Q4 2022 GEE Group Inc Earnings Call

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Speaker 3: [music]

Derek Dewan: Good morning and welcome to the GEE Group fiscal fourth quarter and fiscal year ended September 30th, 2022 earnings and 2023 update webcast conference call. I'm Derek Dewan, the Chairman and Chief Executive Officer of GEE Group.

Derek Dewan: I will be hosting today's call and joining me as a co-presenter is Kim Thorpe, our Senior Vice President and Chief Financial Officer.

Speaker 6: And joining me as a co-presenter is Kim Thorpe, our Senior Vice President and Chief Financial Officer.

Derek Dewan: Thank you for joining us today.

Derek Dewan: It's our pleasure to share with you GEE Group's results for the fiscal year and for the fourth quarter ended September 30th, 2022, and also to provide you with our outlook for fiscal year 2023 in the foreseeable future.

Derek Dewan: Some comments Kim and I will make may be considered forward-looking, including predictions and estimates about our future performance.

Speaker 10: including predictions and estimates about our future performance.

Derek Dewan: These represent our current judgments of what the future holds and are subject to risks and uncertainties that actual results may differ materially from our forward-looking statements.

Derek Dewan: These risks and uncertainties are described in Tuesday's earnings press release and our most recent 10-K and other SEC filings under the captions "Cautionary statement regarding forward-looking statements" and "Forward-looking statement - safe harbor."

Speaker 13: "Cautionary statement regarding forward-looking statements" and "Forward-looking statement - safe harbor."

Speaker 14: and "Forward-looking statement - safe harbor."

Derek Dewan: We assume no obligations to update the statements made on today's call.

Derek Dewan: During this presentation, we will also talk about some non-GAAP financial measures and reconciliations and explanations of these metrics are included in the earnings press release.

Speaker 17: and reconciliations and explanations of these metrics are included in the earnings press release.

Derek Dewan: Our presentation of financial amounts and related amounts including growth rates, margins and trends and metrics are rounded or based upon rounded amounts for purposes of this call and all amounts, percentages and related items presented are approximations accordingly. For your convenience, our prepared remarks for today's call are available in the investor center of our website.

Speaker 19: and metrics are rounded or based upon rounded amounts for purposes of this call and all amounts, percentages and related items presented are approximations.

Speaker 20: percentages and related items presented are approximations.

Speaker 21: accordingly. For your convenience, our prepared remarks for today's call

Speaker 22: are available in the investor center of our website.

Derek Dewan: With that business behind us, I'm very happy to report that we achieved outstanding results in the fiscal year 2022 with revenue of $165.1 million for the year and revenue for our fiscal fourth quarter of $41.5 million.

Derek Dewan: Gross profits and gross margins were $61.7 million and $15.1 million, and 37.4% and 36.3% for the fiscal year and fourth quarter ended September 30th, 2022, respectively.

Speaker 25: were $61.7 million and $15.1 million,

Speaker 26: and 37.4% and 36.3% for the fiscal year and fourth quarter ended September 30th, 2022, respectively.

Derek Dewan: Our non-GAAP adjusted EBITDA for fiscal 2022 was $12.5 million, up 200,000 or 2% compared to fiscal 2021, and that represents a 7.5% margin to revenue.

Speaker 28: up 200,000 or 2% compared to fiscal 2021, and that represents a 7.5% margin to revenue.

Derek Dewan: Non-GAAP adjusted EBITDA for the fiscal 2022 fourth quarter was $1 million compared to $3.6 million for the fiscal 2021 fourth quarter.

Derek Dewan: We achieved net income of $19.6 million, or 17 cents per diluted share, for fiscal 2022 overall.

Derek Dewan: We reported a small net loss of $800,000 or one cent per diluted share for fiscal 2022 fourth quarter.

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

Derek Dewan: They work extremely hard every day to ensure that our clients get the very best service.

Derek Dewan: This was a key factor in the outstanding performance of GEE Group in fiscal 2022 and will contribute greatly to the Company's future success.

Derek Dewan: At this time, I'd like to turn over the call to our CFO , Kim Thorpe, who will further elaborate on our fiscal 2022 annual and fourth quarter results. Kim.

turn over the call to our CFO , Kim Thorpe, who will further elaborate on our fiscal 2022 annual and fourth quarter results. Kim.

