Bay Street News

GEE Group Announces Fiscal Year 2018 and Fourth Quarter Results

Annual Revenue Up 22.5%; Full Year GAAP Income From Operations $2.5 million

and Non-GAAP Adjusted EBITDA $13.2 million

JACKSONVILLE, Fla., Dec. 27, 2018 (GLOBE NEWSWIRE) — GEE Group Inc. (NYSE American: JOB) (“the Company” or “GEE Group”), a provider of professional staffing services and solutions, today announced consolidated financial results for the fourth quarter and fiscal year ended September 30, 2018.

Fourth Quarter and Full Year Highlights                                         

The aforementioned Fourth Quarter and Full Year Highlights should be read in conjunction with  all of the financial and other information included in GEE Group’s Quarterly Reports on Form 10Q, Current Reports on Forms 8K & 8K/A, Information Statements on Schedules 14A & 14C, and Annual Reports on Form 10K filed with the SEC for the fiscal years 2017 and 2018, the discussion of financial results in this press release, and the use of non-GAAP  financial measures and the related schedules attached hereto which reconcile non-GAAP financial information to that prescribed by GAAP. These non-GAAP financial measures and metrics of financial results or financial performance are not a substitute for the measures provided by GAAP as further discussed below in this press release. Financial information provided in this press release may consist of estimates, projected financial information and certain assumptions that are considered forward looking statements and are predictive in nature, depend on future events and the projected financial results may not be realized nor are they guarantees of future performance.     

Full Year Financial Results: Discussion

The Company reported consolidated revenue of approximately $165.3 million for the year ended September 30, 2018 up approximately 22.5% as compared to revenue of approximately $134.9 million for the fiscal year ended September 30, 2017. Contract staffing services contributed approximately $142.2 million or approximately 86% of consolidated revenue and direct placement services contributed approximately $23.1 million or approximately 14% of consolidated revenue for the 2018 fiscal year versus approximately $120.2 million or approximately 89% of consolidated revenue and approximately $14.7 million or approximately 11% of consolidated revenue respectively for the 2017 fiscal year. The increase in contract staffing services revenue for the fiscal year ended September 30, 2018 over the comparable prior year was primarily due to an increase of approximately $25.2 million in professional contract staffing services revenue including a significant contribution from the SNI acquisition. Commercial (industrial) staffing services revenue was approximately $21.6 million for the fiscal year ended September 30, 2018 compared to approximately $24.9 million for the fiscal year ended September 30, 2017. The change in commercial (light industrial) revenue was primarily attributable to the elimination of less profitable customers.

GEE Group’s overall combined gross margin for the fiscal year ended September 30, 2018 (including direct placement services) improved by approximately 240 basis points to approximately 35.7% as compared to approximately 33.3% recorded for the fiscal year ended September 30, 2017. The increase in overall combined gross margin for the 2018 fiscal year was primarily attributable to an increase in direct placement services revenue which is recorded at 100% gross profit. The Company’s professional contract staffing services gross profit margin excluding direct placement services for the fiscal year ended September 30, 2018 was approximately 26.5% versus approximately 27.4% for fiscal year ended September 30, 2017. The Company’s commercial (industrial) staffing services gross margin for the 2018 fiscal year was approximately 17.9% versus approximately 16.5% for the 2017 fiscal year. The change in professional contract staffing services gross margin was primarily due to a revenue mix change including MSP/VMS business which typically carries lower gross margin and lower SG&A with good profitability and revenue contributed from the acquisition of SNI. GEE’s commercial (industrial) staffing services division gross margin improved by approximately 140 basis points for the fiscal year ended September 30, 2018 vs. the comparable prior year period. The improved gross margin was primarily attributable to the elimination of less profitable customers, better pricing from new and existing customers and the benefit of lower workers’ compensation costs and related rebates.

The Company’s selling, general and administrative expenses (SG&A) for the year ended September 30, 2018 increased by approximately $7.9 million to approximately $47.4 million compared to approximately $39.5 million for the prior fiscal year. The increase was primarily related to the inclusion of selling, general and administrative expenses from the acquisition of SNI and increases in noncash stock and stock option compensation expenses during the 2018 fiscal year.

