GEE Group Inc. reported its fourth-quarter 2024 earnings, revealing a decline in both earnings per share (EPS) and revenue compared to forecasts. The company's EPS fell short of expectations, posting a loss of $0.02 against a forecasted gain of $0.02. Revenue also missed projections, coming in at $28.35 million versus the anticipated $38.53 million. Despite these results, the stock saw a slight increase in pre-market trading, rising by 2.53% to $0.2225.
Key Takeaways
- GEE Group's EPS and revenue both fell short of expectations.
- The stock price increased slightly despite the earnings miss.
- The staffing industry is experiencing a downturn, impacting GEE Group's performance.
- The company is exploring AI integration and cloud migration for future growth.
- No major account losses reported, maintaining strong client retention.
Company Performance
GEE Group's overall performance for fiscal year 2024 showed significant declines, with consolidated revenues down 24% year-over-year to $116.5 million. The fourth quarter alone saw a 17% decrease in revenues compared to the previous year. The staffing industry downturn, coupled with challenging economic conditions, has heavily impacted the company's financial results.
Financial Highlights
- Revenue: $28.35 million for Q4 2024 (down 17% YoY)
- Earnings per share: -$0.02 (missed forecast of $0.02)
- Gross Profit: $37.6 million for FY 2024 (down 29% YoY)
- Net Loss: $24.1 million or -$0.22 per diluted share
- Cash Position: $20.8 million
Earnings vs. Forecast
GEE Group's actual EPS of -$0.02 fell short of the forecasted $0.02, marking a significant miss. The revenue of $28.35 million was also below the expected $38.53 million, reflecting a challenging quarter. This earnings miss contrasts with previous quarters where the company had managed to meet or exceed expectations.
Market Reaction
Despite the disappointing earnings report, GEE Group's stock rose by 2.53% in pre-market trading to $0.2225. This movement suggests that investors may be optimistic about the company's future initiatives or see the current price as a buying opportunity. The stock remains within its 52-week range, which has seen a low of $0.21 and a high of $0.522.
Company Outlook
Looking ahead, GEE Group anticipates a gradual market recovery in 2025, aiming to reach revenue levels of $150 million to achieve positive EBITDA. The company is focusing on technological advancements, including AI integration in recruiting tools and migrating to cloud-based systems. Additionally, GEE Group is exploring mergers and acquisitions in the IT sector and complementary verticals.
Executive Commentary
CEO Derek Duan emphasized the company's resilience, stating, "Complacency breeds mediocrity," reflecting a commitment to innovation and growth. He also highlighted the company's strong financial position, saying, "We're not leveraged at all and we're poised to really take off." CFO Kim Thorpe added, "We proved out of COVID that we can produce and be profitable," underscoring confidence in the company's ability to navigate challenging times.
Q&A
During the earnings call, analysts inquired about potential stock buybacks and the reasons behind the revenue decline relative to unemployment rates. Executives also addressed the impact of AI on the staffing industry and confirmed strong client retention despite the economic challenges.
Risks and Challenges
- Economic downturns affecting staffing demand, particularly in IT and healthcare sectors.
- Potential delays in technological upgrades and AI integration.
- Competitive pressures from other staffing firms adapting to market changes.
- Uncertainty in the broader economic environment, including hiring freezes and project delays.
- Maintaining profitability amid declining revenues and ongoing cost reductions.
Full transcript - GEE Group Inc (JOB) Q4 2024:
Derek Duan, Chairman and Chief Executive Officer, GEE Group: Hello, and welcome to the GEE Group Fiscal 20 24 Full Year and Q4 ended September 30, 2024 earnings and update webcast conference call. I'm Derek Duan, 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 year Q4 ended September 30, 2024, and provide you with our outlook for fiscal year 2025 and the foreseeable future. Some comments Ken 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 10Q, Form 10 ks 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 fiscal year or the fiscal year, which refer to the 3 month or 12 month periods ended September 30, 2024, respectively. Likewise, when we refer to the prior year quarter or prior year, we are referring to the comparable prior 3 month or 12 months period ended September 30, 2023, respectively. 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, 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 of our website, www.geegroup.com. Now on to today's prepared remarks. In fiscal 2024, we encountered and continue to face very difficult and challenging conditions in the hiring environment for our staffing services and human resources solutions, stemming from macroeconomic uncertainty, recession fears, interest rate volatility and inflation, leading to a less than robust hiring environment and slowdown in the labor market, which resulted in fewer job orders and lower revenue. These conditions have produced a near universal cooling effect on businesses' use of contingent labor and the hiring of full time personnel.