Kim Thorpe: Derek, thank you very much and good morning, everyone. As Derek mentioned, revenues for fiscal 2022 were $165.1 million, up 11% as compared with fiscal 2021 revenues of $148.9 million.

Kim Thorpe: Revenues for the fourth quarter fiscal 2022 once again were $41.5 million, up slightly as compared with revenues reported for the fiscal 2021 fourth quarter.

Contract staffing services contributed $138.5 million and $35 million, or 84% of revenues, for both the fiscal year and fourth quarter ended September 30, 2022 respectively.

or 84% of revenues, for both the fiscal year and fourth quarter ended September 30, 2022 respectively.

Direct hire placement revenues contributed $26.6 million and $6.5 million, or in both cases 16% of revenues for the fiscal year and fourth quarter ended September 30, 2022 respectively.

for the fiscal year and fourth quarter ended September 30, 2022 respectively.

Contract staffing services revenues for fiscal 2022 increased $8.7 million, or 7%, as compared to fiscal 2021.

Contract staffing services revenues were near level for each of fiscal 2022 and 2021 fourth quarters, although up slightly in the 2022 fourth quarter.

Direct hire placement revenues for fiscal 2022 increased by $7.5 million, or 39%, as compared to fiscal 2021.

Direct hire placement revenues, again, were near level for each of fiscal 2022 and 2021 fourth quarters. Direct hire placement revenues for fiscal 2022 set a record high for the Company, exceeding even pre-COVID-19 results.

The increases in total contract and direct hire placement services revenues for the fiscal year ended September 30, 2022, were primarily attributable to increased demand in our professional staffing services segment as the negative effects of COVID-19 have continued to lessen.

the fiscal year ended September 30, 2022, were primarily attributable to increased demand in our professional staffing services segment as the negative effects of COVID-19 have continued to lessen.

services segment as the negative effects of COVID-19 have continued to lessen.

as the negative effects of COVID-19 have continued to lessen.

In addition, the volatility experienced in the U.S. economy and workforce in 2022 created many opportunities and increased demand, particularly in the direct hire placement services market.

Total revenues from our professional staffing services segment, which includes contract staffing and direct hire placement services, were $149.2 million and $37.5 million and represented 90% of total revenue for both fiscal year and fourth quarter ended September 30, 2022 respectively.

fiscal year and fourth quarter ended September 30, 2022 respectively.

Professional staffing services revenues were up 13 percent and 1 percent respectively from the comparable fiscal 2021 periods.

Our highly specialized IT services vertical, which includes agile resources, access data consulting, paledon consulting and S&IT brands, accounted for 51% of our professional services business segment revenues for fiscal 2022, and were up 23% year over year.

and S&IT brands.

accounted for 51% of our professional services business segment revenues for fiscal 2022, and were up 23% year over year.

The other professional services verticals: finance, accounting, office support, engineering, health care, and others accounted for the remaining 49% of professional services business revenues for fiscal 2022, and were up 5% year over year.

of professional services business revenues for fiscal 2022, and we're up 5% year over year.

for fiscal 2022, and we're up 5% year over year.

year over year.

Industrial staffing services revenues were $15.9 million and $4 million and represented 10% of total revenue for both fiscal year and fourth quarter ended 20- I'm sorry, September 30, 2022 respectively.

for both fiscal year and fourth quarter ended 20- I'm sorry, September 30, 2022 respectively.

Industrial staffing services revenues were down 8% and 9% respectively from the comparable fiscal 2021 period.

We continue to experience some pandemic related conditions associated with the Delta and then Omicron variants, Omicron, excuse me, in our Ohio markets in the earlier quarters of fiscal 2022. These include school and business closings and interruptions we've commented on before, which were reminiscent in some respects of the early COVID-19 pandemic.

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

Consolidated gross profits and margins were $61.7 million or 37.4%

and $15.1 million are 36.3% for the fiscal year and 4th quarter ended September 30, 2022, respectively. Our consolidated gross margins for the last 6 quarters have consistently been above 36%.

The overall improvement in the Company's combined gross profit margin is largely due to substantial increases in direct hire placement revenues which have grown, I'm sorry, which have 100% gross margin.

Selling, general and administrative expenses for the fiscal year and fourth quarter into September 30, 2022, increased $10.3 million, and $2.6 million respectively.

