Q4 2024 GEE Group Inc Earnings Call
and Dave Harbour.
We assume no obligation to update statements made on today's call.
Throughout this presentation, we will refer to periods being presented as this quarter, or the quarter, or this fiscal year, or the fiscal year, which refer to the 3-month or 12-month periods ended September 30, 2024, respectively.
Likewise, when we refer to the prior year quarter or prior year, we are referring to the comparable prior 3-month or 12-month period ended September 30, 2023, respectively.
During this presentation, we will also talk about some non-GAAP financial measures.
Reconciliations and Explanations of the Non-Gap Measures we will address today are included in the earnings press release.
Our presentation of financial amounts and related items, including growth rates, margins, and trend metrics, are rounded or based upon rounded amounts. For purposes of this call, in 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, www.geegroup.com. Now on to today's prepared remarks.
In fiscal 2024, we encountered and continue to face very difficult and challenging conditions.
in the hiring environment for our staffing services and human resources solutions.
stemming from macroeconomic uncertainty, recession fears, interest rate volatility, and inflation leading to a less than robust hiring environment and slowdown in the labor market which resulted in fewer job orders and lower revenue.
These conditions have produced a near-universal cooling effect on businesses' use of contingent labor and the hiring of full-time personnel.
As a brief reminder, the demand environment for our services, as well as our industry peers, began to soften in the latter part of calendar 2023, following a robust hiring of both contract, labor, and permanent employees.
in the calendar year 2021 and 2022, much of which was attributable to a post-COVID-19 bounce.
Since then, many client initiatives such as IT projects, backfilling of open jobs, and corporate expansion activities, requiring additional labor in general, have been put on hold.
Instead, many businesses who we serve have implemented and proceeded with layoffs and hiring freezes.
These conditions persisted during the 2024 fiscal year and have continued to negatively impact job orders for both temporary health and direct hire replacements.
Thus, our financial results for the 2024 fiscal fourth quarter and full year ended September 30, 2024 have been negatively impacted by these conditions.
GE Group's consolidated revenues were $28.3 million for the 2024 fiscal fourth quarter and $116.5 million for the fiscal year ended September 30, 2024.
Gross Profits and Gross Margins were $9.5 million and 33.7% respectively for the quarter and $37.6 million and 32.3% respectively for the quarter.
for the fiscal year.
Consolidated non-gap adjusted EBITDA was negative $1 million for the quarter and negative $2.3 million for the fiscal year.
We reported a net loss of $2.3 million or $0.02 per diluted share for the quarter and a net loss of $24.1 million or $0.22 negative per diluted share for the fiscal year.
In order to improve our financial results, we are taking aggressive actions, both short-term and long-term.
As recently announced, we are taking this opportunity to ramp up our M&A activities at the same time.
for streamlining our operations.
We have now executed on substantially all of the estimated $3 million in annual reduction in SG&A costs that we announced earlier and continue to tightly manage costs.
In addition, we are exploring various options to streamline our business and further reduce costs. Additionally, we intend to begin to migrate and integrate further our remaining legacy front office and back office systems.
on the singular cloud-based platform starting in 2025.
We have the resources to complete this process over a period of 12 to 18 months once commenced and Anticipate we will further achieve economies of scale and be positioned to accelerate and integrate future creative acquisitions more efficiently
In addition to these near-term initiatives,
We are closely working with our frontline leaders in the field across all of our verticals to help them continue to aggressively pursue new business as well as opportunities to grow and expand existing client revenues.
We are seeing some positive results. When an anticipated recovery does occur in the future, I am very confident that we are positioned to meet the increased demand from existing customers and win new business.
We successfully did this following the COVID-19 pandemic and severe downturn in 2020.
We generated significant growth in 2021-2022 and the first part of 2023 prior to the current downturn and were profitable in all three of those years.
As a matter of fact,
2022 was one of our best years ever.
We can do it again and are laying the foundation to do so. I am also happy to report that we are now well underway formulating and executing on our recently enhanced strategic plans which include making prudent investments to grow both organically and through mergers and acquisitions.
At the same time, rest assured that we will always manage our business prudently, maintaining a solid cash position with available attractive financing.
With regard to M&A...
