GEE Group Inc. (JOB) Q2 2026 Earnings Call Transcript

2026-05-15 12:30:44 ET

GEE Group Inc. (JOB) Q2 2026 Earnings Call May 15, 2026 10:00 AM EDT

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 Second Quarter and Year-to-Date Period Ended March 31, 2026, Earnings and Update Webcast Conference Call. I'm Derek Dewan, Chairman and Chief Executive Officer of GEE Group, 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 second quarter and year-to-date period ended March 31, 2026, and provide you with our outlook for the rest of the fiscal 2026 year and the foreseeable future. Some comments Kim and I will make today will be considered forward-looking, including predictions, estimates, expectations and other statements about 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 periods being presented as this quarter or the quarter or this year-to-date or the year-to-date, which refers to the 3- or 6-month periods ended March 31, 2026, respectively. Likewise, when we refer to the prior year quarter or the prior year-to-date, we're referring to the comparable prior 3- and 6-month periods ended March 31, 2025, respectively. When we refer to the prior sequential quarter, we are referring to the 3-month period ended December 31, 2025. 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 at all amounts percentages and related items presented or approximations accordingly. For your convenience, our prepared remarks for today's call are available in the Investor Center on our website, www.geegroup.com.

Now on to today's prepared remarks. First, I'm pleased to report that our company reported net income for this quarter and that our year-to-date results have significantly improved. Conditions in the hiring environment for our staffing services remain challenging and have been so since the second half of 2023. Companies and businesses continue to cautiously assess the economy and market conditions to ensure that their investments in technology and human capital are strategic and sustainable. A setback for us earlier this fiscal year was the acquisition of one of our larger clients who terminated our services, moving these to an affiliate of the acquirer. This was a high-volume, lower-margin account, which somewhat lessened the negative impact on our results. However, on the brighter side, our direct hire placement revenues, which have the highest gross margin at 100% are up 7% in the quarter and year-to-date and appear 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 the uncertainties created by recent macroeconomic conditions and acceleration of AI in combination are behind the decreases in job orders for both contract and direct hire placements we and others have experienced.

Conversely, we are implementing and incorporating AI into our own businesses and strategic plans in order to digitize, streamline and enhance and accelerate our recruiting and sales processes. Another closely aligned AI goal of ours is to provide our clients with the necessary human resource solutions to implement and support their uses of AI that 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 were reclassified as discontinued operations being excluded from the results of continuing operations for the fiscal 2025 periods will make comparisons to today. Our consolidated revenues were $19.5 million for the quarter and $40 million year-to-date. Gross profit and gross margins were $7.4 million and 38.1%, respectively, for the quarter and $14.8 million and 37.1%, respectively, year-to-date. Consolidated non-GAAP adjusted EBITDA was $108,000 for the quarter and a negative $28,000 year-to-date. We reported net income of $14,000 for the quarter and a net loss of $136,000 year-to-date. We continue to aggressively take actions 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 to improve our results despite lower business volume.

We took measures to reduce our SG&A during the latter portion of fiscal 2025 by an estimated annual amount of $3.8 million. The cost reductions contributed $1.3 million to our decrease in SG&A for the quarter and $2.4 million year-to-date versus the comparable prior periods. 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 profitability as soon as practically possible. Our results for the quarter are encouraging, and though we remain cautiously optimistic, our goal is to strengthen our results over the remainder of 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 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 intended to successfully manage through the challenges I've outlined and restore overall growth and improve 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 recent trading levels very near and even slightly below tangible book value. And that there is a 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 continuing 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 modified 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 are the most important ingredient for our company's future success.

At this time, I'll turn over the call to our Senior Vice President and Chief Financial Officer, Kim Thorpe, who will further elaborate on our fiscal 2026 second quarter and year-to-date results. Kim?

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