Q4 2021 GEE Group Inc Earnings Call
Yeah.
Hello, and welcome to the G group fiscal fourth quarter and fiscal year ended.
September 30th 'twenty, one earnings and 2022.
Date webcast conference call.
With me today is Kim Stoehr, our Chief Financial Officer, and senior Vice President and Derek do you want the chairman and Chief Executive Chief Executive Officer of G Group.
Thank you all for joining us today, it's our pleasure to share with you.
G group's results for the fiscal fourth quarter and year ended September 30.
One.
Some comments, Kim and I will make today.
May be considered forward looking including predictions and estimates about our future performance.
These statements represent our current judgment of what the future holds.
And are subject to risks and uncertainties.
That actual results may differ materially from those forward looking statements.
These risks and uncertainties are described.
In the earnings press release that we filed.
And our most recent Form 10-K filing and other filings with the SEC under the caption cautionary statement regarding forward looking statements and forward looking statements Safe Harbor, we assume no obligation to update the statements made on today's call.
During this presentation. We also will mentioned in reference some non-GAAP financial measures. We have provided reconciliations and further explanations of these measures and are included in the supplemental schedules to our earnings press release that we filed.
Our presentation of revenues cost of services gross profits and gross margins and their related growth rates and trends around it or.
Or based upon rounded a mouse.
For purposes of this call and all amounts percentage and related items.
Should be considered approximations accordingly for your convenience our prepared remarks for today's call are.
We are available in the Investor Center of our website.
W. W. W. Dot G group dotcom.
We have achieved near record levels of $41 5 million and non-GAAP adjusted EBITDA of $3 6 million and our 2021 fiscal fourth quarter due to increased demand for our permanent placement and contract staffing services.
We were particularly pleased with the strength of our permanent placement revenue, which nearly doubled over the 'twenty 'twenty fiscal fourth quarter and exceeded the 2021 sequential third quarter.
Permanent placement revenue for the full fiscal year 2021 beat both 2020 and 2019.
Contract revenue for the fiscal 2021 fourth quarter also grew by double digits over fiscal 2000, Twenty's fourth quarter.
Then the 2021 sequential third quarter contract revenue for the full fiscal year 2021 beat 2020, and nearly equaled 2019 coming in just about 3% lower in fact, we set our 2019 higher pre pandemic results as the benchmark for our 2020.
<unk> fiscal year performance.
And although revenue came in just under our fiscal 2019, we beat bested virtually all other 2019 financial results, including GAAP and non-GAAP profit measures, even with COVID-19, and its variants still very much.
And the picture for.
For 2021 fiscal fourth quarter, we reported net income of.
A $3 million or three cents per diluted share a significant improvement compared with the fiscal 2024th quarter's significant loss per diluted share.
No form of diluted EPS, excluding the effects of former debt and related interest and gains and losses on debt extinguishment was two cents in Q4 2021 compared with negative one set for Q4 2020.
Ah three cents per share improvement.
Our net income and diluted EPS.
Were approximately breakeven for the 2021 full fiscal year.
Estimated pro forma diluted EPS for the full for the school year 2021, again after removing the effects of former debt and related items beat the 2020 full fiscal year.
Our non-GAAP adjusted EBITDA and non-GAAP EBITDA for the 2021 fiscal fourth quarter were $3 6 million and $3 4 million respectively. The difference between the two represented nearly entirely by our noncash stock compensation expense for the quarter.
non-GAAP adjusted EBITDA and non-GAAP EBITDA for the 2021 full year were $12 3 million and $10 9 million respectively.
As I said last quarter.
It is worth repeating our dedicated and hard working employees have stepped up.
It can't challenges that have faced us I'm very proud of our recruiters business development and field leadership and our corporate support team all of whom are the key to our success.
Our people continue to amaze us every day with their positive can do attitudes.
Innovativeness.
And good old fashioned work ethic.
As you know, we recently announced obtaining forgiveness from the SBA for the remaining cares Act PPP loans and related interest.
$16 7 million in the aggregate, which our business is qualified for and initially obtained in April and early May 2020.
At that time, we had over 100 million and higher cost debt. Our consolidated net book value was less than $2 million and we were entering into one of the most uncertain precarious.
Periods in our country and the World has faced during our lifetimes, we likely would have not survived these circumstances without the cares Act assistance, we were able to obtain and we're certainly grateful to our leaders in Washington for their foresight in helping our businesses and our other small businesses out there across the nation.