We have identified several potential strategic acquisition targets and expect to complete accretive transactions.
early in the calendar year 2025. As you know, we paused share repurchases on December 31st, 2023, having repurchased just over 5% of our outstanding shares as of the beginning of the program.
Share repurchases always will be considered as an alternative component of our capital allocation strategy and a bona fide alternative use of excess capital in the future if and when considered prudent based upon all of the facts and circumstances.
Before I turn it over to Kim, I want to reassure everyone that we fully intend to successfully manage through the aforementioned challenges and restore growth and profitability as quickly as possible.
Speaker Change: GE Group has a strong balance sheet with substantial liquidity in the form of cash and borrowing capacity.
Kim: The company is well positioned to grow internally and be acquisitive. We also continue to believe that our stock is undervalued and especially so based upon recent trading at levels very near and even slightly below tangible book value.
Kim: Also, only a relatively small portion of our float is actually trading at these levels.
Kim: Further evidence that there is a good opportunity for upward movement in the share price once we are able to operate again in economic and labor conditions that are more conducive to our business.
Kim: The management team and our Board of Directors are working collectively and diligently.
Kim: to deliver strong financial results, which will drive an increase in shareholder value. Finally, I wish to thank our wonderful dedicated employees and associates that work extremely hard every day to ensure that our clients get the very best service.
They are a key factor in our prior achievements.
and the most important driver of our company's future success.
Speaker Change: At this time, I'll turn the call over to our Senior Vice President and Chief Financial Officer, Kim Thorpe, who will further elaborate on our fiscal 2024 annual and fourth quarter results. Kim.
Thank you, Derek, and good morning, everyone, and happy holidays.
Speaker Change: As Derek reported, consolidated revenues for the 2024 fiscal year and the fourth quarter were $116.5 million and $28.3 million, down 24% and 17% respectively from the comparable prior year periods.
Speaker Change: Contract Staffing Services revenues for the fiscal year and quarter were $104.3 million and $25 million, down 22% and 19% respectively from the comparable prior year periods.
Speaker Change: professional contract services revenue for the fiscal year, which represents 91% of all contract services revenue and 80% of total revenues.
decreased 25.3 million dollars or 21 percent.
as compared with the prior year.
Speaker Change: professional contract services revenue for the quarter also represented 91% of all contract services revenue and 80% of total revenue.
Speaker Change: and decreased $4.9 million, or 18%, as compared with the prior year quarter.
Speaker Change: Industrial contract services revenue for the fiscal year, which represents 9% of all contract services revenue and 8% of total revenues decreased $3.5 million, or 27% as compared with the prior fiscal year.
Speaker Change: Industrial contract services revenues for the quarter represented 9% of all contract services revenue and 8% of total revenue and decreased $800,000 or 27% as compared with the prior year quarter.
Speaker Change: Direct higher revenues for the fiscal year were $12.2 million, down 37% as compared with the prior year, and were $3.4 million for the quarter, down 5% as compared with the prior year quarter.
Speaker Change: As Derek commented, our top-line performance was directly impacted by the difficult economic and labor market conditions facing us and the entire industry.
Speaker Change: Gross profit for the fiscal year was $37.6 million, down 29% as compared with the prior year. Gross profit for the quarter was $9.5 million, down 18% as compared with the prior year quarter.
Our overall gross margins were 32.3% and 34.7%.
for the fiscal year and comparable prior fiscal year, respectively.
Speaker Change: Consolidated gross margins were 33.7% and 33.9% for the quarter and comparable prior year quarter, respectively.
Speaker Change: The decreases in gross profit and gross margins are mainly attributable to the decline in volume and mix of direct higher revenues, which have 100% gross margin relative to total revenue.
Speaker Change: Lower numbers of job orders and tight labor markets on the contract services side also contributed, resulting in more competitive conditions and downward pressure on bill rates and spreads accordingly.
Speaker Change: Our professional contract services gross margin was 25.3% for the fiscal year as compared with 26.1% for the prior fiscal year, a decrease of 80 basis points.
Speaker Change: Staffing services gross margins is due in part to increases in contractor pay and other employment costs associated with the recent rise in inflation in combination with more competition for orders and candidates again resulting in overall net spread compression.
