GEE : Conference Call Transcript Q2 2026

Published: 2026-05-15 09:36:10 ET JOB

Published on 05/15/2026 at 09:36 am EDT

Derek Dewan - Chairman and Chief Executive Officer

Kim Thorpe - Senior Vice President and Chief Financial Officer

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 remainder of the fiscal 2026 year and 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 quarter" or "the quarter" and "this year-to-date" or "the year-to-date," which refers to the three or six-month periods ended March 31, 2026, respectively. Likewise, when we refer to "the prior year quarter" or "the prior year-to-date," we are referring to the comparable prior three and six-month periods ended March 31, 2025, respectively. When we refer to the "prior sequential quarter," we are referring to the three-month period ended December 31, 2025.

During this presentation, we also will 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 on our website, https://www.geegroup.com. Now on to today's prepared remarks.

First, I am pleased to report that our Company reported net income for this quarter and that our net 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 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

them to an affiliate of the acquirer. This was a high volume, lower margin account, which somewhat lessened its 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 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 solutions to implement and support their uses 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 were reclassified as discontinued operations, being excluded from the results of continuing operations for the fiscal 2025 periods we'll make comparisons to today.

Our consolidated revenues were $19.5 million for the quarter and $40.0 million year-to-date. Gross profit and gross margin 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 thousand for the quarter and negative $(28) thousand year-to-date. We reported net income of $14 thousand for the quarter and a net loss of $(136) thousand 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 us 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. These 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 year 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 practicably 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 front-line 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 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 at 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 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 bona fide 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 the call over 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.

Thank you, Derek, and good morning. As Derek mentioned, we reported net income of $14 thousand for the quarter and a net loss of $(136) thousand year-to-date, as compared with net losses from continuing operations of $(33.0) million for the prior year quarter and $(33.6) million for the prior year-to-date. The comparable prior year periods include a $22.0 million non-cash goodwill impairment charge and a $9.8 million provision for income taxes attributable to an increase in the Company's valuation allowance on its deferred tax assets. In addition to the absence of these non-cash charges in fiscal 2026, we have been able to grow our direct hire revenues again in fiscal 2026, improve our gross margins, and we are now realizing the cost reductions and productivity improvements we implemented during the latter portion of fiscal 2025.

Our adjusted EBITDA, a non-GAAP financial measure, was $108 thousand for the quarter and negative $(28) thousand year-to-date, improving from negative adjusted EBITDA of $(597) thousand and $(894) thousand for the comparable prior year periods, respectively. EBITDA, which also is a non-GAAP financial measure, was $8 thousand for the quarter and negative $(295) thousand year-to-date, improving from negative EBITDA of $(945) thousand and $(1.5) million

for the comparable prior year periods, respectively.

As I mentioned, one of the bright spots in our results so far in fiscal 2026 has been our ability to grow our direct hire placement revenues. These were $3.2 million for the quarter and $5.9 million year-to-date, respectively, up approximately 7% from the comparable prior year periods. Additionally, direct hire placement revenues were up 17% from the prior sequential quarter.

Consolidated revenues were $19.5 million for the quarter and $40.0 million year-to-date, down 20% and 18%, respectively, from the comparable prior year periods. Contract staffing services revenues were $16.3 million for the quarter and $34.1 million year-to-date, down 24% and 21%, respectively, from the comparable prior year periods. As Derek mentioned, one of our former high volume, lower margin clients was acquired and moved its business to an affiliate of the acquirer at the beginning of our fiscal 2026 year. This accounted for $2.5 million and $5.1 million of the decreases in our contract staffing services revenues for the quarter and year-to-date, respectively. Absent the loss of this single customer, contract staffing services revenues decreased 14% for the quarter and 10% year-to-date.

As Derek commented, macroeconomic and AI-related conditions in the hiring environment for our staffing services remain challenging and companies and businesses, including our existing clients, continue to remain somewhat tentative regarding their HR and staffing needs.

