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GEE Group Inc. (JOB)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 revenue declined 27.8% year-over-year to $28.05M, with gross margin compressing to 31.3% from 34.0% on mix shift away from direct hire; diluted EPS was $(0.01) versus $0.01 in Q2 2023 .
  • Sequentially, revenue fell 6.8% versus Q1 2024 ($30.6M), while adjusted EBITDA swung to $(0.63)M from $(0.20)M in Q1 2024, reflecting weaker direct hire and fixed SG&A burden on lower volumes .
  • Management cited “green shoots” with April job orders and revenue per billing day up, price/spread improvements, and strong client retention ≥90% among largest accounts; capital allocation pivoted from buybacks to organic hiring and M&A execution following a strategic alternatives review .
  • No formal quantitative guidance was issued; tone was cautiously optimistic with preparedness to cut costs further if macro conditions worsen; catalysts include potential M&A, pricing actions, and signs of demand stabilization heading into summer .

What Went Well and What Went Wrong

What Went Well

  • Price/spread improvement: Professional contract gross margin improved ~30 bps YoY in Q2 (25.7% vs 25.4%), aided by mark-up and bill rate initiatives .
  • Leading indicators and retention: April job orders and revenue per billing day were up; largest-account retention ≥90% in March/April despite sales downturn .
  • Balance sheet strength: $21.2M cash, $8.2M undrawn ABL, current ratio 3.9x, and zero long-term debt, enabling organic hiring and M&A optionality .

What Went Wrong

  • Top-line pressure: Revenue down 27.8% YoY; direct hire down ~50% YoY to $2.455M, highlighting cyclicality and macro drag (“Big Stay” limiting permanent hires) .
  • Profit deterioration: Net loss $(1.008)M vs $0.658M a year ago; adjusted EBITDA fell to $(0.63)M from $1.70M last year on lower volumes and mix .
  • SG&A deleverage: SG&A fell 15% YoY to $10.006M but rose to 35.7% of revenue (vs 30.1% last year) due to fixed costs and nonrecurring items (legal, advisory, severance) .

Financial Results

MetricQ2 2023Q1 2024Q2 2024
Revenue ($USD Millions)$38.859 $30.6 $28.050
Gross Profit ($USD Millions)$13.216 $9.7 $8.767
Gross Margin %34.0% 31.8% 31.3%
SG&A ($USD Millions)$11.705 $10.6 $10.006
Net Income ($USD Millions)$0.658 $(1.6) $(1.008)
Diluted EPS ($USD)$0.01 $(0.01) $(0.01)
Adjusted EBITDA ($USD Millions)$1.702 $(0.20) $(0.630)

Revenue by type:

Revenue TypeQ2 2023Q2 2024
Contract staffing services ($USD Millions)$33.976 $25.595
Direct hire placement services ($USD Millions)$4.883 $2.455

Segment detail (professional vs industrial contract):

Contract SegmentQ2 2023Q2 2024
Professional contract services ($USD Millions)~$30.7 (derived from $23.1 down $7.6) $23.1
Industrial contract services ($USD Millions)~$3.2 (derived from $2.5 down $0.7) $2.5

Segment margins:

Segment MarginQ2 2023Q1 2024Q2 2024
Professional contract gross margin %25.4% 25.0% 25.7%
Industrial contract gross margin %16.5% 16.0% 15.2%
Total company gross margin %34.0% 31.8% 31.3%

Liquidity and KPIs:

KPIQ1 2024Q2 2024
Cash And Equivalents ($USD Millions)$19.9 $21.2
Borrowing availability ($USD Millions)$9.3 $8.2
Current Ratio (x)4.2 3.9
Shareholders’ Equity ($USD Millions)N/A$105.5
Net Debt ($USD Millions)$0.0 $0.0
Net book value per share ($)$0.93 $0.92
Net tangible book value per share ($)$0.33 $0.32
Adjusted Free Cash Flow YTD ($USD Millions)N/A$0.385