$10.3 million, and $2.6 million respectively.

SG&A expenses were 31.4% and 34.8% of revenue for the fiscal year and 4th quarter, it is September 30, 2022 respectively, compared with 28% and 28.6% for the comparable fiscal 2021 period.

for the fiscal year and 4th quarter, it is September 30, 2022 respectively, compared with 28% and 28.6% for the comparable fiscal 2021 period.

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 $800,000 in charges associated with two former positions that were eliminated during fiscal 2022, also, a $400,000 increase in bad debt expense associated with one of the Company's former industrial staffing services customers, and a $1,000,000 in charges for the settlement of legal matter- of an old legal matter that added to our SG&A expenses in the earlier quarters of fiscal 2022.

resulting in additional incentive compensation and bonuses, the increases in SG&A expenses and ratios were affected by $800,000 in charges associated with two former positions that were eliminated during fiscal 2022, also, a $400,000 increase in bad debt expense associated with one of the Company's former industrial staffing services customers, and a $1,000,000 in charges for the settlement of legal matter- of an old legal matter that added to our SG&A expenses in the earlier quarters of fiscal 2022.

the increases in SG&A expenses and ratios were affected by $800,000 in charges associated with two former positions that were eliminated during fiscal 2022, also, a $400,000 increase in bad debt expense associated with one of the Company's former industrial staffing services customers, and a $1,000,000 in charges for the settlement of legal matter- of an old legal matter that added to our SG&A expenses in the earlier quarters of fiscal 2022.

associated with one of the Company's former industrial staffing services customers, and a $1,000,000 in charges for the settlement of legal matter- of an old legal matter that added to our SG&A expenses in the earlier quarters of fiscal 2022.

and a $1,000,000 in charges for the settlement of legal matter- of an old legal matter that added to our SG&A expenses in the earlier quarters of fiscal 2022.

that added to our SG&A expenses in the earlier quarters of fiscal 2022.

As Derek mentioned in his remarks, we achieved net income for fiscal 2022 of $19.6 million or 17 cents per diluted share as compared with net income of $6,000 or near break even, zero cents per diluted share rounded for fiscal 2021.

There was also a small net loss for the fiscal 2022 fourth quarter of $800,000 or approximately $0.01 per diluted share as compared with net income of $2.9 million or $0.03 per diluted share for the comparable fiscal 2021 quarter.

Perjilu to chair for the conference of fiscal 2021 quarter.

Non-GAAP adjusted net income loss and diluted EPS, excluding the effects of non-operating and or non-recurring items, as outlined in the earnings press release, were $7.7 million or $0.07 per diluted share and a loss of $400,000 or $0.00 cents per diluted share for the fiscal year and fourth quarter ended September 30, 2022. Adjusted EBITDA, which is a non-GAAP financial measure, was $12.5 million for the fiscal year, up $200,000 or 2% compared with fiscal 2021.

or $0.00 cents per diluted share for the fiscal year and fourth quarter ended September 30, 2022. Adjusted EBITDA, which is a non-GAAP financial measure, was $12.5 million for the fiscal year, up $200,000 or 2% compared with fiscal 2021.

Non-GAAP adjusted EBITDA for the fiscal 2022 fourth quarter was $1 million compared to $3.6 million for the comparable fiscal 2021 fourth quarter. Again, our fourth quarter results were impacted by the accrual of additional incentive compensation and bonus- bonuses commensurate with the significant improvements in revenues, earnings, and productions we produced in fiscal 2022. As we've commented in prior years, or I'm sorry, in prior quarters, we believe these types of positive results are sustainable.

bonuses commensurate with the significant improvements in revenues, earnings, and productions we produced in fiscal 2022. As we've commented in prior years, or I'm sorry, in prior quarters, we believe these types of positive results are sustainable.

we believe these types of positive results are sustainable.

A reconciliation of GEE 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 the supplemental schedules as part of our earnings press release.

To conclude, our current or working capital ratio at September 30, 2022 is 2.7 to 1.

Consolidated accounts receivable, net of allowances for [inaudible] accounts at the end of fiscal 2022 were $22.8 million and our day sales outstanding performance metric or DSO was approximately 49 days.