Through this unprecedented pandemic.
At this time I'll turn the call over.
And the presentation towards senior Vice President and Chief Financial Officer, Kim Thorpe, who will further elaborate on our results for the 2021 fiscal fourth quarter and full year Kim.
Kim.
Okay.
Thank you Derek and good morning, everyone.
Derek said consolidated revenues were $41 $5 million in the fiscal 2021 and fourth quarter.
This was up 34% from the fiscal 2024th quarter up 9% sequentially from the fiscal 2020, when third quarter and up 7% from fiscal 2019 fiscal fourth quarter.
Our professional staffing services segment revenues were $37 million up 40% from the fiscal 2024th quarter up 8% sequentially from the 2021 fiscal third quarter and up 12% from fiscal 2019 fiscal fourth quarter.
Professional direct hire or permanent placement services revenues were up 96% year over year, and 18% sequentially as compared to the 2021 fiscal third quarter.
These comprised 18% of total revenues for the professional services business segment, and 16% of consolidated contract and direct hire revenues professional services revenues in the fiscal 2021 fourth quarter also grew nicely up 40% year over year.
<unk> and 8% sequentially over the 2021 fiscal third quarter.
Our it services and markets at agile access data powered consulting and F&I accounted for 48% of our professional services business segment revenues and were up 25% year over year and 14% sequentially. The.
The other professional services end markets.
It adds accounting administrative and office engineering health care and other accounted for the remaining 52% of the professional services business revenues were up 57% year over year and 3% sequentially over the immediate prior quarter.
And our light industrial services business segment revenues for the quarter were down year over year, 3%.
Up sequentially, 16% from the 2021 fiscal third quarter the year over year decrease is due to the lagging recovery in this end market is temporary laborers and our light industrial segment have not come back into the workforce as quickly as others since the COVID-19 pandemic.
We pointed out earlier that as government stimulus monies, including enhanced unemployment benefits.
Advance payment childcare credits and the like begin to scale down or terminate we expect the supply of labor to increase and we anticipate an increase in field orders and related revenues in fiscal 2022.
We believe the large sequential increase in Q4 2021 versus Q3 2021.
As a positive recent trend, indicating their temporary labor are beginning to return to work in greater numbers all our professional services segment direct hire in contract revenues combined comprised 89% and 88% of our consolidated revenues for the fiscal fourth quarter and full fiscal year.
Year 2021, respectively looking at our consolidated revenue from the viewpoint of all contract services.
Professional and light industrial combined.
<unk> with direct hire all of which is professional.
By contract revenues were 84% and 88% of our consolidated revenues for the fiscal fourth quarter and full fiscal year 2021, respectively.
Direct hire revenues were 16% and 12% respectively.
As Derek mentioned, our direct hire.
Revenue performance was outstanding in Q4, 2021, and the full year the <unk>.
Higher mix of direct hire which has 100% gross margin was instrumental in achieving our outstanding fiscal 2021 fourth quarter and full year results.
Fiscal fourth quarter consolidated gross profit dollars were up 45% year over year and up 10% sequentially as compared to the 2021 fiscal third quarter. Our professional staffing segment 2021 fiscal fourth quarter gross profit dollars were up 57% year over year.
At 11% sequentially as compared to the immediately preceding quarter.
Consolidated gross margin percentage for Q4, 2021 was up two seven percentage points year over year and up four percentage points sequentially as compared to the 2021 fiscal third quarter as I. Just mentioned are permanent placements carry a 100% gross margin.
So as a higher mix helped improve our gross margin accordingly.
Selling general and administrative or SG&A expenses were approximately 29% of consolidated revenues.
Paired with approximately 33% of revenues in the fiscal fourth quarter of 2020.
In addition debt substantially higher revenue relative to fixed cost overall this four percentage point.
The improvement is the result of higher productivity compensation expense savings lower occupancy costs lower job board.
Advertising costs, and lower travel and entertainment expenses.
For the 2021 fiscal fourth quarter as Derek mentioned earlier, we reported net income of $3 million or <unk> <unk> per diluted share.
A significant improvement compared to negative 58 cents loss per diluted share in the comparable fiscal 2024th quarter pro forma diluted EPS that is excluding the effects of former debt and related interest gains and losses on debt extinguishment was <unk> in Q4 2012.
81, compared with negative one set in Q4 2020.
<unk> per share improvement, our net income and diluted EPS were approximately breakeven for the 2021 full fiscal year, our estimated diluted EPS and loss per share for full fiscal year, 2021, and 2020, respectively.