As a brief reminder, the demand environment for our services as well as our industry peers began to soften in the latter part of calendar 2023, following a robust hiring of both contract labor and permanent employees in the calendar year 2021 2022, much of which was attributable to a post COVID-nineteen bounce. Since then, many client initiatives such as IT projects, backfilling of open jobs and corporate expansion activities requiring additional labor in general have been put on hold. Instead, many businesses who we serve have implemented and proceeded with layoffs and hiring freezes. These conditions persisted during the 2024 fiscal year and have continued to negatively impact job orders for both temporary help and direct hire replacements. Thus, our financial results for the 2024 fiscal Q4 and full year ended September 30, 2024 have been negatively impacted by these conditions.
GE Group's consolidated revenues were $28,300,000 for the 2024 fiscal 4th quarter and $116,500,000 for the fiscal year ended September 30, 2024. Gross profits and gross margins were $9,500,000 33.7 percent, respectively, for the quarter and $37,600,000 and 32.3 percent, respectively, for the fiscal year. Consolidated non GAAP adjusted EBITDA was negative $1,000,000 for the quarter and negative $2,300,000 for the fiscal year. We reported a net loss of 2,300,000 dollars or $0.02 per diluted share for the quarter and a net loss of $24,100,000 or $0.22 negative per diluted share for the fiscal year. In order to improve our financial results, we are taking aggressive actions, both short term and long term.
As recently announced, we are taking this opportunity to ramp up our M and A activities at the same time for streamlining our operations. We have now executed on substantially all of the estimated $3,000,000 in annual reduction in SG and A costs that we announced earlier and continue to tightly manage costs. In addition, we are exploring various options to streamline our business and further reduce costs. Additionally, we intend to begin to migrate and integrate further our remaining legacy front office and back office systems on the singular cloud based platform starting in 2025. We have the resources to complete this process over a period of 12 to 18 months once commenced and anticipate we will further achieve economies of scale and be positioned to accelerate and integrate future accretive acquisitions more efficiently.
In addition to these near term initiatives, we are closely working with our frontline leaders in the field across all of our verticals to help them continue to aggressively pursue new business as well as opportunities to grow and expand existing client revenues. We are seeing some positive results. When anticipated recovery does occur in the future, I am very confident that we are positioned to meet the increased demand from existing customers and win new business. We successfully did this following the COVID-nineteen pandemic and severe downturn in 2020. We generated significant growth in 2021, 2022 and the 1st part of 2023 prior to the current downturn and were profitable in all three of those years.
As a matter of fact, 2022 was one of our best years ever. We can do it again and are laying the foundation to do so. I am also happy to report that we are now well underway, formulating and executing on our recently enhanced strategic plans, which include making prudent investments to grow both organically and through mergers and acquisitions. At the same time, rest assured that we will always manage our business prudently, maintaining a solid cash position with available attractive financing. With regard to M and A, we have identified several potential strategic acquisition targets and expect to complete accretive transactions early in the calendar year 2025.
As you know, we paused share repurchases on December 31, 2023, having repurchased just over 5% of our outstanding shares as of the beginning of the program. Share repurchases always will be considered as an alternative component of our capital allocation strategy and a bona fide alternative use of excess capital in the future, if and when considered prudent based upon all of the facts and circumstances. Before I turn it over to Kim, I want to reassure everyone that we fully intend to successfully manage through the aforementioned challenges and restore growth and 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 internally and 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. Also, only a relatively small portion of our float is actually trading at these levels, further evidence that there is good opportunity for upward movement in the share price once we are able to operate again in economic and labor conditions that are more conducive to our business. The management team and our Board of Directors are working collectively and diligently to deliver strong financial results, which will drive an increase in shareholder value. Finally, I wish to thank our wonderful dedicated employees and associates that work extremely hard every day to ensure that our clients get the very best service. They are a key factor in our higher achievements and the most important driver of 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 2024 annual and 4th quarter results. Kim?
