2,525)** | **-9%** | Revenue Comparison: 9 Months 2025 vs 9 Months 2024 (in thousands) | Service Line | 9 Months 2025 | 9 Months 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Professional contract services | $64,310 | $71,977 | $(7,667) | -11% | | Direct hire placement services | $8,733 | $8,797 | $(64) | -1% | | **Consolidated net revenues** | **$73,043** | **$80,774** | **$(7,731)** | **-10%** | - A non-cash goodwill impairment charge of **$22.0 million** was recognized during the nine months ended June 30, 2025, compared to a **$14.2 million** charge in the prior-year period[139](index=139&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Key Liquidity Metrics (in thousands) | Metric | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Cash | $18,622 | $20,828 | | Working Capital | $24,112 | $26,079 | - As of June 30, 2025, the company had no outstanding borrowings and **$6.6 million** of unused capacity available under its **$20 million** revolving credit facility[65](index=65&type=chunk)[153](index=153&type=chunk) - During the nine months ended June 30, 2025, the company used **$1.1 million** in cash for the Hornet acquisition and received **$0.7 million** from the sale of the Industrial Segment[150](index=150&type=chunk)[151](index=151&type=chunk) - Management believes that the company can generate adequate liquidity to meet its obligations for the foreseeable future and at least for the next twelve months[156](index=156&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable to the company for this reporting period - The company has indicated that quantitative and qualitative disclosures about market risk are not applicable[159](index=159&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the nine-month period - Based on an evaluation as of June 30, 2025, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective[159](index=159&type=chunk) - No changes occurred in the company's internal control over financial reporting during the nine-month period ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[160](index=160&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=33&type=section&id=Item%201%2E%20Legal%20Proceedings) The company reports no significant legal proceedings during the period - There are no pending significant legal proceedings to which the Company is a party[88](index=88&type=chunk)[161](index=161&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A%2E%20Risk%20Factors) The company directs investors to the risk factors disclosed in its Annual Report on Form 10-K for the fiscal year ended September 30, 2024, indicating no material changes or new significant risks in the current quarter - The report refers to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024, for a comprehensive understanding of potential risks[162](index=162&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company provides details on its share repurchase program, which was authorized on April 27, 2023, for up to **$20 million** and concluded on December 31, 2023, by which time the company had repurchased **6,128,877 shares**, representing approximately **5.4%** of its outstanding common stock - A share repurchase program, authorizing up to **$20 million** in stock purchases, was active from April 27, 2023, through December 31, 2023[163](index=163&type=chunk) - Upon conclusion of the program, the company had repurchased an aggregate of **6,128,877 shares**, accounting for about **5.4%** of the issued and outstanding common shares prior to the program[164](index=164&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206%2E%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Asset Purchase Agreement for the sale of the Industrial Segment, certifications from the principal executive and financial officers, and Inline XBRL documents - Key exhibits filed with the report include the Asset Purchase Agreement related to the sale of BMCH, Inc. and certifications by the CEO and CFO as required by the Exchange Act[169](index=169&type=chunk)