Again after removing the effects of former debt related items and a noncash goodwill impairment charge were six cents per diluted share.
For fiscal 2021, compared with pro forma diluted loss per share of negative 13 cents for the 2020 full fiscal year.
Adjusted EBIT.
EBIT, which is a non-GAAP financial measure was $3 6 million for fiscal <unk>.
2021 fiscal fourth quarter up $1 9 million or a 112% year over year, and a half a million dollars or 16% sequentially as compared to the immediately preceding quarter non-GAAP EBITDA was $3 4 million for the <unk>.
2021 fiscal fourth quarter. The main difference as Derek mentioned being noncash stock comp expense.
The overall improvement is a continuation of recovery and growth trends since the onset of the COVID-19, pandemic and cost savings from integration and restructuring activities, both before and after the effects of COVID-19, which we addressed last quarter in our call.
These measures have resulted in higher productivity lower comp costs, lower occupancy job board advertising and lower travel and entertainment expenses reflected in our SG&A Importantly in addition to these improvements in earnings and quality of earnings. We also are generating solid cash from operations.
Once again with the many improvements we've now made we expect these positive trends in the company's results to be sustainable.
Reconciliations of G groups GAAP net income to the company's non-GAAP adjusted EBITDA non-GAAP EBITDA for the quarter can be found in the supplemental schedule to our earnings release to conclude my remarks are current.
Our working capital ratio at September 32021 was one one to one which included approximately 676 $47 million and current liabilities related to the cares Act.
Payroll protection plan and lines that we had remaining as Gary mentioned in his opening remarks forgiveness has now been received from the SBA for all our remaining lines since the end of the 2021 fiscal fourth quarter and year end.
Thus after giving full effect to the PPP loan forgiveness, our pro forma current ratio at September 32021 was $2 three <unk>.
Consolidated accounts receivable net at the end of the fiscal fourth quarter were $23 $1 million and implied days sales outstanding or DSO was a stable and <unk>.
Attractive 46 days.
Last but not least our liquidity and cash flow have dramatically improved.
So with that now I'll turn it back over to Derek.
Thank you Kim the 2021 fiscal fourth quarter and fiscal year have been a turning point for <unk> group and.
In addition to our good results hallmarks include the successful completion of our follow on public offering in which we raised approximately $52 5 million in cash.
Closing of our new.
Well priced 20 million dollar bank senior asset bank asset based credit facility and the payoff in retirement.
$60 million and former high cost senior debt and fees as Kim mentioned, our liquidity and cash flow are dramatically improved.
At September 32021, the company had $10 million of cash in the bank and over $15 million in available credit under its new bank credit ABL facility.
Now that all our former cares act PPP loans had been forgiven by the SBA our debt leverage is nil.
This all greatly enhances both the current enterprise value and financial fundamentals of our company and significantly improve G group's prospects for future profitable growth in 2022 and beyond.
A year ago, the world faced an uncertain future with extraordinary challenges for businesses created by the pandemic along the way we've continued to work tirelessly and creatively from GE groups' offices and virtually to help our clients safely and successfully navigate through.
This unprecedented period, we also strengthened our commitment to our professionals equipping them with state of the art technology to work remotely and providing them the tools necessary to help clients with their critical talent needs. Despite changes in the workplace environment.
As a result, we closed the fourth quarter with an employee base that is more engaged and productive than ever.
With near record high revenues, creating positive strong momentum.
Heading into the fiscal year 2022.
Supported by the strengths of our specialty brands and high end verticals deep subject matter expertise our investments in recruiting and account management personnel and a refined streamline professional business model. We're excited about the continued ability to find meaningful and exciting employment for the people we place and.
Provide clients access to the specialized talent they need to grow their businesses and successfully compete in a dynamic world.
G Group continued its strong momentum from the fourth quarter of fiscal 2021 into fiscal 2022, and we expect to report strong results for the first quarter ending December 31 2021.
Finally, we'd like to again, thank our wonderful employees for their professionalism hard work and dedication without which we could not accomplish all the good things we have this quarter and this past year.
Now Kim and I will be happy to answer your questions.
Please ask one question and then rejoin the queue with follow up questions as needed.
If there is time, we'll come back to you for the additional questions and give you. The answers you will submit those electronically and we will respond to those I've.
Read the question and respond to your questions.
So the first question.
That we have is are you guys, considering a new division for hiring and F. T Tech guys.
