Q1 2024 GEE Group Inc Earnings Call
<unk>, Chairman and Chief Executive Officer of GE group that will be hosting today's call.
Joining me as a presenter is Kim Thorp, our senior Vice President and Chief Financial Officer.
Got it.
[music].
Thank you for joining us today.
It is our pleasure to share with you.
G E group's results for the fiscal 'twenty four.
First quarter ended December 31, 2023, and provide you with our outlook for the remainder.
Yeah.
Of the 2020 for fiscal year in the foreseeable future.
Yeah.
Some comments, Kim and I will make maybe considered forward looking including predictions estimates.
Hello, and welcome to the G Group fiscal 2020 for first quarter ended.
Expectations and other statements about our future performance.
December 31st 2023 earnings and update webcast conference call.
These represent our current judgment of what the future holds Andrew.
Derek Don Chairman and Chief Executive Officer of GE group that will be hosting today's call joined.
And are subject to risks and uncertainties that actual results may differ materially from our forward looking statements.
Joining me as a presenter is Kim Thorp, our senior Vice President and Chief Financial Officer.
These risks and uncertainties are described below under the caption forward looking statements.
Thank you for joining us today.
Safe Harbor.
It is our pleasure to share with you.
Yeah.
Okay.
<unk> group's results for the fiscal 'twenty four.
And in Tuesday's earnings press release.
First quarter ended December 31, 2023, and provide you with our outlook for the remainder.
And.
Our most recently Form 10-Q, 10-K, and other SEC filings under the caption cautionary statement regarding forward looking statements and forward.
Of the 2020 for fiscal year in the foreseeable future.
Forward looking statements.
Some comments, Kevin I will make maybe considered forward looking including.
Safe Harbor.
We assume no obligation to update statements made on today's call. During this presentation. We will also talk about some non-GAAP financial measures.
<unk> estimates.
Expectations and other statements about our future performance.
These represent our current judgment of what the future holds and.
The Asian and explanations of the non-GAAP measures. We will address today are included in the earnings press release.
And are subject to risks and uncertainties that actual results may differ materially from our forward looking statements.
The presentation of financial amounts and related items, including growth rates margins and trend metrics around it are based upon rounded amounts.
These risks and uncertainties are described below under the caption forward looking statements.
The purposes of this call and all amounts and percentages.
Safe Harbor.
Okay.
Okay.
And the related items presented are approximations accordingly.
And in Tuesday's earnings press release.
For your convenience our prepared remarks for today's call are available in the Investor Center of our website Www Dot G E group dotcom.
And.
Our most recently Form 10-Q, 10-K, and other SEC filings under the caption cautionary statement regarding forward looking statements and forward.
Forward looking statements.
We face significant difficulties in the fiscal 2020 for first quarter ended December 31.
Safe Harbor.
We assume no obligation to update statements made on today's call. During this presentation. We will also talk about some non-GAAP financial measures.
2023, mainly stemming from economic and labor market instability and uncertainty.
The Asian and explanations of the non-GAAP measures. We will address today are included in the earnings press release.
Economic and market conditions for us and our industry began to worsen earlier in calendar 2023, following the COVID-19 bounce in 2022.
Our presentation of financial amounts and related items, including growth rates margins and trend metrics around it are based upon rounded amounts.
And it worsened even more in the second half of calendar 2023.
The purposes of this call and all amounts and percentages.
Leading to the significant decline in results from the comparable fiscal 2023 first quarter ended December 31 2022.
And the 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 Www Dot G E group dotcom.
Consolidated revenues were $30 6 million for the fiscal 2020 for first quarter.
Gross profit and gross margin were $9 7 million and 31, 8% respectively for the fiscal 2020 for first quarter.
We face significant difficulties in the fiscal 2020 for first quarter ended December 31.
2023, mainly stemming from economic and labor market instability and uncertainty.
Consolidated non-GAAP adjusted EBITDA.
It was minus 200000.
And we reported a net loss of $1 6 million or one cent per diluted share for the fiscal 2020 for first quarter.
Economic and market conditions for us and our industry began to worsen earlier in calendar 2023, following the COVID-19 bounce in 2022.
The prior fiscal 2023 first quarter results were above normal led by record high demand for direct hire placement services in 2022, driven by the post COVID-19 recovery bounce at that time.
And it worsened even more in the second half of calendar 2023.
Waiting to the significant decline in results from the comparable fiscal 2023 first quarter ended December 31 2022.
The pullback in demand for direct hire placement services in particular contributed to the significant shortfall in the fiscal 2024 first quarter results.
Consolidated revenues were $30 6 million for the fiscal 2020 for first quarter.
Relative to those of the first quarter of fiscal 2023.
Gross profit and gross margin were $9 7 million and 31, 8% respectively for the fiscal 2020 for first quarter.
Our performance still compares and tracked consistently with our industry peers. As we are all facing similar challenges the challenges being faced by the U S staffing industry as a whole.
Consolidated non-GAAP adjusted EBITDA.
Minus 200000, and we report.
Including us are expected to continue through at least the first half of calendar 2024.
Before I turn it over to Kim I would like to touch.
Based on some recent achievements.
We concluded our share repurchase program on December 31, 2023, under which we purchased $6 1 million shares of.
A job common stock.
Just over 5% of our outstanding shares at the beginning of the program.
In December 2023, our M&A Committee of the board of directors engaged the investment banking firm D. C advisory to assist the company with the review of strategic alternatives, which includes capital allocation strategies mergers acquisitions, and others, including future share repurchases, we expect to.
Receive D C advisory initial findings to be presented to the M&A Committee as soon as this week or next.
I want to assure everyone that our sole focus now and into the immediate future is to manage through this downturn with the objective of minimizing its negative impact on our businesses and preparing for an eventual recovery we have hardened our balance sheet with substantial liquidity in the form of cash and borrowing capacity.
And are very well prepared to successfully navigate our president poor economic conditions. We also continue to believe that our stock is undervalued and has substantial room to grow and.
And finally before I turn it over to Kim I want to thank.
A wonderful dedicated employees and associates. They work extremely hard every day to ensure that our clients get the very best service. They were a key factor in our achievements and the most important driver of our company's future success.
This time I'll turn the call over to our senior Vice President and Chief Financial Officer, Jim Thorpe, who will further elaborate on our fiscal 2024 first quarter results Kim.
Thank you Derek and good morning.