Kim Thorpe, Senior Vice President and Chief Financial Officer, GEE Group: Thank you, Derek, and good morning, everyone, and happy holidays. As Derek reported, consolidated revenues for the 2024 fiscal year and the 4th quarter were $116,500,000 $28,300,000 down 24% 17% respectively from the comparable prior year periods. Contract staffing services revenues for the fiscal year quarter $104,300,000 $25,000,000 down 22% 19% respectively from the comparable prior year periods. Professional contract services revenue for the fiscal year, which represents 91% of all contract services revenue and 80% of total revenues decreased $25,300,000 or 21% as compared with the prior year. Professional contract services revenue for the quarter also represented 91% of all contract services revenue and 80% of total revenue and decreased $4,900,000 or 18% as compared with the prior year quarter.
Industrial contract services revenue for the fiscal year, which represents 9% of all contract services revenue and 8 percent of total revenues decreased $3,500,000 or 27% as compared with the prior fiscal year. Industrial contract services revenues for the quarter represented 9% of all contract services revenue and 8% of total revenue and decreased $800,000 or 27% as compared with the prior year quarter. Direct hire revenues for the fiscal year were $12,200,000 down 37% as compared with the prior year and were $3,400,000 for the quarter, down 5% as compared with the prior year quarter. As Derek commented, our top line performance was directly impacted by the difficult economic and labor market conditions facing us and the entire industry. Gross profit for the fiscal year was $37,600,000 down 29% as compared with the prior year.
Gross profit for the quarter was $9,500,000 down 18% as compared with the prior year quarter. Our overall gross margins were 32.3% 34.7% for the fiscal year and comparable prior fiscal year respectively. Consolidated gross margins were 33.7% 33.9% for the quarter and comparable prior year quarter respectively. The decreases in gross profit and gross margins are mainly attributable to the decline in volume and mix of direct hire revenues, which have 100% gross margin relative to total revenue. Lower numbers of job orders and tight labor markets on the contract services side also contributed resulting in more competitive conditions and downward pressure on bill rates and spreads accordingly.
Our professional contract services gross margin was 25.3 percent for the fiscal year as compared with 26.1% for the prior fiscal year, a decrease of 80 basis points. The gross margin for professional contract services was 25.5 percent for the quarter compared with 27.2% for the comparable prior year quarter, a decrease of 170 basis points. The decrease in professional contract staffing services gross margins is due in part to increases in contractor pay and other employment costs associated with the recent rise in inflation in combination with more competition for orders and candidates, again resulting in overall net spread compression. Our industrial contract services gross margin for the year was 15.8% compared with 16.5% in the prior year, which was a decrease of 70 basis points. The gross margin for Industrial Contract Services was 16.6% for the quarter compared with 16.5% for the prior year quarter, an increase of 10 basis points.
In addition to fewer job orders, we continue to experience challenges with our industrial business, including sourcing and recruiting qualified candidates as well as increased competition resulting in overall net spread compression experienced. Selling, general and administrative expenses or SG and A for the fiscal year were $41,500,000 down 13% compared with the prior fiscal year. SG and A for the quarter was $10,700,000 down 5% as compared with the prior year quarter. The ratios of SG and A to revenues were 35.7% for the fiscal year compared with 31.2% for the prior year and were 37.9% for the quarter compared with 33% for the prior year quarter. The increases in SGA as a percentage of revenues during the fiscal 2024 year and Q4 were primarily and mainly attributable to declines in revenues in relation to the level of fixed SG and A expenses, including fixed personnel related expenses, occupancy costs, job boards and applicable tracking systems and due to the presence of certain non cash and or non operational and other non recurring expenses.
I also wish to inform you all that as a result of the company's performance in fiscal 2024, senior management did not earn and has not or will not in the future be paid any incentive compensation for that year under the company's annual incentive compensation program. As a matter of fact, some of the performance based equity awards previously granted to senior management team members were clawed back under the workings of the company's annual incentive compensation plan based upon the fiscal 2024 performance. A key aspect of our plans to streamline operations that Derek spoke of in his opening remarks is to migrate and integrate our remaining legacy front and back office systems onto cloud based platforms and that means consolidation of some of these systems. The company has the financial means to do this and expects to commence this task in early 2025. We anticipate financial and operational returns in terms of providing the means to improve our ability to generate organic growth and to accelerate and integrate future accretive acquisitions more efficiently and achieve economies of scale more rapidly.
