Q3 2022 GEE Group Inc Earnings Call

Okay.

[music].

Good morning, everyone.

Welcome to the G E third quarter.

Earnings in 2022 update webcast conference call.

I'm Derek to one chairman and Chief Executive Officer of the company came Thorp, our senior Vice President and Chief Financial Officer will also join the call.

I'll be hosting today's call.

And we will be addressing the quarter and our outlook for the remainder of 2022.

Thanks, a lot for joining today, it's a pleasure to share with you our results for the fiscal 2022 third quarter ended June 30th two.

22, and provide you with our outlook for the final quarter.

Of our fiscal year 2022 year end and also the outlook for the foreseeable future.

Some comments Kim and I will make today may be considered forward looking including predictions and estimates about our future performance.

These represent our current judgment of what the future holds and are subject to risks and uncertainties that actual results may differ materially from forward.

We're looking statements. These risks and uncertainties are described in Monday's earnings press release, and our most recent Form 10-Q, and other SEC filings under the captions cautionary statement regarding forward looking statements and forward looking statements Safe Harbor, we assume no obligation to update the statements made on <unk>.

As call.

During this presentation. We will also talk about some non-GAAP financial measures.

Reconciliations and explanations of these measures are included in the earnings press release.

Our presentation of financial amounts and related amounts, including growth rates margins and trends.

<unk> are based upon rounded amounts for purposes of this call and all amounts or percentages related items presented are approximations accordingly.

For your convenience our prepared remarks for today's call are valuable in the Investor Center of our website Www Dot GE group Dot com.

With that business behind Us I'm very happy to report that we once again achieved outstanding results beginning with net income of $2 6 million.

Or <unk> <unk> per diluted share for the third quarter over 2022 fiscal year.

And for the nine month periods ended June 32022, net income of $24 million or <unk> 18 per diluted share.

Consolidated revenues for the three and nine month periods ended June 32022 were $41 1 million.

And $123 6 million.

Up, 8% and 15% respectively over the comparable fiscal 2021 periods.

And gross profits and gross margins were $16 5 million and $46 6 million.

And 41% and 37, 7% respectively.

Our non-GAAP adjusted EBITDA for the 22.

Our fiscal third quarter was $4 1 million up $1 million or 34% over the comparable prior fiscal year quarter.

It represents a 10% margin.

Revenue.

non-GAAP adjusted EBITDA for the nine month periods ended.

June 30th 2022 was $11 5 million up $2 8 million or 32% compared to the nine month periods ended June 32021.

Before I turn it over to Kim I want to say again, how very proud I am of our dedicated and talented people.

They work extremely hard every day to ensure that our clients get the very best service. This is one of if not the most important key to our success.

At this time I'll turn the call over to our CFO Ken Thorpe.

Who will further elaborate on our results for the 2022 fiscal third quarter.

Kim.

Thank you Derek and good morning.

As Derek mentioned revenues for the three and nine month periods ended June 32022 were $41 $1 million and $123 6 million up.

8% and 15% respectively over the comparable fiscal 2021 period.

Contract services excuse me in contract staffing services contributed <unk>.

$33 $1 million, and $103 $5 million or 80% and 84% of revenues, respectively and direct placement services.

We did $8 million and $20 $1 million or 20% and 16% of revenues respectively for the three and nine month periods ended June 32022.

Contract staffing services revenues increased by <unk>.

$6 million or $600000, and $8 $7 million or 2% and 9% for the three and nine month periods ended June 32022, respectively. These increases were mainly attributable to increased demand in our professional contract services Mark.

<unk>.

The negative effects of COVID-19 lesson in the U S economy, and workforce continue on recovery paths towards pre COVID-19 conditions.

Direct hire placement revenues for the three and nine months ended June 32022 were $8 million and $21 million.

Up 45% and 60% respectively.

The comparable fiscal 2021 periods direct hire revenues for Q3 2020 to set a new high for us.

And the first nine months of.

Fiscal 2022 already has surpassed the entire 2021 fiscal year.

Total revenues from our professional staffing services segment, which includes contract staffing and direct hire placement services were $37 million and $111 6 million and represented 90% of total revenue for both periods respectively.