Financial Data and Key Metrics Changes - Consolidated revenues for the quarter were $24.5 million and $48.5 million year to date, reflecting a decline of 41% respectively from the comparable prior periods [7][13] - Gross profits were $8.4 million with a gross margin of 34.1% for the quarter, and $16.3 million with a gross margin of 33.6% year to date [8][15] - The net loss from continuing operations was $33 million or $0.30 per diluted share for the quarter, and $33.6 million or $0.31 per diluted share year to date, compared to a net loss of $0.9 million or $0.01 per diluted share for the prior year quarter [8][16] Business Line Data and Key Metrics Changes - Professional contract staffing services revenues were $21.5 million for the quarter and $43 million year to date, down 71% respectively from the comparable prior periods [13][14] - Direct hire placement revenues were $3 million for the quarter and $5.5 million year to date, showing a slight increase compared to the prior six-month period [14] Market Data and Key Metrics Changes - The staffing industry is experiencing a cooling effect due to macroeconomic uncertainties, interest rate volatility, and inflation, leading to layoffs and hiring freezes among clients [4][5] - Many client initiatives requiring additional labor have been put on hold, impacting job orders for both temporary help and direct hire placements [5] Company Strategy and Development Direction - The company is focusing on M&A activities, having completed its first transaction in the quarter and evaluating several others [9][10] - There is a renewed focus on integrating AI technology into recruiting and sales processes to enhance productivity and efficiency [19] - The company aims to restore profitability by the latter part of 2025 or early 2026 through expense reduction and revenue growth [10][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging conditions in the hiring environment and is taking aggressive actions to mitigate losses and prepare for recovery [21] - The company remains optimistic about long-term growth and is positioning itself to capitalize on future demand once market conditions improve [19][21] Other Important Information - The company has paused share repurchases as of December 31, 2023, having repurchased just over 5% of its outstanding shares [11] - The liquidity position remains strong with $18.7 million in cash and no outstanding debt as of March 31, 2025 [18] Q&A Session Summary Question: Can you provide any additional color on the status of the current M&A pipeline? - The pipeline is robust and full, with ongoing evaluations of targets to ensure they have leveled off from the industry's decline [23] Question: Do you have any letters of intent that are outstanding? - Yes, there are nonbinding letters of intent outstanding [23] Question: What is the status of the industrial business and its potential sale? - The sale process is ongoing and has been managed internally, with expectations for a positive outcome soon [26][27] Question: What are your plans regarding share repurchases and M&A? - Both share repurchases and M&A are being considered as part of the capital allocation strategy, with execution dependent on business visibility [29][30] Question: What specific actions are being taken to reduce SG&A expenses? - The company is reviewing performance across businesses and plans to utilize offshore recruiters and AI to enhance efficiency and reduce costs [49]

Financial Data and Key Metrics Changes - Consolidated revenues for Q2 2025 were $24.5 million, down 41% year-over-year, and year-to-date revenues were $48.5 million, also down 41% [6][12] - Gross profits for the quarter were $8.4 million with a gross margin of 34.1%, compared to 32.8% in the prior year quarter [7][14] - The company reported a net loss from continuing operations of $33 million or $0.30 per diluted share for the quarter, compared to a net loss of $900,000 or $0.01 per diluted share in the prior year quarter [7][15] - Non-GAAP adjusted EBITDA was negative $600,000 for the quarter and negative $900,000 year-to-date [7][16] - The liquidity position remained strong with $18.7 million in cash and no outstanding debt [17] Business Line Data and Key Metrics Changes - Professional contract staffing services revenues were $21.5 million for the quarter, down 71% year-over-year, and $43 million year-to-date, also down 71% [12] - Direct hire placement revenues were $3 million for the quarter, down 20%, and $5.5 million year-to-date, slightly above the prior six-month period [12] Market Data and Key Metrics Changes - The staffing industry is experiencing a cooling effect due to macroeconomic uncertainties, interest rate volatility, and inflation, leading to layoffs and hiring freezes among clients [4][5] - Many client initiatives requiring additional labor have been put on hold, impacting job orders for both temporary help and direct hire placements [5] Company Strategy and Development Direction - The company is focusing on M&A activities, having completed its first transaction in the quarter and evaluating several others [8][20] - There is a renewed focus on integrating AI technology into recruiting and sales processes to enhance productivity [8][18] - The company aims to restore profitability by the latter part of 2025 or early 2026 through expense reduction and revenue growth [9][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging conditions in the staffing industry and is cautiously optimistic about future recovery [4][9] - The company is preparing for a more conducive labor market and aims to aggressively pursue new business opportunities [20][50] Other Important Information - The company has paused share repurchases since December 2023, having repurchased just over 5% of outstanding shares [10] - The industrial staffing services segment is classified as a discontinued operation as of March 31, 2025, as the company is negotiating its sale [6][25] Q&A Session Summary Question: Can you provide any additional color on the status of the current M&A pipeline? - The pipeline is robust, and the company is cautiously tracking the performance of potential targets [22] Question: Do you have any letters of intent that are outstanding? - Yes, there are nonbinding letters of intent outstanding [22] Question: What is the status of the industrial business and its potential sale? - The sale process has been ongoing since April of the previous year and is expected to close soon [25][26] Question: What are your plans regarding share repurchases? - Both M&A and share repurchases are being considered, with execution dependent on visibility of existing business [28][40] Question: What specific actions are being taken to reduce SG&A expenses? - The company is reviewing performance and looking to utilize offshore recruiters and AI to reduce costs [47][48]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) GEE Group experienced revenue declines and a significant net loss in Q2 and YTD FY2025, primarily due to non-cash impairment charges, despite slight gross margin improvement Q2 & YTD FY2025 Key Financial Metrics (vs. FY2024) | Metric | Q2 FY2025 | Q2 FY2024 | Change | YTD FY2025 | YTD FY2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Consolidated Revenues** | $24.5M | $25.6M | -4% | $48.5M | $53.7M | -10% | | **Gross Profit** | $8.4M | $8.4M | 0% | $16.3M | $17.7M | -8% | | **Gross Margin** | 34.1% | 32.8% | +1.3 p.p. | 33.6% | 33.0% | +0.6 p.p. | | **SG&A Expenses** | $9.3M | $9.6M | -3% | $17.7M | $19.7M | -10% | | **Loss from Continuing Ops** | $(33.0)M | $(0.9)M | N/A | $(33.6)M | $(2.4)M | N/A | | **Diluted EPS (Continuing Ops)** | $(0.30) | $(0.01) | N/A | $(0.31) | $(0.02) | N/A | Revenue by Service Type (Q2 & YTD FY2025) | Revenue Source | Q2 FY2025 | Q2 FY2024 | Change | YTD FY2025 | YTD FY2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Professional Contract Staffing** | $21.5M | $23.1M | -7% | $43.0M | $48.2M | -11% | | **Direct Hire Placement** | $3.0M | $2.5M | +20% | $5.5M | $5.5M | 0% | - The significant increase in loss from continuing operations was primarily due to two non-cash charges: a **$22.0 million goodwill impairment** and a **$9.9 million valuation allowance** against net deferred tax assets[2](index=2&type=chunk)[3](index=3&type=chunk) - As of March 31, 2025, the company reported a strong liquidity position with **$18.7 million in cash**, **$7.4 million available** under its undrawn credit facility, and **zero long-term debt**[7](index=7&type=chunk) [Operational Highlights & Strategic Updates](index=1&type=section&id=Operational%20Highlights%20%26%20Strategic%20Updates) GEE Group reclassified Industrial Staffing as discontinued operations and acquired Hornet Staffing to enhance professional services and leverage offshore recruiting - The former Industrial Staffing Services segment has been classified as a discontinued operation, with its results reclassified accordingly[1](index=1&type=chunk)[7](index=7&type=chunk) - On January 3, 2025, the Company acquired Hornet Staffing, Inc. to enhance its service offerings for large companies, particularly in IT and professional verticals, utilizing managed service providers (MSP) and an offshore recruiting team[7](index=7&type=chunk) [Management Commentary and Outlook](index=3&type=section&id=Management%20Commentary%20and%20Outlook) Management acknowledges a challenging macroeconomic environment, expressing cautious optimism for H2 FY2025, focusing on AI integration, offshore recruiting, and expansion into higher-value services - Management attributes the challenging business environment to macroeconomic uncertainty, causing clients to be cautious with hiring and new projects, and a reduction in available candidates due to the "great stay" phenomenon[8](index=8&type=chunk) - The company's strategic plan focuses on competing more effectively by: * Embracing artificial intelligence (AI) to enhance recruiting and sales * Using offshore recruiting to maximize fill rates efficiently * Expanding into higher-end services like HR