As Derek mentioned revenues for the fiscal 2020 for first quarter were $36 million.
Down 26% as compared to the fiscal 2023 first quarter revenue of $41 $4 million results for the fiscal 'twenty.
For first quarter decline in comparison to those of fiscal 2020, threes first quarter due mainly to the significant working worsening economic conditions.
We also achieved record performance in the 2022 calendar year, including the fiscal 2023 first quarter ended December 31, 2022, driven by some what Sumner.
Industry as Derrek mentioned, a moment ago.
As was a post COVID-19 valves and unemployment recovery trends. This gateway to returning concerns about uncertainties surrounding the economy that have negatively impacted labor markets throughout 2023 and worsening in the later portion of calendar 2023.
Leading to further decreases in orders and placements for our businesses.
Through the first quarter of 2024.
Professional and industrial contract staffing services revenues.
For fiscal 2020 for his first quarter were $27 6 million.
Down 22% as compared to the fiscal 2023 first quarter professional contract services revenue, which represents 91% of all contract services revenue.
With 31 2022.
Driven by some what some in our industry.
Industry and as Derrek mentioned, a minute ago is was a post COVID-19 valves and employment recovery trends.
And 82% of total revenue decreased $6 7 million or 21%.
This gateway to returning concerns about uncertainties surrounding the economy that have negatively impacted labor markets throughout 2023 and worse than in the later portion of calendar 2023.
Quarter over quarter industrial contract services revenue, which represents 9% of all contract service services revenue and 8% of all revenue decreased $1 1 million or 31% quarter over quarter.
Leading to further decreases in orders and placements for our businesses.
Again, the economic and labor market factors previously discussed.
Through the first quarter.
For 2024.
<unk> two a decline in orders from our clients as well as temporary labor to fill those orders leading to the decrease in contract revenues.
Professional and industrial contract staffing services revenues.
For fiscal 2020 for his first quarter were $27 6 million.
Direct hire revenues for the fiscal 2020 for first quarter were $3 $1 million down 47% as compared with fiscal 2023 first quarter direct hire revenues as Derek and I mentioned earlier the fiscal 2023 first quarter ended December 31, 2022 was hard.
Down 22% as compared to the fiscal 2023 first quarter professional contract services revenue, which represents 91% of all contract services revenue.
And 82% of total revenue decreased $6 7 million or 21%.
And at the end of a record high calendar year for direct hire placements. Furthermore, direct hire placements versus temporary placements are usually the first to be negatively impacted in an economic downturn.
Over quarter industrial contract services revenue, which represents 9% of all contract service services revenue and 8% of all revenue decreased 1.1 billion or 31% quarter over quarter.
It has not experienced since 2022, just post COVID-19 bounce to the resurgence.
The economic and labor market factors previously discussed contributed to a decline in orders from our clients as well as temporary labor to fill those orders.
To the resurgence of economic and labor uncertainties in 2023.
Gross profit for the fiscal 2020 for first quarter was $9 $7 million down 32% as compared to the fiscal 2023 first quarter gross profit of $14 $44 million. Our overall gross margins were 31, 8% and 35%.
Leading to the decrease in contract revenues.
Direct hire revenues for the fiscal 2020 for first quarter were $3 1 million down 47% as compared with fiscal 2023 first quarter direct hire revenues as Derek and I mentioned earlier the fiscal 2023 first quarter ended December 31 2022 was.
For the fiscal 2024, and 2023 first quarters respectively.
Part of that and at the end of a record high calendar year for the direct hire placements.
These decreases in gross profit and gross margin are mainly attributable to a decline in direct hire business.
In a more direct hire placements versus temporary placements are usually the first to be negatively impacted in an economic downturn.
The first reporting 24 first quarter.
Yeah.
Our I'm sorry are mainly attributable to the decline in direct hire business, which has a 100% gross margin.
Does that experience since 2020 twos post COVID-19 bounce to the resurgence.
Our professional contract services gross margin was 25% for the fiscal 2024 first quarter compared to 25, 4% for the fiscal 2023 first quarter.
To the resurgence of economic and labor uncertainties in 2023.
Gross profit for the fiscal 2020 for first quarter was $9 $7 million down 32%.
Decline of only 40 basis points, our light industrial services gross margin was 16% for the fiscal 2024 first quarter compared with 15, 5% for the fiscal 2023 first quarter, which was an increase of 50 basis points.
As compared to the fiscal 2023 first quarter gross profit of $14 $4 million. Our overall gross margins were 31, 8% and 35% for the fiscal 2024, and 2023 first quarters respectively.
Spite lower quarter over quarter overall gross profit and gross margins our current margins remain relatively high as compared with those of our competitors.
These decreases in gross profit and gross margin are mainly attributable to the decline in direct hire business for the fiscal 2020 for first quarter.
Selling and.
Selling general and administrative expenses SG&A.
Uh huh.
I'm sorry are mainly.
Fiscal 2020 for first quarter were $10 $6 million down 17% as compared with the fiscal 2023 first quarter SG&A expenses were 34, 6% of revenues for this fiscal 2024 first quarter compared with 31.1%.
Well to the decline in direct hire business, which has a 100% gross margin our professional contract services gross margin was 25% for the fiscal 2024 first quarter compared to 25, 4% for the fiscal 2023 first quarter.
Decline of only 40 basis points, our light industrial services gross margin was 16% for the fiscal 2024 first quarter compared with 15, 5% for the fiscal 2023 first quarter, which was an increase of 50 basis points. Despite.
Of the fiscal 2023 first quarter the increase in SG&A relative to revenue.
Primarily attributable to fixed cost, including personnel related expenses occupancy costs software subscriptions.
Despite lower quarter over quarter overall gross profit and gross margins our current margins remain relatively high as compared with those of our competitors.
For Africa, and sourcing and tracking and others, which increased proportionally relative to lower revenues.
And to a lesser extent certain other nonrecurring expenses associated with core business operations.
Selling and selling general and administrative expenses SG&A.
We reported a net loss for the fiscal 2024 first quarter, $1 6 million or a negative <unk> <unk> per diluted share down $2 3 million.
For fiscal 2020 for first quarter were $10 $6 million down 17% as compared with the fiscal 2023 first quarter SG&A expenses were 34, 6% of revenues for this fiscal 2024 first quarter compared with 31.1%.
Compared with a net income of $700000 or <unk> <unk> per diluted share for fiscal 2023 first quarter.