We ended June 32022 professional staffing services segment revenues were up 8% and 18% from the comparable fiscal 2021 periods, respectively, Our IP services and markets.

<unk> resources access data consulting and.

In consulting and SME.

Accounted for 48% of our professional services business segment revenues for the nine months ended June 32022, and were up 27% year over year.

The other professional services end markets.

Hence accounting administrative and office engineering healthcare and others accounted for the remaining 52%.

Professional services business revenues for the nine months ended June 32022, and were up 14% year over year.

Industrial staffing services revenues were $4 1 million and $11 9 million for the three and nine month periods ended June 32022, respectively, compared to $3 8 million and $12 9 million for the three and nine month periods ended June 32021.

We continue to experience some pandemic related conditions associated with the Delta in omicron variance.

In our Ohio markets in earlier quarters of the fiscal year, including school of business closings and interruptions.

Each were reminiscent in some respects of the early COVID-19 pandemic.

Consolidated gross profits and margins were $16 5 million or 41% at $46 6 million or 37, 7% for the three and nine month periods ended June 32022, both up substantially from comparable fiscal 2020.

<unk> periods or consolidate our consolidated gross margins for the last five consecutive quarters have been above 36%.

Overall improvement in the company's combined gross profit margin is largely due to the substantial increase in our direct hire placements, which have 100% gross margins.

Selling general and administrative expenses or SG&A for the three and nine month periods ended June 32022% increased $1 7 million and $7 $7 million respectively.

G&A expenses were 31, 3% at 33% of revenues for the three and nine month periods ended June 32022, respectively compared to 29, 2% in 2007.

7% for the three and nine months periods ended June 32021.

In addition to overall growth of the business, resulting in additional incentive compensation and bonuses the increases in SG&A expenses and ratios were affected by $800000 in charges associated with two former positions that were eliminated 300000.

During the three months period ended June 32022, and $500000 during an earlier quarter of fiscal 2022, and addition of 400000 dollar increase in <unk>.

Bad debt expense allowance associated with one of the companies industrial services customers.

And the $1 million charge for the settlement of a legal matter added to our SG&A in earlier quarters of fiscal 2022.

As Jerry mentioned in his room marks.

We achieved net income for the three and nine months periods ended June 32022 of 20, I'm, sorry of $2 6 million.

Our <unk> per diluted share and $24 million or <unk> 18 per diluted share as compared with net losses of 937000 or negative <unk> <unk> per diluted share.

And negative $3 million or negative <unk> <unk> per diluted share for the three and nine month periods ended June 32021.

Net net sorry, non-GAAP adjusted net income and diluted EPS, excluding the effects of nonoperating and nonrecurring items as outlined in the earnings press release were $3 1 million or <unk> <unk> per diluted share and $8 1 million or seven.

Per diluted share respectively for the three and nine month periods ended June 32022.

Adjusted EBITDA, which is a non-GAAP financial measure was $4 $1 million for the 2022 fiscal third quarter of $1 million or 34%.

Over the comparable prior fiscal year quarter non-GAAP adjusted EBITDA for the nine months period ended June 32022 was 11 5 million up $2 8 million or 32% compared to the nine month period ended June 32021.

As we've commented in prior quarters, assuming the spread persistence and severity of COVID-19 continue to lessen we believe these types of positive results are sustainable a reconciliation of G. Group's GAAP net income to the company's non-GAAP adjusted EBITDA and reconciliations.

Of other non-GAAP measures with their GAAP counterparts discussed today can be found in supplemental schedules in our earnings press release to conclude our current and working capital ratio at June 32022 was three to one <unk>.

Consolidated accounts receivable net of allowances for doubtful accounts at the end of the 2022 fiscal third quarter were $21 2 million and our days sales outstanding performance metrics. Our DSO was approximately 42 days we.

We reported positive cash flow from operating activities of $3 $4 million for the 2022 fiscal third quarter and $7 $8 million year to date, and non-GAAP free cash flow of $3 4 million $7 $6 million respectively.

Our cash flow from operations and free cash flow for the nine months ended June 32022 were reduced in part by payment of the first of two equal installments of deferred.

Hi Tech obligations allowed under the cares Act.

Approximately $1 $8 million.

In December 2021, and the payment of $1 million in settlement of an old and isolated legal matter made in April of 2022.