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY/Q3-Q4 2024None providedNo formal guidance; management “cautiously optimistic,” seeing April order and billing day improvement Maintained “no guidance” with positive directional commentary
Gross MarginFY/Q3-Q4 2024None providedPricing/spread actions continuing; professional margin up ~30 bps YoY in Q2 Directional improvement; no numeric range
SG&AFY 2024/2025None providedCost actions underway; selective hiring; potential further cuts if macro worsens Directional: streamline with flexibility
Capital Allocation (Repurchases)OngoingProgram paused 12/31/23Repurchases discontinued for now; focus on organic/M&A per DC Advisory recommendations Lowered (paused)
LiquidityOngoingN/A$21.2M cash, $8.2M undrawn ABL; zero long-term debt N/A (status update)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Macro demand / “Big Stay”Industry-wide softness; perm hit first; expected recovery later 2024 Continued softness; signs of stabilization; April orders up; cautious optimism Stabilizing with early green shoots
Pricing/spreadsMark-ups/bill rates to counter inflation; margins resilient Professional margin +30 bps YoY; spread improvements taking hold Gradual improvement
Direct hire cyclicalityDown sharply from 2022 peaks; perm likely to follow contract on upswing Direct hire down ~50% YoY in Q2 Still under pressure
Share repurchasesCompleted 6.1M shares; considering strategic alternatives Paused; capital to be deployed into organic/M&A growth per DC Advisory Shift to growth investments
M&A strategyStrategic review underway; tuck-ins considered Active target list; niche staffing in IT/healthcare; typical multiples 5–8x EBITDA; equity only at higher valuations Execution phase
Client retention/DSOStrong liquidity; positive cash flow track record; DSO ~43–44 days noted Retention ≥90% among largest accounts; DSO ~43–44 days affirmed Solid, supportive of recovery
AI/cyber initiativesPriority vertical; building capabilities Aggressively integrating AI in recruiting; placing AI/cyber talent Strategic focus expanding
Industrial staffingCompetition/labor sourcing challenges; inflationary wage pressure Industrial margin down 130 bps YoY; sourcing challenges persist Still challenged

Management Commentary

  • “Price and spread improvements in our professional verticals are beginning to take hold and job orders were up in April. Our revenues for April and revenues per billing day are coming in higher than both the month of March 2024 and the average monthly revenues for the entire quarter.” — CEO Derek Dewan .
  • “Our professional contract services gross margin was 25.7% for the fiscal 2024 second quarter compared with 25.4% for the fiscal 2023 second quarter, an improvement of 30 basis points.” — CFO Kim Thorpe .
  • “We paused the Company’s share repurchases… For now, our Board and management have determined that it is prudent to discontinue share repurchases… in the context of our overall growth strategy and goals it is not, by itself, a long-term growth strategy.” — CEO Derek Dewan .
  • “We are… implementing DC Advisory’s recommendations, which include making prudent investments in both organic and M&A growth.” — CEO Derek Dewan .

Q&A Highlights

  • Market share and peer comparison: Management attributed relative weakness to mix skewed to SMB clients, but said order trends align with peers; not “considerably weaker than our peers” .
  • Buybacks vs growth: Repurchases paused; fiduciary focus on higher-return uses (organic hires and M&A) rather than buybacks at depressed valuation .
  • M&A appetite and multiples: Niche IT/healthcare staffing attractive; typical 5–8x EBITDA multiples; equity only if GEE stock valued sufficiently; cited TSR acquisition at 71% premium as peer valuation marker .
  • Bottoming and summer outlook: COO noted “green shoots across all verticals” and believes “the bottom has been hit,” expecting a “substantially different” summer .
  • Capacity/cost discipline: No industry overcapacity; prepared to cut costs further if needed; exploring offshore recruiting to lower costs .

Estimates Context

  • S&P Global consensus estimates for Q2 2024 EPS and Revenue were unavailable via our data request at this time. Given the magnitude of YoY and sequential revenue declines and negative adjusted EBITDA, we expect near-term sell-side estimates (where coverage exists) to bias lower for direct hire and total company profitability absent a sustained demand inflection .
  • Attempted retrieval of “Primary EPS Consensus Mean” and “Revenue Consensus Mean” via S&P Global failed due to request limit; therefore, estimate comparisons could not be included at this time.

Key Takeaways for Investors

  • Volume softness continued in Q2 with outsized pressure in direct hire; however, April order flow improved and price/spread actions are working, supporting a potential inflection into summer — monitor sequential revenue and order trends in weekly/monthly updates .
  • Balance sheet provides downside protection and M&A optionality (cash $21.2M, undrawn ABL $8.2M, no debt); equity deployment likely targets tuck-ins at 5–8x EBITDA in core verticals .
  • Margin trajectory is stabilizing: professional contract margin expanded 30 bps YoY despite macro; watch mix shifts back toward perm for aggregate margin lift .
  • SG&A leverage remains a headwind at current volumes; management is adding producers but remains ready to cut costs further — track SG&A as % of revenue and productivity per desk .
  • Near-term trading: Without formal guidance or estimates, stock likely trades on sequential KPIs (orders, billing-day revenue, margin) and corporate actions (M&A announcements); potential re-rating if demand stabilization persists and acquisition execution begins .
  • Medium-term thesis: If cyclical recovery unfolds, contract first then perm should lift aggregate margins and EBITDA; GEE’s valuation commentary and peer M&A premiums suggest embedded optionality for strategic outcomes over 6–12 months .
  • Risks: Prolonged macro weakness, continued perm drought, industrial sourcing challenges, and potential competitive pricing pressure could delay EBITDA normalization — management’s willingness to flex costs is a mitigating factor .