Good morning, everyone. Welcome to the GEE Third Quarter Earnings 2022 Update Webcast Conference Call. I’m Derek Dewan, Chairman and Chief Executive Officer of the company. Kim Thorpe, our Senior Vice President and Chief Financial Officer will also join the call. I’ll be hosting today’s call and we will be addressing the quarter and our outlook for the remainder of 2022. Thanks a lot for joining today. It is our pleasure to share with you our results for the fiscal 2022 third quarter ended June 30, 2022 and provide you with our outlook for the final quarter of our fiscal 2022 year end and also the outlook for foreseeable future. Some comments Kim and I will make today may be considered forward-looking, including predictions and estimates 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 in Monday’s earnings press release and our most recent Form 10-Q 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. During this presentation, we also will talk about some non-GAAP financial measures. Reconciliations and explanations of these measures are included in the earnings press release. Our presentation of financial amounts and related amounts including growth rates, margins and trends 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 of our website www.geegroup.com. With that business behind us, I am very happy to report that we once again achieved…

Thank you, Derek, and good morning. As Derek mentioned, revenues for the three and nine-month periods ended June 30, 2022, were $41.1 million, and $123.6 million, up 8% and 15%, respectively, over the comparable fiscal 2021 periods. Contract staffing services contributed $33.1 million and $103.5 million, or 80% and 84% of revenues, respectively, and direct placement services contributed $8 million and $20.1 million, or 20% and 16% of revenues, respectively, for the three and nine-month periods ended June 30, 2022. Contract staffing services revenues increased by $0.6 million or $600,000 and $8.7 million, or 2% and 9%, for the three and nine-months ended June 30, 2022, respectively. These increases were mainly attributable to increased demand in our professional contract services markets as the negative effects of COVID-19 lessen and the US economy and workforce continue on recovery paths toward pre-COVID-19 conditions. Direct hire placement revenues for the three and nine-months ended June 30, 2022, were $8 million and $20.1 million, up 45% and 60%, respectively, over the comparable fiscal 2021 periods. Direct hire revenues for Q3 2022 set a new high for us, and the first nine months of fiscal 2022 already have surpassed the entire 2021 fiscal year. Total revenues from our professional staffing services segment, which includes contract staffing and direct hire placement services, were $37 million and $111.6 million, and represented 90% of total revenue for both periods, respectively ended June30, 2022. Professional staffing services segment revenues were up 8% and 18%, from the comparable fiscal 2021 periods, respectively. Our IT services end markets at Agile Resources, Access Data Consulting, Paladin Consulting and SNIT accounted for 48% of our professional services business segment revenues for the nine-months ended June 30, 2022 and were up 27% year-over-year. The other professional services end markets, finance, accounting, administrative & office,…

Thank you, Kim. The 2022 fiscal third quarter was our fourth consecutive full quarter of strong performance since deleveraging the company. Having consistently achieved profitable growth and higher margins, earnings and free cash flow for the last four quarters we now have a positive track record as well as positive momentum for the future. At June 30th, 2022, the company had over $17 million in cash and another $14 million in availability under GEE Group’s bank asset-based credit facility. GEE Group’s prospects today for future profitable growth have never been better. Absent the onset of a recession or other unforeseen events we anticipate outstanding results for our final quarter and all of our 2022 fiscal year and beyond. 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. Without them, we could not have accomplished all the good things we have shared with you today. Now, Kim and I would be happy to answer your questions.