Speaker Change: The gross margin for industrial contract services was 16.6% for the quarter compared with 16.5% for the prior year quarter, an increase of 10 basis points.
Speaker Change: In addition to fewer job orders, we continue to experience challenges with our industrial business, including sourcing and recruiting qualified candidates, as well as increased competition, resulting in overall net spread compression.
experienced.
Speaker Change: compared with the prior fiscal year. SG&A for the quarter was $10.7 million, down 5% as compared with the prior year quarter.
Speaker Change: The ratios of SG&A to revenues were 35.7% for the fiscal year, compared with 31.2% for the prior year, and were 37.9% for the quarter, compared with 33% for the prior year quarter.
The increases in SGA as percentage of revenues during...
Speaker Change: The fiscal 2024 year and fourth quarter were primarily and mainly attributable to declines in revenues.
Speaker Change: Job boards, and applicable tracking systems, and due to the presence of certain non-cash-in or non-operational and other non-recurring expenses.
Speaker Change: I also wish to inform you all that as a result of the company's performance in fiscal 2024, senior management did not earn and has not or will not in the future be paid any incentive compensation for that year under the company's annual incentive compensation program.
As a matter of fact
Speaker Change: Some of the performance-based equity awards previously granted to senior management team members were clawed back under the workings of the company's Annual Incentive Compensation Plan based upon the fiscal 2024 performance.
Speaker Change: A key aspect of our plans to streamline operations that Derek spoke of in his opening remarks is to migrate and integrate our remaining legacy front and back office systems onto cloud-based platforms.
Speaker Change: and that means consolidation of some of these systems. The company has the financial means to do this and expects to commence this task in early 2025.
Speaker Change: We anticipate financial and operational returns in terms of providing the means to improve our ability to generate organic growth and to accelerate and integrate future accretive acquisitions more efficiently and achieve economies of scale more rapidly.
Speaker Change: We reported a net loss for the fiscal year of $24.1 million, or negative 22 cents per deluded share, as compared with net income of $9.4 million, or 8 cents per deluded share for the prior year.
Speaker Change: Our net loss for the quarter was $2.3 million, or negative two cents per diluted share, compared with net income of $200,000, or nil, zero per diluted share, for the prior year quarter.
Speaker Change: Our adjusted net loss, which is a non-GAAP financial measure for the fiscal year, was a negative $7.6 million, down $18.7 million as compared with adjusted net income of $11.1 million for the prior fiscal year.
Speaker Change: Our adjusted net loss for the quarter was 2.1, but negative 2.1 million down 33.2 million, excuse me, as compared with the adjusted net income of 1.1 million for the prior year quarter.
Speaker Change: The main drivers of these declines in net income and loss
Speaker Change: for the quarter and the fiscal year were I'm sorry for the for the fiscal year
where the $28.5 million in non-cash impairment charges
Thank you so much, Eric.
EBITDA is a non-GAAP financial measure.
Speaker Change: and for the fiscal year was negative $4 million down $9.3 million as compared with $5.3 million positive for the prior year.
Speaker Change: Even up for the quarter was negative $1.2 million, down $1.5 billion as compared with positive $300,000 for the prior year.
Speaker Change: Justin Iveda also is a non-GAAP measure and for the fiscal year was negative 2.3 million dollars.
Speaker Change: down $9.3 million as compared with $7 million for the prior year. Adjusted EBITDA for the quarter was a negative $1 million, down $2.2 million as compared with $1.2 million of adjusted EBITDA in the prior year quarter.
Speaker Change: Again, the main drivers for the declines in non-GAAP EBITDA and non-GAAP adjusted EBITDA for the quarter are the declines in job orders and placements resulting in lower revenues as we've discussed.
Speaker Change: I'm sorry, our current or working capital ratio as of September 30, 2024 was 3.8 to 1, up from 3.6 to 1 as of September 30, 2023.
Speaker Change: The company reported $200,000 and $5.9 million in cash flow from operations.
Speaker Change: for the fiscal years ended September 30, 2024 and 2023, respectively.
Speaker Change: Our liquidity position at September 30, 2024 remains strong, with $20.8 million in cash, an undrawn ABL credit facility with availability of $8.1 million, net working capital of $26.1 million, and no outstanding debt.
