GEE : Conference Call Transcript FY 2021

GEE Group Inc. (NYSE American: JOB) Fiscal Fourth Quarter & FYE 9-30-21 Earnings

and 2022 Update Webcast Conference Call: Prepared Remarks

Tuesday, January 4, 2022, 10:00 AM ET

https://event.webcasts.com/starthere.jsp?ei=1521934&tp_key=bd07601384

Company Participants

Derek Dewan - Chairman and Chief Executive Officer

Kim Thorpe - Senior Vice President & Chief Financial Officer

Operator

Hello, and welcome to the GEE Group fiscal fourth quarter and fiscal year ended September 30, 2021 earnings and 2022 update webcast conference call. Our hosts for today's call are Mr. Derek Dewan, Chairman and Chief Executive Officer of GEE Group, and Mr. Kim Thorpe, Senior Vice President and Chief Financial Officer. Mr. Dewan, you may begin.

Derek Dewan

Hello, everyone. Thank you for joining us today. It is our pleasure to share with you GEE Group's results for the fiscal fourth quarter and year ended September 30, 2021. Some comments Kim and I will make on today's call may be considered forward looking, including predictions and estimates about our future performance. These statements represent our current judgment of what the future holds and are subject to risks and uncertainties that actual results may differ materially from these forward-looking statements. These risks and uncertainties are described in last week's earnings press release and our most recent Form 10-K and other SEC filings under the captions, "Cautionary Statement Regarding Forward Looking Statements" and, "Forward-looking Statements Safe Harbor". We assume no obligation to update the statements made on today's call.

During this presentation, we also will mention and reference some non-GAAP financial measures. Reconciliations and further explanations of these measures are included in supplemental schedules to our earnings press release last week. Our presentation of revenues, cost of services, gross profits and gross margins and the related growth rates and trends are rounded, or based upon rounded amounts, for purposes of this call and all amounts, percentages and related items

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GEE Group Inc. (NYSE American: JOB) Fiscal Fourth Quarter & FYE 9-30-21 Earnings

and 2022 Update Webcast Conference Call: Prepared Remarks

Tuesday, January 4, 2022, 10:00 AM ET

https://event.webcasts.com/starthere.jsp?ei=1521934&tp_key=bd07601384

should be considered approximations, accordingly. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, www.geegroup.com.

We achieved near record levels of revenues of $41.5 million, and non-GAAP adjusted EBITDA of $3.6 million, in our 2021 fiscal fourth quarter due to increased demand for our permanent placement and contract staffing services. We were particularly pleased with the strength of our permanent placement revenue, which nearly doubled over the 2020 fiscal fourth quarter, and exceeded the 2021 sequential third quarter. Permanent placement revenue for the full fiscal year, 2021, beat both 2020 and 2019.

Our contract revenue for our fiscal 2021 fourth quarter also grew by double digits over fiscal 2020's fourth quarter and was higher than the 2021 sequential third quarter. Contract revenue for the full fiscal year, 2021, beat 2020, and nearly equaled 2019, coming in just 3% lower.

In fact, we set our 2019 higher pre-pandemic results as the benchmark for our 2021 fiscal year performance and although revenue came in just under fiscal 2019, we bested virtually all other 2019 financial results, including GAAP and non-GAAP profit measures, even with COVID-19 and its variants still very much in the picture.

For the 2021 fiscal fourth quarter, we reported net income of $3.0 million, or $0.03 per diluted share; a significant improvement compared with the fiscal 2020 fourth quarter's significant loss per diluted share. Pro forma diluted EPS excluding the effects of former debt and related interest and gains and losses on debt extinguishments, was $0.02 in Q4 2021 compared with negative $(0.01) for Q4 2020, a $.03 per share improvement. Our net income and diluted EPS were approximately breakeven for the 2021 full fiscal year. Our estimated pro forma diluted EPS for the full fiscal year 2021, again after removing the effects of former debt and related items, beat the 2020 full fiscal year.

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GEE Group Inc. (NYSE American: JOB) Fiscal Fourth Quarter & FYE 9-30-21 Earnings

and 2022 Update Webcast Conference Call: Prepared Remarks

Tuesday, January 4, 2022, 10:00 AM ET

https://event.webcasts.com/starthere.jsp?ei=1521934&tp_key=bd07601384

Our non-GAAP adjusted EBITDA and non-GAAP EBITDA for the 2021 fiscal fourth quarter were $3.6 million and $3.4 million, respectively, the difference between the two represented nearly entirely by our non-cash stock compensation expense for the quarter. Non-GAAP adjusted EBITDA and non-GAAP EBITDA for the 2021 full year were $12.3 million and $10.9 million, respectively.

As I said last quarter and it is worth repeating, our dedicated and hard-working employees have stepped up to the significant challenges that have faced us. I am very proud of our recruiters, business development and field leadership, and our corporate support team, all of whom are the key to our success. Our people continue to amaze us every day with their positive "can do" attitudes, innovativeness, and good old fashioned work ethic.