We reported a net loss for the fiscal year of $24,100,000 or negative $0.22 per diluted share as compared with net income of $9,400,000 or $0.08 per diluted share for the prior year. Our net loss for the quarter was $2,300,000 or negative $0.02 per diluted share compared with net income of $200,000 or nil 0 per diluted share for the prior year quarter. Our adjusted net loss, which is a non GAAP financial measure for the fiscal year was a negative $7,600,000 down $18,700,000 as compared with adjusted net income of $11,100,000 for the prior fiscal year. Our adjusted net loss for the quarter was negative $2,100,000 down $33,200,000 excuse me, as compared with the adjusted net income of $1,100,000 for the prior year quarter. The main drivers of these declines in net income and loss for the quarter and the fiscal year were I'm sorry, for the fiscal year were the $20,500,000 of non cash impairment charges taken in the June quarter and the declines in job orders and placements resulting in lower recurring revenues that we've discussed, as well as the reversal of evaluation allowance of our deferred tax assets in the prior year.
EBITDA is a non GAAP financial measure and for the fiscal year was negative $4,000,000 down $9,300,000 as compared with $5,300,000 positive for the prior year. EBITDA for the quarter was negative $1,200,000 down $1,500,000 as compared with positive $300,000 for the prior year. Adjusted EBITDA also is a non GAAP measure and for the fiscal year was negative $2,300,000 down $9,300,000 as compared with $7,000,000 for the prior year. Adjusted EBITDA for the quarter was a negative $1,000,000 down $2,200,000 as compared with $1,200,000 of adjusted EBITDA in the prior year quarter. Again, the main drivers for the declines in non GAAP EBITDA and non GAAP adjusted EBITDA for the quarter are the declines in job orders and placements resulting in lower revenues as we've discussed.
Our current or operate I'm sorry, our current or working capital ratio as of September 30, 2024 was 3.8:one, up from 3.6:one as of September 30, 2023. The company reported $200,000 $5,900,000 in cash flow from operations for the fiscal years ended September 30, 2024 and 2023 respectively. Our liquidity position at September 30, 2024 remains strong with $20,800,000 in cash, an undrawn ABL credit facility with availability of $8,100,000 net working capital of $26,100,000 and no outstanding debt. Our net book value per share and net tangible book value per share were $0.77 $0.34 respectively as of September 30, 2024. Our net book value per share and net tangible book value per share were $0.96 and $0.35 respectively as of September 30, 2023.
The decrease in net book value per share in particular was the result of the non cash impairment charges taken in the Q3 ended June 30, 2024. These had no effect on our cash position, tangible assets, net working capital or net tangible book value. In conclusion, while we're obviously disappointed with our results and remain somewhat cautious in our near term outlook, we do remain optimistic about and are preparing for the long term. Our management team and field leadership are experienced in managing through difficult times such as the business disruption attributable to COVID and previous cyclical downturns affecting the labor markets. Collectively, we have demonstrated that our company can generate earnings consistently under more favorable economic conditions and a more conducive demand environment for the staffing industry.
Before I turn it back over to Derek, please note that reconciliations of G Group's non GAAP financial measures discussed today with their GAAP counterparts can be found in supplemental schedules included in our earnings press release. Now, I'll turn the call back over to Derek.
Derek Duan, Chairman and Chief Executive Officer, GEE Group: Thank you, Kim. Despite some economic headwinds and staffing industry specific challenges impacting the demand for our services, we are aggressively managing our business and taking steps to increase revenue and reduce expenses to mitigate losses and restore profitability. What we hope you take away from our remarks today, our earnings release and from our strategic announcement last quarter is that we are moving aggressively not only to prepare for a more conducive and growth oriented recovery in the labor market, but also to restore growth sooner by executing on both organic and M and A growth plans and initiatives. We will continue to work hard for the benefit of our shareholders, including consistently evaluating strategic uses of GE Group's capital to maximize shareholder returns. Before we pause to take your questions, I want to again say a specific thank you to all our wonderful people for their professionalism, hard work and dedication.
Now Kim and I would be happy to take 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. So the first question that we have is at what price would you start buying back stock? We are approaching net cash value on the company.
So the answer to that is we constantly evaluate alternative uses of our capital. And the question is very relevant at these levels of our trading. The comment was you could be buying cash back at a discount. And it's kind of interesting, we're trading about at our cash level right now on a market cap basis. The Board of Directors and senior management have had discussions regarding capital allocation.