We reported positive net cash flow from operating activities of $1.4 million for the 2022 fiscal fourth quarter and $9.2 million during the fiscal 2022 year as a whole and non-GAAP free cash flow of $1.3 million and $8.9 million respectively.

of $1.4 million for the 2022 fiscal fourth quarter and $9.2 million during the fiscal 2022 year as a whole and non-GAAP free cashflow of $1.3 million and $8.9 million respectively.

Our cash flow from operations and free cash flow for the year ended September 30, 2022, were reduced in part by payment of the first of two equal instalments of deferred FICA obligations allowed as under the [inaudible] Cares Act of $1.8 million, which was made in December of 2021, and the payment of $1 million in settlement of an old isolated legal matter that was made in April 2022.

of deferred FICA obligations allowed as under the [inaudible] Cares Act of $1.8 million, which was made in December of 2021, and the payment of $1 million in settlement of an old isolated legal matter that was made in April 2022.

Our liquidity position is strong. We have no outstanding debt and our net book value per share was 88 cents at September 30, 2022, and our net tangible book value per share was 25%. That was up over the prior year. Now I'll turn it back over to Derek.

over the prior year.

over the prior year. Now I'll turn it back over to Terry.

Derek Dewan: Thank you, Kim.

The 2022 fiscal fourth quarter and fiscal year marked our fifth consecutive quarter and first full year of strong performance in [inaudible] company.

Having consistently achieved higher margins and free cash flow for the last five quarters, we are establishing a positive, sustainable track record, as well as positive momentum for the future.

as well as positive momentum for the future.

September 30th, 2022, the company had over $18.8 million in cash and another $15.4 million in availability under its ABL facility.

GEE Group's prospects for today and for future profitable growth have never been better. Despite macroeconomic challenges or unforeseen events, we believe we can continue to produce solid results in fiscal year 2023 and beyond.

Before we pause to take your questions, I want to again say 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 shared with you today.

If you have questions, please submit those by email and we'll start the queue at that point.

at that point.

Please just ask one question and rejoin the queue with a follow-up as needed. If there's time, we'll come back to you as well.

Thank you, and we'll start the Q&A session.

Multiple speakers: One of the first questions is related to the fourth quarter and the revenue in our fourth quarter was very similar to the fourth quarter of fiscal 2021. However, the SG&A was higher and thus net income and adjusted EBITDA were lower. Kim, will you address that for me, please? Sure. The question was why is your EBITDA lower and what caused your SG&A to increase?

Multiple speakers: and the revenue in our fourth quarter was very similar to the fourth quarter of fiscal 2021. However, the SG&A was higher and thus net income and adjusted EBITDA were lower. Kim, will you address that for me, please? Sure. The question was why is your EBITDA lower?

and what caused your sGNA to increase.

Kim Thorpe: Part of the reason why SG&A was higher in the fourth quarter was because we accrued additional incentive compensation and bonuses commensurate with the outstanding performance that we had put in throughout the remainder of the year.

We held off in doing that until the fourth quarter for various practical reasons, but we thought it was prudent to take the full charge for all of that incentive comp, and then also there was- there is a progression of increased compensation and bonuses over a calendar year of which the last three quarters of this fiscal year, were the first three quarters of the calendar year. So, there is an upward progression year over the year, but those things specifically account for the increase in SG&A. One other thing I might point out, that I think is worthy: if you go back to our 2018 year, and you compare our revenues, they're literally within $200,000 of one another. Our revenues in 2018 were $165.3 million now they are $165.1 million, however, our gross profit this year was $3 million higher, and if you take that same ratio concept and instead of applying the ratio of SG&A against revenue you applied against gross profit, our SG&A expenses were actually lower as a percentage of gross profit.

but we thought it was prudent to take the full charge for all of that incentive comp, and then also there was- there is a progression of increased compensation and bonuses over a calendar year of which the last three quarters of this fiscal year, were the first three quarters of the calendar year. So, there is an upward progression year over the year, but those things specifically account for the increase in SG&A. One other thing I might point out, that I think is worthy: if you go back to our 2018 year, and you compare our revenues, they're literally within $200,000 of one another. Our revenues in 2018 were $165.3 million now they are $165.1 million.