Our liquidity position is strong and we have no outstanding debt. Our net book value per share was 89 per share at June 32022, and our net tangible book value per share was <unk> 25.

Now I'll turn it back over to Derek.

Thank you Kim.

The 2022 fiscal third quarter was our fourth consecutive.

Full quarter of strong performance.

Since deleveraging the company.

Having consistently achieved profitable growth at higher margins earnings and free cash flow for the last four quarters as well, we now have a positive track record as well as positive momentum for the future.

At June 30 of 2022, the company had over $17 million in cash and another $14 million in availability under G groups Bank.

Based credit facility.

<unk> group prospects today and for the future.

I have never been better.

Absent the onset of a recession or other unforeseen events.

Anticipate outstanding results for our final quarter.

And all of our 2022 fiscal year and beyond.

Before we pause to take your questions I want again.

Thank you to all of our wonderful people for their professionalism.

Hard work and dedication.

Without them, we could not have accomplished all the good things we have shared with you today.

Now, Kevin and I will be happy to take questions.

Please ask just one question via email and rejoin the queue with a follow up as needed.

There is time, we'll come back to you for additional questions.

So the first question that we've received.

It is as follows I know it is important to maintain a cash reserve for M&A opportunities. However, sometimes the best opportunity is buying back your own stock.

Why not use the newly generated cash each quarter for stock buybacks.

Similar to that question is the next question given the price of the stock.

And our estimate of intrinsic value every dollar of stock bought back with conservatively create 30% to 40 and shareholder value.

You give us a rough percentage of how high that is being considered.

Come December when the company will likely have well over $20 million in cash.

<unk>.

December is the first time.

And that's after the mid part of the bonds that we can buy back stock pursuant to the cares Act provision on the last day of forgiveness of our PPP loans.

So that's the comment related to December is spot on.

The whole buyback situation relative to M&A.

Is that or observation is that when you are trading at the level. We are now.

It's more efficient and effective to buy back shares versus.

Making an acquisition.

I can say that there has been significant discussion regarding share buybacks.

And I think it's important for everyone to stay tuned.

The next question is.

Regarding insider or management purpose purpose purchases, including directors purchases of stock why hasn't there been more of it.

There's been several discussions about blackout periods and so forth.

And we have a lot of activity going on in our company that preclude us because of inside information for purchasing.

Including results when we get toward the end of a quarter.

So I think that youll see some activity there, but it's a personal decision of directors and officers to buy stock, although we're bullish and we own significant positions in the company, but I think that.

Enhancing those positions is a good thing to do particularly since our stock price is cheap relative to the peer group and relative to.

Other metrics that are out there.

So I agree with that comment and to the extent, we can do it I think you'll see activity there.

Interest and the next question is.

Right.

How much cash do we need to run operations.

Cam do you want to copy comment on that how much cash do we need to fund capital H.

Further.

For almost the entire period.

<unk> thousand 18 2019 2020.

Until the beginning of the pandemic, we operated the company essentially on $3 million to $4 million of cash.

Which covers.

About one 5% to payroll cycles.

We were able to do that primarily because of how efficient.

Our business is.

The only strain that we.

Recognizing our cash flow is while we're growing.

Significantly in dollars and that amount of Australia, only last about eight to nine weeks.

And what it represents is.

Paying our employees, who we contract with clients.

And then billing our clients in collecting our accounts receivable as I mentioned in my comments 42 days later so.

But other than that our collections are are really very good relative to other businesses in part because we supply a major resource and asset to our clients to support their business cycles.

So $3 million to $4 million.

We operated on very successfully for almost three years.

Including through a fairly tumultuous period.

Let me add to that that.

Staffing companies that do contract staffing and addition to permanent placements.

Tend to collect cash.

And increased cash flow.

More in a downturn because they are collecting accounts receivable that were on the books faster than they were spending money for contract payroll.

That's something that I've experienced in 2000, 2001, 2000 and <unk> nine.

And briefly during the pandemic.

So.

Or the effects of the severe parts of the pandemic on business in general so.

To answer the question is we don't need a lot of cash to <unk>.

<unk> payroll.

As our biggest cash flow obligation.

If we're not growing so that's an interesting dynamic that we actually collect more cash in.

When.

