Revenues down over 14% YoY in Q1 2019 for GEE Group
GEE Group Inc. has released its results for the first quarter of 2019, ended 31st December 2018.
The company reported consolidated revenue of approximately $38.5m for the fiscal first quarter ended 31st December 2018, down 14.8% as compared to revenue of approximately $45.2m for the fiscal first quarter ended 31st December 2017. Total revenue for the 2019 fiscal first quarter was impacted by the implementation of GEE Group’s strategic plan to improve profitability, which resulted in the planned reduction of unproductive and underperforming sales and recruitment full time personnel and consolidation or closure of certain offices. Also, revenue was negatively impacted in the 2019 fiscal first quarter to some extent by holidays falling mid-week, fewer billing days in the quarter and severe winter weather in some markets. Contract staffing services contributed approximately $34.0m or approximately 88.2% of consolidated revenue and direct placement services contributed approximately $4.5m or approximately 11.8% of consolidated revenue for the 2019 fiscal first quarter. Industrial contract services revenue for the 2019 fiscal first quarter was approximately $5.6m as compared to approximately $5.9m recorded in the 2018 fiscal first quarter.
GEE Group’s overall staffing services gross profit margin including direct placement services (recorded at 100% gross margin) for the 2019 fiscal first quarter was approximately 33% versus approximately 34.9% for the comparable 2018 prior year fiscal first quarter. The change in the overall gross margin in the 2019 fiscal first quarter from the comparable prior year fiscal first quarter was due to several factors including a lower percentage of direct placement revenue (which is recorded at 100% gross margin) and a greater percentage of VMS, MSP, MSA and other volume corporate business in the professional contract staffing services division.
In the professional contract staffing services segment, the gross margin (excluding direct placement services) was approximately 26.1% for the 2019 fiscal first quarter compared to approximately 27.0 % for the 2018 fiscal first quarter.
The company’s industrial staffing services gross margin for the 2019 fiscal first quarter was approximately 13.9% versus approximately 15.6% for the 2018 fiscal first quarter.
The Company’s selling, general and administrative expenses (SG&A) for the fiscal first quarter ended 31st December 2018 decreased as a percentage of revenue and was approximately 26.1% compared to approximately 28.2% of revenue for the fiscal first quarter ended 31st December 2017. The decrease of approximately $2.7m in SG&A in the 2019 fiscal first quarter over the comparable prior year fiscal first quarter is primarily attributable to the implementation of GEE Group’s strategic profitability improvement plan, which included a reduction of underperforming and unproductive full time personnel and actions taken by management to obtain additional operational efficiencies, maximize productivity and realize economies of scale.
The company’s adjusted earnings before interest, taxes, depreciation, amortization, noncash stock and stock option expenses and acquisition, integration, and restructuring expenses, gain on asset disposal (adjusted EBITDA, a non-GAAP financial measure) was approximately $3.3m for the fiscal first quarter ended 31st December 2018 compared to approximately $3.3m for the fiscal first quarter ended 31st December 2017.
Derek E. Dewan, chairman and chief executive officer of GEE Group, commented, “GEE’s performance improvement plan implemented in the past year had a positive impact on the Company’s financial performance and contributed to solid adjusted EBITDA for the fiscal first quarter ended December 31, 2018. Our dedicated and hardworking employees have made concerted efforts to improve their productivity while providing outstanding service to our customers. GEE’s strategy for the remainder of this fiscal year includes the selective addition of sales and delivery talent, in addition to beefing up our recruiting capabilities to help us continue to gain market share and increase GEE Group’s organic revenue growth and profitability. We plan to bolster our balance sheet and continue to evaluate and make strategic acquisitions that are complimentary to our business, which will be accretive to earnings while adding extensively to our service delivery network.
“We anticipate that the tight labor market with low unemployment will continue for the rest of this year. There continues to be strong demand from our customers for IT, accounting, finance, engineering, healthcare and other highly skilled professional workers and we are well equipped to recruit and deploy the best talent to fulfill our customers needs (sic). Secular change in employment is resulting in greater usage of a flexible on-demand workforce to satisfy personnel needs in corporate America; this creates favorable conditions for our business and the staffing industry as a whole.”
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