consulting, IT statement of work (SOW) projects, and resource process outsourcing (RPO)[8](index=8&type=chunk) - GEE Group is focused on prudently managing costs and streamlining the business, while leveraging its strong balance sheet (**current ratio of 3.9**) to make investments that maximize shareholder value[8](index=8&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) The consolidated financial statements reflect a significant net loss driven by goodwill impairment and a substantial decrease in total assets and shareholders' equity [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Condensed Statement of Operations (in thousands) | Line Item | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net Revenues** | $24,495 | $25,589 | $48,520 | $53,726 | | **Gross Profit** | $8,360 | $8,393 | $16,286 | $17,729 | | **Goodwill impairment charge** | $22,000 | $0 | $22,000 | $0 | | **Loss from Operations** | $(23,220) | $(1,948) | $(23,993) | $(3,586) | | **Loss from Continuing Operations** | $(32,956) | $(919) | $(33,640) | $(2,436) | | **Consolidated Net Loss** | $(33,119) | $(1,008) | $(33,811) | $(2,563) | | **Diluted EPS (Consolidated)** | $(0.30) | $(0.01) | $(0.31) | $(0.02) | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Condensed Balance Sheet (in thousands) | Line Item | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Cash** | $18,501 | $20,735 | | **Total current assets** | $32,472 | $35,401 | | **Goodwill** | $24,607 | $46,008 | | **Deferred tax assets, net** | $0 | $9,495 | | **Total Assets** | $61,770 | $95,902 | | **Total current liabilities** | $8,363 | $9,322 | | **Total Liabilities** | $11,129 | $11,691 | | **Total Shareholders' Equity** | $50,641 | $84,211 | [Reconciliation of Non-GAAP Financial Measures](index=4&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) The company's non-GAAP measures show Adjusted EBITDA declined and Free Cash Flow turned negative for Q2 and YTD FY2025, reflecting operational challenges [Reconciliation of Net Loss to EBITDA and Adjusted EBITDA](index=4&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20EBITDA%20and%20Adjusted%20EBITDA) Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net loss from continuing ops** | $(32,956) | $(919) | $(33,640) | $(2,436) | | **Non-GAAP EBITDA** | $(945) | $(1,163) | $(1,458) | $(2,009) | | **Non-GAAP adjusted EBITDA** | $(590) | $(554) | $(894) | $(699) | [Reconciliation of Net Cash to Free Cash Flow](index=5&type=section&id=Reconciliation%20of%20Net%20Cash%20to%20Free%20Cash%20Flow) Free Cash Flow Reconciliation (in thousands) | Metric | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $(1,141) | $423 | | **Acquisition of property and equipment** | $(4) | $(38) | | **Non-GAAP free cash flow** | $(1,145) | $385 | [Company Overview](index=6&type=section&id=Company%20Overview) GEE Group Inc. is a long-standing specialized staffing solutions provider, offering professional services in IT, engineering, finance, accounting, and healthcare - GEE Group provides professional staffing services in IT, engineering, finance, and accounting through brands like Access Data Consulting, Agile Resources, Omni-One, Paladin Consulting, and various SNI brands[24](index=24&type=chunk) - The company also operates in the healthcare sector via its Scribe Solutions brand, providing medical scribes for emergency departments and medical practices[24](index=24&type=chunk) [Forward-Looking Statements](index=7&type=section&id=Forward-Looking%20Statements) This section outlines the inherent risks and uncertainties associated with forward-looking statements, emphasizing that actual results may differ materially from projections - The press release contains forward-looking statements that are subject to risks and uncertainties and are not guarantees of future performance[25](index=25&type=chunk) - Key risk factors include changes in economic conditions, loss of customers, acts of war or terrorism, changes in regulations, failure to integrate acquisitions, and the adverse impact of geopolitical events or health crises[25](index=25&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The unaudited financial statements for Q1 2025 reveal a substantial decline in assets and a significant net loss, primarily due to goodwill impairment and tax provisions [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets significantly decreased to $61.8 million, driven by goodwill reduction and a deferred tax asset valuation allowance Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | September 30, 2024 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$61,770** | **$95,902** | **($34,132)** | | Goodwill | $24,607 | $46,008 | ($21,401) | | Deferred tax