Adjusted net loss, which is a non-GAAP financial measure for fiscal 2024 is first quarter was a negative $900000 or a negative <unk> <unk> per diluted share down $2 million as compared to $1 1 million or one cents per diluted share.
The fiscal 2023 first quarter the increase in SG&A relative to revenue.
Is primarily attributable to fixed cost, including personnel related expenses occupancy costs software subscriptions upfront.
For Africa, and sourcing and tracking and others, which increased proportionally relative to lower revenues.
Fiscal 2023 first quarter, our reported net losses for the fiscal 2024 first quarter again are mainly the result of the death of the decreases in revenue and gross profit and gross margin on lower direct hire placement business previously discussed.
And to a lesser extent certain other nonrecurring expenses associated with core business operations.
We reported a net loss for the fiscal 2024, our first quarter $1 $6 million or a negative <unk> <unk> per diluted share down $2 3 million.
Adjusted EBITDA, which is a non-GAAP financial measure for fiscal 2024 is first quarter was a negative $200000 down $2 2 million as compared with $2 million for the fiscal 2023 first quarter.
Compare with a net income of $700000 or one cent per diluted share for fiscal 2023 first quarter.
Adjusted net loss, which is a non-GAAP financial manager for fiscal 'twenty 'twenty. Four is first quarter was a negative $900000 or a negative one cent per diluted share down $2 million as compared to $1 $1 million or one cents per diluted share.
Our current our working capital ratio as of December 31, 2023 was $4 80 to 100.
60 basis points from three six to one as of September 32023, we reported negative cash flow from operating activities of $900000 for the fiscal 2020 for first quarter ended December 31 2023.
Fiscal 2023 first quarter, our reported net losses for the fiscal 2024 first quarter again are mainly the result of the death of the decreases in revenue and gross profit and gross margin on lower direct hire placements business previously discussed.
Our liquidity our liquidity position remains very strong and we have no outstanding debt.
Net book value per share and net tangible book value per share was <unk> 93 cents.
Adjusted EBITDA, which is a non-GAAP financial measure for fiscal 2024 is first quarter was a negative $200000 down $2 $2 million as compared with $2 million for the fiscal 2023 first quarter.
And 33 cents, respectively as of December 31, 2023.
To conclude we're obviously disappointed with our fiscal 2024 first quarter results.
We remain and we remain cautious on our outlook for the remainder of fiscal 2024, considering current economic and labor market. Uncertainties. Importantly, however, we do remain optimistic for the long term and have demonstrated we can produce earnings consistently under better economic conditions.
Our current our working capital ratio as of December 31, 2023 was $4 two to whine about 60 basis.
Basis points from three six to one as of September 32023, we reported negative cash flow from operating activities of $900000 for the fiscal 2020 for first quarter ended December 31 2023.
<unk> before I turn it back over to Derek. Please note that the reconciliation of <unk> non-GAAP financial measures.
Our liquidity our liquidity position remains very strong and we have no outstanding debt.
<unk> today with their GAAP counterparts can be found in supplemental schedules included in our earnings release.
Net book value per share and net tangible book value per share were 93 cents.
Now I'll turn the call back over to Derek.
And 33 cents, respectively as of December 31, 2023.
Thank you Kim.
At December 31, 2023.
To conclude we're obviously disappointed with our fiscal 2024 first quarter results.
The company had $19 9 million in cash.
And another $9 3 million and availability.
We remain and we remain cautious on our outlook for the remainder of fiscal 2024, considering current economic and labor market uncertainties and importantly, however, we do remain optimistic for the long term and have demonstrated we can produce earnings consistently under better economic conditions.
Under its bank ABL facility.
Despite economic headwinds and staffing industry specific challenges impacting demand for our services.
We are aggressively managing and preparing our businesses.
An inevitable recovery, we will continue to work hard for the benefit of our shareholders.
Before I turn it back over to Derek. Please note that the reconciliation of G groups non-GAAP financial measures.
<unk> consistently evaluating strategic uses of G group's capital to maximize shareholder returns.
<unk> today with their GAAP counterparts can be found in supplemental schedules included in our earnings release.
Before we pause to take your questions I want to again say a special thank you to all of our wonderful employees.
Now I'll turn the call back over to Derek.
Their professionalism hard work and dedication.
Thank you Kim.
Without them, we could not have accomplished all the good things.
At December 31, 2023.
The company had 19 9 million in cash.
We have shared with you today.
Kim and I will be happy to answer your questions.
And another $9 3 million and availability.
Please just ask one question and rejoin the queue with a follow up as needed if theres time, we'll come back to you for additional questions.
Under its bank ABL facility.
Despite economic headwinds and staffing industry specific challenges impacting demand for our services.
Thank you.
We are aggressively managing and preparing our businesses.
And inevitably recovery, we will continue to work hard for the benefit of our shareholders.
<unk> consistently evaluating strategic uses of G group's capital to maximize shareholder returns.
Before we pause to take your questions I want to again say a special thank you to all of our wonderful employees.
So the first question.
And is.
Regarding the stock buyback and that expires December 31st.
Their professionalism hard work and dedication.
Of 2023.
Without them, we could not have accomplished all the good things.
Would we consider.
Reinstating our buyback plan.
We have shared with you today.
Kim and I will be happy to answer your questions.
And the thought process.
Please just ask one question and rejoin the queue with a follow up as needed. If there is time, we'll come back to you for additional questions.
We are waiting for the findings from our.
Investment Bank D C advisory.
Which will set forth strategic alternatives, including maximum use of our capital.
Thank you.
Which.
They will evaluate all the options, we have with respect to utilization of our capital and.
And we expect that system.
Either the latter part of this.
Or next week.
We will communicate back.
So the first question.
And is.
Also with you regarding the findings there.
Regarding the stock buyback and that expires December 31st.
So we are well positioned cash wise and credit wise, we have no debt.
A 2023.
So we're very very in good shape and by that I mean long term debt, Ken would you like to add anything to that.
Would we consider.
Reinstating our buyback plan.
And the thought process.
No I mean I think we're.
We are waiting for the findings from our.
You know I would like to point out I know the quarter is disappointing, but we.
We were.
Investment Bank D C advisory.
We're very well prepared for this week, we've done it before.
Which is which will set forth strategic alternatives, including maximum use of our capital.
We came out stronger.
After the pandemic than before the pandemic actually.