When things are bad on a net net basis than we than the cash outflow. However, we'd rather have the outflow going and growing.

And the assumption on that is that your accounts receivable are good and they are we have a great track record there.

Great collection efforts by our teams and.

And our Dsos are very low.

The next question is how will acquisitions be funded.

I can't give you or your observation on that and I know, we're somewhat dreading.

On that but go ahead.

We start.

We start with a clean template on any target that we look at and we generally guided three sources.

Available cash.

Financing or stock, depending and of course, right now given where our stocks trading we probably would not.

Entertain issuing stock.

But then also seller financing and then because of how we've set the table with the deleveraging.

We have plenty of ample opportunities.

For senior financing from other sources.

But but the idea is for us to create.

On the acquisition strategy and implement it in a way that does not overleverage the company.

And takes advantage of cash available cash we have and again all of those things.

Our annualized.

In.

Relation.

What we believe the opportunity is in the acquisition so.

But it's generally we start with three to four <unk>.

Sources of funds when we look at an acquisition.

Oh and earn outs I forgot earn outs.

Okay. Thank you Kim.

Rob.

The next question.

Is threefold.

The first part of the question is the company is severely undervalued about 30% discount to book what is your.

What is your plan to pass through.

Those results.

The company.

And then the next part of that in stellar financial times as the company received interest for a merger or a complete buy out.

Is the company planning to staff overseas contract construction labor as this sector is severely impacted the answer to the last question is.

In terms of any significant investment overseas is no.

A lot of territory in the U S. We may use some resources from overseas to staff.

Fund, our U S business, but.

We're not planning a major movement into the international front, we've got a lot of footprint.

An opportunity in the U S.

As the company received interest for a merger of complete buyout.

I may say the company always gets in.

Interest.

And from time to time clearly.

Proposals for buying part or all of the business.

That in turn by the way limits the ability of management directors to buy back stock. If those are reviewed are entertained because we don't want to have a look back period, where people bought stock in there. There was about the answer is the company is very very satisfied.

Today growing.

And participating in acquisitions to grow its business and we have a $1 billion target to get to.

But I think importantly, we want to create shareholder value and opportunities for our employees. So that's our prime focus here.

But we do get interested of course and.

I've done a lot of acquisitions over the years.

And I ran a business for 17 years before we had a transaction and ran it now that was successful and we got several billion dollars and we have growth opportunities here that are tremendous.

From time to time, we do get.

Acquisition offers participation in equity investments and so forth, but I think you have a very good standalone business with a lot of opportunity to grow.

And I think there is another part of that question, let's see.

What's going on with inflation.

[laughter] I'll say ask somebody else.

Inflation happens to be pretty good we've had price increases so.

That's not all bad we're able to pass those through.

And we've had to adapt our business to higher prices for different aspects of goods that we use <unk> labor, but it's worked out quite well for us we have a variable cost business.

Able to do a lot of pass through on that how do we how do acquisitions look in the sector.

I can't say that we don't get a day, where we get an offer.

Or an acquisition prospect or opportunity plus our own work that we know where the good ones are.

So it is robust and there's a lot of activity I will say that a downturn typically increases the opportunities out there at lower prices. So patience is a virtue right now.

Jumping in an acquisition.

<unk>.

Potentially uncertain times coming up I mean, they are uncertain and I would say there are always uncertain, but if we execute and continue our strategy, we're perfectly fine and if a deal comes across the table.

It's an offer that we can't refuse then obviously we'll be opportunistic.

What else would you do an acquisition or a buyback.

The answer is no.

On a purely mathematical basis buybacks appear to be more.

Effective in the short run, but we can do both.

I think that's strategically what we will look at.

Can you discuss pricing actions taken during the quarter Kim you want to talk about what we've done on pricing our services.

Sure.

Then two sources.

And let me just say our prices have moved along as you might imagine with the economy.

And inflation and increase in wages.

The way we price our pricing began the first step is is a leveraging of whatever we're paying our.

Employees are contract employees, so on the contract business our prices move up as we increase their pay.

By design.

And we coordinate obviously with our clients our clients are aware.

Nonetheless employment and the workforce is still somewhat volatile so our clients are very willing.

To to work with us on those increases in that and that helps that's helpful.