Kevin would you handle that one please yes.
I'm, assuming by NFC, you mean non fungible token.
Technology specialists.
Non fungible tokens for everyone's benefit on the call are involved in blockchain technology, but the answer to your question is.
Yes, we are.
We're looking at all the tax bases with the highest priority among the <unk> professional verticals, including looking at emerging specialties like in ft.
So the answer to that question would be yes.
Thank you.
The next question is why insiders don't buy shares.
At the low price if you say the company is undervalued.
Great question so.
The officers and directors of the company do have significant holdings N G group.
What happens is that we are locked out from the market periodically.
And almost exclusively with a few windows and opportunities for us to buy shares.
And we're limited by material nonpublic information in terms of us buying when we know here's a great example.
We submitted the PPP loan forgiveness is.
Applications and that was approximately $17 million that we hadn't heard from right when the SBA left so once.
That's pending that would have been considered insider information and we couldn't trade buy or sell a share.
Shares in our company as insiders.
That's one example, the other is strictly timing of reported earnings and any any other activity like.
Defeasance of that when those negotiations were going on that would preclude us we did buy on the equity offering.
And Youll see us periodically by when the Windows open up.
I personally have significant holdings.
The company is fairly high basis.
And I'm quite confident and excited about our opportunity.
To materially create additional shareholder value. So we will buy periodically when the window opens.
The next question is why aren't we seeing insiders buying hand over fist.
[laughter] because you were very undervalued and again, that's the same question that I had an answer covered that my question is surrounding that excellent tech acquisitions will be diversified to do online placements like slack and upward.
Okay. That's a great question. So what you have going on in our industry today.
Is.
Some individuals have created these medium of exchanges similar too.
Zillow or realtor dot com, where there is theres postings of individuals' available for work and people will periodically enter into that universe of candidates and try to hire directly.
But not using quote and agency.
And what what we believe is happening is very similar to the real estate industry for example in residential real estate.
Individual realtors are succeeding immensely despite all of these exchanges of information and placements online of housing.
And what we do is periodically we will tap all resources for information with our expertise in recruiting and our technology, which is far superior to most of these what I call mediums are exchanging job information.
We use Linkedin recruiter for example, very very well which is.
By far more sophisticated and has more detail on candidates so.
Again, our these medium of exchanges.
Where you have job placements and potential candidates.
On an exchange or are they going to displace staffing companies and the answer is no but will they augment us in terms of how we go into those.
And find talent speed to market is critical so you'd have to narrow your search and hit the market quickly. We are able to do that and would we buy one of these or create one if we find that they become even more valuable today.
They're not that great and in a lot of the companies that are sole source mediums of exchange do not make money as a sole source. However, if they become more useful as we move on we will absolutely move into that so that's an excellent question.
And.
Somebody said have we.
Second question.
Had we received unsolicited offers to buy the company.
Our great results.
That's a question that we get offers all the time and that you know that's very flattering.
But where we're down to the business here and we're building what I believe is a five star company.
Sustainable company for the longer term.
But as shareholders know you know, we always want to maximize shareholder value and I had the prior company I was with the <unk> group.
Formerly accu staff for 17 years and grew it into a $4 billion plus company.
A company that was global and a Deco group made an offer in 2009.
And we closed the deal in 2010 at a huge premium.
When that comes about if it's in the best interests of the shareholders longer term, we would we will do what makes sense. However, we're in the build mode of our company here and longevity.
Is something that were built building and sustainability.
So we're quite excited and we're quite flattered when we get these opportunities as well.
Another question supply side talent grew roughly 10% sequentially great work by our teams in terms of Bill.
Bill rates spreads are they maintaining expanding any color there.
Kim will you take that question. Please.
Yeah.
Yeah.
Okay.
I'm not sure if Kim still on but I'll take my mute button, Hey, I'm sorry.
But that's why you just wanted to see if I knew the answer.
The answer is yes, we are seeing rates and spreads expand to some extent as you all probably know if you track.
Federal data on employment and unemployment.
Employment is still has not caught up to pre pandemic levels, we find ourselves with and our clients find themselves with more orders.
And then still with candidates and even though the candidates are beginning to catch up.
There has been some there has it has been necessary to pay our candidates more which in turn translates into higher bill rates and spreads for us.
Okay great.
Apart to are we seeing largely current clients or our new clients also are part of our recent revenue strength.
I can say that across the board we.
We are seeing existing clients use us more.