GEE Group recorded GAAP income from operations of approximately $2.5 million for the fiscal year ended September 30, 2018 compared to a GAAP loss from operations of approximately $1.4 million for the fiscal year ended September 30, 2017.  GAAP net loss for the fiscal year ended in 2018 was approximately $7.6 million compared to GAAP net loss for the fiscal year ended in 2017 of approximately $2.4 million. The GAAP net loss for the fiscal year ended September 30, 2018 included interest expense of approximately $11.5 million and a tax benefit of approximately $859,000 compared to interest expense of approximately $5.9 million and a tax benefit of approximately $6 million included in the GAAP net loss for the fiscal year ended September 30, 2017.

GEE Group’s adjusted EBITDA (adjusted EBITDA, a non-GAAP financial measure), computed EBITDA as adjusted for noncash stock compensation and stock option expense, acquisition, integration & restructuring expenses, changes in acquisition deposit for working capital guarantee and loss on extinguishment of debt was approximately $13.2 million for the fiscal year ended September 30, 2018 compared to adjusted EBITDA of approximately $6.4 million for the fiscal year ended September 30, 2017. Reconciliations of non-GAAP adjusted EBITDA for the fiscal years ended September 30, 2018 and September 30, 2017 to GAAP net income (net loss) for those periods are attached to this press release.

Use of Non-GAAP Financial Measures

The Company discloses and uses the above-mentioned non-GAAP financial measures internally as a supplement to GAAP financial information to evaluate its operating performance, for financial planning purposes, to establish operational goals, for compensation plans, to measure debt service capability, for capital expenditure planning and to determine working capital needs and believes that these are useful financial measures also used by investors. Non-GAAP adjusted EBITDA is defined as GAAP net income or net loss before interest, taxes, depreciation and amortization (EBITDA) adjusted for the non-cash stock compensation and stock option expense, acquisition, integration & restructuring expenses, changes in acquisition deposit for working capital guarantee and loss from extinguishment of debt. Non-GAAP EBITDA and non-GAAP adjusted EBITDA are not terms defined by GAAP and, as a result, the Company’s measure of non-GAAP EBITDA and non-GAAP adjusted EBITDA might not be comparable to similarly titled measures used by other companies. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flow that either excludes or includes amounts that are not normally included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP financial measures discussed above , however, should be considered in addition to, and not as a substitute for, or superior to net income or net loss as reported for GAAP on the Consolidated Statements of Income, cash and cash flows on the Consolidated Statement of Cash Flows or other measures of financial performance prepared in accordance with GAAP, and as reflected on the Company’s financial statements prepared in accordance with GAAP included in GEE Group’s Form 10Q and Form 10K for the respective periods filed with the SEC.  These non-GAAP financial measures are not a substitute for or presented in lieu of financial measures provided by GAAP and all measures and disclosures of financial information pursuant to GAAP as reflected in Form 10Q and Form 10-K for the respective periods should be read to obtain a comprehensive and thorough understanding of the Company’s financial results. The reconciliations of non-GAAP EBITDA and non-GAAP adjusted EBITDA to GAAP operating income (loss) and/or GAAP net income (net loss) referred to in the highlights or elsewhere in this press release are provided in the schedules that are a part of this press release.

Management Comments

Derek E. Dewan, Chairman and Chief Executive Officer of GEE Group, commented, “We are pleased with our Company’s financial performance for the fiscal year ended September 30th, 2018. It was a highly successful year as we were able to streamline our operations and improve the overall productivity of our hard-working sales, recruitment and account management personnel, all of whom contributed to a very successful year.        GEE Group continues to enhance its menu of services, broaden its delivery capability, implement state of the art recruiting tools and better position its geographic footprint to serve our customers in a timelier and more cost-efficient manner.”

Mr. Dewan added, “We made excellent progress in fiscal 2018 and expect to obtain additional operational efficiencies and economies of scale in fiscal 2019, which will lower selling, general and administrative expenses (SG&A) overall and as a percentage of revenue, and significantly improve our bottom line. We will judiciously add recruiting and sales resources to help us grow our business as we obtain new customers and further penetrate existing accounts. The Company has a clear focus to increase organic growth and to be opportunistic with potential acquisitions, which we will aggressively pursue in the new year.”                                                                                                                                                           

Mr. Dewan concluded, “There continued to be strong demand for our services through the end of 2018, absent the holidays falling mid-week. We anticipate that the robust employment environment experienced in the last several years will continue as we enter 2019. Secular changes in employment, resulting in more widespread use of “on demand” labor in the “gig economy”, will continue to benefit the staffing industry and GEE. We anticipate that the macroeconomic conditions will be conducive to the continued growth and profitability of our Company. We applaud the efforts of our talented regional and local personnel who are driving outstanding customer service and have positioned GEE for continued success as we move into 2019.”