Which.
So I I wouldn't I don't have anything to add.
They will evaluate all the options we have.
With respect to utilization of our capital.
Thank you.
One of the questions. The next question.
And we expect that.
Either the latter part of this.
Has to do with you know the strategic alternatives again, we're going to.
Or next week.
We will communicate back.
Wait for a report to discuss those in further.
Also with you regarding the findings there.
How much did the company spend on D C Advisory strategic review.
So we are well positioned cash wise and credit wise, we have no debt.
I believe that that is held confidential based on D. C Advisory agreement with us So I really can't discuss that I would say, though we are very very cost conscious there and they were very very.
So we're very very good shape and by that I mean long term debt, Ken would you like to add anything to that.
No I mean I think we're.
You know I would like to point out I know the quarter is disappointing, but we.
We you know, we're we're very well prepared for this we did we've done it before.
Very very.
Good about working with us.
We came out stronger after.
A low rate.
And I felt very good about.
After the pandemic than before the pandemic actually.
The process and we look forward to their findings.
So I.
I wouldn't I don't have anything to add.
Thank you.
One of the questions. The next question has to do with you know strategic.
Okay.
Okay.
So one question is you know what things with the strategic review.
Alternatives again, we're going to.
Wait for a report to discuss those in further.
Reduced and as I mentioned, the best use of our capital will talk about M&A strategy.
How much did the company spend on D C Advisory strategic review.
And so forth.
I believe that that is held confidential based on D. C Advisory agreement with us So I really can't discuss that I would say, though we are very very cost conscious there and they were very very.
And.
When we get the court will talk more about what we're doing there.
On a long term basis, if you like your stock buyback.
Would you like to buy it at 37 says I'd like to buy it at a dollar quite frankly, but the the stock buyback program was successful thus far.
Very very.
Good about working with us.
And I want to also comment on recessionary trends.
A low rate.
And I felt very good about.
The.
The process.
Trend line.
We look forward to their findings.
For our business, you'll see a dip in 202001, you'll see it in 2008 2009 and again that same dip is what we're facing now.
Okay.
Okay.
So one question is you know what things would the strategic review.
Good thing is the recovery.
M P.
Doesn't it shows.
Produce and as I mentioned, the best use of our capital will talk about M&A strategy.
Rapid rise in business volume.
We are preparing for the rapid rise and the way, we're preparing as hiring sales and recruiting personnel.
And so forth.
And.
When we get the court will talk more about what we're doing there.
To meet the demand.
Also we keep SG&A in check SG&A dropped significantly almost $2 million.
On a long term basis, if you like your stock buyback.
Would you like to buy it at 37 says I'd like to buy it at a dollar quite frankly.
This quarter, it's up as a percentage of revenue because of the revenue drop but we have a few.
But the the stock buyback program was successful thus far.
Arrows in the quiver to work on SGA SG&A, a bit, but you don't want to cut SG&A to the bone.
And I want to also comment on recessionary trends.
If your expectation is there will be a demand recovery at some point.
The <unk>.
Trend line for our business, you'll see a dip in 2000 2001, you'll see it in 2008 2009 and again that same dip is what we're facing now.
In the near future in the near future can mean six months it could be nine months.
But we can see it in our.
Backorder log for job orders. So we will keep you posted on that.
The good thing is the recovery.
Desert shows for <unk>.
I can tell you I've been through it before.
Rapid rise in business volume.
And I really enjoy the recovery period.
We are preparing for the rapid rise and the way, we're preparing as hiring sales and recruiting personnel.
I think Derek Who's had some difficulty.
To meet the demand.
Also we keep SG&A in check SG&A dropped significantly almost $2 million.
This is Mike.
So I'll try to step in and take over a couple of these questions.
This quarter, it's up as a percentage of revenue because of the revenue drop but we have a few.
The repurchase program expired December 20th request through the play out of these levels doesn't it make sense to buy more stock.
Arrows in the quiver to work on SGA SG&A, a bit, but you don't want to cut SG&A to the bone.
D C advisory is definitely looking at that along with the other portions of the review.
If your expectation is there will be a demand recovery at some point.
In the near future in the near future can mean six months it could be nine months.
As Derek said.
Good day.
But we can see it in our.
They intend to complete the review.
Ah report us either this week or next week to our M&A Committee, our M&A Committee is leading.
Backorder log for job orders. So we will keep you posted on that.
I can tell you I've been through it before.
That project or if it's comprised entirely of independent directors.
And I really enjoy the recovery period.
So it's something that we take very seriously.
In the realm of governments.
Hello, Derrick you there.
Those are the strategic alternatives review include a serious look at selling the company.
You all all pathways will be reviewed in the strategic alternatives review.
Although there is another question here.
Okay.
What would you consider selling the company under these conditions.
I I think Derek has had some difficulty with his mic.
My own personal opinion, I think I speak for Derek as well.
I prefer to sell <unk>, and so high rather than the opposite.
So I'll try to step in and take over a couple of these questions.
Well Kim I can also add.
The repurchase program expired December 'twenty three requests through the play out of these levels doesn't it make sense to buy more stock.
Thank you.
Sorry so.
I've been on a little technical glitch for a second but no I've listened on the question.
D. C advisory is definitely looking at that along with the other pulp portions of the review.
The one thing people need to remember that.
As Derek said.
The day, they intend to complete the review and have a report us either this week or next week to our M&A Committee on our M&A Committee is leading.
There's some up and downs in the sector.
Industry.
But it has cyclicality to it based on demand and the macro economic environment.
And I've lived through multiple cycles.
That project arm is it's comprised entirely of independent directors and so it's something that we take very seriously.
And exited as well very successfully so the comment about that is you know.
In the realm of governments.
As as a public company you have to maximize shareholder value and at this point.
Those are the strategic alternatives review include a serious look at selling the company.
We have to build our business back to at least where it was first and then get to the next level all of which.
Yeah, all all pathways will be reviewed in the strategic alternatives review.
Is.
Very possible for sure because of what we're seeing.
Although there is another question here.
Would you consider selling the company under these conditions.
We're pretty hopeful that we flattened out on the lower demand.
My own personal opinion, I think I speak for Derek as well as you know I prefer to sell buy low and sell high rather than the opposite.
And that will catch the upswing.
Towards the latter part of 'twenty 'twenty four it takes a little bit longer that's fine, we're well positioned to do it.