assets, net | $0 | $9,495 | ($9,495) | | Cash | $18,501 | $20,735 | ($2,234) | | **Total Liabilities** | **$11,129** | **$11,691** | **($562)** | | **Total Shareholders' Equity** | **$50,641** | **$84,211** | **($33,570)** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a substantial net loss of $33.1 million for the quarter, primarily due to goodwill impairment and tax provisions Quarterly Performance (Three Months Ended March 31, in thousands) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $24,495 | $25,589 | -4.3% | | Gross Profit | $8,360 | $8,393 | -0.4% | | Goodwill impairment charge | $22,000 | $0 | N/A | | Loss from Operations | ($23,220) | ($1,948) | 1092% | | Consolidated Net Loss | ($33,119) | ($1,008) | 3186% | | Diluted Loss Per Share | ($0.30) | ($0.01) | 2900% | Year-to-Date Performance (Six Months Ended March 31, in thousands) | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $48,520 | $53,726 | -9.7% | | Gross Profit | $16,286 | $17,729 | -8.1% | | Goodwill impairment charge | $22,000 | $0 | N/A | | Loss from Operations | ($23,993) | ($3,586) | 569% | | Consolidated Net Loss | ($33,811) | ($2,563) | 1219% | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities totaled $1.1 million, a reversal from the prior year, with significant cash used for acquisitions Cash Flow Summary (Six Months Ended March 31, in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,141) | $423 | | Net cash used in investing activities | $(972) | $(38) | | Net cash used in financing activities | $(39) | $(1,656) | | **Net change in cash** | **$(2,152)** | **$(1,271)** | - The primary use of cash in investing activities was **$968 thousand** for a business acquisition (Hornet Staffing)[14](index=14&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the Hornet Staffing acquisition, Industrial Segment divestiture, goodwill impairment, and a significant deferred tax asset valuation allowance - On January 3, 2025, the Company acquired Hornet Staffing, Inc. for **$1,500 thousand**, consisting of **$1,100 thousand** in cash and **$400 thousand** in promissory notes[18](index=18&type=chunk)[19](index=19&type=chunk) - The company's Industrial Segment has been classified as a discontinued operation as of March 31, 2025, with an expected divestiture in 2025[26](index=26&type=chunk) - A **$22,000 thousand** non-cash goodwill impairment charge was recorded for the Professional Services reporting unit due to net losses and a negative trend in the company's stock price and market capitalization[60](index=60&type=chunk) - A full valuation allowance of **$13,600 thousand** was recorded against net deferred tax assets due to significant recent pre-tax book losses and economic uncertainty, leading to a **$9,800 thousand** tax expense[87](index=87&type=chunk)[85](index=85&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant net loss driven by non-cash charges, strategic divestitures, and the integration of new acquisitions - The net loss for Q2 2025 is primarily due to a **$22,000 thousand** goodwill impairment charge and the establishment of a full valuation allowance against deferred tax assets, both non-cash charges[99](index=99&type=chunk) - The company acquired Hornet Staffing, Inc. in January 2025 to broaden its footprint in the professional contract staffing market, particularly with managed service providers (MSP) and vendor management systems (VMS)[95](index=95&type=chunk)[101](index=101&type=chunk) - The Industrial Staffing Services segment is now reported as a discontinued operation, with a sale expected to close in the quarter ending June 30, 2025, as part of a strategy to focus on professional verticals[104](index=104&type=chunk) - The company is responding to market changes by integrating AI into its operating strategy, focusing on placing AI talent, and leveraging offshore recruiting models from the Hornet acquisition[100](index=100&type=chunk)[103](index=103&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Consolidated net revenues decreased 4% to $24.5 million, with a significant operating loss driven by goodwill impairment Revenue Breakdown (Three Months Ended March 31) | Service | 2025 (in thousands) | 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Professional contract services | $21,495 | $23,134 | -7% | | Direct hire placement services | $3,000 | $2,455 | +22% | | **Consolidated net revenues** | **$24,495** | **$25,589** | **-4%** | Gross Profit Margin by Service (Three Months Ended March 31) | Service | 2025 | 2024 | | :--- | :--- | :--- | | Professional contract services | 24.9% | 25.7% | | Direct hire placement services | 100.0% | 100.0% | | **Combined gross profit margin** | **34.1%** | **32.8%** | - A