GEE Group(JOB) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (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 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 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 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] Notes to Condensed Consolidated Financial Statements 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][19] - The company's Industrial Segment has been classified as a discontinued operation as of March 31, 2025, with an expected divestiture in 2025[26] - 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] - 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][85] Management's Discussion and Analysis of Financial Condition and Results of Operations 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] - 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][101] - 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] - 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][103] Results of Operations 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][116] - 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][124] Liquidity and Capital Resources 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] - The company used $1,100 thousand in cash for the acquisition of Hornet Staffing, Inc. on January 3, 2025[142] - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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][89] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - 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] Item 6. Exhibits This section lists the exhibits filed with the report, including officer certifications and data files