Well I can I can also add.
We don't have to be.
RAF without any decisions to do anything.
Thank you.
Sorry so.
Out of the ordinary but we do have to be prudent in managing both the top and the bottom line.
I've been on a little technical glitch for a second but no I've listened on the question and.
And you.
You know keep driving the business forward, we have a great.
And one thing people need to remember that.
Value proposition in terms of our verticals our margins by the way were either second or third in the peer group for the industry on gross margin, even with the decline down from down from roughly 35% to 31, five which is driven by Perm placement.
There's some up and downs in the sector. It's a good thing.
Industry, but have cyclicality til based on demand and the macro economic environment.
I've lived through multiple cycles.
And exited as well very successfully so the comment about that is you know.
Volume that influences it but our contract gross margins are also holding very well and our pricing is also holding.
As as a public company you have to maximize shareholder value and at this point.
The let's let me take another question.
We have to build our business back to at least where it was first and then get to the next level all of which.
Gary May I add something yeah sure.
Is.
So to put this in perspective.
Very possible for sure because of what we're seeing.
I don't want folks to think that we don't take the loss this quarter seriously we take it very seriously.
We're pretty hopeful that we flattened out on the lower demand.
Let me let me put this attempt to put some more perspective around this.
And that will catch the upswing.
Toward the latter part of 'twenty 'twenty four it takes a little bit longer that's fine, we're well positioned to do it.
And the last 10 quarters since we go to our follow on offering.
We generated $500 million in revenue.
We don't have to be.
Rash that many decisions to do anything.
100, almost $180 million and gross profit.
Out of the ordinary but we do have to be prudent in managing both the top and the bottom line.
Our gross margin across all 10 quarters was 35, 6%, which is in the high end of our industry.
And you.
You know keep driving the business forward, we have a great.
Our adjusted EBITDA over that period cumulative spend about Japan over 6% I mean, we obviously need to work on getting that higher and we will.
Value proposition in terms of our verticals our margins by the way were either second or third in the peer group for the industry on gross margin, even with the decline down from down from roughly 35% to 31.5, which is driven by Perm placement.
Our net income over that period has been $27 million or five 5%.
Our cumulative earnings per share says.
Volume that influences it but our contract gross margins are also holding very well and our pricing is also holding.
The offering at 60 sites has been 27 says 44% of the 60 share price that the follow on offering went out on and last but not least we've generated $16 $5 million in free cash flow in 10 quarters. This is the first loss we've had.
The let's let me take another question.
Gary May I add something yeah sure.
So to put this in perspective.
Since the fourth quarter of 2023, the first quarter of 2023, which was a small.
I don't want folks to think that we all take the loss this quarter seriously we take it very seriously.
Net loss of about $300000. So I just want everybody to know that we are managing this company for the long term and we believe that it's kind of a lot more juice.
Let me let me put this attempt to put some more perspective around this.
In the last 10 quarters since we did our follow on offering.
We generated $500 million in revenue.
And were anxious to get to the recovery.
100, almost $180 million and gross profit.
Yeah.
Thank you Kevin.
So.
Our gross margin across all 10 quarters was 35, 6%, which is in the high end of our industry.
One of the other questions.
And.
It was repeated a few times in a slightly different format was how are your business verticals and.
Our adjusted EBITDA over that period cumulative spend about gip been over 6% I mean, we obviously need to work on getting that higher we will.
What do you what do you think is going to happen going forward.
Our net income over that period has been $27 million or five 5%.
So each business vertical.
A decrease in demand.
Coupled with.
Our cumulative earnings per share says.
Supply issues.
The offering at 60 Sachin has been 27 says 44% of the 60 share price that the follow on offering went out on and last but not least we've generated $16.5 million in free cash flow in 10 quarters. This is the first loss we've had.
Getting our labor.
Teed up to fill some of the orders.
That is slowly changing and as you know there were big layoffs in the information technology sector.
And that halted some projects that were being done.
Internally by our client companies.
Since the fourth quarter of 2023, the first quarter of 'twenty, 'twenty, three which was a small net.
That is starting to warm up so when will that take.
Take a real upward swing.
Net loss of about $300000.
And we can't predict which quarter that will happen.
So I just want everybody to know that we are managing this company for the long term and we believe that as kind of a lot more juice.
But we do know that it happens and it has happened historically time and tell them again and we're prepared for it.
And we're and we're anxious to get to the recovery.
The vertical of accounting Finance for example, also was impacted but that turns as well.
Thank you Kevin.
So one of the other questions.
So I can tell you that we will position our company.
And.
It was repeated a few times in a slightly different format was how are your business verticals and.
For growth and profitability and have positioned it and we'll continue to do so and catch the upswing.
And that.
What do you what do you think is going to happen going forward.
We'll get the shareholders.
So each business vertical.
The value they need on price.
A decrease in demand.
Strategic alternatives, how we use our cash what's pricing on acquisitions those questions have come up acquisition prices are somewhat muted now because of the downturn.
Coupled with.
Supply issues.
Of getting a labor.
Teed up to fill some of the orders.
So are they five times EBITDA or six times.
That is slowly changing and as you know there were big layoffs in the information technology sector.
They are.
But.
With synergies and so forth you have to bring the multiple down.
And that halted some projects that were being done.
Two.
Internally by our client companies.
The three or four range.
With the deals if that becomes an option for us, but again, we will review all of these strategic alternatives when the report comes in.
That is starting to warm up so when will that.
I'll take a real upward swing.
And we can't predict which quarter that will happen.
And move forward judiciously with it.
But we do know that it happens and it has happened historically time and time again and we're prepared for it.
We are well positioned.
In my prior life I was well positioned in OE.
To capture the upswing and have done it the same with 202001.
The vertical of accounting Finance for example, also was impacted but that turns as well.
We had kind of a dotcom bust then.
So.
So I can tell you that we will position our company.
The key for us is not to make rash decisions, but to be thoughtful and what we're doing with our strategic plan and I can tell you there's active board.
For growth and profitability and have positioned it and we'll continue to do so and catch the upswing.
And that.
Participation, including our largest shareholder.
We'll get the shareholders.
And we have the horsepower to succeed.
The value they need on price.
Strategic alternatives, how we use our cash what's pricing on acquisitions those questions have come up acquisition prices are somewhat muted now because of the downturn.
You have the guidance to succeed.
We have the expertise internally and management and we have the oversight in place by the board.