And also we are adding new clients every day, so we even though the job order flow is.
Significant and we have huge demand we never stop in our search for new customers and new avenues to add growth to our business.
So we realize that.
For continued success you have to keep expanding your customer base and we're doing that and we also are penetrating existing covered customers.
With all of our services for example, if we have a customer that's I T.
And.
And using our I T group.
When they have accounting finance needs.
Our cross selling activity will bring in our accounting and finance team.
And that client we use that has.
<unk> been successful in using all of our services and Thats. Just the example of how we approach expanding our business.
Okay. Another question.
Revenue look strongest since 2017, we are undervalued why not inflow implement a share buyback and focus on organic growth versus acquisitions. Since we are valued at nearly half of comparable peers.
Barry Astute question and when we look at buybacks, we focus on organic growth. The answer is yes, we do and we are focused on organic growth.
Our acquisitions important acquisitions and I've done several with our company we've done five to build it to where we're at and previously in my prior company I've done over 150 over a period of years.
They are important for building your net workout and your verticals and your expertise and to add talent because we're all our success is critical.
And critically based on internal talent.
Broadening the market and client base, so acquisitions do provide that in terms of building your organization and of course, the byproduct is increased revenue.
And earnings.
However, we are focused on organic growth as well and improving.
Our shareholder value, so I called the triple option similar to a football play our buybacks and your playbook or acquisitions and your playbook is organic growth.
Key area of focus and your playbook. The answer is yes. So as we move forward. We have all of these options and the triple option playbook and will execute as appropriate. The next question is will you consider a stock split to create more investable trading level.
And the stock split they're referring to is the reverse.
Reverse stock split sometimes are necessary to allow for larger financial institutions and mutual funds to buy your stock. So will we consider doing that at some point. The answer is we looked at all facets of improvement of shareholder value and Thats also in our playbook.
Will you consider.
A modest buyback given the five X EBITDA valuation that you have and your net cat cash position no.
No acquisition could match that.
Again, I think I answered that it's in our playbook.
And so it will all be considered as we move forward.
Now that's terrific numbers are out and outlook, there's very strong might we see more direct shares.
Involvement with insiders again, I gave that answer about insider participation.
Inside participation in our equity will continue.
And we're very bullish on our stock.
How are you preparing for a potential recession.
I personally have managed staffing company of multiple offices much larger than we have.
Through both 2000, 2001 recession, and the OE Oh nine recession.
ZIP is a recession last about eight months in our industry. The <unk> nine was prolonged because of the financial crisis about 18 months.
Beautifully staffing companies tend to increase cash flow during a recession, because they collect accounts receivable faster than it spend money for payroll on the contract side. So I'm living through a recession is really not.
To me an issue.
Our cash flow will improve temporarily and the other thing is we've organized our balance sheet.
From a position of strength, so going into a recession with a high debt situation at a high interest costs would be not favorable but we're not in that situation weren't quite the opposite so I feel quite comfortable that we'll sell through a recession.
Why are you not buying shares as insiders. The price is depressed again I answered that one earlier Hello from Germany, why don't you clearly published the E. P. A.
As well as the planned EPS for 2022.
We clearly published the EPS in our press release, both for the quarter and for the fiscal year ended 2021, and I think there is an outlook and some of the analyst reports that 2022 movie.
Moving forward.
Our customers receiving a high quality customer service I can tell you.
Firsthand.
From customer involvement that I have and also from the caliber of the people we have on our team that we placed customer service at the top of the list and I believe that our customers have the best service and that's why we're able to compete with much larger companies in our space.
The next one says can you talk about 2022 expectations Youre back to 2019 revenue levels. The demand for employees is incredibly strong I T workers remain in demand, but finding.
People seems to be a bottleneck can you talk about the market dynamics and your expectations I can tell you that this is a robust employment market and the challenge of finding.
Individuals' to satisfy our demand is up there. However, we have invested in technology and people. We've added recruiting resources to meet that demand. We have added remote recruiting resources internal recruiting resources and we are up to the challenge and we are meeting expectations.
Patients and in many cases exceeding those and that's due to the quality and the caliber of our people that we have in our company and we will continue to make investments in our people to meet these expectations. We are expanding as I sit here today I personally approve new hires.
All new hires to the company and I can't keep my pen.
And move it fast enough because we are getting the talent, we need to expand and grow so I'm quite confident that we will meet the rising demand.
That seems to be the last question. Thus far if you have any other questions. Please submit them electronically.