Reconciliation of Non-GAAP Adjusted EBITDA to GAAP Net Income (Net Loss)
Fourth Quarter Ended September 30,

(In thousands)          
    2018       2017  
Net income (net loss) GAAP $ (1,008 )   $ 3,726  
Interest expense, net   3,121       2,865  
Taxes (benefit)     (1,118 )     (6,350 )
Depreciation and amortization   1,486       1,317  
Stock compensation, Stk. option & other    583       262  
Acquisition, integration & restructuring   682       619  
Change in acq. deposit for working capital      (617 )      
               
               
Non-GAAP adjusted EBITDA  $ 3,129     $ 2,439  
           


Reconciliation of Non-GAAP Adjusted EBITDA to GAAP Net Income (Net Loss)
Year Ended September 30,

(In thousands)        
    2018     2017  
Net income (net loss) GAAP $ (7,564 ) $    (2,372  )
Interest expense, net   11,502     5,995  
Taxes (benefit)   (859 )   (6,018 )
Depreciation and amortization   5,972     3,953  
Stock compensation & stock option expense    1,660     902  
Acquisition, integration & restructuring   3,092     2,925  
Loss on extinguishment of debt       994  
Change in acq. dep. working capital   (617 )      
         
Non-GAAP adjusted EBITDA  $ 13,186   $ 6,379  
         

  GEE GROUP INC.                    
  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)                    
  (In Thousands, Except Per Share Data)                    
                           
              Three Months Ended September 30,   Fiscal Year Ended September 30,
              2018     2017     2018     2017  
                           
  NET REVENUES:                      
    Contract staffing services     $  34,368   $  40,201   $  142,228   $  120,247  
    Direct hire placement services        5,560      6,153      23,056      14,731  
      NET REVENUES        39,928      46,354      165,284      134,978  
                           
    Cost of contract services        25,117      29,531      106,352      90,003  
      GROSS PROFIT        14,811      16,823      58,932      44,975  
                           
    Selling, general and administrative expenses        11,567      14,646      47,406      39,498  
    Acquisition, integration and restructuring expenses        1,380      619      3,092      2,925  
    Depreciation expense        103      98      390      426  
    Amortization of intangible assets        1,383      1,219      5,582      3,527  
  INCOME FROM OPERATIONS        378      241      2,462      (1,401 )
    Change in acquisition deposit for working capital guarantee        617      –      617      –  
    Loss on extinguishment of debt        –      –      –      (994 )
    Interest expense        (3,121 )    (2,865 )    (11,502 )    (5,995 )
  INCOME (LOSS) BEFORE INCOME TAX PROVISION        (2,126 )    (2,624 )    (8,423 )    (8,390 )
    Provision for income tax benefit        1,118      6,350      859      6,018  
  NET LOSS       $  (1,008 ) $  3,726   $  (7,564 ) $  (2,372 )
  NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS     $  (1,008 ) $  3,726   $  (7,564 ) $  (2,372 )
                           
  BASIC INCOME (LOSS) PER SHARE     $  (0.09 ) $  0.38   $  (0.74 ) $  (0.25 )
  WEIGHTED AVERAGE NUMBER OF SHARES – BASIC AND DILUTED        10,695      9,879      10,239      9,630  
                           

 

  GEE GROUP INC.          
  CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)          
  (In Thousands, Except Per Share Data)          
              September 30,   September 30,
              2018   2017
                   
  ASSETS            
    CURRENT ASSETS:          
      Cash     $  3,213   $  2,785  
      Accounts receivable, less allowances ($302 and $1,712, respectively)      20,755      23,178  
      Prepaid expenses and other current assets      2,266      3,014  
           Total current assets      26,234      28,977  
      Property and equipment, net      891      914  
      Goodwill      76,593      76,593  
      Intangible assets, net      29,467      35,049  
      Other long-term assets      416      282  
    TOTAL ASSETS   $  133,601   $  141,815  
  LIABILITIES AND SHAREHOLDERS’ EQUITY          
    CURRENT LIABILITIES:          
      Accounts payable   $  2,523   $  3,243  
      Acquisition deposit for working capital guarantee      883      1,500  
      Accrued compensation      5,212      7,394  
      Short-term portion of subordinated debt      106      1,225  
      Short-term portion of term loan, net of discount      2,331      3,433  
      Other current liabilities      2,064      2,690  
           Total current liabilities      13,119      19,485  
      Deferred taxes      146      958  
      Revolving credit facility      11,925      7,904  
      Term loan, net of discounts      40,253      42,018  
      Subordinated debt      1,000      1,000  
      Subordinated convertible debt      16,685      16,685  
      Other long-term liabilities      583      369  
           Total long-term liabilities      70,592      68,934  
                   