Gross profit was $7.4 million for the quarter and $14.8 million year-to-date, down 11% and 9%, respectively, from the comparable prior year periods, primarily due to lower contract services revenue. However, gross margins were 38.1% for the quarter and 37.1% year-to-date, both up

significantly (400 basis points and 350 basis points, respectively) from 34.1% for the prior year quarter and 33.6% for the prior year-to-date. The significant improvements in our gross margins are mainly attributable to the growth and increase in the mix of direct hire placement revenues, relative to total revenue. Also contributing, to a lesser extent, is an increase in prices and spreads on some of our contract staffing services businesses. While the loss of the high volume, lower margin client we spoke about earlier caused the majority of our revenue reduction year-to-date, it also contributed to the improvement in our business mix and gross margins.

Selling, general and administrative expenses ("SG&A") were $7.4 million for the quarter and

$15.1 million year-to-date, down 20% and 15% from the comparable prior year periods. Our SG&A as a percentage of revenues for the quarter were 38.0%, level with that for the prior year quarter. SG&A for the year-to-date were 37.8%, up from 36.6% for the prior year-to-date. This increase is attributable to lower revenues in relation to fixed costs such as certain personnel, occupancy, applicant tracking and job board costs.

In response to the realities of our present environment, we continue to prioritize and focus heavily on streamlining our core operations and improving our productivity to match our current lower volumes of business. As Derek mentioned, we reduced our SG&A during the latter portion of fiscal 2025 by an estimated $3.8 million on an annual basis. These cost reductions contributed $1.3 million to our decrease in SG&A for the quarter and $2.4 million year-to-date over the comparable prior year periods, aiding in our improvement in results despite a lower volume of business.

We are now well underway updating and further integrating our ERP and applicant tracking systems, and certain other key operating systems and processes. We anticipate that these new tools

will add substantial enhancements to our core business processes, ranging from significant improvements in the speed and accuracy of our client and candidate service processes and cycles, our ability to share and leverage client and candidate information across all our businesses, and increase overall productivity, scalability and reduce costs. Importantly, these initiatives also will include strategic and thoughtful implementation of AI tools, to make us even more competitive. Our goal is to be complete or substantially complete by the end of September, and to be fully complete by the end of calendar 2026.

In addition to positive earnings in terms of net income, EBITDA and adjusted EBITDA in the quarter and significant improvements in our year-to-date operating results, the Company also produced net cash from continuing operations for the quarter and reduced the amount of cash used in our operations for the first six months of fiscal 2026 vs. fiscal 2025.

As of March 31, 2026, our liquidity position remained very strong with $20.3 million in cash, an undrawn ABL credit facility with availability of $4.9 million, net working capital of $23.8 million, and no outstanding debt. Our current or working capital ratio was 4.6-to-1. Our net book value per share and net tangible book value per share were $0.46 and $0.23, respectively, as of March 31, 2026.

In conclusion, while the improvements in our results so far this fiscal year are a source of optimism, we remain cautious in our near-term outlook. We also remain resolved to continue to improve our results and profitability and to stay focused and prepare for the long term, including the improvements to our core business processes and systems and the integration of AI I just spoke about.

Before I turn it back over to Derek, please note that reconciliations of GEE Group's non-GAAP financial measures discussed today, with their GAAP counterparts, can be found in the supplemental schedules included in our earnings press release.

Now, I'll turn the call back over to Derek.

Thank you, Kim. Despite the macroeconomic headwinds and staffing industry challenges impacting the demand for our services, we are aggressively managing and preparing our business to mitigate losses, restore profitability and be prepared for an anticipated recovery. What we hope you take away from our earnings press release and our remarks today, and from our strategic announcements, is that we are moving aggressively not only to prepare for a more conducive and growth oriented labor market, but also to restore growth by continuing with the execution on both organic and M&A growth plans and initiatives. As previously announced, we have engaged Roth Capital Partners to assist us in performing an analysis of strategic alternatives available to us to maximize shareholder value.

Before we pause to take your questions, I want to again say a special thank you to all our wonderful people for their professionalism, hard work and dedication.