As you know, we also recently announced obtaining forgiveness from the SBA for the remaining CAREs Act PPP loans and related interest; $16.7 million, in the aggregate, which our businesses qualified for and initially obtained in April and early-May 2020. At that time, we had over $100 million in high-cost debt, our consolidated net book value was less than $2 million, and we were entering into one of the most uncertain and precarious periods our country and the world has faced during our lifetimes. We likely would not have survived these circumstances without the CAREs Act assistance we were able to obtain and we are certainly grateful to our leaders in Washington for their foresight in helping our businesses and other small businesses across the nation through this unprecedented pandemic.

At this time, I'll turn the call over the presentation to our Senior Vice President and Chief Financial Officer, Kim Thorpe, who will further elaborate on our results for the 2021 fiscal fourth quarter and full year. Kim.

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GEE Group Inc. (NYSE American: JOB) Fiscal Fourth Quarter & FYE 9-30-21 Earnings

and 2022 Update Webcast Conference Call: Prepared Remarks

Tuesday, January 4, 2022, 10:00 AM ET

https://event.webcasts.com/starthere.jsp?ei=1521934&tp_key=bd07601384

Kim Thorpe

Thank you, Derek, and good morning, everyone. As Derek said, consolidated revenues were $41.5 million in the fiscal 2021 fourth quarter. This was up 34% from the fiscal 2020 fourth quarter, up 9% sequentially from the fiscal 2021 third quarter, and up 7% from fiscal 2019's fiscal fourth quarter. Our professional staffing services segment revenues were $37.0 million, up 40% from the fiscal 2020 fourth quarter, up 8% sequentially from the 2021 fiscal third quarter, and up 12% from fiscal 2019's fiscal fourth quarter.

Professional direct hire or "permanent placement" services revenues were up 96% year-over-year and 18% sequentially as compared to the 2021 fiscal third quarter. They comprised 18% of total revenues for the professional services business segment and 16% of consolidated contract and direct hire revenues. Professional contract services revenues in the fiscal 2021 fourth quarter also grew nicely, up 40% year-over-year and 8% sequentially over the 2021 fiscal third quarter. Our IT services end markets at Agile, Access Data, Paladin Consulting and SNI accounted for 48% of our professional services business segment revenues and were up 25% year-over-year and 14% sequentially. The other professional services end markets (Finance, Accounting, Administrative & Office, Engineering, Healthcare, and other) accounted for the remaining 52% of professional services business revenues and were up 57% year-over-year and 3% sequentially over the immediate prior quarter.

Industrial Services business segment revenues for the quarter were down (3%) year-over-year and up 16% sequentially from the 2021 fiscal third quarter. The year-over-year decrease is due to the lagging recovery in this end market as temporary laborers in our light industrial segment have not come back into the workforce as quickly as others since the COVID-19 pandemic. We pointed out earlier that, as government stimulus monies including enhanced unemployment

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GEE Group Inc. (NYSE American: JOB) Fiscal Fourth Quarter & FYE 9-30-21 Earnings

and 2022 Update Webcast Conference Call: Prepared Remarks

Tuesday, January 4, 2022, 10:00 AM ET

https://event.webcasts.com/starthere.jsp?ei=1521934&tp_key=bd07601384

benefits and advance payment child care credits begin to scale down or terminate, we expect the supply of labor would increase and we anticipate an increase in filled orders and related revenue in fiscal 2022. We believe the large sequential increase in Q4 2021 versus Q3 2021 is a positive recent trend indicating that temporary laborers are beginning to return to work in greater numbers.

All our professional services segment direct hire and contract revenues comprised 89% and 88% of our consolidated revenues for the fiscal fourth quarter and the full fiscal year 2021, respectively. Looking at our consolidated revenue from the viewpoint of all contract services, both professional and light industrial combined, compared with direct hire, all of which is professional, combined contract revenues were 84% and 88% of our consolidated revenues for the fiscal fourth quarter and the full fiscal year 2021, respectively. Direct hire revenues were 16% and 12%, respectively. As Derek mentioned, our direct hire revenue performance was outstanding in Q4 2021. The higher mix of direct hire, which has a 100% gross margin, was instrumental in achieving our outstanding fiscal 2021 fourth quarter results.

Fiscal fourth quarter consolidated gross profit dollars were up 45% year-over-year and up 10% sequentially as compared to the 2021 fiscal third quarter. Our professional staffing segment 2021 fiscal fourth quarter gross profit dollars were up 57% year over year and 11%, sequentially, as compared to the immediately preceding quarter. The consolidated gross margin percentage for Q4 2021 was up 2.7 percentage points year over year and up 0.4 percentage points, sequentially, as compared to the 2021 fiscal third quarter. As I just mentioned, our permanent placements carry 100% gross margin, so the higher mix helped improve our gross margin.

Selling, general and administrative ("SG&A") expenses were approximately 29% of consolidated revenues, compared with approximately 33% of revenues in the fiscal fourth quarter of 2020. In addition to substantially higher revenue relative to fixed costs overall, this four-percentage point

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