To help us drive the business forward.
So are they five times EBITDA or six times.
I'm very very.
Bullish.
They are.
<unk> long term outlook and that can mean, a couple of quarters.
But.
With synergies and so forth you have to bring the multiple down.
But we should see indicators coming up and we will report to you.
Two.
The three or four range.
Without those indicators.
With the deals if that becomes an option for us, but again, we will review all of these strategic alternatives when the report comes in.
We're not satisfied in the least with our performance nor our stock price.
But as the leader of the company I have an obligation to gut check every aspect of our business and also position our business for the.
And move forward judiciously with it.
We are well positioned.
In my prior life I was well positioned in OE.
The success that we anticipate coming.
And that is the most critical aspect of what I can deliver today. We are prepared we will take advantage of growth and we will not make rash business decisions.
To capture the upswing and have done it the same with 202001.
We had kind of the dot com bust then.
So.
The key for us is not to make rash decisions, but to be thoughtful and what we're doing with our strategic plan and I can tell you there's active board.
Don't have to and we're well positioned to do that.
Patiently waiting for.
We're going to be a very good second to get back on.
Participation, including our largest shareholder.
I'm back on habitat glitch, there, but yeah, we're good.
And we have the horsepower to succeed.
Kim do you want to take a shot and then another question.
The guidance to succeed.
Yeah, I mean, you have here.
We have the expertise internally and management and we have the oversight in place by the board.
Yeah.
Let's see let me go to.
To help us drive the business forward.
I'm very very.
GDP grew by four 9% and three Q3, 3% and <unk>, whereas the economic weakness you're referring to.
Bullish.
On long term outlook and that can mean, a couple of quarters.
But we should see indicators coming up and we will report to you.
GDP does not alone.
Dictate how the economy is theres no.
Without those indicators.
We're not satisfied in the least with our performance nor our stock price.
Jim we have rising inflation high interest rates there is still a threat of inflation out there the job figures keep getting adjusted downward it's not the panacea that you see on TV all the time, it's not the only indicator.
As the leader of the company I have an obligation to gut check every aspect of our business and also position our business for the success that we anticipate coming.
The indication you can look at to verify this is going to look at our peers, including the Robert Half's, the debt goes and others and there were all still being pinned down to some extent by broader economic uncertainty than just a quarter or two as GDP. So that's the answer to that what are the trends.
And that is the most critical aspect of what I can deliver today. We are prepared we will take advantage of growth and we will not make rash business decisions. When you don't have to and we're well positioned to do that.
Patiently waiting for.
Like hearing what you can do better.
Do.
Do a job of setting your expectation with analysts on Wall Street.
We were trying to we don't provide guidance as a policy because it's it's.
It's very.
Expensive to maintain and.
And to create the systems you need to do and it's and then it's not always reliable, but we have given as much directional guidance as we can we've talked about the turn in the trends from 2022 to 2023.
We're gonna give Derek a second to get back on.
I'm back on habitat glitch, there, but yeah, we're good.
Kim do you want to take a shot and then other question.
If you look at other.
Yeah, I mean, you have here.
Releases of other staffing firms that will bear out what we're saying.
Let's see let me go to.
The staffing industry analysts were the largest trade associations you can go online and read their publications it will bear out what we're saying.
GDP grew by 4.9% and three Q, and three 3% and <unk>, whereas the economic weakness you're referring to.
Okay.
Why were you so aggressive buying back at 58 cents and then nothing in stock when it's lower.
GDP does not alone.
Dictate how the economy is theres no question, we have rising inflation high interest rates. There is still a threat of inflation out there the job figures keep getting adjusted downward.
We bought back we bought back a lot of stock we bought back steadily all the way from the time, we implemented the program in 2023 till the time it ended as of December 31.
Given the economy and the downturn that we're in the midst of and the fact that we are about to get a report from an independent expert on strategic strategic alternatives. We felt like it was prudent to pause for a few.
Weeks.
It doesn't mean that we will abandon their altogether, we will see what our adviser has to say on how our board feels about it but it has not necessarily been with them. We bought it back at all kinds of prices.
That 58% or I'm, sorry, 58 cents or lower.
Yes, there is a lot like I realize there's a lot of people upset about the stock price were upset about it to all I can tell you is as our tangible net book value is 33 a share.
The stock price selling at less than 40 cents a share means that you all are indicating you all being I think a lot of speculators out there and people do engage trading in short termers are suggesting that our but yeah. We can liquidate our company theoretically at 33 cents.
And then and then the rest of our business of $150 million revenue business that has produced $165 million.
Two of the last five years is only worth $4 million tomorrow.
We are confident that the stock was undervalued and where it yeah.
We don't like taking this much more time, either but it is it's going to come back up when the recovery hits, we've proven we can do that.
Yeah, Let me add a few things Kim so.
We are in.
In a great position.
Catch the upswing.
We don't have a great crystal ball as to which quarter. The upswing will happen, it's usually a gradual process.
And we are seeing.
Some better job orders, we believe we flattened at the bottom at this point.
Absent some other calamity in the macro environment.
And then and one of the questions was will it looks like the macro environment is not so bad.
Well first of all our peer group.
Has had reductions in comparable quarter revenue ranges from 12.
250%, depending upon the geographic location and the vertical in which they operate whether they have volume accounts, whether they have retail accounts, whether they're on V. M S.
And a lot of speculators out there and people doing day trading in short Termers.
Suggesting that are yeah, we could liquidate our company theoretically at 33 cents.
At MSP accounts, and so forth. However, it's epidemic and I just got back from an industry C E O group.
And then and then the rest of our business of $150 million revenue business that has produced $165 million.
And it's across the board and the economist predicted that the only jobs being filled today our government.
Two of the last five years is only worth $4 million from a.
Lower end hospitality.
We are confident that the stock was undervalued and we are.
And some health care because of the cuts in health care and I'll give you a great example, health care has had great demand.
We don't like taking this much more time, either but it is it's going to come back up when the recovery hits, we've proven we can do that.
During COVID-19 and a bit post Covid and then there were some layoffs AAM.
Yeah, Let me add a few things camp so.
I am in health care, which is the <unk>.
<unk> health care staffing firm nursing.
We are.
Physicians and so forth.
In a great position.
It's been down 30% to 40%.
Catch the upswing.
And topline.