Speaker Change: Our net book value per share and net tangible book value per share were $0.77 and $0.34, respectively, as of September 30, 2024. Our net book value per share and net tangible book value per share were $0.96 and $0.35.
respectively as of September 30, 2023.
Speaker Change: The decrease in net book value per share, in particular, was the result of the non-cash impairment charges taken in the third quarter into June 30, 2024. These had no effect on our cash position, tangible assets, net working capital, or net tangible book value.
Speaker Change: In conclusion, while we're obviously disappointed with our results and remain somewhat cautious in our near-term outlook, we do remain optimistic about and are preparing for the long-term.
Speaker Change: Our management team and field leadership are experienced in managing through difficult times such as the business disruption attributable to COVID and previous cyclical downturns affecting the labor markets.
Speaker Change: Collectively, we have demonstrated that our company can generate earnings consistently under more favorable economic conditions and a more conducive demand environment for the staffing industry.
Speaker Change: Before I turn it back over to Derek, please note that reconciliations of G Group's non-GAAP financial measures discussed today with their GAAP counterparts.
Speaker Change: can be found in supplemental schedules included in our earnings press release.
Now, I'll turn the call back over to Derek.
Thank you, Kim.
Despite some economic headwinds and staffing industry-specific challenges,
impacting the demand for our services.
Speaker Change: We are aggressively managing our business and taking steps to increase revenue and reduce expenses to mitigate losses and restore profitability.
what we hope you take away
from our remarks today.
our earnings release and from our strategic announcement last quarter
Speaker Change: is that we are moving aggressively, not only to prepare for a more conducive and growth-oriented recovery in the labor market, but also to restore growth sooner by executing on both organic and M&A growth plans and initiatives.
Speaker Change: We will continue to work hard for the benefit of our shareholders, including consistently evaluating strategic uses of GE Group's capital to maximize shareholder returns.
Speaker Change: Before we pause to take your questions, I want to again say a specific thank you to all our wonderful people for their professionalism, hard work, and dedication.
Now, Kim and I would be happy to take questions.
Speaker Change: Please ask just one question and rejoin the queue where the follow-up is needed. If there's time, we'll come back to you for additional questions.
for joining us. We'll see you next time.
So, the first question that we have.
is at what price would you start buying back stock?
We are approaching net cash value on the company.
Speaker Change: So the answer to that is we constantly evaluate alternative uses of our capital.
Speaker Change: The comment was, you could be buying cash back at a discount. And it's kind of interesting, we're trading about at our cash level right now on a market cap basis.
Thank you.
Oh.
My response to that is stay tuned.
I think that we will move forward as appropriate.
and Dewan.
Speaker Change: Our capital allocation, we have enough cash and liquidity to do a lot. We do want to protect our balance sheet
Speaker Change: as well, as we get out of these rough times. And we anticipate a more favorable economic environment for our business going forward.
Speaker Change: Political climate is better for us in terms of labor laws and rules.
Speaker Change: and we look forward to restoring profitability. So the buyback is definitely something we would consider and stay tuned.
Speaker Change: regarding it and our M&A activity and hopefully restoration of profitability in the near term.
Speaker Change: Another question is, the company has grown in size over the years, since 2015, quite frankly in 2015 when we took over the company.
The company was ready to be delisted.
Speaker Change: had heavy debt, was losing money, we turned the corner, had several great years of profitability, made strategic acquisitions, built the company up.
and perform.
Speaker Change: quite well over a period of years. We ran into a rough spot during COVID. We were able to
Speaker Change: last through COVID and come out of that pretty good. I think we're kind of in the same situation now and are looking for the same type of recovery post deal.
The question too is
Speaker Change: what what happened to results industry versus your results we were we were geared we had about 18 percent
Speaker Change: 13 to 18 percent PERM in that range. We had a PERM year in 2022 that was a record.
Speaker Change: Permanent placement's the first part of our staffing business that would get hit when there's a hiring freeze or a downturn or perceived economic weakness.
Speaker Change: in our economy. Also, project work would be put on hold
Speaker Change: for Fear of the Unknown, and there's been a lot of pauses in continuing IT projects, engaging in new ones, and so forth. We're starting to see that change.