So, the first question that we've received is as follows. I know its important to maintain a cash reserve for M&A opportunities. However, sometimes the best opportunity is buying back your own stock. Why not use the newly generated cash each quarter for stock buybacks. Similar to that question is the next question, is the next question, given the price of the stock, and our estimate of intrinsic value, every dollar of stock bought back would conservatively create $0.30 to $0.40 of shareholder value. Could you give us a rough percentage of how high that is being considered from December when the company will likely have well over $20 million in cash? December is the first time -- and that's after the mid part of the month, that we can buy back stock pursuant to the Cares Act provision on the last day forgiveness of our PPP loans. So that's the comment related to December is spot-on. The whole buyback situation relative to M&A is that or observation is that when you're trading at the level we are now it's more efficient and effective to buy back shares versus making an acquisition. I can say that there's been significant discussion regarding share buybacks, and I think it's important for everyone to stay tuned. The next question is regarding insider of management purchases, including directors, purchases of stock. Why hasn't there been more of it? There's, been several discussions about blackout periods and so forth. And we have a lot of activity going on in our company that preclude us because of inside information from purchasing, including results when we get toward the end of a quarter. So I think that you'll see some activity there, but it's a personal decision of directors and officers to buy stock, although we're bullish, and we own significant positions in the company, but I think that enhancing those positions is a good thing to do, particularly since our stock price is cheap relative to the peer group and relative to other metrics that are out there. So I agree with the comment. And to the extent we can do it, I think you'll see activity there. Interest, the next question is how much cash do we need to run operations? Kim, do you want to comment on that? How much cash do we need to fund the capital base?

Yeah. For almost the entire period 2018, 2019, 2020 until the beginning of the pandemic, we operated the company essentially on $3 million to $4 million of cash which covers about 1.5 to two payroll cycles. We were able to do that primarily because of how efficient our business is. The only strain that we recognize in our cash flow is while we're growing significantly. And that amount of strain only last about eight to nine weeks. And what it represents is paying our employees who we contract with clients and then billing our clients and collecting our accounts receivable, as I mentioned in my comments, 42 days later. So -- but other than that, our collections are really very good relative to other businesses, in-part because we supply a major resource and asset to our clients that support their business cycles. So -- but $3 million to $4 million, we operated on very successfully for almost three years, including through a fairly tumultuous period.

Let me add to that, that staffing companies that do contract staffing, in addition to permanent placements, tend to collect cash and increased cash flow more in a downturn, because they are collecting accounts receivable that were on the books faster than their expending money for contract payroll. That's something that I've experienced in 2000, 2001, 2008, 2009 and briefly during the pandemic. So -- or the effects of the severe parts of the pandemic, on business in general. So, to answer the question is, we don't need a lot of cash to fund payroll, which is our biggest cash flow obligation, if we're not growing. So that's an interesting dynamic that we actually collect more cash when things are bad, on a net-net basis, then we out -- than the cash outflow. However, we'd rather have the outflow going and growing. And the assumption on that is that your accounts receivable are good, and they are, we have a great track record there. We have great collection efforts by our teams and our DSOs are very low. The next question is, how will acquisitions be funded? Kim, give your observation on that. And I know where someone dreading on that. But go ahead.

We start with a clean template on any target that we look at, and we generally go to three sources; available cash, financing or stock, depending -- and of course, right now, given where our stock is trading, we probably would not entertain issuing stock, but then, also seller financing. And then, because of how we've set the table with the deleveraging, we have ample opportunities for senior financing from other sources. But the idea is for -- is to create an acquisition strategy and implement it in a way that does not overleverage the company and takes advantage of cash -- available cash we have. And, again, all those things are analyzed in relation to what we believe the opportunity is in the acquisition. So -- but it's generally -- we start with three to four sources of funds when we look at an acquisition. And earnouts, I forgot earnouts.

Okay. Thank you, Kim. The next question is threefold. The first part of the question is, the company is severely undervalued about 30% discount to book. What is your plan to pass through those results to company? And then the next part of that, in stellar financial times, as the company received interest for a merger or complete buyout, is the company planning to staff overseas contract construction labor as the sector is severely impacted? The answer to the last question is, in terms of any significant investment overseas is, no. We have a lot of territory in the US. We may use some resources from overseas to staff or fund our US business. But we're not planning a major movement into the international front. We've got a lot of footprint and opportunity in the US. As the company received interest for a merger or complete buyout? I may say, the company always gets interest and from time-to-time, clearly, proposals for buying part or all of the business. That in turn by the way limits the ability of management, directors to buy back stock if those are reviewed or entertained, because we don't want to have a look-back period where people bought stock and then there was a buyout. The answer is the company is very, very satisfied today growing and participating in acquisitions to grow its business. And we have a $1 billion target to get to. But I think importantly, we want to create shareholder value and opportunities for our employees. So that's our prime focus here. But we do get interest, of course. And I've done a lot of acquisitions over the years. And I ran a business for 17 years before we had a transaction and rent it. Now that was successful. We got to several…

