GEE Group(JOB) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Gross profit for fiscal 2023 third quarter was $13.7 million, down $2.8 million or 17% compared to fiscal 2022's third quarter gross profit of $16.5 million, with gross margins at 35.8% for fiscal 2023 and 40.1% for fiscal 2022 [1] - Net income for fiscal 2023's third quarter was $7.9 million or $0.07 per diluted share, compared to net income of $2.6 million or $0.02 per diluted share for fiscal 2022's third quarter [4] - Adjusted net income for fiscal 2023's third quarter was $8.1 million or $0.07 per diluted share, compared to $3.1 million or $0.03 per diluted share for fiscal 2022 [6] - Current working capital ratio at June 30, 2023, was 4.1:1, up from 2.7:1 at September 30, 2022 [8] - Net book value per share was $0.96 at June 30, 2023, and tangible book value per share was $0.35, both significantly up since September 2022 [9] Business Line Data and Key Metrics Changes - Professional contract staffing services for fiscal 2023's third quarter were $33 million, nearly level with the comparable fiscal 2022's third quarter contract staffing revenue [91] - Professional contract services revenue, the largest segment, represented 90% of all contract services revenue and increased by $800,000 or 3% quarter-over-quarter [91] - Direct hire placement revenue for fiscal 2023's third quarter was $5.2 million, down from $8 million in fiscal 2022's third quarter [93] - Industrial staffing services revenues were $3.2 million, representing 8% of total revenue for fiscal 2023's third quarter [94] Market Data and Key Metrics Changes - IT contract services achieved 9% growth year-to-date and now represent 59% of all professional services contract revenue [92] - The company continues to face growth challenges in light industrial markets, attributed to lingering COVID-19 relief programs affecting worker hours [94] Company Strategy and Development Direction - The company has implemented cost reductions with estimated annual savings of approximately $4 million and is monitoring operating costs to identify further reductions [3] - A strategic review is underway to explore various alternatives for enhancing shareholder value, including potential acquisitions and share buybacks [27][35] - The company aims to achieve a target SG&A ratio of 30% or lower [63] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about fiscal 2023 performance despite macroeconomic headwinds and anticipates continued profitability and cash flow generation [10][13] - The outlook for the macroeconomic environment is described as choppy, with expectations of strength in 2024 compared to current recessionary trends [24] - Management acknowledges the stock is undervalued and sees substantial room for growth, with expectations for improved performance relative to industry peers [21][40] Other Important Information - The company has repurchased nearly 1.5 million shares of common stock since the buyback program was authorized [9] - The deferred tax benefit of $6.8 million recognized in the quarter significantly impacted earnings per share [4][40] Q&A Session All Questions and Answers Question: Can you explain the structure of the business regarding professional contract services and direct hire segments? - The businesses are different, with some overlap in customers, but they generally operate separately [17][18] Question: What are your expectations for Q4 '23 and full year of 2024? - The company expects to perform well relative to industry peers, with a focus on navigating uncertainties such as inflation and potential recession [19][24] Question: Can you elaborate on the agreement with Red Oak? - Red Oak is the largest shareholder and has joined the Board, bringing valuable experience to the organization [34] Question: What is the status of the acquisition pipeline and industry consolidation? - The acquisition pipeline is good, with the company being selective in evaluating opportunities [43] Question: How is candidate availability currently? - Candidate availability has improved over the last 12 months, though some sectors still face challenges [67] Question: What is the company's plan for buybacks given the stock remains depressed? - The company plans to be aggressive in buybacks, supported by a strong cash position [62]