non-cash goodwill impairment charge of **$22,000 thousand** was the primary driver of the **$23,200 thousand** loss from operations in Q2 2025[115](index=115&type=chunk)[116](index=116&type=chunk) - For the six months ended March 31, 2025, professional contract services revenues decreased **11%** year-over-year, while direct hire placement revenues were flat[123](index=123&type=chunk)[124](index=124&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains adequate liquidity with $18.7 million in cash and $7.4 million available on its credit facility Liquidity Position (as of March 31, 2025, in thousands) | Metric | Amount | | :--- | :--- | | Cash | $18,676 | | Working Capital | $24,109 | | Availability on Credit Facility | $7,368 | - Cash used in operating activities for the six months ended March 31, 2025 was **$1,100 thousand**, compared to **$400 thousand** provided by operating activities in the prior year period[140](index=140&type=chunk) - The company used **$1,100 thousand** in cash for the acquisition of Hornet Staffing, Inc. on January 3, 2025[142](index=142&type=chunk) - Management believes that the company can generate adequate liquidity to meet its obligations for the foreseeable future and at least for the next twelve months[148](index=148&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company indicates that this section is not applicable for the current reporting period - The company has indicated that this item is not applicable[150](index=150&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed effective, with no material changes to internal controls over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[151](index=151&type=chunk) - No changes in internal control over financial reporting occurred during the six-month period that have materially affected, or are reasonably likely to materially affect, these controls[152](index=152&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) No significant legal proceedings are reported that would materially impact the company's financial position - There are no significant legal proceedings to which the Company is a party[153](index=153&type=chunk)[89](index=89&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) Investors are directed to the Annual Report on Form 10-K for risk factors, as no new risks are presented - The report refers to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2024[154](index=154&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details of the concluded share repurchase program, which bought back approximately 6.1 million shares, are provided - A share repurchase program, authorizing up to **$20,000 thousand** in purchases, ran from April 27, 2023, through December 31, 2023[155](index=155&type=chunk) - Upon conclusion, the company had repurchased **6,128,877 shares**, accounting for approximately **5.4%** of the issued and outstanding common shares prior to the program[156](index=156&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including officer certifications and data files

[Fiscal 2025 First Quarter Financial Highlights](index=1&type=section&id=Fiscal%202025%20First%20Quarter%20Financial%20Highlights) GEE Group reported a 15% revenue decline to $26.0 million in Q1 FY2025, improving net loss to $(0.7) million via 17% SG&A cuts Q1 FY2025 vs Q1 FY2024 Key Financial Metrics (in millions, except percentages and per share data) | Financial Metric | Q1 FY2025 | Q1 FY2024 | Change | | :--- | :--- | :--- | :--- | | **Consolidated Revenues** | $26.0 million | $30.6 million | -15% | | **Gross Profit** | $8.3 million | $9.7 million | -14.4% | | **Gross Margin** | 31.9% | 31.8% | +0.1 p.p. | | **SG&A Expenses** | $8.8 million | $10.6 million | -17% | | **Net Loss** | $(0.7) million | $(1.6) million | +56.3% | | **Diluted Loss Per Share** | $(0.01) | $(0.01) | No Change | | **Adjusted EBITDA** | $(0.3) million | $(0.2) million | -50% | - The decrease in consolidated revenues was primarily caused by a persistent malaise in demand, with fewer job orders from companies due to macroeconomic weaknesses, policy uncertainty, and persistent inflation[4](index=4&type=chunk) - SG&A expenses decreased by **17% YoY**, driven by cost reduction initiatives targeting fixed expenses like personnel, occupancy, and job boards, with SG&A as a percentage of revenue improving to **33.9%** from **34.6%**[4](index=4&type=chunk) [Business Segment Performance](index=1&type=section&id=Business%20Segment%20Performance) All segments experienced Q1 FY2025 revenue declines, with professional contract staffing down 14% to $21.5 million Q1 FY2025 Revenue by Segment (YoY Comparison, in millions) | Revenue Segment | Q1 FY2025 | Q1 FY2024 | Change | | :--- | :--- | :--- | :--- | | Professional Contract Staffing | $21.5 million | ~$25.0 million* | -14% | | Industrial Contract Services | $2.0 million | ~$2.5 million* | -20% | | Direct Hire Placement | $2.5 million | $3.1 million | -18% | *Note: Q1 FY2024 segment revenues were not explicitly stated but calculated from the provided percentage changes and Q1 FY2025 values* - The declines across all segments were attributed to reduced demand, workforce volatility, and economic headwinds, leading to fewer job orders and projects utilizing contract labor[4](index=4&type=chunk) - The performance challenges experienced by the company are consistent with trends in the broader U.S. staffing industry, particularly in the cyclical direct hire placement sector[4](index=4&type=chunk) [Financial Position and Strategic Developments](index=2&type=section&id=Financial%20Position%20and%20Strategic%20Developments) GEE Group maintained a strong balance sheet with $19.7 million cash and zero long-term debt, acquiring Hornet Staffing to enhance capabilities Key Balance Sheet and Liquidity Metrics (as of Dec 31, 2024, in millions) | Metric | Value | | :--- | :--- | | Cash Balance | $19.7 million | | ABL Credit Facility Availability | $7.0 million (undrawn) | | Net Working Capital | $25.9 million | | Long-Term Debt | Zero | | Shareholders' Equity | $83.6 million | | Current Ratio | 4.7 | | Net Book Value Per Share | $0.76 | | Net Tangible Book Value Per Share | $0.34 | - Subsequent to the quarter, the Company acquired **Hornet Staffing, Inc.**, a provider of IT, professional, and customer service staffing solutions to large-scale, 'blue chip' companies[8](index=8&type=chunk) - The **Hornet acquisition** is expected to enhance GEE Group's ability to compete for business from Fortune 1000 companies and other large users of contingent labor, particularly through Hornet's expertise with **MSP** and **VMS** systems[8](index=8&type=chunk)[9](index=9&type=chunk) [Management Commentary and Outlook](index=3&type=section&id=Management%20Commentary%20and%20Outlook) Management noted weak Q1 FY2025 demand, actively managing costs, adopting AI, and anticipating gradual demand improvement in late 2025 - CEO Derek E. Dewan noted that the hiring slowdown is due to an uncertain macroeconomic environment and the end of the post-pandemic 'job switching frenzy'[9](index=9&type=chunk) - The company is tightly managing costs and plans to adopt **artificial intelligence (AI)** software for more cost-efficient recruiting and **AI agents** for prospecting target accounts[9](index=9&type=chunk) - Management anticipates a gradual improvement in the demand environment in the **latter part of 2025** and is prepared for an eventual recovery[9](index=9&type=chunk) - GEE Group intends to deploy its capital judiciously, leveraging its **strong balance sheet** for both **organic growth** and **strategic acquisitions** like Hornet Staffing[9](index=9&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) The company uses non-GAAP measures like adjusted net loss and adjusted EBITDA to evaluate performance, with Q1 FY2025 adjusted net loss at $(0.6) million [Reconciliation of Net Loss to Non-GAAP Adjusted Net Loss](index=4&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Non-GAAP%20Adjusted%20Net%20Loss) Reconciliation to Non-GAAP Adjusted Net Loss (In thousands) | | Three Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2023 | | :--- | :--- | :--- | | **Net loss** | **$ (692)** | **$ (1,555)** | | Non-cash stock compensation | 118 | 153 | | Other income | (33) | - | | Severance agreements | - | 300 | | Acquisition, integration & restructuring | 91 | 243 | | Other losses (gains) | - | 5 | | Net tax effect (25.1%) | (44) | (176) | | **Non-GAAP adjusted net loss** | **$ (560)** | **$ (1,030)** | [Reconciliation of Net Loss to Non-GAAP EBITDA and Adjusted EBITDA](index=4&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Non-GAAP%20EBITDA%20and%20Adjusted%20EBITDA) Reconciliation to Non-GAAP EBITDA and Adjusted EBITDA (In thousands) | | Three Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2023 | | :--- | :--- | :--- | | **Net loss** | **$ (692)** | **$ (1,555)** | | Interest expense | 66 | 71 | | Interest income | (155) | (190) | | Depreciation | 57 | 84 | | Amortization | 205 | 720 | | Other income | (33) | - | | **Non-GAAP EBITDA** | **(552)** | **(870)** | | Non-cash stock compensation | 118 | 153 | | Severance agreements | - | 300 | | Acquisition, integration & restructuring | 91 | 243 | | Other losses (gains) | - | 5 | | **Non-GAAP adjusted EBITDA** | **$ (343)** | **$ (169)** | [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Unaudited financial