Sure. There have been two sources of -- and let me just say our prices have moved along, as you might imagine, with the economy and inflation and increase in wages. The way we price our pricing begins. The first step is a leveraging of whatever we're paying our employees, our contract employees. So on the contract business, our prices move up as we increase their pay by design. And we coordinate obviously, with our clients, our clients are aware. Nonetheless, employment and the workforce is still somewhat volatile. So our clients are very willing to work with us on those increases. And that's helpful. On permanent placements, we get increases, not so much in prices. But as again, salaries go up, our fees for placements are based on first year base salary. So as the cost of salaries go up, our fees go up accordingly. And I think in the past, we've commented and I think so far this year, it's fair to say that our prices are probably up somewhere between 8% and 9% overall. And that's taking into account mostly contract that is not necessarily current replacements of the contract.

Thank you. The next question is regarding analyst coverage. There's one analyst with a $2 price target. Actually, Marc Riddick is on the call. And was on the call today and also covering the company from Sidoti. So we have Marc and his coverage and you'll probably get an update from him after this report. But we are seeking other analyst coverage, and we're also marketing to a broader base of investors as well with the roadshow and other techniques. How much does the company have remaining in NOLs, net operating losses? And does amortization of intangibles have a similar effect. Kim, do you want to take that?

Yes. The company has between $15 million and $20 million of NOL carryforwards remains. That's a rough estimate. I actually saw the question and tried to open up my – my last 10-K, but it's disclosed in our 10-K and the tax note for those who want to look at us specifically. And then on amortization of intangibles, we amortized goodwill for tax purposes. So we do get a benefit from that, that creates in part a net deferred tax asset, but because our prosperity has been relatively recent. We have not fully recognized that yet. The accounting rules generally say, they like to take three years of improved performance before you tinker with your allowance for deferred tax assets. So that's out there somewhere in the future that could become beneficial later on. And then most of our intangibles are [Audio Gap] net income that sort of held in over time.

Okay. Thanks, Kim. But the reference to the footnote in the 10-K will cover most of that question. The next question is recession is now widely expected rather unforeseen. How would you adjust your outlook for this expectation? I think, there's a debate on what the definition of a recession is, but I'll tell you the real definition of a recession. Recession is when your neighbor loses his job and a depression is when you lose yours. So after that definition, I can say that, we're hiring actively now and getting a lot of quality people to fill jobs and meet our recruiting needs. And I can safely say that, I've lived through, let's say, one, two, three downturns. And the most material downturn was the 2008, 2009 because of the length of it, and that the financial crisis was layered on top of the economic downturn with instability in the banking system. But for that, and that was around an 18 month, 17 to 18 month downturn sailed right through it with my predecessor company, with no debt and a bunch of cash. As I said, cash flow typically goes up for a good period of time during that period. So our outlook is bullish at this point, because even if the general economy doesn't grow, the labor market is so tight that just filling existing jobs that were either cut or abandoned during the COVID downturn. There still hasn't been a recovery to that level. So, we have more job orders unfilled than we do candidates. And that continues, and I looked at a few competitors opinions, and they concur, particularly the higher end businesses and that's why we're focused on the higher end professional services businesses. So, I'm not concerned much about the downturn, especially since our…

Yes. That's -- we have an unused portion fee, which is common on asset-backed facilities like ours. And I think it's 37 basis points or something. And so that's our -- and there might -- there's some other fees that the -- that the banks throw in there. But it's all fee income. There's no -- there have been no borrowings on our facility since the very first two weeks we had but which we paid off right away.

Okay. And can you talk about free cash flow and the need for capital near-term? I'll let you handle that one, too.