Speaker Change: and we're very optimistic over a period of months that we will get back to
Speaker Change: Why is the company less profitable as I said you know during COVID versus now? The difference is during COVID that was a force that was layered upon a good economy.
Speaker Change: mostly remote as we had almost a hundred percent remote workers at that time.
Speaker Change: and in particular the IT business was very robust with projects that had started and continued because that could be done remotely.
We flew out of it.
Speaker Change: 2020 malaise of COVID into 2021-2022 was very good years and the first part of 2023 was outstanding.
Speaker Change: relative but we started to see that weakness as we said earlier in the middle latter part of 2023 that's continued into 2024.
Speaker Change: Optimism for 2025 is out there. Industry leaders feel that way and we share that sentiment. It'll be a gradual process but we're very excited about moving forward.
Speaker Change: but we will also adjust our income statement based on the current revenue
to restore profitability and of course look for new business.
Speaker Change: new business from existing customers, new clients, and of course make strategic acquisitions and then re-examine our capital allocation strategy.
Speaker Change: Another question, Kim this one's for you. What is the quarterly annual revenue level to achieve break-even results? What is the annual revenue level needed to generate five to ten million in EBITDA?
as you were not too long ago.
Speaker Change: That's an outstanding question and something we look at regularly. Yeah, we're very close right underneath the level that I would call breakeven as you can tell from the numbers.
Speaker Change: If you focus on the adjusted EBITDA number that we quoted for the quarter,
you could just about tune everything else from there.
Speaker Change: Now, and that's before we do anything else, including all the strategic things that we're in process of doing with systems and so forth to improve profitability and to improve throughput on sales.
Speaker Change: One of the things we didn't get into in detail on the call is one of the reasons we're taking this hiatus and spending investment money into our systems is because it will help us share orders across all our brands.
Speaker Change: which now we're having to do more or less through referral, the old-fashioned way. With the systems we have teed up, which are very affordable, it's an excellent investment for us to now share orders across brands, and we're very bullish on that.
Speaker Change: Let me also say that, as a rule of thumb, you can go back to 2018.
2021
Speaker Change: 2022, and those are the levels that you would see where we're, you know, anywhere from $150 million up in revenue, we're beginning to generate high single-digit EBITDA numbers again.
Speaker Change: And then, of course, we want to grow beyond that, and the icing on the cake, in our view, to get beyond that is to focus both on organic and M&A, which Derek mentioned.
Speaker Change: Let me say one more thing talking about the pandemic and the recovery from the pandemic and so on.
Speaker Change: 2020 was not only a pandemic year. For us, it was a huge deleveraging event that occurred in June of 2020.
Speaker Change: We took out all our subordinated debt and all of our preferred.
Speaker Change: And we basically cleaned up our balance sheet a lot and for a little bit of money we took out about
Speaker Change: $47 million in subordinated debt for about $5 million in cash and 1.8 million shares of stock. So that was a hallmark.
Speaker Change: The following year we took out senior debt and the senior debt Really was what was choking us We took the senior debt out and to do that we had to do a large offering
Speaker Change: and the large offering, you know, did cause dilution, but we made the strategic decision and the tactical decision.
Speaker Change: that it was better to take the dilution and grow from there than to continue in a downward spiral late with debt lightening, so
Speaker Change: In 2020 and 2021, the result was we took out over $120 million in debt, and I'm throwing the PPP money in there. We took out $120 million in debt, and since then, we've built up $20 million in cash.
Pre-cash.
Speaker Change: So, you can't look at 21, 22, and 23 and say, oh, well, you just had a short period of profitability. No, we rebuilt and restructured the company in 2020 to be profitable.
Speaker Change: We are experiencing a temporary downturn in profitability right now. We proved out of COVID that we can produce and be profitable. When this recovery happens, I'm fairly confident, in fact, I'm very confident we can do it again.
Speaker Change: Thank you, Kim. That leads into the next question, which is right on target.
Kim Thorpe: Can you speak to the current national unemployment rate, which suggests a tight labor market, versus the performance of J-O-B in the past year, which suggests a loose market?
Kim Thorpe: Is this a result of the markets that job operates in or are there other factors?
Kim Thorpe: So, the employment statistics that the BLS puts out are interesting.