And my response to that is stay tuned. I think that we will move forward as appropriate and do our capital allocation. We have enough cash and liquidity to do a lot. We do want to protect our balance sheet as well as we get out of these rough times. And we anticipate a more favorable economic environment for our business going forward.
Political climate is better for us in terms of labor laws and rules. And we look forward to restoring profitability. So the buyback is definitely something we consider and stay tuned regarding it and our M and A activity and hopefully restoration of profitability in the near term. Another question is, the company has grown in size over the years, since 2015. Quite frankly, in 2015, when we took over the company, the company was ready to be delisted, had heavy debt, was losing money, returned the corner, had several great years of profitability, made strategic acquisitions, built the company up and performed quite well over a period of years.
We ran into a rough spot during COVID. We were able to last through COVID and come out of that pretty good. I think we're kind of in the same situation now and are looking for the same type of recovery post deal. The question 2 is, what happened to results industry versus your results. We were geared, we had about 18% 13% to 18% perm in that range.
We had a perm year in 2022 that was a record. Permanent placements, the first part of our staffing business that would get hit when there's a hiring freeze or a downturn or perceived economic weakness in our economy. Also project work would be put on hold for fear of the unknown. And there's been a lot of pauses in continuing IT projects, engaging in new ones and so forth. We're starting to see that change, and we're very optimistic over a period of months that we will get back to where we were before.
Why is the company less profitable, as I said, during COVID versus now? The difference is during COVID, that was a force that was layered upon a good economy. And business continued mostly remote as we had almost 100% remote workers at that time. And in particular, the IT business was very robust with projects that had started and continued because that could be done remotely. And the perm business was pretty solid.
Despite that, they were perming perm hires and putting them remote. So it was an interesting dynamic and we flew out of that 2020 malaise of COVID into 2021, 2022 with very good years. And the 1st part of 2023 was outstanding relative, but we started to see that weakness as we said earlier in the middle latter part of 2023 that's continued into 2024. Optimism for 2025 is out there. Industry leaders feel that way.
And we share that sentiment. It'll be a gradual process, but we're very excited about moving forward. But we will also adjust our income statement based on the current revenue to restore profitability and of course, look for new business, new business from existing customers, new clients, and of course, make strategic acquisitions and then reexamine our capital allocation strategy. Another question, Kim, this one's for you. What is the quarterly annual revenue level to achieve breakeven results?
What is the annual revenue level needed to generate $5,000,000 to $10,000,000 in EBITDA as you were not too long ago? That's an outstanding question and something we look at regularly. But Kim, go ahead and take that.
Kim Thorpe, Senior Vice President and Chief Financial Officer, GEE Group: Yes. We're very close right underneath the level to that I would call breakeven as you can tell from the numbers. If you focus on the adjusted EBITDA number that we quoted for the quarter, you could just about tune everything else from there. And that's before we do anything else, including all the strategic things that we're in process of doing with systems and so forth to improve profitability and to improve throughput on sales. One of the things we didn't get into in detail on the call is one of the reasons we're taking this hiatus and spending investment money into our systems is because it will help us share orders across all our brands, which now we're having to do more or less through referral the old fashioned way.
With the systems we have teed up, which are very affordable, it's an excellent investment for us to now share orders across brands and we were very bullish on that. Let me also say that as a rule of thumb, you can go back to 2018, 2021, 2022 and those are the levels that you would see where we're anywhere from $150,000,000 up in revenue, we're beginning to generate high single digit EBITDA numbers again. And then of course, we want to grow beyond that. And the icing on the cake in our view to get beyond that is to focus both on organic and M and A, which Derek mentioned. So that as a rule of thumb, I think if you look at our 2018 year or 2019 year, 2021 2022, those are good benchmarks to look at to figure out profitability of the business.
Let me say one more thing, talking about the pandemic and the recovery from the pandemic and so on. 2020 was not only a pandemic year. For us, it was a huge deleveraging of that that occurred in June of 2020. We took out all our subordinated debt and all of our preferred and we basically cleaned up our balance sheet a lot and for a little bit of money. We took out about $47,000,000 in subordinated debt for about $5,000,000 in cash and 1,800,000 shares of stock.
So that was a hallmark. The following year, we took out senior debt and the senior debt really was what was choking us. We took the senior debt out and to do that we had to do large offering and the large offering did cause dilution, but we made the strategic decision and the tactical decision that it was better to take the dilution and grow from there than to continue in a downward spiral late with debt lightening. So in 2020 2021, the result was we took out over $120,000,000 in debt. We're not throwing the PPP money in there.