compensation and bonuses over a calendar year of which the last three quarters of this fiscal year, were the first three quarters of the calendar year. So, there is an upward progression year over the year, but those things specifically account for the increase in SG&A. One other thing I might point out, that I think is worthy: if you go back to our 2018 year, and you compare our revenues, they're literally within $200,000 of one another. Our revenues in 2018 were $165.3 million now they are $165.1 million.

the last three quarters of this fiscal year, were the first three quarters of the calendar year. So, there is an upward progression year over the year, but those things specifically account for the increase in SG&A. One other thing I might point out, that I think is worthy: if you go back to our 2018 year, and you compare our revenues, they're literally within $200,000 of one another. Our revenues in 2018 were $165.3 million now they are $165.1 million.

and you compare our revenues, they're literally within $200,000 of one another. Our revenues in 2018 were $165.3 million now they are $165.1 million.

2018 were $165.3 million now they are $165.1 million.

however, our gross profit this year was $3 million higher, and if you take that same ratio concept and instead of applying the ratio of SG&A against revenue you applied against gross profit, our SG&A expenses were actually lower as a percentage of gross profit.

The reason they came in that well is because of all the extensive restructuring and expenses we took out of the business between 2018 and up through the pandemic.

So, I just wanted to point that out.

Derek Dewan: Okay. Thank you, Kim.

Another question is: it seems like in the middle of the month there were large trades in the stock, upward around 250,000 at the close. I also observed that occurred for several days - maybe four or five days. Is that stock manipulation? And if so, who's doing it? I'm paraphrasing the question.

it seems like in the middle of the month.

There were large trades in the stock.

Upward around 250,000 at the close.

I also observed that occur for several days, maybe four or five days.

Is that stock manipulation? And if so, who's doing it? And I'm paraphrasing the question.

And if so, who's doing it? And I'm paraphrasing the question.

The answer to that is that we just don't know. A lot of the trades are made around the New York on some of the other electronic mediums and those trades influence the stock price at closing or slightly after hours.

A lot of the trades are made around the New York. on some of the other electronic mediums.

on some of the other electronic mediums.

And those trades influence the stock price at closing or slightly after hours.

You know, that happens from time to time and we're not too concerned about it.

We don't have a large short position in our company either so, if someone was trying to manipulate the stock price as has been suggested in the question, we're not aware of who that might be, and I think that it's temporary at best.

if someone was trying to manipulate the stock price as has been suggested in the question, we're not aware of who that might be, and I think that it's temporary at best.

we're not aware of who that might be, and I think that it's temporary at best.

The other question that came up is what are you going to do with your large cash position?

is what are you going to do with your large cash position?

The comment, a couple comments related to stock buybacks. We were restricted until about now/ mid-December because of the CARES Act, PPP loans that you had one year after the date of the last loan being forgiven that would preclude you up until that time that we were precluded from doing a stock buyback.

mid-December because of the CARES Act, PPP loans that you had one year after the date of the last loan being forgiven that would preclude you up until that time that we were precluded from doing a stock buyback.

that would preclude you up until that time that we were precluded from doing a stock buyback.

So, now that we're in a position that stock buybacks could be done those discussions are happening with our directors at our board meetings and we will address that soon after these earnings releases

Those discussions are happening with our directors at our board meetings. and We will address that. soon after these earnings releases.

and We will address that. soon after these earnings releases.

We will address that. soon after these earnings releases.

soon after these earnings releases.

get digested by the Street. So, there are some rules on stock buybacks that the SEC put out.

There's some rules on 10B51 plans, which we would be likely to adopt so that when we, if and when we do a buyback, that we can take advantage of the safe harbors in 10B51.

that we can take advantage of the safe harbors in 10B51.

So those are all things that are out there. There's also a 1% excise tax that was encouraged by the president. adopted by Congress that one excise tax is on buybacks over $1 million, just to give you a background, because I had several questions on buybacks.

was encouraged by the president.

adopted by Congress that one excise tax

is on buybacks over a million.

just to give you a background, because I had several questions on buybacks.

So the answer to buybacks, historically I've done buybacks [inaudible] company. I'm well familiar in how to do them and we will address that soon after the earnings are digested.

processor company.

I'm well familiar in how to do them. familiar in how to do them. we will address that soon after the earnings are digested.

familiar in how to do them. we will address that soon after the earnings are digested.

we will address that soon after the earnings are digested.