On permanent placements, we get increases not so much in prices, but as again salaries go up rfps for placements are based on.

First year base salary so as the cost of salaries go up our fees go up accordingly.

And yes, I think in the past we've commented and I think so far this year, it's fair to say that our prices are probably up somewhere between 89% overall and thats taking into account mostly contract that is not.

Not necessarily for a replacement of the contract.

Thank you. The next question is regarding analyst coverage.

There's one analyst with a $2 price target.

Actually Marc Riddick.

On the call.

And was that on the call today and also.

Covering the company from Sidoti.

So we have mark and his coverage and Youll, probably get an update from him.

After this report.

But we are seeking other analyst coverage and we're also marketing to a broader base of investors.

Well with the road show and other.

Techniques.

How much does the company have remaining in Nols net operating losses, and as amortization of intangibles have a similar effect.

You want to take that.

The company has between 15 and $20 million of Nols carryforwards remaining.

That's a rough estimate I actually saw the question and tried to open up my my last 10-K, but it's disclosed in our 10-K and the tax matter.

For those that want to look it up specifically.

And then on amortization of intangibles.

Are we amortize goodwill.

For tax purposes.

We do get a benefit from that that creates in part our net deferred tax asset.

But because.

Our prosperity has been relatively recent.

We have not fully recognize that yes, the accounting rules generally say.

They like to see three years or so.

Improved performance before you Tinker with.

Youre allow us.

For.

A deferred tax asset so so thats out there somewhere in the future that could become beneficial later on and then.

Most of our intangibles are.

From.

Net income.

Built in over time.

Okay.

Okay, Thanks, Kim but the reference to the footnote in the 10-K will cover most of.

That question.

Next question is recession is now widely expected.

Rather unforeseen how would you adjust your outlook for this expectation.

I think there's a debate on what the definition of a recession is.

But I will tell you the real definition of a recession risk.

The recession is when your neighbor loses his job and a depression is when you lose yours.

So.

After that definition I can say that.

We're hiring actively.

Now and getting a lot of.

They're still hasn't been a recovery to that level. So.

We have more job orders unfilled than we do.

Canada and that continues and I looked at a few competitors are opinions and they concur, particularly the higher end businesses and that's why we're focused on the higher end professional services businesses.

I'm not concerned much about the downturn, especially since our balance sheet is pristine.

And we're highly liquid can you discuss current end market activities in key areas such as it.

Finance accounting et cetera.

Well I can say that it finance and accounting are all robust.

It.

Is one that allows for the most remote working and virtual working.

And we have.

Great leadership, there and continue to grow that in addition, our accounting and finance units have performed really really well.

Several quarters because of the demand for permanent placement and we have some highly experienced recruiters are in that segment.

Segment, and we're continuing to add talent by the way across both of these segments It finance and accounting.

Are you starting to see any softness in permanent placements in light of economic uncertainty.

Can say that whats happened a bit is that we see some shift from permanent hires to contract workers. During a period of uncertainty. So we're seeing kind of the the movement toward contract staffing a bit from permanent hires.

And you can say, it's a try before you buy concept.

We've seen it obviously several times in the past and based on my experience in the industry.

And it's one that we adapt well too. So we are lean and our productivity is so high from a recruitment personnel that were not overstaff by any means and I can say that we adapt to that so the expectation of lower permanent placements, possibly.

If there's a recession.

Economic uncertainty that happens but.

We're still showing very good permanent placement activity.

And we've increased our contract head count recently, which is very very good.

So.

We're in great shape.

And we can deal with periods of uncertainty with no problem.

Next question.

Is what.

What has been.

Okay are you starting to see got that prospects for acquisitions, we talked about that what has been the trend over the past few months to for bill spreads permanent placement refunds and general demand.

For employment demands high unfilled orders continue.

Permanent placement refunds are very very minor or nonexistent very rare.

What else.

That's about it when the trend and the trend continues to be very good.

Has there been any.

Institutional interest are expected analyst coverage at the company the answer to that is yes.

Do you see a lot of acquisition targets, yes.

Increasing.

As I had said before.

Unpaired of uncertainty.

Lot of smaller players or boutique players become available.

For whatever.

Because of that and.

We see more activity.