We don't have a great crystal ball as to which quarter. The upswing will happen, it's usually a gradual process.
And if you go to Robert half their Perm business is actually down.
Similar to ours.
The revenue was down and some of the buffers by the way for the larger staffing companies came from the European business not from the U S business.
And we are seeing.
Some better job orders, we believe we flattened at the bottom at this point.
Absent some other calamity in the macro environment.
The U S side was down for example, manpower.
And one of the questions was will it looks like the macro environment is not so bad.
But now they're French businesses catching it too so.
So this is not unusual from an industry standpoint.
Well first of all our peer group.
The macroeconomics broken down at the meeting that I went to my economist two different ones.
Has had reductions in comparable quarter revenue range from 12.
Point to exactly what we've been saying they also point to an anticipated.
250%, depending upon the geographic location and the vertical in which they operate whether they have volume accounts, whether they have retail accounts, whether they're on Vms and.
Recovery and we might be you know may be bumpy for awhile.
But they do believe there will be one.
And we also have to realize that there was a hiring boom in 2022 when we call it the post COVID-19 bounce.
At MSP accounts, and so forth. However, it's epidemic and I just got back from an industry CEO group.
And it's across the board and the economist predicted that the only jobs being filled today.
So adjusting our labor force Mark for 2023 toward the latter part started it's not finished but we think its leveled off and then there'll be the upswing projects will start now interest rates went up.
Our government.
Lower end hospitality.
And some health care because of the cuts in health care and I'll give you a great example, health care has had great demand.
That put a little damper on project business for corporate America, and so forth.
Inflationary trends in wages.
During COVID-19 and a bit post Covid and then there were some layoffs.
Our margins have held one of the questions was of your spreads and your gross profits and your pricing holding the answer is yes.
I am in health care, which is the <unk>.
<unk> health care staffing firm nursing.
The influence on gross margin was perm related <unk>.
Physicians and so forth.
Perm is it a 100% gross profit so you have less perm impacts the gross margin in the aggregate.
It's been down 30% to 40%.
And topline.
And if you go to Robert half their Perm business is actually down.
But I can safely say, hey, we're well positioned to move forward, we will take the actions necessary to restore profitability and get topline humming again.
Similar to ours.
The revenue was down and some of the buffers by the way for the larger staffing companies came from the European business not from the U S business.
And.
That's what we're focused on and we appreciate you as shareholders and interested parties.
The U S side was down for example, manpower.
But now they're French businesses catching it too so.
Being on the team.
And we ask you for some patients.
So this is not unusual from an industry standpoint.
But we don't have we're not satisfied and leased with the performance at this level, but we are optimistic that we will get out of here.
The macroeconomics broken down at the meeting that I went to buy economist two different ones.
Point to exactly what we've been saying they also point to an anticipated.
Level.
And start moving in the great direction that we need to now I will tell you.
We have signs at different regions of the country and different verticals.
Recovery and we might be you know may be bumpy for a while.
But they do believe there will be one.
Ticking.
Outward.
And we also have to realize that there was a hiring boom in 2022, and we call. It the post COVID-19 bounce.
There is somewhat mitigated by those that are still flat.
But that should come around.
And we're very.
So adjusting our labor force March 2023 towards the latter part started it's not finished but we think its leveled off and then there'll be the upswing projects will start now interest rates went up.
Optimistic in the longer term outlook.
So I can safely say that we're well positioned balance sheet wise.
I have to say that I predicted this was happening.
Would happen.
That put a little damper on project business for corporate America, and so forth.
We saw the same type of thing and Oh, five and no sex with Perm hit a bubble.
Inflationary trends in wages.
Our peak similar to what it did in 'twenty two.
Our margins have held one of the questions wasn't your spreads and your gross profits and your pricing holding the answer is yes.
And then there was a decline in staffing and what happens.
When there's a cut in employment, usually the contract labor.
The influence on gross margin was perm related.
Permanent placement business get hit first.
Perm is it a 100% gross profit so you have less perm impacts the gross margin in the aggregate.
Before full time staff get let go.
One thing companies have been doing is holding on I think this is a key point that was made by the economist.
But I can safely say, we're well positioned to move forward, we will take the actions necessary to restore profitability and get topline humming again.
Reason, though layoffs aren't more significant on the core employees of a client company.
And.
That's what we're focused on and we appreciate you as shareholders and interested parties.
Is because they're retaining.
Those employees.
Even if the business didn't warrant because they don't want to lay them off because it's difficult to get them back so that trend that's been going on sooner or later you know activity is good for our business. So if there's a bunch of layoffs will will benefit from the recovery because the law. Additionally, higher contract and then little higher Perm again.
Being on the team.
And we ask you for some patients.
But we don't have we're not satisfied in the leased with the performance at this level, but we are optimistic that we will get out of here.
Level.
And start moving in the great direction that we need to be now I will tell you.
We have signs at different regions of the country in different verticals.
So that's the cycle and it's borne out historically.
And the economist predicted this theyre showing why total employment.
Ticking.
Outward.
There is somewhat mitigated by those that are still flat.
Was not bad in the aggregate, but then they dissected it and why temp labor and permanent hires from temp.
But that should come around.
And we.
Barry.
Optimistic in the longer term outlook.
Staffing companies.
Our down and it was across the board.
So I can safely say that we are well positioned balance sheet wise.
I will say the optimism index of all the C suite executives that were at the meeting that I went to.
I have to say that I predicted this was happening it would happen.
Is high they don't know when that breakout will start occurring.
We saw the same type of thing and Oh, five and six would perm hit a bubble.
It's starting to as I said burst wherever you leveled off we believe we have leveled off and then are we catching an upswing and will that be in 2024.
Our peak similar to what it did in 2022.
And then there was a decline in staffing and what happens.
When there's a cut in employment, usually the contract labor and.
The resounding answer was yes, it is but it could be the latter part of.
Permanent placement business get hit first.
For a full time staff get let go one thing companies have been doing is holding on I think this is a key point that was made by the economist.
2024.
Nonetheless, we're well position, we will take aggressive action on both top.
And we shouldn't bottomline.
Reason, though layoffs arent more significant on the core employees of a client company.
We have great talent internally, great talent, and we're adding great talent and people are coming to us for jobs, because they think it's a great place to be.
Is because they are retaining.
Those employees.
Coming from competitors, so we feel good about that.
Even if the business doesn't warrant because they don't want to lay them off because it's difficult to get them back so that trend that's been going on.