I'm the largest shareholder. What would you do with your cash? Do you need it for working capital? The answer is no.

Do you need it for working capital? The answer is no.

Our working capital is sustained by our collection of accounts receivable and billings. We keep those accounts receivable, I think Kim gave you the DSO number of about 49 days, so, we're not really having to tap our cash reserves and we're definitely not tapping our [inaudible] facility for working capital. So, we're doing very well on cash management and how we deploy that cash is a subject of additional conversations with our Directors.

for working capital. So, we're doing very well on cash management and how we deploy that cash is a subject of additional conversations with our Directors.

and how we deploy that cash is a subject of additional conversations with our directors.

Prospects for future profitable growth?

Let me address what's happened in our industry and in the general economy for labor in the U.S.

for labor in the US.

So [inaudible] way through our fourth quarter, and this was during our third quarter announcement, I said we were very optimistic but for some issues with potential macroeconomic turbulence with recessions or layoffs or some combination of both.

Way through our. Fourth quarter. And this was during our third quarter announcement. I said we were very optimistic. but for some issues with potential macroeconomic turbulence with recessions or layoffs or some combination of both.

Fourth quarter. And this was during our third quarter announcement. I said we were very optimistic. but for some issues with potential macroeconomic turbulence with recessions or layoffs or some combination of both.

And this was during our third quarter announcement. I said we were very optimistic. but for some issues with potential macroeconomic turbulence with recessions or layoffs or some combination of both.

but for some issues with potential macroeconomic turbulence with recessions or layoffs or some combination of both.

We have seen layoffs at customers. We have seen employment tighten up for full-time hires in a big way.

employment tighten up for full-time hires in a big way.

2022 fiscal year was a robust year for full-time hires but midway during the fourth quarter, we saw some of those full-time higher opportunities reduced and the contract head count was consistent. And what typically happens during a downturn of some type or noise in the economy, full time hires tend to drop some and all hiring drops for a period of time and then contract hiring starts to kick in in a higher way,  and then full-time comes back toward the end of the end of the economic cycle or what I quote "the noise goes away." So we're in that period now and you could see if you see the business news, Goldman Sachs laid off substantially. a lot of their full-time people.

But midway during the fourth quarter, we saw some of those full-time higher opportunities.

reduced.

and the contract headcount was consistent. And what typically happens during a downturn of some type or noise in the economy, full time hires tend to drop some.

and all hiring drops for a period of time.

and then contract hiring starts to kick in in a higher way.

and then full-time comes back toward the end of the end of the economic cycle or what I quote "the noise goes away." So we're in that period now and you could see if you see the business news, Goldman Sachs laid off substantially. a lot of their full-time people.

goes away. So we're in that period now and you could see if you if you see the business news, Goldman Sachs laid off substantially.

a lot of their full-time people.

Interestingly enough, and that's indicative of what large corporate employers are doing, not just in investment banking but across the board. Goldman is a client of ours and we were not at this point hurt by that. We have contract labor there. However, if there were full-time hires going in, they would put those on hold, but the contract people that we have so far have stayed out. But, the point here is that the general level of hiring is somewhat muted during this period of what I call uncertainty. People don't know if we're going into a downturn, you've got a high interest rate environment, some people have additional interest expense and so forth. I believe we'll end up in the Spring kicking really hard on a comeback assuming, and when I say that, we're doing quite well except perm placements will not be at the same level as they were in fiscal 2022. All of our competition has said the same thing and that's because full-time hiring has been dampened because of potential economic turbulence on the outlook front.

Goldman is a client of ours and we were not at this point hurt by that. We have contract labor there. However, if there were full-time hires going in, they would put those on hold, but the contract people that we have so far have stayed out. But, the point here is that

people that we have so far have stayed out. But the point here is that.

the general level of hiring is somewhat muted during this period of what I call uncertainty. People don't know if we're going into a downturn, you've got a high interest rate environment, some people have additional interest expense and so forth. I believe we'll end up in the Spring kicking really hard on a comeback assuming, and when I say that, we're doing quite well except perm placements will not be at the same level as they were in fiscal 2022. All of our competition has said the same thing and that's because full-time hiring has been dampened because of potential economic turbulence on the outlook front.

on a comeback assuming, and when I say that, we're doing quite well except perm placements will not be at the same level as they were in fiscal 2022. All of our competition has said the same thing and that's because full-time hiring has been dampened because of potential economic turbulence on the outlook front.

said the same thing and that's because full-time hiring has been dampened because of potential economic turbulence on the outlook front.

on the outlook front.

