Gee Group's Q4 2025 Earnings Call: Contradictions Emerge in Acquisition Strategy, AI Staffing, M&A Focus, Automation, and Offshore Operations

Date of Call: December 18, 2025

Financials Results

• Revenue: Consolidated revenue: $23.5M for the quarter and $96.5M for the fiscal year, both down 10% YOY; professional contract staffing revenue $20.4M Q / $84.7M FY (down 11% YOY); direct hire revenue $3.1M Q / $11.8M FY (down 9% Q and 3% FY YOY).
• EPS: Loss from continuing operations: quarter loss $613k, or $0.01 per diluted share (vs loss $2.1M or $0.02 prior-year quarter); fiscal year loss $34.7M, or $0.32 per diluted share (vs $22.7M or $0.21 prior year). FY2025 includes $22M noncash goodwill/intangible impairment.
• Gross Margin: Quarter gross margin 35.8% (gross profit $8.4M) and fiscal year gross margin 34.6% (gross profit $33.4M), compared with 35.1% (Q prior year) and 33.8% (FY prior year), respectively.

Guidance:

• Target to restore profitability in fiscal 2026, with management hoping for return to profitability by mid-fiscal 2026.
• Realizing ~$3.8M annualized SG&A reductions (approx. $954k realized in FY2025) with additional reductions expected in FY2026.
• Prioritizing VMS/MSP business, AI integration across recruiting/sales, and productivity improvements.
• Pursuing disciplined M&A focused on AI consulting, cybersecurity and IT consulting to drive growth and scale.
• Share repurchases considered but will be evaluated only with visibility into sustainable profitability/free cash flow.

Business Commentary:

* Challenging Hiring Environment and Economic Uncertainty: - GEE Group experienced [difficult and challenging conditions in the hiring environment] since the second half of 2023, impacting their staffing services and client initiatives. - This was attributed to overhiring in the immediate aftermath of the pandemic, followed by macroeconomic uncertainty, interest rate volatility, and inflation.

• Revenue and Financial Performance Decline:
• Consolidated revenues were $23.5 million for the quarter and $96.5 million for the fiscal year, both down [10%] from the comparable prior year periods.
• Gross profits and gross margins were $8.4 million and 35.8%, respectively, for the quarter, with losses from continuing operations of $613,000 and $0.01 per diluted share.
• The decline in revenue and financial performance was primarily due to lower volumes in professional contract staffing services.

• Cost Reduction and Strategic Focus:
• The company reduced its SG&A expenses by an estimated annual amount of $3.8 million, with an estimated $954,000 realized in fiscal year results.

• GEE Group acquired Hornet Staffing and focused on VMS and MSP source business, integrating AI technology into operations to improve productivity and restore profitability.

• Strong Liquidity Position:

• GEE Group reported positive free cash flow, including cash flows from discontinued operations, of $533,000 for the fiscal year.
• The company maintained a strong liquidity position with $21.4 million in cash, an undrawn ABL credit facility with availability of $4.8 million, and net working capital of $24.0 million, with no outstanding borrowings.

Sentiment Analysis:

Overall Tone: Neutral

• Management repeatedly stressed disappointment with near-term results but emphasized active cost reductions, AI integration and disciplined M&A to restore profitability: "Our goal is to become profitable again in fiscal 2026" and "we are aggressively managing and preparing our business to mitigate losses, restore profitability and be prepared for an anticipated recovery."

Q&A:

• Question from Analyst (Unknown): What is the company's time line for achieving your goal of $1 billion in revenue per year?
  Response: No specific timeline; management cannot say when $1B will be reached and is focused first on returning to growth safely, then scaling as quickly and prudently as possible.

• Question from Analyst (Unknown): What changes are going to be made to raise the stock price?
  Response: Priority is to return to profitability, reduce costs, pivot toward AI/automation and pursue strategic M&A to scale operations and improve valuation.

• Question from Analyst (Unknown): Comment on the recent BGSF transaction and whether it's something you might consider?
  Response: Familiar with the deal; view it as validation that scale and strategic M&A matter — company is continuously seeking opportunities to enhance shareholder value through acquisitions.

• Question from Analyst (Unknown): Why hasn't there been more insider buying and have senior management/board taken salary cuts?
  Response: Insiders and significant holders already own ~25% of shares; senior management holds ~5–6M shares; no base-salary increases since 2023, bonuses forfeited, and compensation is performance‑based.