And we'll pause for a second Kim would you like to add anything to what I've expanded on.
Yeah, just to say that.
No.
Still.
I would remind everyone that we're still somewhat in the paint under pandemic conditions, albeit obviously not nearly as bad as it was a year ago.
But things are beginning to come back there was a question a minute ago, what are your expectations for 2022, and when winter people coming back into the workforce.
My personal view on that as always.
And this may sound glib, but when people feel pain.
But when the when the stimulus and the generous unemployment benefits.
Other sources of money began to dry up.
I think they won't be coming back into the workforce in greater numbers, we're already seeing the professional workforce are actually not only come back, but but but begin to grow again.
So.
That would be the only addition, I would make.
Thank you we have another question what are your expectations in 2022 regarding mergers and acquisitions I can tell you that we have several opportunities for M&A.
Constantly get candidates and we also are astute and using our existing talent in the field to identify what I call quality competitors that may want to join us for some of their people that may want to join us. So yes, we are always looking and my expectation is in 2000.
22 were.
We're likely to execute on the transaction.
<unk>.
Next question, obviously, the labor shortage has created some tailwind for the business specifically in permanent placement.
What is the normalized revenue EBIT margins and cash flow to the business.
Well, Kim I'm going to let you talk a little bit about the normalized revenue EBIT charges and cash flow.
Sure.
The fourth quarter of 2009 or I'm, sorry, 2021.
The third and the fourth quarters in a typical year are usually pretty good quarters in our business.
They have a large number of billing days the December quarter, and the March quarter tend to back off a little it's really hard to read right now.
As Derek mentioned, we're having a great December quarter, so far.
So and frankly somebody made the comment.
A minute ago that it looked like we were back to 2019 revenues. If you project off the third quarter and the fourth quarter of 2021, we're actually running ahead of 2019 revenues again projecting off those two quarters.
And if you annualize the average of those two numbers that would put us sort of just over <unk>.
Industry level growth for fiscal 2022, now we're not.
Putting that out there as guidance.
Because we specifically disclaim from financial guidance, but if you do that math, that's the resolved so just putting it out there for you all but I'd like to run spreadsheets and so forth are normalized EBIT margin has been high single digits.
Yeah again as our revenues grow we have a significant enough fixed cost base that we believe that that margin should go up.
And perhaps get into low single digits and the cash flow in the business.
Yeah.
Not to quote history, but this time two years ago, we had $12 million in annual interest.
We have less than 100000, now which is comprised of.
The fees that we pay just to keep the line of credit in place as $12 million of cash, but we didn't have two years ago.
So if you look at our operating income that's a good gauge to sort of tell you approximately what are our COO.
Cash flow is in general our business is very efficient in terms of conversion.
What we record on a GAAP basis to cash basis, we have you know.
A 46 day average DSO, we pay our payables on about the same place so.
That's a good benchmark for cash flow and importantly, again, if you take that benchmark.
And do the math on it youre going to see that.
Cash flow is now positive so.
Okay.
Okay that leads into the next question can you shed any light on upcoming or imminent acquisitions or mergers.
The answer is that we are now position balance sheet wise to absorb acquisitions, so the likelihood of an imminent.
Or an acquisition and it could mean tomorrow, so I'm not going to tell you exactly when but likely in this fiscal year.
You'll see activity. There. The next question is I thought you were going to update us on how Q1 2022 is going that I missed that.
Q1, 2022 would end December 31, 2021, and since were now in early January we do have strong indicators that we monitor daily and weekly that indicate that the first quarter of 2022 is a good one so in case you missed it.
It's a good one and that will be reported sometime in February.
Mid February.
The next question in the presentation. It is mentioned that topline growth goal is $1 billion and U S. Professional revenue could you. Please elaborate on how you expect to achieve that goal.
And when youre going to achieve that.
I can tell you that based on prior history in my experience I took the company public at $94 million to $89 million.
1 billion, six and 96 and $4 billion and 98.
And the reason that we were able to grow was because we position the company from a position of strength financially and we augmented our internal growth with acquisitions. So it would be a combination of internal growth and strategic acquisitions.
And I'd say you know in the $1 billion would be in our five year plan.
I was able to do it quicker before but I don't want to set the goal to aggressively.
And I think five years is a reasonable timeframe for us to be able to approach the target.
Benchmark objectives as fiscal year, 2021, Q4, GAAP EPS annualized for.
22, a good benchmark.