      Commitments and contingencies          
                   
    MEZZANINE EQUITY          
    Preferred stock; no par value; authorized – 20,000 shares –          
      Preferred series A stock; authorized -160 shares; issued and outstanding – none      –      –  
      Preferred series B stock; authorized – 5,950 shares; issued and outstanding – 5,816
and 5,926 at September 30, 2018 and September 30, 2017, respectively; liquidation
value of the preferred series B stock is approximately $28,255 and $28,800 at
September 30, 2018 and September 30, 2017, respectively
     28,788      29,333  
    SHAREHOLDERS’ EQUITY          
    Common stock, no-par value; authorized – 200,000 shares; issued and outstanding – 10,783        
      shares at June 30, 2018 and 9,879 shares at September 30, 2017      –      –  
    Additional paid in capital      44,120      39,517  
    Accumulated deficit      (23,018 )    (15,454 )
      Total shareholders’ equity      21,102      24,063  
    TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $  133,601   $  141,815  
                   

 

About GEE Group

GEE Group Inc. is a provider of specialized staffing solutions and is the successor to employment offices doing business since 1893. The Company operates in two industry segments, providing professional staffing services and solutions in the information technology, engineering, finance and accounting specialties and commercial staffing services through the names of Access Data Consulting, Agile Resources, Ashley Ellis, General Employment, Omni-One, Paladin Consulting and Triad. Also, in the healthcare sector, GEE Group, through its Scribe Solutions brand, staffs medical scribes who assist physicians in emergency departments of hospitals and in medical practices by providing required documentation for patient care in connection with electronic medical records (EMR). Additionally, the Company provides contract and direct hire professional staffing services through the following SNI brands: Accounting Now®, SNI Technology®, Legal Now®, SNI Financial®, Staffing Now®, SNI Energy®, and SNI Certes.

Forward-Looking Statements

In addition to historical information, this press release contains statements relating to the Company’s future results (including certain projections, pro forma financial information, and business trends) that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, (the “Exchange Act”), and are subject to the “safe harbor” created by those sections. The statements made in this press release that are not historical facts are forward-looking statements that are predictive in nature and depend upon or refer to future events. Such forward-looking statements often contain, or are prefaced by, words such as “will,” “may,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “pro forma,” “estimates,” “aims,” “believes,” “hopes,” “potential,” “intends,” “suggests,” “appears,” “seeks,” or variations of such words or similar words and expressions. Forward-looking statements are not guarantees of future performance, are based on certain assumptions, and are subject to various known risks and uncertainties, many of which are beyond the Company’s control, and cannot be predicted or quantified and, consequently, as a result of a number of factors, the Company’s actual results could differ materially from those expressed or implied by such forward-looking statements. Certain factors that might cause the Company’s actual results to differ materially from those in the forward-looking statements include, without limitation: (i) the loss, default or bankruptcy of one or more customers; (ii) changes in general, regional, national or international economic conditions; (iii) an act of war or terrorism or cyber security breach that disrupts business; (iv) changes in the law and regulations; (v) the effect of liabilities  and other claims asserted against the Company including the failure to repay indebtedness or comply with lender covenants ; (vi) changes in the size and nature of the Company’s competition; (vii) the loss of one or more key executives; (viii) increased credit risk from customers; (ix) the Company’s failure to grow internally or by acquisition or the failure to successfully integrate acquisitions; (x) the Company’s failure to improve operating margins and realize cost efficiencies and economies of scale; (xi) the Company’s failure to attract, hire and retain quality recruiters, account managers and salesmen; (xii) the Company’s failure to recruit qualified candidates to place at customers for contract or full-time hire; and such other factors as set forth under the heading “Forward-Looking Statements” in the Company’s annual reports on Form 10-K, its quarterly reports on Form 10-Q and in the Company’s other filings with the Securities and Exchange Commission (SEC). More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the SEC. Investors and security holders are urged to read these documents free of charge on the SEC’s web site at http://www.sec.gov. The Company is under no obligation to (and expressly disclaims any such obligation to) and does not intend to publicly update, revise or alter its forward-looking statements whether as a result of new information, future events or otherwise.

Contact:
GEE Group Inc.
Kim Thorpe
(904) 512-7504
invest@genp.com

SOURCE: GEE Group Inc.