• Question from Analyst (Unknown): Are you consolidating offices given lower demand?
  Response: Yes — about half a dozen offices closed/consolidated over the past 2–3 years; shifting away from bricks-and-mortar enabled by technology, hybrid work and AI tools.

• Question from Analyst (Unknown): Would you consider initiating buybacks once you have visibility into profitability rather than waiting until it's achieved?
  Response: Yes — buybacks are evaluated at virtually every board meeting and are an option once there is sufficient visibility into sustained profitability and free cash flow.

• Question from Analyst (Unknown): What M&A valuation multiples are you seeing and targeting to justify acquisitions vs. buybacks?
  Response: Observed multiples roughly 6–10x EBITDA depending on growth and sector; preference for deals offering strong synergies, scale and pivot into SOW consultancies (AI, cybersecurity, IT).

• Question from Analyst (Unknown): Are you committed to leveraging offshore or international sales and recruiting, and what's current utilization?
  Response: Yes — currently leveraging an offshore team in India, planning to expand offshore and nearshore (including Latin America) using AI recruiting tools with domestic oversight.

Contradiction Point 1

Acquisition Strategy vs. Share Buyback

It highlights a shift in strategic focus, potentially influencing financial decisions and shareholder returns.

Why is the company prioritizing acquisitions over stock buybacks to increase future earnings per share? - Name Not Provided(Company Name)

2025Q4: We believe there are better opportunities in acquisitions that could provide better long-term returns than buybacks. - Derek Dewan(CEO)

How many shares can you repurchase daily? - Name Not Provided(Company Name)

2023Q3: We do have 25% of the average volume of the stock that we can buy back. We have a 10b5-1 plan in place. - Kim Thorpe(CFO)

Contradiction Point 2

AI Impact on Staffing

It involves the company's perspective on how AI is impacting staffing demands and roles, which has implications for both operational and strategic decisions.

Are you developing your own AI staffing tools or using existing ones? How large is the offshore IT segment? - Name Not Provided(Company Name)

2025Q4: AI has disintermediated some staffing positions, but high-demand skill sets like machine learning and data scientists remain. - Derek Dewan(CEO)

How is AI affecting staffing needs, and how is the company responding? - Operator

2025Q3: AI has overall impact on employment, not just staffing. - Derek Dewan(CEO)

Contradiction Point 3

M&A Strategy and Focus

It involves differing statements on the focus and prioritization between M&A and stock buybacks, which can impact financial strategy and investor expectations.

Why is the company focusing on acquisitions to grow rather than using stock buybacks to boost future earnings per share? - Name Not Provided(Company Name)

2025Q4: We believe there are better opportunities in acquisitions that could provide better long-term returns than buybacks. - Derek Dewan(CEO)

Would you consider share repurchases in conjunction with or instead of M&A? - Name Not Provided(Company Name)

2025Q2: Both M&A and share repurchases are on the list for enhancing shareholder value. We'd like to be in a net neutral or positive cash flow position before moving forward on share repurchases. We believe both can be done in tandem, and we see opportunities on the horizon. - Derek Dewan(CEO)

Contradiction Point 4

AI and Automation Implementation

It involves statements on the timeline and impact of AI and automation integration, which can influence operational efficiency and future growth.

What changes will be made to raise the stock price? - Name Not Provided(Company Name)

2025Q4: AI and automation will play a crucial role in this process [returning the company to profitability and growth]. - Kim Thorpe(CFO)

What specific steps are you planning to take to reduce SG&A? - Name Not Provided(Company Name)

2025Q2: AI has a lot of opportunity to make our recruiting more efficient and higher quality, and sales processes as well. - Kim Thorpe(CFO)

Contradiction Point 5

Offshore and International Operations

It involves the company's plans for leveraging offshore and international sales and recruiting capabilities, which can impact operational efficiency and growth.

Is the company committed to leveraging international sales and recruiting? - Name Not Provided(Company Name)

2025Q4: We currently have an offshore team in India and are leveraging it now. We want to expand this by providing international teams with AI tools. - Derek Dewan(CEO)

Are you developing AI staffing tools or using existing ones? How large is the offshore IT segment? - Operator

2025Q3: Offshore IT segment is mainly for recruiting, growing, and efficient. - Derek Dewan(CEO)