Sure.
The objective so Kim do you that question, Yeah, I mean go.
Let me just say this the quality of earnings is much higher than if you go back to the presentation, we talked about the pro forma.
Q4 EPS.
<unk> was two cents and the pro forma annual EPS was six sets.
So.
Again.
It's ballpark how many of those are those are pretty good benchmarks right now to use yes, we're still in a pandemic anything can happen.
So take that with a grain of salt, but.
Yeah. The numbers are a lot cleaner now so I think and you could also begin to.
Predict off of.
Our TTM EBITDA and adjusted EBITDA numbers more because again.
Not to keep bringing it back up but with the payoff of all that that we had that was a that was a pretty complicated mass that we have on our hands and then the pandemic, but now that we're beginning to come out of that with the momentum we are.
I think those are good numbers.
Okay. Thank you.
Next question, how many analysts are following G E.
Today, we have one analyst and we are approaching.
Various others and you should you should see the analyst picking up coverage.
This fiscal year as I sit here today, we've had contact with several others, who have indicated their interest in picking up our stock we are also.
Preparing to launch what I call Investor awareness Roadshows with other institutional and retail investors that is forthcoming as well we are in current discussions with investment banks regarding that.
To expand our investor base and the visibility of our stock so great question.
On that and you should see activity there as well next question are there specific metrics you look for when you search for buying other companies can we expect them to be immediately accretive to earnings the answer to the second part is yes. They are going to be immediately accretive to earnings Thats, one criteria that we use.
The other thing is we look to see how they've grown over the years and whether they could sustain organic growth.
Their margins.
Our expectations of higher margin.
And also the quality and caliber of their people.
Well G group work with overseas companies like all <unk>, Samsung and others to get exclusive contracts. This potentially could lead to fixed income going forward. The question. There is leaning toward newer type revenue streams and the answer is yes, we will pursue those and.
And we do have some annuity type revenue streams in terms of continuing contracts on several clients, but the more you can create an annuity stream.
Moves out.
Positives.
And dips and revenue and so forth so as we grow.
And expand our service mix.
That is a focus and I think that's a great question for you to grow to $1 billion in revenue annually wouldn't you need to make huge acquisitions to accomplish that goal.
The answer to that is I think that our approach would be similar to what I've done before we'd rather take small bites on the Apple.
And integrate very successfully and quickly.
And that would be more of the approach than the big by Apple of going after some large target unless it made total sense and.
And was seamless and but I would say that larger acquisition would be later in the game.
After we've built out to a couple of hundred million dollars in size ourselves. So another great question and that's the approach. We're taking are there any prospects in terms of staffing firms you're interested in acquiring in the near future. The answer is that is resoundingly, yes.
Is there an acquisition if you do one do you plan to go with that cash stock or both Kevin why don't you address that of the type of consideration we use when we go after at acquisition sure. That's a great question or go to currencies for acquisitions our cash.
Prudently our own stock again, right now it's kind of undervalued. So that explains a little bit as to why we're still a little bit in a holding pattern and not jumping on acquisitions right away.
And then.
Third a third element for us.
The question says that we with particular with smaller acquisitions and entrepreneur owned businesses, we like seller debt.
Because and look at it in a manner similar to the type of M&A strategy, you might have in a rollout.
Because that invest the new owner in the company and our lives everybody's interest.
And then last but not least when we go to the private debt market or commercial net market.
Senior debt, we would if an acquisition was so good.
And it wasn't too big a piece.
I would tell you the reason that we went all the way we get this question a lot.
And raise so much capital that we could pay off all our debt.
And as Derek mentioned, our leverage right. Now is now is so that we can use senior debt in a prudent way and size it to the acquisition and not add to an already leveraged up position if that makes sense. So.
We're very much strategizing and planning.
On acquisitions to happen in the not too distant future.
But let me add that one.
One other component of the acquisition structure may be an earn out.
And in terms of the earn out.
We will pay for performance.
Future performance as it is realized.
Some people want to get paid for outlook.
We pay for performance has realized.
Something like that in place typically.
On some of the acquisitions that we will make.
Another great question can you break out your goal of your revenue longer term, how much will come from direct hire versus professional staffing and light industrial.
How to think about margins longer term.
Really good question. So as we have expanded we have increased.
Particularly if you look at this quarter and this last fiscal year, our gross margin.
And what we call our gross profit dollar per hour, we continue to focus on that and you will see us moving.
More towards professional services and the higher end verticals.
