JACKSONVILLE, FL., February 14, 2023 -- GEE Group Inc. (NYSE American:JOB) together with its subsidiaries (collectively referred to as the "Company", "GEE Group", "us", "our", or "we"), a provider of professional staffing services and human resource solutions, today announced consolidated results for the fiscal 2023 first quarter ended December 31, 2022. All amounts presented herein are consolidated or derived from consolidated amounts, and are rounded and represent approximations, accordingly.

Fiscal 2023 First Quarter versus Fiscal 2022 First Quarter Highlights

• Revenue for the fiscal 2023 first quarter was $41.1 million, down $1.7 million, or 4%, compared with the fiscal 2022 first quarter revenue of $42.8 million. Revenue for the prior fiscal 2022 first quarter included professional contract revenue of $2.3 million generated from certain discreet projects for clients administering and providing services to or on behalf of COVID-19 responders, which ended during the fiscal 2022 first quarter and are non-recurring in nature. Excluding the effects of these nonrecurring COVID-19-related projects, our remaining consolidated revenue increased $0.6 million, or 1%, quarter over quarter.


• Professional contract services revenue, which represents 77% of our total revenue, increased $1.5 million, or 5%, quarter over quarter, excluding the effects of the nonrecurring COVID-19-related projects revenue. Professional IT contract services revenue grew 15% quarter over quarter. IT contract services represents 60% of all professional services contract revenue, 49% of total revenue, and is a high priority growth sector for the Company.


• Direct hire revenue for the fiscal 2023 first quarter was $5.7 million, down $0.5 million, or 8%, compared with the fiscal 2022 first quarter revenue of $6.2 million. Considering the inherent sensitivity to macroeconomic conditions in the direct hire business (all of which is in our professional services segment) and last year's record high performance, we remain cautiously optimistic about our overall direct hire revenue potential for fiscal 2023.


• Gross profit for the fiscal 2023 first quarter was $14.4 million, down $1.2 million, or 8%, compared with fiscal 2022 first quarter gross profit of $15.6 million. Our overall gross margins were 35.0% and 36.4% for the fiscal 2023 and 2022 first quarters, respectively. In addition to the effects of lower direct hire business (which has 100% gross margin) and fiscal 2022's non-recurring COVID-19-related projects, the decreases in gross profit and gross margin quarter over quarter are attributable to increases in contractor pay associated with the recent rise in inflation resulting in some spread compression within the Professional Services Segment. The Company has stepped-up counter-inflationary increases in bill rates and spreads in order to address recent margin compression. Despite lower quarter over quarter gross margin, GEE Group's current percentage is relatively high, as compared to those of many competitors.


• Net income for the fiscal 2023 first quarter was $0.7 million, or $0.01 per diluted share, down $16.0 million and $0.13 per diluted share compared with the fiscal 2022 first quarter. The fiscal 2022 first quarter net income included gains on the forgiveness of former PPP loans of $16.8 million, and a non-cash goodwill impairment charge of $2.15 million. Adjusted net income (a non-GAAP financial measure) for the fiscal 2023 first quarter was $1.1 million, or $0.01 per diluted share, down $1.6 million, or 59%, as compared with $2.7 million, or $0.02 per diluted share, for the fiscal 2022 first quarter. The Company's net income and adjusted net income were similarly affected by the items discussed above with regard to gross profit and gross margin, as well as investments in sales and recruiting resources and some other inflationary increases in SG&A. Our investments in sales and recruiting resources and the price increases and targeted cost reductions discussed above are expected to begin to have positive effects on results during the remainder of fiscal 2023. Reconciliations of net income to non-GAAP adjusted net income are attached hereto.


• Adjusted EBITDA (a non-GAAP financial measure) for the fiscal 2023 first quarter ended December 31, 2022 was $2.0 million, down $1.9 million, as compared with $3.9 million for the fiscal 2022 first quarter. As discussed above, the Company expects recent investments in resources, price increases and targeted cost reductions to begin to have positive effects on results during the remainder of fiscal 2023. Reconciliations of net income to non-GAAP Adjusted EBITDA are attached hereto.


• Adjusted free cash flow (a non-GAAP financial measure) for the fiscal 2023 first quarter ended December 31, 2022 was $2.5 million as compared with $4.0 million for the fiscal 2022 first quarter. Adjusted free cash flow has been adjusted to exclude payments of the two installments of deferred FICA taxes of $1.8 million each under the CARES Act, and the effects of annual cash bonus payments under the Company's new performance-based incentive compensation program. Reconciliations of cash flow from operating activities to non-GAAP adjusted free cash flow are attached hereto.


• As of December 31, 2022, cash balance of $18.5 million, borrowing availability under GEE Group's bank ABL credit facility was $13.0 million, and net working capital of $28.5 million. As of December 31, 2022, current ratio of 3.6, shareholders' equity of $102.0 million, and zero long term debt.


• Net book value per share and net tangible book value per share were $0.89 and $0.26, respectively, as of December 31, 2022.

Management Comments

Derek E. Dewan, Chairman and Chief Executive Officer of GEE Group, commented, "We are off to a solid start for the fiscal year. Our 2023 first quarter results compared with those of the prior fiscal year's first quarter, adjusted for non-recurring and one-time items, compare favorably, especially considering the volatility and uncertainties that persist in our economy and labor markets. When we reported similar solid performance for our fiscal 2022 first quarter this time last year, we faced the same sorts of macroeconomic conditions we face today. At that time, we expressed cautious optimism because of these uncertainties, but were able to finish fiscal 2022 strong by executing on opportunities available to us as a result of these conditions. The recent strong jobs growth report is a positive indicator for us now and despite the potential for some disruption in the labor markets, we continue to express this same cautious optimism for future profitable organic growth, increased earnings and enhanced free cash flow for fiscal 2023. To augment internal growth, we are focused on strategic tuck-in acquisitions as well."

Mr. Dewan added, "Fiscal 2023 looks promising so far, and we intend to continue the philosophy and strategy of taking advantage of any and all opportunities we can to help our clients meet their human resource needs as we all navigate unprecedented socioeconomic challenges. Our people are the best in the business at identifying, recruiting and placing the best talent available to meet our clients' unique and ever-evolving needs. The flexible, on-demand workforce needs of corporate America remain strong and are growing and changing daily. These dynamic changes in how America works will benefit our Company and the staffing industry as a whole."

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