And opportunities do you see a lot of existing tourists. We got that what is the interest charged on the revolving credit facility.

Tim you want to handle that yes.

Yes, that's right.

Have an unused.

Portion fee, which was comment on.

Asset back facilities like ours, and I think it's.

37 basis points or something and so that's our.

And then there's some other fees.

The bank's throw in there, but it's all fee income there is no there there.

Borrowings on our facilities since the very.

First two weeks.

For which we paid off right away.

Okay and can you talk about free cash flow and the need for capital near term.

Let you handle that one too yes, great question.

Outlook for free cash flow is very good.

Our cash flow and I realized as the CPA I want to be delicate here, but.

If you look at our EBITDA and our adjusted EBITDA because of the formulas that are underneath those two numbers.

And you combine that with the efficiency.

In our cash flows from operations that I mentioned earlier, that's a fairly good proxy for our capacity to generate cash flow.

And our working capital is very strong right now.

Three to one.

A half of which is cash and growing.

So.

Yes.

Our operating needs for what we currently have or there is a lot of your questions.

That have come in so far a lot of all of the investors questions.

Alluded to we are.

In constant.

Internal discussions on how to best deploy the capital going forward and considering a lot of the various things that have been brought up on the call.

Thanks, Kim next question says.

Yeah.

I don't I know that you do not have to worry about your share price.

Relative to your NYSE listing compared to the NASDAQ and Thats true.

And theyre talking about trading below a dollar.

But we would appreciate your thoughts.

On a potential reverse split.

And this person.

And to be foreign and submitting it says.

You're executing well keep on doing it.

Greetings from Switzerland.

So.

The concept there is that if you're trading at a certain dollar price certain institutional investors cannot buy your stock so.

At this point.

We took some dilution on the stock price when we paid off our debt with an equity offering.

And we're in that recovery mode to get the share price back up.

Through performance and execution.

Stock buybacks helped that.

Acquisitions that are accretive helped that.

And then the constant will reverse split obviously pushes your price up.

With fewer shares outstanding and allows for <unk>.

Some institutional investors for sure.

To participate in your company shareholders.

So all of those things are considered by our company and.

Under discussion and review with advisors as well.

And I can say that.

During these periods of trying to increase shareholder value and planning it's difficult for us to buy shares if we execute on any of these.

Particulars.

Before we go public so that's something that we navigate through as well relative to a prior question that I had so.

Are these things under consideration they always are.

By the way I have solicited input from our shareholders all of you.

And others and experts.

And I don't get a uniform answer.

One way or the other but I have a lot of experience in the area of dealing with the street.

Institutional investors.

And listening to.

To what our shareholders say and potential shareholders say, so we will continue to.

Move forward and evaluate alternatives for those type of things, but I can tell you one thing.

Focus on your business and execution.

Profitability and growth.

All matter significantly.

And we will tend to help cure the problem and if we could boost that by other methods. We will continue to do that.

How much revenue is still within the 90 day period on firms.

What risk do you have Kim essentially they're saying falloff on firms, which youre right on.

We carry a reserve on our books.

Combined for financial reporting purposes, with our allowance for doubtful accounts.

But we carry a reserve that we update every quarter.

And it will it moves the reserve moves up naturally win business moves.

And I would say right now commensurate with the comments that you heard Derek make earlier on our outlook, we don't foresee at this point.

But.

Yes.

Im a big REIT.

Yes.

The bubble of cancellations.

If we go into a recession.

Not to say that they might not go up but.

I don't think.

We're not fearful that it would be a massive.

A reversal of <unk>.

For example.

The good results that we just reported.

Outside of the reserves that we already carry.

Okay. Thank you.

Kim.

Another question is I don't see information regarding bill rates are revenue producing workers or other similar measures in the presentation can we get some numbers in regards to terminal build hours for the period and other metrics.

We do have.

Various metrics that we put out and they're in some of the public filings.

In the presentation, that's current and there in some prior presentations, we talk about bill rate ranges for verticals like IP and accounting and finance, we tell our gross margins indicative of bill rates and spreads.

One thing we don't do is put out information that could be used by competitors.

Either in and.

Pricing.

Or.

Shopping for.

Customers and trying to low ball or do whatever so we.

We are very sensitive to those.