That we're realizing the higher margins and what I call gross profit dollar per hour.
In the other part of the question was how much of your business will be direct hire a permanent placement as you move forward what's your goal.
Versus contract staffing.
And the answer to that is we have a nice blend ranging from 13% to 18%.
Permanent direct hire.
Versus contract staffing and we think the mix is quite quite good.
As you know permanent placement is pretty hot right now so that percentage has moved upwards sum, but longer term it will probably level off in the 15% to 16% range.
And we will grow our business, but you should see higher margins as we move forward.
And more of a focus towards the higher end verticals.
Do you have the management and <unk> systems in place.
To scale GE.
<unk> group again, a wonderful question, there and Kim why don't you talk about what we've built and how we can add to our revenue without increasing fixed costs fixed costs and actually expand our operating margin.
Yeah. Thanks, Terry that's a great question the answer to that is yes.
And let me, let me qualify that slightly just say.
We're 90% there.
And the reason I quit vacated 90% is that we are putting the finishing touches on a couple of things right. Now are standard is to have one G. L. One applicant tracking system.
Common billing system and common payroll systems, which we are in.
In the final throws the latter of which we're in the final throes of aligning and by having this this will allow us when we acquire a company.
We can immediately.
Segment the company in terms of clients.
Contractors and people and we can onboard those groups those factions from the company, we can onboard them directly onto our Susquehanna and through a series of coatings that we have in place maintained the legal entity sanctity of that company, but.
Have them come onto a common system, that's not only faster and cleaner, but it also is.
And also as efficient in the background, we already have common Treasury management, everybody is managed through a common treasury management system.
We have common back office systems, we have a common HR platform, we have common.
Support platforms. So we're very when I say, 90% I'm really being conservative.
We are we're prepared particularly to do the type the size and scale of acquisitions that we're probably going to come out of the box with.
In the near future.
Okay, Great one question.
How are you going to get to $1 billion in revenue can you elaborate we've answered that one.
Here's another one thank you very much for directly interacting with shareholders.
Through these calls we shareholders appreciate the efforts of the whole team and also appreciate the.
The insights I can tell you it's very rewarding to have these calls and to get these questions and get as much transparency on our company out there to you all and this is the good part of business because we're all in it together to succeed and I want our shareholders to be part of the process of not only.
Ending where we're going but having key insight into.
Patients.
And transparency into the numbers and so forth so.
I applaud that question and I. Thank you for your good comments, but I also want to applaud.
All of you on the call today for really great questions and being so attentive and a part of our organization and understanding where we're going we're excited about the growth prospects and we look forward to.
Much more success have.
Have you given the Q1 update I mentioned that 2020 to the first quarter ending December 31 looks good.
Business continues to be very very good.
Thank you much for having the call I think it's helpful. Do you have a sense when you will be reporting the December quarterly results mid February.
What analyst reports are you referencing.
We have the think equity report out there today.
And there'll be more reports forthcoming as we expand our analyst base, how many analysts <unk> G. We answered that as your January 'twenty. Two IR. Please just obtained is it correct that your pro forma book value per share as of <unk> 86 per share isn't correct Kim pro forma book value for okay, with little interest expense and de Minimis.
Capex wouldn't EBITDA be close to cash flow.
Good question, yes.
We will be paying taxes in the next few years.
I hope not.
But there's still.
Quite a bit of I don't have the exact figure with me, but we still have pretty significant NOL carryover, okay. F&I acquisition cost common shareholders do insurance dilution, what's needed to pay off the expensive debt. We've done all of that thank you.
What do you enjoy most about operating GE I think it's the interaction with all of you and our employees and the ability to develop something.
That I can look at.
Historically, that's been a success story are you guys aware of how that.
Hello.
Okay is there a fun who do you take big positions. Your company you just have to look at the filings to get that.
Is $8 20, EPS for the first quarter realistic.
I would say Kim.
Keep in mind and there'll be a seventh near 17, 16, $4 $7 million gain.
For the forgiveness of the PPP loans and that alone I think is about I haven't done the math.
We got one minute left we have one minute left I'd like to wrap it up and say thank you all for being so attentive and being on our call.
And being shareholders and interested investors potentially if you're not a shareholder we'd love to have you.
All of our company.
And we're working very very hard and our people are working very very hard.
To even be more successful so it's been a great quarter and a great fiscal year, we look forward to delivering great results in fiscal 2022.
Once again that concludes our call and thank you for joining.