Kim Thorpe: First of all, as you know, they've been adjusted downward several times in each quarter that they've been announced.
Kim Thorpe: Also, the job gains that have been announced have been primarily in government-assisted jobs, hospitality, and some what we call lower-end type jobs.
our business
Kim Thorpe: does not benefit from that, in fact, IT is huge for us and projects have been put on hold.
due to economic uncertainty.
Kim Thorpe: and Accounting and Finance, which is our next largest segment, also
Kim Thorpe: There's been hesitancy in hiring there, particularly in the full-time side.
Kim Thorpe: So there's a big discrepancy in how the staffing industry operates at what I call the higher-end professional segments versus the jobs that are being added mostly in the lower-end segments.
Kim Thorpe: Interestingly, the industrial sector of staffing took a hit as well.
Kim Thorpe: Further, when you get a labor report for the BLS, you really have to look into it
Kim Thorpe: and how it impacts the staffing industry as a whole, and then what vertical you're in a segment. Healthcare took a hit too.
Kim Thorpe: pretty big. Now, the good news is we think we've hit
Kim Thorpe: the bottom of the cycle with respect to contingent labor employment and direct-hire employment.
and we see a gradual increase moving forward.
On top of that
Kim Thorpe: We are taking aggressive action in any event to streamline our cost structure.
Kim Thorpe: and run off the existing revenue that we have. Someone asked, you know, at what point would you be breakeven or profitable? That analysis is ongoing, and we're pretty hopeful that it'll be sooner versus later.
In any event, we're prepared for a robust recovery.
I had another staffing company in 08.
when we took a hit about one-third of our revenue.
Kim Thorpe: We were heavily IT at that point as well as accounting and finance
Kim Thorpe: took a hit, about one-third of our revenue went down in 08 during the Great Recession, started to see flatness from that downturn in 09 and then an unbelievable recovery in 2010.
Kim Thorpe: We we think we're in a similar pattern now And that was the most prolonged downturn in the whole industry
Kim Thorpe: for years, 80-81, 90-91, 2000-2001, and then 08-09 with recovery in 2010. That's the cycle of staffing.
Kim Thorpe: I believe that we're well positioned here to get upward movement and profitability.
Kim Thorpe: and also be very prudent in how we use our cash. Those things are...
Kim Thorpe: something that we do, we're not leveraged at all, and we're poised to really take off. Can you comment on demand trends you're seeing toward the end of the fiscal Q1 and into fiscal 25 by end market? Has there been any change in the environment?
That's another great question. So the environment for IT...
Kim Thorpe: seems to be perking upward. We'll have a pretty good perm month in December. It looks good. And it's better than the prior month. So November was an interesting dynamic.
Kim Thorpe: Most of the workers took off the whole week of Thanksgiving.
instead of
Kim Thorpe: The two days, or even three days of that week, most took the whole week off. So there's a lot going on in the labor market.
Kim Thorpe: which is our actual second quarter, fiscally, which would end March 31, is not our most robust quarter, typically. However, the hiring starts hard.
Kim Thorpe: in mid-February, and then it picks up and runs hard through the spring into the summer, and is usually strong in the fall as well.
Thank you. You're welcome. Thanks for having me.
Kim Thorpe: We're working really hard to get back to profitability. I mean, that's the key focus right now.
Kim Thorpe: Above all, we're not used to and don't like running at the level we're at now.
Kim Thorpe: Well, we're going to fix that. The temp penetration, this is another good observation, the temp penetration rate is currently around 1.69. Historically, it has averaged around 1.9, and the last time it came to that was 0.809. So that validates what I just said.
Speaker Change: That was a great observation, and we believe it'll pick back up. In terms of acquisitions, are you looking at expanding areas like IT, where you are already a player, or bolt-on acquisitions to different specialties?
The answer on that one is both.
Speaker Change: There are some other verticals that will benefit us. And here's the other thing.
Prices for Deals
and structure the deals.
are much better now.
Speaker Change: after staffing companies took a hit, people are becoming more realistic on pricing and structure of the deal.
Speaker Change: So we'll be very opportunistic in that regard and we're trying to find deals
Speaker Change: on what we call Managed Service Provider, or VMS Accounts, Vendor Management Systems.