Tricks, but in terms of how many revenue producing workers do we have that's a pretty.

Straightforward.

Thats a good question because actually we were running at about.

Between 260 to 270.

Full time.

For employees.

Just don't include the people that.

We employ that work for our clients those are the folks that man our front office this year.

My car sales that recruit our candidates et cetera, and our support and we've now recently.

<unk> made headway in adding some meaningful.

Hires, including a couple of Rainmakers and certain markets. So our number is getting closer to 300.

Now.

And Thats, we have done that in recognition of.

As Derek mentioned there is a there is kind of a soft hedge if you will that.

Happens around cycles between Perm and contract and were really shoring up our contract resources, because we think that that's the next big.

Source for revenue going forward.

And we're doing it selectively.

I was in markets that we believe represent.

The best opportunity to grow our contract business professional.

The next question.

Deals with competition in the market.

And.

Can you speak about the companies and the competition.

Can you speak about higher quest higher quest is not a competitor for the most part with our company our competitors vary based upon the vertical or specialization.

That we are operating it for example in finance and accounting.

Robert half would be a big competitor.

And in.

In the higher end.

There's a lot of boutique companies that are out there that compete with us and then some of the bigger ones like <unk>.

In their higher end piece.

For example would be a competitor.

Sure.

Each of the big staffing companies like our manpower my.

Predecessor, Adecco group.

That bought MTS group the company that I was with before that they <unk>.

Essentially bought our it business and have it.

That would be a competitor.

Manpower is experienced at times as a competitor, but then there is a lot of local players.

That compete very effectively at the higher end.

With this Robert Half's kind of Nikkei group that would compete with our <unk> group.

So in each vertical and then specifically within that vertical there are several competitors and that's based on the type of skill positions they are filling.

And we keep track of all of that to see.

How they're performing how they're growing how they're pricing to the extent we can get the data are there any special events to be discussed at the end of the month Board meeting.

There's a lot of discussion at the end of the month Board meeting and our annual shareholder meeting.

We will delve into strategy with our directors.

Will address all of the things that have been brought up today and we constantly do but we will have some very very in depth face time meetings with our team.

Given the much higher cash balance and the consistency of the business as an opportunity to push.

Let's see.

Let's see what it says.

Okay is there any opportunity to.

Breach of Bill how are you going to get $1 billion sales, we've got to how much cash balance did see the business, because you've been or an opportunity too.

Pushed the company's cost of debt down.

We don't have any debt.

That answers that one.

Does the company plan on expanding the scope of services from staffing and placement.

Two online placement as well great question. So.

Online.

Job boards online exchanges for labor and so forth.

Or a tool that we are able to access but they're not a replacement for what we do it's very similar to I use the analogy of a real estate agent still.

Still being very very active even though there's a lot of online tools and even exchanges where you can.

By real estate for example, I believe zillow used to.

Actually buy and sell real estate through their mechanism and they've abandoned that now theyre more.

And information source.

Again, we have state of the art tools.

We have just met with all of the what.

What I called job board providers.

Database Aggregators.

So forth and there's no company that has better access to technology or better tools than us. We're nimble. We're quick we've made the investments and our people are highly specialized and use those tools effectively and we just went through with all of our providers how much better we can be and what.

Other information, we can garner in order to make the appropriate placements for our customers I will say speed to market is probably the most critical aspect of our business and that AIDS in finding the candidates and are scarce.

Scare specialty.

And a job shortage, that's going on and then getting that candidate to the customer. So we're very very skilled at that and we have great tenure amongst our employees, which I think matters greatly in a good training program that we've implemented to for the younger crowd coming in.

Let's see.

So the next question is.

What is the company going.

Two how do you highlight your brands.

We're going through a brand consolidation in certain areas or refinement and that'll be forthcoming and we will talk a little bit more about that.

The next quarter.

Recruiting and training.

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Talk about SG&A, Kim and our percentage of SG&A and what impacts the dollar amount and the percentage of revenue calculation.

Yes, our SG&A.

Two thirds of our SG&A is what I would call falls under the asks are selling.

That has the salaries of all our front office personnel of our 300 and some odd employees about 260 of those represent front office and we have about.

Actually probably about $2 50, we have about 50 support staff some of which are in the field also embedded in the field, but there's about 40.

