Revenues up 110% YoY for GEE Group in Q3 2017
GEE Group Inc. has announced results for its third quarter ended 30th June 2017.
Revenue for the fiscal 2017 third quarter was approximately $46.1m, up by approximately 110% over the amount recorded in the third quarter of fiscal 2016. The revenue for the fiscal 2017 third quarter includes the post-merger contract staffing and direct placement services revenue contributed from the recently acquired SNI Companies ("SNI"). Contract staffing services contributed approximately $40.1m or approximately 87% of revenue and direct placement services contributed approximately $6m or approximately 13% of revenue. This compares to contract staffing services of approximately $20.3m or approximately 92.4% of revenue and direct placement services of approximately $1.7m or approximately 7.6% of revenue respectively for the same quarter of fiscal 2016. Revenue from the combined professional contract and professional direct placement services, which is comprised of staffing and solutions in the information technology, engineering, healthcare and finance & accounting specialties, was approximately $39.4m, and represents approximately 85.4 % of total revenue for the 2017 fiscal third quarter.
Overall gross margin for the fiscal third quarter ended 30th June 2017 (including direct placement services) was approximately 37.02% compared to approximately 28.54% for the fiscal third quarter ended 30th June 2016. Professional contract staffing services gross margin increased (excluding direct placement services) for the 2017 fiscal third quarter to approximately 29.3% compared to approximately 26.1% for the 2016 fiscal third quarter. Industrial contract services gross margin for the 2017 fiscal third quarter improved to approximately 14.1% compared to approximately 13.1% for the 2016 fiscal third quarter.
Selling, general and administrative expenses (SG&A) increased as a percentage of revenue for the 2017 fiscal third quarter and was approximately 34%, compared to approximately 24% of revenue for the 2016 fiscal third quarter, an increase of approximately 10 percentage points.
GAAP loss from operations for the 2017 third quarter was approximately $2.4m compared to GAAP income from operations of approximately $522,000 for the comparable 2016 fiscal third quarter. The 2017 GAAP loss from operations included costs in the aggregate of over approximately $3.4m related to the SNI merger including acquisition, integration and merger expenses, increased goodwill amortization and depreciation expense.
GAAP net loss for the 2017 fiscal third quarter was approximately $6m, compared to GAAP net income of approximately $528,000 for the comparable 2016 fiscal third quarter. The GAAP net loss for the 2017 third quarter included the impact of the aforementioned costs related to the SNI merger (over approximately $3.4m) and an increase in interest expense and loss on extinguishment of debt of approximately $2.9m, related to the refinancing of GEE's existing indebtedness combined with the financing of the SNI acquisition. The 2016 third quarter GAAP net income included the benefit of approximately $425,000 from a change in contingent consideration.
Adjusted earnings before interest, taxes, depreciation, amortization, noncash stock and stock option expenses, acquisition, merger and integration expenses, loss on extinguishment of debt and change in contingent consideration (adjusted EBITDA, a non-GAAP financial measure) for the 2017 fiscal second quarter was approximately $1.8 million vs. approximately $1.3m for the comparable prior year fiscal second quarter (see non-GAAP adjusted EBITDA reconciliation to GAAP net income (net loss) attached to this press release).
Derek E. Dewan, chairman and chief executive officer of GEE Group, commented, "During the 2017 third quarter, we successfully closed the SNI acquisition which had a positive impact on GEE's revenue and adjusted EBITDA. We expect that SNI will significantly contribute to the future revenue and cash flow of the Company through its broad service offerings and expansive geographic footprint. In addition, we have started the integration process and are continuing to streamline our business processes. We anticipate and expect that GEE will realize post acquisition economies of scale and cost synergies beginning in the 2017 fourth quarter and into fiscal 2018. GEE will continue to fuel organic growth by selectively adding high caliber sales and recruiting talent to meet the needs of our clientele while growing our top and bottom lines. Our pipeline of great companies contemplating joining GEE through acquisition is stellar and continues to grow and we will accelerate our aggressive external growth from this outstanding list of staffing solutions providers."
"The use of contingent labor in the 'gig economy' is robust and the demand for our services continues to be strong in a very tight domestic job market. With GEE's enhanced service capability and its expanded geographic footprint, we expect to achieve continued growth in revenue and profitability. We credit the entire field organization for their efforts during this rapid growth phase of our Company as they are helping us to broaden our customer base, improve our operational efficiency and provide outstanding customer service."
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