We took out $120,000,000 in debt and since then we've built up $20,000,000 in cash, free cash. So to don't you can't look at 2021, 2022 and 2023 and say, oh, well, you just had a short period of profitability. Now, we rebuilt and restructured the company in 2020 to be profitable. We are experiencing a temporary downturn in profitability right now. We proved out of COVID that we can produce and be profitable.
When this recovery happens, I'm fairly confident, in fact, I'm very confident we can do it again.
Derek Duan, Chairman and Chief Executive Officer, GEE Group: Thank you, Kim. That leads into the next question, which is right on target. Can you speak to the current national unemployment rate, which suggests a tight labor market versus the performance of JOB in the past year, which suggests a loose market. Is this a result of the markets that job operates in or are there other factors? So the employment statistics that the BLS puts out are interesting.
First of all, as you know, they've been adjusted downward several times in each quarter that they've been announced. Also, the job gains that have been announced have been primarily in government assisted jobs, hospitality and some what we call lower end type jobs. Our business does not benefit from that. In fact, IT is huge for us and projects have been put on hold due to economic uncertainty and accounting and finance, which is our next largest segment. Also, there's been hesitancy in hiring there, particularly in the full time side.
So there's a big discrepancy in how the staffing industry operates at what I call the higher end professional segments versus the jobs that are being added mostly in the lower end segments. Interestingly, the industrial sector of staffing took a hit as well. So it's a dynamic that you have to digest further when you get a labor report from the BLS. You really have to look into it and how it impacts the staffing industry as a whole and then what vertical you're in a segment. Healthcare took a hit too pretty big.
Now the good news is we think we've hit the bottom of the cycle with respect to contingent labor employment and direct hire employment. And we see a gradual increase moving forward. On top of that, we are taking aggressive action in any event to streamline our cost structure and run off the existing revenue that we have. Someone asked, what point we'd be breakeven or profitable? That analysis is ongoing and we're pretty hopeful that it'll be sooner versus later.
In any event, we're prepared for a robust recovery. I had another staffing company in 2008, when we took a hit about 1 third of our revenue, we were heavily IT at that point, as well as accounting and finance, took a hit about 1 third of our revenue went down in 2008 during the great recession, started to see flatness from that downturn in 2009 and then an unbelievable recovery in 2010. We think we're in a similar pattern now. And that was the most prolonged downturn in the whole industry for years, 'eighty, 'eighty one, 'ninety, 'ninety one, 'two thousand, 'two thousand and one and then 2008, 2009 with recovery in 2010. That's the cycle of staffing.
I believe that we're well positioned here to get upward movement in profitability and also be very prudent how we use our cash. Those things are something that we do. We're not leveraged at all and we're poised to really take off. Can you comment on demand trends you're seeing toward the end of the fiscal Q1 and into fiscal 2025 by end market? Has there been any change in the environment?
That's another great question. So the environment for IT seems to be perking upward. We have pretty good per month in December. It looks good and it's better than the prior month. So November was an interesting dynamic.
Most of the workers took off the whole week of Thanksgiving, instead of the 2 days or even 3 days of that week, most took the whole week off. So there's a lot going on in the labor market within corporate America and also in the temp sector. But again, we're seeing the activity pick up again in December. The Q1 of which is our actual second quarter fiscally, which would end March 31 is not our most robust quarter typically. However, the hiring starts hard in early February and then it picks up runs hard through the spring into the summer, and is usually strong in the fall as well.
So we're highly optimistic, quite frankly, and we're working really hard to get back to profitability. I mean, that's the key focus right now of all. We're not using and don't like running at the level we're at now. So we're going to fix that. The temp penetration, this is another good observation.
The temp penetration rate is currently around 1.69. Historically, it has averaged around 1.9. And the last time it came to that was 'eight, 'nine. So that validates what I just said. That was a great observation.
And we believe it will pick back up. In terms of acquisitions, are you looking at expanding areas like IT, where you are already a player or bolt on acquisitions, different specialties? The answer on that one is both. There's some other verticals that will benefit us. And here's the other thing, prices for deals and structure of deals are much better now.