And we only are hiring production personnel.
Recruiting.
Account managers and salespeople at this point.
Sooner or later you know activity is good for our business. So if theres a bunch of layoffs will will benefit from the recovery because it will initially higher contract and then the higher Perm again.
Does they will deliver the results we need.
Propel revenue forward and get net income and EBITDA back on.
On the right track.
So that's the cycle and it's borne out historically.
Cam do you want to add anything I'm trying to give some global answers to similar questions.
And the economists have predicted this theyre showing why total employment.
Yeah Derek.
Derek.
Was not bad in the aggregate, but then they dissected it and why temp labor and permanent hires from temp.
There's a there's been a question or two on AI and I know, it's not directly yeah. Robert Let me cover that so we've covered AI the recent meeting.
Staffing companies are.
Down.
And it was across the board.
The top 10 trends for staffing were discussed.
I will say the optimism index of all the C suite executives that were at the meeting that I went to.
AI for sure was a critical element of that.
What do we anticipate doing with AI and how will it benefit our business and also about internally and also benefit us from placing.
Is high they don't know when that breakout will start occurring.
It's starting to as I said first.
Wherever you leveled off we believe we have leveled off and then are we catching an upswing and will that be in 2024.
AI expertise at our customers.
In the I T sector.
The resounding answer was yes, it is but it could be the latter part of.
We're focused on growing.
The AI and cyber security.
2024.
Nonetheless, we're well positioned we will take aggressive action on both top.
Capability.
Four placements of those it personnel at client companies, we're doing that through.
And we shouldn't bottomline.
What I call very very sophisticated recruiting.
We have great talent internally, great talent, and we're adding great talent and people are coming to us for jobs, because they think it's a great place to be.
And we will also have the AI integrated into our recruiting.
I have various individuals in the company right now.
Coming from competitors, so we feel good about that.
Studying the different tools.
And we only are hiring production personnel.
To bring in for AI.
Recruiting.
And also on the vertical leadership side, our I T leaders are.
Account managers and salespeople at this point.
Does they will deliver the results we need.
Propel revenue forward and get net income and EBITDA back.
Alright set ourselves job orders, which were getting for the physicians.
On the right track.
Cam do you want to add anything I'm trying to give some global answers to similar questions.
And I think what's important on the tech side.
Is that technology is driving business period.
Yeah.
Across the spectrum and.
Eric.
There is.
And we have a significant practice and we're adding to it.
There has been a question or two on AI and I know, it's not directly.
That's a huge growth area for us, but one of the questions was how are you dealing with it.
Let me cover that so we've covered AI the recent meeting.
And my responses very aggressively both for internal use.
The top 10 trends for staffing were discussed.
And for placement of the AI professionals.
AI for sure was a critical element of that.
Cyber is intertwined in there as well.
What do we anticipate doing with AI and how will it benefit our business. It also been internally and also benefit us from placing.
Into both of those areas.
Do you have do you want to add anything to that.
No I think you had again a lot of these areas. We're gonna be covered I think and be part of the conversation around strategic alternatives.
AI expertise at our customers.
In the <unk> sector.
We're focused on growing.
There are some good questions here, but no I don't have anything else at this point there.
The AI and cyber security.
Capability.
Okay.
Or placements of those it personnel at client companies, we're doing that through.
Look we're always available for follow up as necessary and the one thing I ask.
What I call very very sophisticated recruiting.
And we will also have the AI integrated into our recruiting.
Is that.
Believe that we are doing and will do everything.
I have various individuals in the company right now.
That we can.
Studying the different tools.
To get back to.
To bring in for AI.
The profitability.
Growth track.
And also on the vertical leadership side, our I T leaders.
That we need to be on.
And we will move forward aggressively strategically and take advantage of opportunity.
Okay shut ourselves job orders, which were getting for the physicians.
Which it's out there.
We will also be judicious in how we spend our money.
And I think what's important on the tech side.
It happened.
So we will be very very.
Is that technology is driving business period.
Prudent.
And we are optimistic on the longer term.
Cross the spectrum and.
And we have a significant practice and we're adding to it.
Aspects of where this company will be.
That's a huge growth area for us, but one of the questions was how are you dealing with it.
We will report back at some point on the strategic alternatives. After we've had a chance to look at those and I anticipate that we'll have a broad plan to grow shareholder value.
And my response is very aggressively both for internal use.
And for placement of AI professionals.
Which is key.
Cyber is intertwined in there as well.
To what we're doing.
Into both of those areas.
We also have a great team our employees are optimistic.
Jim do you want to add anything to that.
They get paid a growth so they are driven.
No I think you have.
Again, a lot of these areas, we're going to be covered I think and be part of the conversation around strategic alternatives.
And we're all are connected to that so we're excited about future prospects.
And the key now is to just buckled down.
There is some good questions here, but no I don't have anything else at this point there.
And block and tackle and deliver the best we can.
Okay.
Macro environment that's choppy.
Look we're always available for follow up as necessary.
High interest rates some inflation.
Very specific employment statistics that you have to look at.
And the one thing I ask.
Is that.
Believe that we are doing and will do everything.
Very very you have to dissect it and that's what these economies have done to prove out what's actually happening in the industry.
That we can.
To get back to.
So that concludes our call for now.
The profitability.
And we'll be in touch we appreciate you joining us today.
Growth track.
That we need to be on.
And we will move forward aggressively strategically and take advantage of opportunity.
And we look forward to some good thanks, Thank you very much.
Thank you folks.
Which it's out there.
We will also be judicious in how we spend our money.
And it happened.
So we will be very very.
Prudent.
And we are optimistic on the longer term.
Aspects of where this company will be.
We will report back at some point on the strategic alternatives. After we've had a chance to look at those.
And I anticipate that we'll have a broad plan to grow shareholder value.
Which is key.
To what we're doing.
We also have a great team our employees are optimistic.
They get paid on growth so they are driven.
And we are all are connected to that so we're excited about future prospects.
And the key now is to just hold town and.
And walk and tackle and deliver the best we can.
The macro environment that's choppy.
Pi interest rates some inflation very specific employment statistics that you have to look at.
Very very you have to dissect it and that's what these economies have done to prove out what's actually happening in the industry.
So that concludes our call for now.
And we'll be in touch we appreciate you joining us today.
And we look forward to some good things. Thank you very much.
Thank you folks.