statements detail Q1 FY2025 performance, showing a net loss of $692 thousand and total assets of $92.8 million [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (unaudited, in thousands) | | Three Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2023 | | :--- | :--- | :--- | | **NET REVENUES** | **$ 26,026** | **$ 30,631** | | Cost of contract services | 17,730 | 20,895 | | **GROSS PROFIT** | **8,296** | **9,736** | | Selling, general and administrative expenses | 8,815 | 10,606 | | Depreciation expense | 57 | 84 | | Amortization of intangible assets | 205 | 720 | | **LOSS FROM OPERATIONS** | **(781)** | **(1,674)** | | Interest income / (expense), net | 89 | 119 | | **LOSS BEFORE INCOME TAX PROVISION** | **(692)** | **(1,555)** | | **NET LOSS** | **$ (692)** | **$ (1,555)** | | **BASIC & DILUTED LOSS PER SHARE** | **$ (0.01)** | **$ (0.01)** | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (unaudited, in thousands) | | Dec 31, 2024 | Sep 30, 2024 | | :--- | :--- | :--- | | **ASSETS** | | | | Cash | $ 19,694 | $ 20,828 | | Accounts receivable, net | 12,334 | 13,747 | | Total current assets | 32,988 | 35,400 | | Goodwill | 46,008 | 46,008 | | **TOTAL ASSETS** | **$ 92,789** | **$ 95,901** | | **LIABILITIES & EQUITY** | | | | Total current liabilities | 7,026 | 9,321 | | Total liabilities | 9,152 | 11,690 | | Total shareholders' equity | 83,637 | 84,211 | | **TOTAL LIABILITIES & SHAREHOLDERS' EQUITY** | **$ 92,789** | **$ 95,901** |

Financial Performance - The company incurred a net loss of $(692) thousand for the fiscal first quarter ended December 31, 2024, primarily due to declines in business from negative economic and labor market conditions [90]. - Consolidated net revenues for the three months ended December 31, 2024, were $26,026 thousand, a decrease of $4,605 thousand or 15% compared to $30,631 thousand in the same period of 2023 [97]. - Professional contract services revenues decreased by $3,568 thousand or 14%, while industrial contract services revenues decreased by $493 thousand or 20% compared to the prior year [98]. - Direct hire placement services revenues fell by $544 thousand or approximately 18% for the three months ended December 31, 2024, reflecting challenging economic conditions [99]. - The Company's revenues for the three months ended December 31, 2024, decreased by 15% compared to the same period in 2023 [106]. - The loss from operations improved to $(781) for the three months ended December 31, 2024, compared to $(1,674) in 2023 [109]. - The Company's net loss was $(692) for the three months ended December 31, 2024, a reduction of $863 from $(1,555) in 2023 [113]. - Cash flows used in operating activities were $(1,117) for the three months ended December 31, 2024, compared to $(919) in 2023 [116]. Cost Management - The company expects to reduce future annualized selling, general and administrative (SG&A) expenses by approximately $3.0 million pre-tax due to strategic actions taken [91]. - SG&A expenses for the three months ended December 31, 2024, decreased by $1,791 thousand or 17% compared to the same period in 2023, representing approximately 33.9% of revenues [104]. - SG&A expenses were reduced to $91 for the three months ended December 31, 2024, down from $548 in the same period of 2023 [107]. - Amortization expense significantly declined to $205 for the three months ended December 31, 2024, from $720 in 2023, primarily due to impairment charges [108]. Acquisition and Market Potential - The company acquired Hornet Staffing, Inc. on January 3, 2025, which is expected to be accretive to earnings and enhance competitive capabilities [93]. - The Company completed the acquisition of Hornet Staffing, Inc. for $1,100 in cash on January 3, 2025 [119]. - The global MSP/VMS market accounted for approximately $222 billion of temporary staffing spend under management in 2023, indicating significant market potential [94]. Operational Efficiency - The company plans to spend between $500 thousand and $1.0 million on systems and software over the next 12 to 18 months to enhance operational efficiency [91]. - The combined gross profit margin for the three-month periods ended December 31, 2024, was approximately 31.9%, slightly up from 31.8% in 2023 [102]. Cash Position and Borrowings - As of December 31, 2024, the Company had $19,694 in cash, a decrease of $1,134 from $20,828 as of September 30, 2024 [116]. - The Company had $6,977 available for borrowings under its facility as of December 31, 2024, with no outstanding borrowings [121]. - The share repurchase program authorized the Company to buy up to $20 million of its common stock, with 6,129 shares repurchased by December 31, 2023 [122].