Now, Kim and I would be happy to answer your questions. Please ask just one question and rejoin the queue with a follow-up, as needed. If there's time, we'll come back to you for additional

questions.

GEE Group Inc. is a provider of specialized staffing solutions and is the successor to employment offices doing business since 1893. The Company provides professional staffing services and solutions in information technology, engineering, finance and accounting specialties through the names of Access Data Consulting, Agile Resources, Omni One, GEE Group Columbus, Hornet Staffing and Paladin Consulting. 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). 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®.

Statements in these prepared remarks and references to financial information include certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, and free cash flow which are provided as additional information to supplement the Company's consolidated financial statements presented on a GAAP basis. These non-GAAP financial measures are used by management internally for planning purposes, to help evaluate the Company's performance period over period, to analyze the underlying trends in its business, to establish operational goals and to provide additional measures of operating performance. GEE Group also uses the non-GAAP financial information to assess the Company's liquidity position, to help determine its ability to make capital expenditures and to provide for its working capital needs. In addition, the Company believes that the non-GAAP financial measures presented herein are meaningful to investors and are utilized by them to enhance the overall understanding of the Company's financial performance. Non-GAAP financial measures do not serve as an alternative to or substitute for the consolidated quarterly and annual financial statements presented in accordance with accounting principles generally accepted in the United States ("GAAP").

The non-GAAP financial measures presented herein might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures reported by other companies. Non-GAAP EBITDA and non-GAAP adjusted EBITDA as determined by the Company provide measures of operating results in a manner that is focused on the Company's core business on an ongoing basis, by removing the effects of non-operating and certain non-cash and non-recurring expenses. Non-GAAP EBITDA and non-GAAP adjusted EBITDA as determined by the Company are computed as net income (loss) from continuing operations before interest, other income, taxes, depreciation and amortization (EBITDA), plus non-cash stock compensation expenses, acquisition, integration, restructuring and other non-recurring expenses, capital market-related expenses, and gains or losses on extinguishment of debt or sale of assets (adjusted EBITDA). The financial information tables that accompany our earnings press release include reconciliations of GAAP net income (loss) from continuing operations to the non-GAAP financial measures, EBITDA and adjusted EBITDA.

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 (loss) and loss from operations as reported in accordance with GAAP on the Consolidated Statements of Operations, cash and cash flows as reported in accordance with GAAP on the Consolidated Statements of Cash Flows or other measures of financial performance prepared in accordance with GAAP, and as reflected on the Company's consolidated financial statements prepared in accordance with GAAP included in GEE Group's Form 10-Q and Form 10-K filed for the respective fiscal periods with the Securities and Exchange Commission ("SEC").

In addition to historical information, the related press release and this script contains statements relating to possible future events and/or the Company's future results (including results of business operations, certain projections, future financial condition, pro forma financial information, and business trends and prospects) 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 the Private Securities Litigation Reform Act of 1995 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. These forward-looking statements include, without limitation, anticipated cash flow generation and expected shareholder benefits. 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 of future tense. 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. The international pandemic, the "Novel Coronavirus" ("COVID-19"), negatively impacted and disrupted the Company's business operations and had a significant negative impact on the global economy and employment in general, resulting in, among other things, a lack of demand for the Company's services. This was exacerbated by government and client directed "quarantines", "remote working", "shut-downs" and "social distancing". Some of these outcomes or by-products of the pandemic have persisted in one form or another since and there is no assurance that conditions will ever fully return to their former pre-pandemic status quo.

These and certain other 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, industrial accidents, 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 including the lack of liquidity to support business operations and the inability to refinance debt, failure to obtain necessary financing or the inability to access the capital markets and/or obtain alternative

sources of capital; (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; (xiii) the adverse impact of geopolitical events, government mandates, natural disasters or health crises, force majeure occurrences, future global pandemics such as COVID-19 or other harmful viral or non-viral rapidly spreading diseases 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 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.

[email protected] SOURCE: GEE Group Inc.

Disclaimer

GEE Group Inc. published this content on May 15, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 15, 2026 at 13:35 UTC.