GEE Group Inc. (JOB) Q1 2026 Earnings Call Transcript

2026-02-13 15:37:46 ET

GEE Group Inc. (JOB) Q1 2026 Earnings Call February 13, 2026 11:00 AM EST

Company Participants

Derek Dewan - Chairman & CEO
Kim Thorpe - Senior VP & CFO

Presentation

Derek Dewan
Chairman & CEO ...

Hello, and welcome to the GEE Group Fiscal 2026 First Quarter ended December 31, 2025, Earnings and Update Webcast Conference Call. I'm Derek Dewan, Chairman and Chief Executive Officer of GEE Group, and I will be hosting today's call. Joining me as a co-presenter is Kim Thorpe, our Senior Vice President and Chief Financial Officer. Thank you for joining us today.

It is our pleasure to share with you GEE Group's results for the fiscal 2026 first quarter ended December 31, 2025, and provide you with our outlook for the fiscal 2026 full year in the foreseeable future. Some comments Kim and I will make may be considered forward-looking, including predictions, estimates, expectations and other statements about our future performance. These represent our current judgments of what the future holds and are subject to risks and uncertainties that actual results may differ materially from our forward-looking statements.

These risks and uncertainties are described below under the caption Forward-Looking Statements Safe Harbor and in Thursday's earnings press release and our most recent Form 10-Q, 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 statements made on today's call. Throughout this presentation, we will refer to the periods being presented as this third quarter or the quarter, which refers to the 3-month period ended December 31, 2025. Likewise, when we refer to the prior year quarter, we are referring to the comparable prior 3-month period ended December 31, 2024.

During this presentation, we will also talk about some non-GAAP financial measures. Reconciliations and explanations of the non-GAAP 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 and all amounts, percentages and related items presented are approximations accordingly. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website.

Now on to today's prepared remarks. The challenging conditions in the hiring environment for our staffing services have been ongoing since the second half of 2023. These stemmed from what is now widely acknowledged as the substantial overhiring that took place in 2021 and 2022 in the immediate aftermath of the pandemic and the macroeconomic weakness and uncertainties related to persistent inflation and high interest rates that followed.

The near universal cooling effect on U.S. employment and businesses use of contingent labor and hiring of full-time personnel have persisted and resulted in volumes below once prior norms. Many of the businesses we serve, continue to implement layoffs and hiring freezes rather than adding new employees. Companies and businesses continue to cautiously assess the economy and market conditions to ensure their investments in technology and human capital are strategic and sustainable.

Another setback for us this quarter was the acquisition of one of our larger clients and movement of its business to an affiliate of the acquirer. This was a high-volume, lower-margin account, which somewhat lessened the negative impact on our results.

Also, on the brighter side, our direct hire revenue, which has the highest gross margin at 100%, was up 8% in the quarter and appears to be on course so far for a better fiscal 2026 versus fiscal 2025. We also expect the use of contingent labor to stabilize this year as we are aware that some businesses are beginning to initiate new projects, which may be expected to lead to more job orders and full-time and contingent staffing placements.

Artificial intelligence, or AI, is gaining ground at an accelerated pace and is further complicating the HR and project planning opportunities and risks facing virtually all companies, including consumers of our services. We believe these conditions are contributing to decreases in job orders for both contract and direct hire placements, also negatively impacting our financial results.

Conversely, we are implementing and incorporating AI into our own business and strategic plans in order to digitize, streamline, enhance and accelerate our recruiting and sales processes. Another closely aligned AI goal of ours is to provide our clients with the necessary human resources to implement and support their use of AI and help them increase speed, efficiency and profitability. These initiatives are a high priority for us, and our goal is to begin seeing returns later this year.

Our contract staffing and direct hire placement services are currently provided under our Professional segment. The operations and substantially all the assets of our former Industrial segment were sold during fiscal 2025 and have been reclassified as discontinued operations and excluded from the results of continuing operations we're presenting today unless otherwise stated.

Our consolidated revenues were $20.5 million for the quarter. Gross profit and gross margin were $7.4 million and 36.1%, respectively, for the quarter. Consolidated non-GAAP adjusted EBITDA was negative $97,000 for the quarter. We reported a net loss from continuing operations of $150,000 or $0.00 per diluted share for the quarter. We continue to aggressively take action to adjust and enhance our strategic focus, growth plans and financial performance and results, including streamlining our core operations and improving or adjusting our productivity to match our current lower volumes of business. This has helped us improve our results despite lower business volume.

We took measures to reduce our SG&A during the second half of 2025 by an estimated amount of $3.8 million, which helped us achieve the $736,000 reduction in SG&A in the fiscal 2026 first quarter versus the prior year first quarter. As we announced early last year, we completed the acquisition of Hornet Staffing in fiscal 2025 and have increased our focus on VMS and MSP sourced business, including the use of special recruiting resources and acceleration of the integration and use of AI technology into our recruiting, sales and other processes. We anticipate achieving continuing improvements in our productivity and restoring profitability as soon as practically possible. Our goal remains to be profitable again in fiscal 2026.

In addition to these near-term initiatives, we are working closely with our frontline leaders in the field to support them as we all continue to aggressively pursue new business in addition to growing and expanding existing client revenues. We are seeing some positive results from these efforts. As the uncertainty and volatility currently gripping our economy and labor markets lessen, I am very confident that we are positioned to meet the increased demand from existing customers and win new business.

I want to reassure everyone that we fully intend to successfully manage through the challenges I've outlined and restore growth and profitability as quickly as possible. GEE Group has a strong balance sheet with substantial liquidity in the form of cash and borrowing capacity. The company is well positioned to grow organically and to be acquisitive. We also continue to believe that our stock is undervalued and especially so based upon the recent trading at levels very near and even slightly below tangible book value.

And that there is good opportunity for upward movement in the share price once we are able to operate again in more normal economic and labor conditions and restore profitable growth. Management and our Board of Directors share the responsibility and are committed to restoring growth and profitability, which will lead to maximizing shareholder value.

Before I turn the call over to Kim, I want to update you on recent activity since our press release issued on January 22, 2026, in response to Star Equity's public commentary regarding an indication of interest in our company. Since then, management and the Board have met to review and discuss multiple unsolicited expressions of interest in the company and continue to evaluate various strategic alternatives to enhance shareholder value.

As we indicated in our press release on January 22, 2026, our Board of Directors in accordance with its fiduciary duty will consider any bonafide offer regarding a business combination, acquisition or other transaction that it believes will enhance shareholder value. Once again, I wish to thank our wonderful dedicated employees and associates. They work extremely hard every day to ensure that our clients get the very best service and the most important ingredient for our company's future success.

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 2026 first quarter results. Kim?

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