Most of the Fortune 500 have those programs in place.
Speaker Change: I'd say the fortune 1000 actually. So that's another area that we we don't typically go after very hard that we will if we get the recruiting mechanism in place and one way to do that is through an acquisition that has an existing recruiting.
Speaker Change: offshore model going. That's been successful, that's proven too. How is AI affecting the sectors you operate in, either in new jobs or jobs lost? Again, we think AI is a benefit to our industry. It streamlines recruiting.
We have...
AI
in some of our tools that we use.
Speaker Change: It's becoming more prevalent as a tool in our industry. And is it eliminating positions that we would normally fill? Clearly, low-end positions can be replaced by AI.
Speaker Change: AI will benefit the high-end IT business and we have a focus to
staff jobs that
require AI capability, AI knowledge, so
Speaker Change: We're big fans of AI. We think AI will actually allow us to move quicker.
on placements, find the best candidates.
Speaker Change: and create jobs but high-end jobs and it'll replace menial task oriented jobs. So that that's our view on AI. Let's see.
Speaker Change: Derek, can I go back and pick up what I think we skipped over? Of course. Yeah, there was a question by one of our good investors who we talk with occasionally about our revenues having declined in the 20% range this year while the industry was down 10 to 15 percent.
Speaker Change: Therefore, are we losing market share? How does this get resolved?
Speaker Change: We're a large company in the big pond of small staffing firms, but there are several companies that are larger than we are.
Speaker Change: They tend to have more large client business than we do. We have our fair share. But the preponderance of our business is SME, small medium enterprise type business.
Speaker Change: and the 10 or 15 percent that the questioner is referencing is probably more of an average.
Speaker Change: We're a little higher than average because we have a preponderance of smaller businesses, smaller businesses.
Speaker Change: being a higher proportion tend to take the hits more in a down economy. How does it get resolved? It gets resolved with a rising economy and a recovery, and we will be right back in business, we believe, when that happens.
Let me add that in the peer group
Speaker Change: you know there's some really good companies in the peer group
larger, much larger than us.
Speaker Change: that are down 20% plus. And I have a list of those. I'm not gonna go through them now.
Speaker Change: And I don't want to say misery loves company because we don't like that, but these are blue chip staffing companies And they're taking aggressive actions as well on their SG&A
Speaker Change: to restore profitability at the levels that they're used to. So we look at those hard. We also look at the.
Speaker Change: international firms to see if the U.S. segment's taking a hit. That seems to be the trend on the large firms that are global.
Speaker Change: as well. So typically IT has been immune from downturns in the staffing industry. This year you saw a lot of IT layoffs at Cisco and Facebook and Google and Amazon and some others.
plus Corporate America as well. So,
Speaker Change: That's just something that's that's pretty new actually to the industry.
Speaker Change: And that's on the wane, and the recovery on project work and so forth is starting to move forward, we're starting to see that. So, we're very optimistic.
Complacency breeds mediocrity.
and that's not something that's in our vocabulary or plans.
We need to move forward.
Speaker Change: and deliver the results that you should expect and want. So I think we're all geared up for that. I think the activity on the M&A and capital allocation front will benefit us greatly, both existing operations.
and to enter new markets, possibly new verticals too.
Speaker Change: Those are the things that we're doing and I think you'll be pleased, hopefully, in our next call that we've made great progress here.
Speaker Change: So, Kim, do you see any other questions that we need to address? Yes, there's a new question just popped up. Can you talk a bit about client retention rates?
Speaker Change: I can speak to this. We track clients and client retention and Derek and I get regular reports on all clients that generate $100,000 a month or more.
Speaker Change: And on the basis of that report and on the basis of other intelligence from our businesses, we have not lost any large clients.
Speaker Change: Rather, our issue is more with clients reacting to the current economy and cutting back orders as we discussed.
Speaker Change: So, our client retention is very good. We're not, we haven't lost any major accounts recently or that I can recall throughout 2024 for that matter.
Speaker Change: Okay, good. So that pretty much concludes covering the questions that we have for today and I can say
Everyone, happy holidays to you.
and please enjoy that period of time.
and note and rest assured that we will work hard.
for all of our shareholders.