Additionally, in the tech sector, as you know or have read, the Amazons, the Googles and so forth have laid off people.

and so forth have laid off people.

Interestingly, a lot of those people were in our business before as recruiters and they're coming back to us for their career so we can pick and choose the best and the brightest.

and they're coming back to us for their career so we can pick and choose the best and the brightest.

Our outlook is good.

We have plenty of cash. We will not waste it.

We will use it judiciously.

And, also, on the SG&A front, we will make adaptations to our SG&A based on the volume of business and it will also go down some if the placements drop at all because commissions are included in that SG&A. So, it's a variable cost in many respects. But to the extent that we can reduce SG&A, which we will absolutely do somewhat and adjust it according to the revenue stream, that will occur as well.

Also, on the SG&A front.

we will make adaptations to our SG&A based on the volume of business and it will also go down some if the placements drop at all because commissions are included in that SG&A. So it's a variable cost in many respects. But to the extent that we can reduce SG&A which we will

absolutely do somewhat and adjust it according to the revenue stream, that will occur as well.

and adjust it according to the revenue stream.

and adjust it according to the revenue stream, that will occur as well.

So some of the one-time items in SG&A will away after the fourth quarter, so remember that as well going forward. In the last two quarters, Management's indicated they would address share buybacks.

so remember that as well going forward. In the last two quarters, Management's indicated they would address your buybacks.

I talked about that in the last two quarters.

Can you please, again, give a little bit more color on why SG&A ballooned in Q4 of this year versus last year?

in Q4 of this year versus last year.

Kim, I think you covered that pretty good, so I'm going to move on.

Well, let's see. Okay. This comment says we're moving into a more challenging economic environment. I addressed that and what we're doing about it. What's your free cash flow priorities in 2023?

In 2023.

Again, share buyback question. Addressed that.

address that. Let's see.

Will you activate the buyback? Okay, another question. Obviously, there's a high degree of interest in stock buybacks.

We'll take that, definitely, into account. Can you add views on current client activity? Things are pretty good, but there's a lot of uncertainty. So some people are putting hires on hold and typically toward the end of the year in the first couple weeks of January, we do see a bit of what I call a hold pattern, and then the hiring cranks up again going into the later part of the Spring, and we should see some good activity then. That's our expectation. How would a recession affect us?

into account? Can you add views on current client activity? Things are pretty good, but there's a lot of uncertainty. So some people are putting hires on hold. And typically toward the end of the year in the first couple weeks of January , we did see a total of 36 Sniper in Italian, in Ach BG. So the biggest concern we Terrific, the latest in Thermal Analysis, was the DNS ofitement- Down-healing relationships, and were the ones not actually

a bit of what I call a hold pattern, and then the hiring cranks up again going into the later part of the Spring, and we should see some good activity then. That's our expectation. How would a recession affect us?

and we should see some good activity then. That's our expectation. How would a recession affect us?

I can tell you I've managed through several recessions, including 2008, and staffing companies collect more cash in a downturn because they're not putting out as much money for payroll, but they're collecting receivables that were on the books at a faster pace than they were expending money for payroll. So, cash flow actually goes up for approximately nine months to ten months, about the time, the average time and duration for a recession but for the '08 recession, which had a financial climate issue attached to it.

and staffing companies collect more cash. in a downturn because they're not putting out as much money for payroll, but they're collecting receivables that were on the book.

in a downturn because they're not putting out as much money for payroll, but they're collecting receivables that were on the book.

at a faster pace than they were expending money for payroll. So, cash flow actually goes up for approximately nine months to ten months.

about the time, the average time and duration for a recession.

But for the 08 recession, which had a financial climate issue attached to it.

So if you think through that, and with our cash position and no debt and the ability to draw on our credit if we need it, we're not concerned about cash flow at all and we will not waste cash. I can tell you that. So we've accumulated cash exactly for the very reason that that question came up. Can you sail through any downturn if you have one? The answer is absolutely, yes.

think through that and with our cash position and no debt and the ability to draw on our credit if we need it.