Support all the businesses are youll find that.

We had a few nonrecurring kind of things.

Yes.

In the nine months, which which happen from time to time, one being a large legal settlement.

And when you clear those out and take into account the growth we've had you'll see that our our SG&A should be below the 30% range, which basically puts it in the ballpark.

Several of the larger players.

And the market, which which is a good.

Comparison for us because that means we're being Lee and I can tell you we are very linear.

We managed $1 here as though they're coming out of our own pockets.

And.

But we make smart investments.

Someone mentioned here investing in technology, our most recent investments in technology.

Our shoring up and preparing ourselves for the brave new world out there of cyber risk.

Yeah.

Which we're investing in.

As far as forward facing as Barry mentioned, we had some very good discussions with some of our providers.

Hope to take advantage of some of those things.

The other one third of our SG&A is relatively fixed.

The questions have been asked couple of times about our average remaining lease life of two years or less.

Are we going to consider virtual markets.

The answer to that is yes.

Either we're expanding for example, we've expanded into the Austin market recently, and we're getting ready to move into a couple of others.

We converted our bricks and mortar in Houston.

To a virtual so I think in the future the future <unk> will be more of a.

A blend of centers of excellence.

With <unk>.

Servicing different markets, some of which will be virtual some which might have small branches, but yes very much we're taking advantage of reducing that cost which is our was our second largest cost and now is our third largest cost.

Hi job boards and.

And personnel.

So those are good questions, but we manage our SG&A very very well.

Keep it nice and low our total corporate expenses are less than 3%.

Of our total revenue so all those things bode well.

Sure.

Kim that leads to the question that.

Came up regarding <unk>.

Leases and whether youre going to move some of those leases or leased office space when the lease expires to virtual ones.

The answer is when when it's appropriate and conducive to our business, we will do that and we've done that.

And certain markets already and will continue to do it selectively.

Additionally, when we're opening in new markets for example, Austin, Texas, we went completely virtual.

And our it group so it's it's a very convenient way because of our technology and our ability to manage our resources from a far without fixed space offices.

To do that is cost effective and it allows you to enter into a new market.

Let me also say that acquisitions come in various forms acquisitions of talent.

That can increase your business.

Without violating noncompete agreements, which we honor all of our competitors.

That's a form of acquisition because they bring other talent to the table and customers and we grow and the cost of that is much cheaper and less risky.

Then.

Spending a whole lot of money out of Big company now the flip side is.

Can you get a good target and the answer is some of these individuals are able to tell us that come from some competitors.

That that would be a great group to bring in to our company.

And they help facilitate the introductions.

And so and then we have a great opportunity.

Cause of that higher.

For an acquisition so.

All of these things are dealt with daily.

And we're not ever complacent, we will never be complacent somebody said are you doing anything for brand awareness.

Are you doing anything to get street exposure analysts new institutional investors. The answer is yes, yes, yes, and yes, yes, yes.

Expect this company to really take off.

And and not take undue risk.

And not lever up to the point that we were.

To get to a good footprint and then we paid off the debt obviously, but.

We're so well positioned right now.

That we will get to the next level, we will increase shareholder value and price and market cap.

And we're bullish about going forward.

We're not too concerned about downturns, because we've lived through them before.

And we were able to successfully navigate through those.

And come out even better.

So the industry actually recovers if you could see the post COVID-19 industry recovery was super.

And then historically the industry does quite well and will be the bellwether.

Going into recession, and coming out and I can tell you.

There's mixed there's mixed activity.

There economically.

Employments heart continues to be Theres, a little loosening, but not enough to really matter to us at this point.

Hiring could be put on hold a bit but that will increase contract business hiring for permanent hires.

And.

These these different areas.

What will actually contribute to our ability to get more business actually we're nimble we're quick decision making.

From that level, which is me.

I participate actively.

With the field personnel, we've got great leadership out in the field.

And they are well experienced our tenure is phenomenal both that the recruiting and account management level.

And at the leadership level by vertical.

So that pretty much concludes our call for today. We appreciate your interest on getting on the call.

Participating.

Investing or possibly investing if you're not already a shareholder look for good things to happen.

And we appreciate all of you.

As shareholders and interested parties. Thank you very much.