After staffing companies took a hit, people are becoming more realistic on pricing and structure of the deal. So we'll be very opportunistic in that regard. And we're trying to find deals and we'll do deals that not only bring their business to the table, but that would benefit us. For example, if we could get an offshore recruiting model to lower our SG and A, that would be very helpful. So we can compete more effectively on high volume accounts on what we call managed service provider or VMS accounts that are management systems.
Most of the Fortune 500 have those programs in place. I'd say the Fortune 1,000 actually. So that's another area that we don't typically go after very hard that we will if we get the recruiting mechanism in place. And one way to do that is through an acquisition that has an existing recruiting offshore model going. That's been successful.
That's proven too. How is AI affecting the sectors, you operate in either in new jobs or jobs lost? Again, we think AI is a benefit to our industry. It streamlines recruiting. We have AI in some of our tools that we use.
It's becoming more prevalent as a tool in our industry. And is it eliminating positions that we would normally fill? Clearly, low end positions can be replaced by AI. AI will benefit the high end IT business and we have a focus to staff jobs that require AI capability and AI knowledge. So we're big fans of AI.
We think AI will actually allow us to move quicker on placements, find the best candidates and create jobs, but high end jobs. And it will replace menial task oriented jobs. So that's our view on AI. Let's see.
Kim Thorpe, Senior Vice President and Chief Financial Officer, GEE Group: Derek, can I go back and pick up what I think we skipped over?
Derek Duan, Chairman and Chief Executive Officer, GEE Group: Of course.
Kim Thorpe, Senior Vice President and Chief Financial Officer, GEE Group: Yes. There was a question by one of our good investors who we talk with occasionally about our revenues having declined in the 20% range this year, while the industry was down 10% to 15%. Therefore, are we losing market share? How does it get resolved? We're a large company in the big pond of small staffing firms, but there are several companies that are larger than we are.
They tend to have more large client business than we do. We have our fair share. But the preponderance of our business is SME, small medium enterprise type business. And the 10% or 15% that the questioner is referencing is probably more of an average. We're a little higher than average because we have a preponderance of smaller businesses.
Smaller businesses being a higher proportion tend to take the hits more at a down economy. How does it get resolved? It gets resolved with a rising economy and a recovery. And we will be right back in business, we believe, when that happens.
Derek Duan, Chairman and Chief Executive Officer, GEE Group: And let me add that in the peer group, there's some really good companies in the peer group, larger much larger than us that are down 20% plus. And I have a list of those. I'm not going to go through them now. And I don't want to say misery loves company because we don't like that. But these are blue chip staffing companies and they're taking aggressive actions as well on their SG and A to restore profitability at the levels that they're used to.
So we look at those hard. We also look at the international firms to see if the U. S. Segment has taken a hit. That seems to be the trend on the large firms that are global as well.
So typically IT has been immune from downturns in the staffing industry. This year, you saw a lot of IT layoffs at Cisco (NASDAQ:CSCO) and Facebook (NASDAQ:META) and Google (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) and some others, plus corporate America as well. So that's just something that's pretty new actually to the industry. And that's on the wane and the recovery on project work and so forth is starting to move forward. We're starting to see that.
So we're very optimistic, but not complacent. I think that's very important. Complacency breeds mediocrity and that's not something that's in our vocabulary or plans. We need to move forward and deliver the results that you should expect and want. So I think we're all geared up for that.
I think the activity on the M and A and capital allocation front will benefit us greatly, both existing operations and to enter new markets, possibly new verticals too. Those are the things that we're doing. And I think you we'll be pleased, hopefully in our next call that we've made great progress here. So, Kevin, do you see any other questions that we need to address?
Kim Thorpe, Senior Vice President and Chief Financial Officer, GEE Group: Yes. A new question is, Pablo, can you talk a bit about client retention rates? I can speak to this. We track clients and client retention and Derek and I get regular reports on all clients that generate $100,000 a month or more. And on the basis of that report and on the basis of other intelligence from our businesses, we have not lost any large clients.
Rather our issue is more with clients reacting to the current economy and cutting back orders as we discussed. So our client retention is very good. We're not we haven't lost any major accounts recently or that I can recall throughout 2024 for that matter.
Derek Duan, Chairman and Chief Executive Officer, GEE Group: Okay, good. So that pretty much concludes covering the questions that we have for today. And I can say, everyone, happy holidays to you. And please enjoy that period of time. And note and rest assured that we will work hard for all of our shareholders.
And thank you so much for getting on today and your investment and interest in our company. That concludes our call for today. Thank you.
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