We're not concerned about cash flow at all. And we will not waste cash, I can tell you that. So we've accumulated cash.

exactly for the very reason that that question came up. Can you sail through any downturn if you have one? The answer is absolutely yes.

Will you use your cash judiciously? Yes.

Acquisitions, do you see them? Yes.

Will you execute? Only the good ones. We're not going to jump into one if it's not a slam dunk. Do you expect the underlying earnings in fiscal '22 to continue in this year, fiscal 2023? The answer to that is the macro factors may keep us from hitting that same target number, but we will do quite well in the event. What is your plan on lost shareholder value? Again, stock buyback question.

fiscal 22.

to continue in this year fiscal 2023? The answer to that is the macro factors may keep us from hitting that same target number, but we will do quite well in the event. What is your plan on lost shareholder value? I guess I'll buy that question.

Availability, talent, are you able to get talent? The answer is we do a real good job recruiting internally. We pretty much have the pick of the litter, particularly with a lot of the layoffs going on in corporate America in the recruiting side, so we've been able to attract some recruiters back to our industry and back to our company, or to our company if they weren't with us before. Analyst coverage? We're working on that.

so we've been able to attract some recruiters back to our industry and back to our company, or to our company if they weren't with us before. Analyst coverage? we're working on that.

What's your long-term strategy?

Our strategy is to continue doing what we're doing, managing costs, particularly adjusting it to the revenue cycle, revenue streams that we see, debt-free.

managing costs, particularly adjusting it to the revenue cycle, revenue streams that we see.

debt-free.

Let's see.

Is the outlet for direct hire, I mentioned that, is it flat or declining a bit in fiscal '23 and will it be at fiscal '18 or fiscal '19 levels?

'23 and will it be at fiscal '18 or fiscal '19 levels?

The fiscal '18, fiscal '19 levels are probably a better indicator of where permanent hires will be or direct hire business would be. For 2023, 2022 was a bit of an abnormality. It was off the charts and that was probably because hiring was muted during the COVID era.

Let me see.

Okay, another question on SG&A. We got that.

...listening...

Do you see temp hiring increasing as perm decreases? The answer is yes temp will increase, but there's a little bit of a transition period, somewhere between December to February, and then we should start seeing the temp hires kicking back up, and perm will stay, you know, somewhat muted in that period of time, although, we're hitting perms still, but not at the 2022 level, which was a pretty hard benchmark to beat.

temp will increase, but there's a little bit of a transition period, somewhere between December to February, and then we should start seeing the temp hires kicking back up, and perm will stay, you know, somewhat muted in that period of time, although, we're hitting perms still, but not at the 2022 level, which was a pretty hard benchmark to beat.

perm will stay, you know, somewhat muted in that period of time, although, we're hitting perms still, but not at the 2022 level, which was a pretty hard benchmark to beat.

in that period of time, although we're hitting perms still, but not at the 2022 level, which was.

a pretty hard benchmark to beat.

Can management comment on how the pricing is looking for acquisitions?

They're holding pretty good. If anything, they've come down a bit because of the economic uncertainty and potentially turbulence in the economy.

because of the economic...

uncertainty and potentially turbulence in the economy.

So, the questions are finished.

Finished.

I thank everyone for being on. I could tell you that we're very optimistic, absent some macroeconomic potential noise going into this fiscal year, although we're gonna manage our income statement appropriately in our expense side to match revenue so that we can stay in the profitability areas that we want to be at and also generating substantial cash flow, which we will continue to do and which we are doing now, and we will use our cash wisely, and look for some good things coming.

Optimistic, absent some macroeconomic potential noise going into this fiscal year, although we're gonna manage our income statement appropriately in our expense slide.

to match revenue so that we can stay. in the profitability areas that we want to be at and also generating substantial cash flow, which we will continue to do and which we are doing now. and we will use our cash wisely. and look for some good things coming.

in the profitability areas that we want to be at and also generating substantial cash flow, which we will continue to do and which we are doing now.

and we will use our cash wisely.

and look for some good things coming.

That concludes our call today. We sincerely appreciate all of your time and effort and your investment, and I can assure you we'll be good fiduciaries for you all shareholders, and we will take care of our employees and look forward to some really good things.

This is a journey. It's not a sprint, so we will absolutely make sure the journey is successful. Thank you very much, and that concludes our call.