Yes. Great question. Outlook for free cash flow is very good. Our cash flow -- and I realize as a CPA, I want to be delicate here. But -- if you look at our EBITDA and our adjusted EBITDA because of the formulas that are underneath those two numbers, and you combine that with the efficiency in our cash flows from operations that I mentioned a little earlier, that's a fairly good proxy for our capacity to generate cash flow. And our working capital is very strong right now at 3:1, half of which is cash and growing. So our operating needs for what we currently have are there. And as a lot of your questions that have come in so far, a lot of -- all the investors' questions have alluded to. We are in constant internal discussions on how to best deploy the capital going forward and considering a lot of the various things that have been brought up on the call.

Thanks, Kim. The next question says -- I know that you do not have to worry about your share price relative to your NYSE listing compared to the NASDAQ, and that's true. And they're talking about trading below $1. But we would appreciate your thoughts on a potential reverse split. And this person happened to be foreign and submitting it says, you're executing well, keep on doing it, greetings from Switzerland. So the concept there is that if you're trading at a certain dollar price, certain institutional investors cannot buy your stock. So at this point, we took some dilution on the stock price when we paid off our debt with an equity offering. And we're in that recovery mode to get the share price back up through performance and execution. Stock buybacks help that, acquisitions that are accretive helped that. And then the constant reverse split, obviously, pushes your price up with fewer shares outstanding, and allows for some institutional investors for sure to participate in your company as shareholders. So all of those things are considered by our company and under discussion and review with advisers as well, and I can say that during these periods of trying to increase shareholder value and planning, it's difficult for us to buy shares if we execute on any of these particulars before we go public. So that's something that we navigate through as well relative to a prior question that I had. So are these things under consideration? They always are. And by the way, I have solicited input from our shareholders, all of you, and others and experts. And I don't get a uniform answer one way or the other, but I have a lot of experience in the area of dealing with the Street and institutional investors, and listening to what our shareholders say and potential shareholders say. So we will continue to move forward and evaluate alternatives for those type of things. But I can tell you one thing, focus on your business and execution, profitability and growth, all matter significantly and will tend to help cure the problem. And if we could boost that by other methods, we will continue to do that. How much revenue is still within the 90-day period on firms, what risk do you have? Kim, essentially, they're saying fall offs on firms, what you're going on?

Yeah. We carry a reserve on our books; it's combined for financial reporting purposes with our allowance for doubtful accounts. But we carry a reserve that we update every quarter, and it will -- it moves -- the reserve moves up naturally when business moves up. And I would say, right now, commensurate with the comments that you heard Derek make earlier on our outlook. We don't foresee at this point that a big -- bubble of cancellations coming if we go in through a recession. That's not to say that they might not go up, but I don't think -- we're not fearful that it would be a massive reversal of, for example, the good results that we just reported outside of the reserves that we already carry.

Okay. Thank you, Kim. Another question is I don't see information regarding bill rates or revenue producing workers or other similar measures in the presentation. Can we get some numbers in regards to total build hours for the period and other metrics? We do have various metrics that we put out and they're in some of the public filings, they're in the presentation that's current and they're in some prior presentations. We talk about bill rate ranges for verticals like IT and accounting and finance. We -- our gross margin is indicative of bill rates and spreads. One thing we don't do is put out information that could be used by competitors either in pricing or shopping for customers and trying to lowball or do whatever. So, we are very sensitive to those metrics. But in terms of Kim, how many revenue-producing workers do we have? That's a pretty straightforward--

Well, that's a good question because actually, we were running at about between 260 to 270 full-time core employees those don't include the people that we employ that work for our clients. Those are the folks that man our front offices here that make our sales, that recruit our candidates, et cetera, our support. And we've now recently made headway in adding some meaningful hires, including a couple of rainmakers in certain markets. So, our number is getting closer to 300. now. And that's -- we've done that in recognition of, as Derek mentioned, there's kind of a soft hedge, if you will, that happens around cycles between perm and contract and we're really shortening up our contract resources because we think that's the next big source for revenue going forward. And we're doing it selectively in chosen markets that we believe represent the best opportunity to grow our contract business professional.

The next question deals with competition in the market? And can you speak about the companies and the competition? Can you speak about HireQuest? HireQuest is not a competitor for the most part with our company. Our competitors vary based upon the vertical or specialization that we are operating in. For example, in finance and accounting, Robert Half would be a big competitor. In IT the higher end IT, there's a lot of boutique companies that are out there that compete with us. And then some of the bigger ones like ASGN in their higher end piece, for example, would be a competitor. Each of the big staffing companies like a Manpower, my predecessor, Adecco Group that bought MPS Group, the company that I was with before that they essentially bought our IT business and have it that would be a competitor. Manpower's experience at times is a competitor. But then there's a lot of local players that compete very effectively at the higher end with us. Robert has got an IT group that would compete with our SNI IT Group. So, in each vertical -- and then specifically within that vertical, there are several competitors and that's based on the type of skill positions they're filling. And we keep track of all that to see how they're performing, how they're growing, how they're pricing to the extent we can get the data. Are there any special events to be discussed at the end of the month Board meeting? There's a lot of discussion at the end of the month Board meeting and our Annual Shareholder Meeting. We will delve into strategy with our Directors. We will address all the things that have been brought up today, and we constantly do, but we'll have some very, very in-depth face time…

Yes. Our SG&A, that about two-third of our SG&A is what I would call, falls under the S or selling. That has the salaries of all our front office personnel of our 300-and-some-odd employees, about 260 of those represent front office. And we have about actually probably about 250 -- we have about 50 support staff some of which are in the field also embedded in the field, but there's about 40 that support all the businesses. You'll find that we had a few non-recurring kind of things come up in the nine months, which happened from time to time, one being a large legal settlement. And when you clear those out and take into account the growth we've had, you'll see that our SG&A should be a tick below the 30% range, which basically puts it in the ballpark of several of the larger players in the market, which is a good comparison for us because that means we're being lean. And I can tell you, we are very lean here. We manage the dollars here as though they're coming out of our own pockets. And -- but we make smart investments. Someone mentioned here investing in technology. Our most recent investments in technology are shoring up and preparing ourselves for the brave new world out there of cyber risk, which we're investing in. And as far as forward facing is, as Derek mentioned, we had some very good discussions with some of our providers and hope to take advantage of some of those things. The other one-third of our SG&A is relatively fixed. The questions have been asked a couple of times about our average remaining lease life of two years or less. Are we going to consider virtual markets? The answer to that is yes. Either when we're expanding. For example, we've expanded into the Austin market recently, and we're getting ready to move into a couple of others. We converted our bricks and mortar in Houston to virtual. So I think in the future, the future GEE will be more of a blend of centers of excellence with servicing different markets, some of which will be virtual, some of which might have small branches, but yeah, very much, we're taking advantage of reducing that cost, which is our – was our second largest cost, and now is our third largest cost, behind job boards and personnel. So, those are good questions. But we manage our SG&A very, very well and keep it nice and low. Our total corporate expenses are less than 3% of our total revenue. So, all those things bode well.

Kim, that leads to the question that came up regarding leases and whether you're going to move some of those leases or leased office space when the lease expires to virtual ones? The answer is, when it's appropriate, and conducive to our business we will do that. And we have done that in certain markets already and we'll continue to do it selectively. Additionally, when we're opening in new markets, for example, Austin, Texas, we went completely virtual in our IT group. So it's a very convenient way, because of our technology and our ability to manage our resources from afar without fixed base offices. To do that, it's cost effective and it allows you to enter into a new market. Let me also say that, acquisitions come in various forms. Acquisitions of talent that can increase your business without violating non-compete agreements, which we honor of our competitors that's a form of acquisition, because they bring other talent to the table and customers and we grow. And the cost of that is much cheaper and less risky than spending a whole lot of money on a big company. Now, the flip side is, can you get a good target? And the answer is some of these individuals are able to tell us that come from some competitors that, that would be a good group to bring in to our company and they help facilitate the introductions, and so -- and then we have a great opportunity because of that hire for an acquisition. So all these things are dealt with daily and we are not ever complacent. We will never be complacent. Somebody said, are you doing anything for brand awareness? Are you doing anything to get Street exposure, analysts, new institutional investors? The answer is yes, yes, yes…